In the Name of Allah the Most Gracious, theMost Beneficent and the Most Merciful

In the Name of Allah the Most Gracious, theMost Beneficent and the Most Merciful Read (O Prophet,) in the name of yours Rub,Who created. Created man from a clot of congealed blood. Read; and your Lord is MostGenerous, Who taught knowledge by the pen;taught man what he did not know. (Al-Alaq, Surah # 96, Ayats 1-4, Para # 30)

dedication
I would like to dedicate my work,As a little t o k e n o f g r a t i t u d e f o r m y L o v i n g P a r e n t s .T h e wisdom and love of my parents enables me to strive towards a l e g a c y o f h o n o r . W i th o u t their knowledge, wisdom and guidance,I would not have the goals, I have to strive and be the best to reach my dreams!

ACKNOWLEDGEMENT I find no words at my command to express my deepest sense of gratitude to the A l m i g h t y ALLAH , t h e m o s t G r a c i o u s , t h e m os t M e rc i ful a nd th e most Beneficent, who gives me the talent to complete this t a s k successfully, He is the one who gave me courage to do this.I a m m u c h o b l i g e d t o m y loving P a r e n t s whose prayers have enabled me to reach this stage. At this occasion I cant forget my parents for their guidance a t t he c ruc i al m o m en t s o f m y l i fe . Next I owe my bottomless thanks to our esteemed resource person Mr. yas ir shehzad who directed me well and was always available to clear my doubts and misunderstandings through out this project.It is also a matter of immense pleasure for me to express my g r a t i t u d e t o the F a c u l t y o f Departmentofcommerce and professional projects evaluation Committee of the b.z.u for giving us their precious time and tried their best as helpful as possible.I wish to thanks all m y F r i e n d s and C l a s s m a t e s w h o r e a l l y h e l p e d me by giving suggestions and critical review of the manuscript

DISCLAIMR The purpose of the project is to introduce the subject matters and provide a general idea and financial information about the Indus Motors Company Limited. All the material included in this document is based on data/information gathered from various sourc es a n d is based on certain assumptions. Although, due care, diligence and reasonabl e efforts has been taken to compile this project, the contained information may vary due to any change in any of concerned f a c t o r s a n d REFRENCES

Executive Summary

Indus Motor Company is one of the Automobile Companies which formedwith the help of house of Habib, Toyota Motor Corporation, Toyota TsushoCorporation. It manufactures and imports cars and enjoys a healthy sharein the market. It is competing with the Honda, Nissan, Suzuki andMitsubishi. To sustain its lead IMC must maintain strategic competitiveadvantage which is its production strength, ability to produce quality carswith respect to low cost and research and development in hybrid and biofuel cars. But recently company is in stabilization mode trying to improve itsfunctional area, consolidation of resources and maintaining SCA. In myOpinion it is the best move made by IMC to survive the financial holocaust

Operating Highlights: For the Year ended June 30, 2009

Vehicle Sales: down30.6% to 35,276 units Vehicle Production: down28.9% to 34,298 units Net Revenues: down8.6% to Rs. 37.9 billion Profit after tax: down39.5% to Rs.1.4 billion Earning per share: down39.5% to Rs. 17.6 Manpower: down6.7% to 1,893 employees Total assets: up50.5% to Rs. 20.69 billion Share holders' equity: up9.1% to Rs. 10.3

2
S h o r t T e r m D e b t Paying Ability 2005 a)Net Working Capital Current Ratio Acid Test Ratio Cash Ratio Cash Flow fromOperations Ratio 3.51 1.46 1.05 0.88 0.12 4.65 1.49 1.07 0.79 0.28 6.15 5.89 1.83 2.56 1.44 1.86 1.15 0.38 1.16 6.83 1.69 1.28 0.98 2006 2007 2008 2009

(0.21) 0.66

L o n g T e r m D e b t Paying Ability

Times Interest Earned Fixed Charged Coverage

25.48 22.60

33.08 32.10

187.44 1284.23 78.09 187.40 1284.23 78.09

Debt Ratio Debt Equity Ratio Debt to Tangible Net Worth.

63.30 00 172.86

60.45 00 152.99

48.65 31.36 50.22 00 00 00

94.78 45.71 100.93

Short term Liquidity Days Sales inAccounts 13.09 Receiveables.

24.89

15.86

18.90

26.02

Accounts Receivable Turnover.

27.89

14.66

23.01

19.32

14.03

Days Sales in Inventory.11.80 Inventory turnover 42.20

15.55 29.20

5.57 37.38

10.92 45.49

14.20 28.36

Profitability ratios

Net Profit Margin

5.38

7.52

7.03

5.53

3.66

Total Assets Turnover

2.26

2.23

2.49

3.01

1.83

Return on Assets

12.17

16.74 9.93

17.53 9.38

16.66 6.70 7.40 3.97

Operating Income Margin 7.73

Operating AssetsTurnover 30.63

25.02

20.53

11.53

9.71

Return on OperatingAssets 164.77 Sales to Fixed Assets 27.63

188.06 20.53

144.29 18.66

63.73 10.27

35.51 9.62

Return on Equity Gross Profit Margin

33.17 9.80

42.32 11.77

34.13 11.37

24.28 9.29

13.45 6.14

Analysis for investor

Earning Per Share

18.89

33.70

34.93

29.15

17.62

Price Earning Ratio

4.76

5.67

8.75

6.86

6.11

Dividend Payout Ratio 52.94

35.61

37.22

36.02

56.75

Dividend Yield Ratio

11.11

6.28

4.26

5.25

9.28

CONDENSED INCOME STATEMENT:

Indus Motor Company Limited Condensed Income Statement For The Year Ended June 30,

Net Sales Gross Profit Operating Profit Profit before Taxation Net Profit

In comparison with FY 2005, sales of FY 2006 have been increased by 7.63 billions.Similarly in FY 2007 and FY 2008 there is an increasing trend by 3.82 billions and 2.36billions while there is decrease in sales of 3.55 billions in FY 2009 with respect to thepreceding years.In the term of percentage sales have increased by 27.66% in FY 2006 as compared to FY2005. In FY 2007, as compared to FY 2006, sales increased by 10.85% whereas the increasewas 6.05% in FY 2008, as compared to FY 2007, while there is a decrease of 8.59% in salesin FY 2009 as compared to the FY 2008. The sales have increased 41.52%, 50.08% and37.19% in FY 2007, FY 2008 and FY 2009 as compare to FY 2005.

NET SALES:

Net Sales %ageComparativeChain base Comparative chain Base 2005 base Vertical common size

. In comparison with FY 2005, sales of FY 2006 have been increased by 7.63 billions.Similarly in FY 2007 and FY 2008 there is an increasing trend by 3.82 billions and 2.36billions while there is decrease in sales of 3.55 billions in FY 2009 with respect to thepreceding years.In the term of percentage sales have increased by 27.66% in FY 2006 as compared to FY2005. In FY 2007, as compared to FY 2006, sales increased by 10.85% whereas the increasewas 6.05% in FY 2008, as compared to FY 2007, while there is a decrease of 8.59% in salesin FY 2009 as compared to the FY 2008. The sales have increased 41.52%, 50.08% and37.19% in FY 2007, FY 2008 and FY 2009 as compare to Fy2005

COST OF GOODS SOLD: C.G.S ComparativeChain Base Percentage Comparative Chain base. Percentage Comparative 2005 Base Vertical Common

In FY 2006, FY 2007 and FY 2008 increase in C.G.S has been recorded with 6.19 billions,3.53 billions and 2.95 billions with respect to the preceding year. In FY 2009 C.G.S has beendecreased by 2.03 billions as compared to FY 2008 due to the low production.An increasing trend was recorded by 24.88%, 11.36% and 8.53% in FY 2006, FY 2007 andFY 2008 respectively as compare to the preceding years. While C.G.S decreased by 5.42% inFY 2009 with respect to FY 2008. As compared to FY 2005 C.G.S increased by 39.07%,50.94% and 42.76% in FY 2007, FY 2008 and FY 2009 respectively.There is a deceasing trend in C.G.S as a part of sales. C.G.S has decreased by 9.80% in FY 2005, FY 2006, FY 2007, FY 2008 and FY 2009respectively.%,11.77%, 11.37%, 9.29% and 6.1

GROSS PROFIT: Gross Profit ComparativeChain Base Percentage ComparativeChain Base %Percentage Comparative2005 Base Vertical Common Size

G.P of FY 2006 and FY 2007 increased by 1.44 billions and 292 millions as compared to theFY 2005 and FY 2006 respectively. In FY 2008 and FY 2009 there was a decrease of 592millions and 1.52 billions in G.P as compared to FY 2007 and FY 2008 respectively.G.P has been increased by 53.27% and 7.06% in FY 2006 and FY 2007 as compared to theFY 2005 and FY 2006 respectively. While GP of FY 2008 and FY 2009 decreased by13.33% and 39.61% with respect to preceding years respectively. As compared to FY 2005G.P has been increased by 64.09% and 42.21%, in FY 2007 and FY 2008 respectively whilein FY 2009 the decrease of 14.12% as compared to FY 2005 was recorded.As compared to sales, G.P has been decreased by 90.02%, 88.23%, 88.63%, 90.71% and93.86% in FY 2005, FY 2006, FY 2007, FY 2008 and FY 2009 respectivel

OPERATING EXPENSES:

Operating Expenses ComparativeChain Base Percentage ComparativeChain Base %Percentage Comparative 2005 Base Vertical Common Size Operating expenses have been increased by 75.1 millions, 127 millions, 9.3 millions and 37.5millions in FY 2006, FY 2007, FY 2008 and FY 2009 respectively in comparison with thepreceding years.In terms of percentage, operating expenses have been increased by 13.19%, 19.76%, 1.21%and 4.79% in FY 2006, FY 2007, FY 2008 and FY 2009 respectively in comparison with thepreceding years. As compared to FY 2005 increase of 35.55%, 37.19%, 43.76% was recordedin FY 2007, FY 2008 and FY 2009 respectively.As compare to sales, there is a significant decrease in operating expenses by 97.93%,98.16%, 98.02%,98.11% and 97.83% in FY 2005, FY 2006, FY2007, FY 2008 and FY 2009respectively.

OPERATING PROFIT:

Operating Profit ComparativeChain Base Percentage ComparativeChain Base %Percentage Comparative2005 Base Vertical Common Size Operating profit is increasing from FY 2006 to FY 2007 by 1.36 billions and 165 millions incomparison with the FY 2005 and FY 2006 respectively. While it decreased in FY 2008 andFY 2009 by 601 millions and 1.56 billions respectively with respect to the previous years

CONDENSED BALANCE SHEET: Indus Motor Company Limited C o n d en s ed B a la n c e S h e et As on June Current Assets Less: Current Liabilities Net Working Capital Net Fixed Assets Capital Work-in-progress

Intangible Assets Other Non Current Assets Net Assets Position Non-Current Liabilities Long Term Debt - - - - Equity Net Liability and Equity Position,

The condensed balance sheet of FY 2005, FY 2006, FY 2007, FY 2008 and FY 2009 isgiving a clear look at the companys resources and claims of outsiders.Net assets of the company are showing an increasing trend from FY 2005 to FY 2009.The long term debt position of the company is obvious and seems that company has a realstrong background. There was no claim of outsiders on the companys resources.The detail of trends of balance sheet is discussed below item wise and the annexed notes arealso at the end of the report which forms an integral part of the above sheet.

SHORT TERM DEBT PAYING ABILITY:

NET WORKING CAPITAL: Net working capital is a financial metric which represents operatingliqui dity available to a business. Along with fixed assets such as plant and equipment,working capital is considered a part of operating followingformula: Formula: Current Assets - Current Liabilities

2005
3513878

2006

2007

2008
588153

2009
6830469

4651103 6149403

Interpretation: Working capital of the company has always been maintained very high up toFY 2007. The company then reduced it in FY 2008 to avoid excessive workingcapital but in FY 2009 it again increased which

showscompany has sufficientcapital to pay its liabilities

CURRENT RATIO: The current ratio is a financial ratio that measures whether or not a firm has enoughresources to pay its debts over the next 12 months. It compares a firm's currentassets to its current liabilities. It is expressed as follows

Formula:
Current Assets Current Liabilities

2005 2006 2007 2008 2009 1.46 : 1 1.49 : 1 1.83 : 1 2.56 : 1 1.69 :1

Interpretation: Current Ratio of the company has a increasing trend up to FY 2008. It was minimumin FY 2005. As the graph shows that current ratio remains positive in last five yearsso the company has the ability to pay its current liabilities with its current assets.Current ratio was maximum in FY 2008 than once again it decreased in FY 2009 dueto increase in liabilities

ACID TEST RATIO: A stringent test that indicates whether a firm has enough short-term assets to cover itsimmediate liabilities without selling inventory. The acid-test ratio is far morestrenuous than the working capital ratio, primarily because the working

capital ratioallows for the inclusion of inventory assets. Current Assets InventoryCurrent Liabilities 2005 2006 2007 2008 2009 1.05 : 1 1.07 : 1 1.44 : 1 1.86 : 1 1.28 : 1

Interpretation: Quick ratio of the company has an increasing trend up to FY 2008 showing theadequacy in paying off the current liabilities. Then it decreased slightly in FY 2009.But as a whole the graph shows that company has a tendency that the most liquidassets of the company are in a position to payoff the current liabilities.

CASH RATIO : The cash ratio is a formula for measuring the liquidity of the company by calculatingthe ratio between all cash and cash equivalent assets and all the current liabilities. Theformula for calculating the cash ratio is as under: Marketable Securities + CashCurrent Liabilities 2005 2006 2007 2008 2009 0.88 : 1 0.79 : 1 1.15 : 1 1.16 : 1 0.98 :

Financial statement analysis is defined as the process of identifying financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account.

Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement analysis:

1. 2.

Horizontal and Vertical Analysis Ratios Analysis

1. Horizontal and Vertical Analysis:

Horizontal Analysis or Trend Analysis: Comparison of two or more year's financial data is known as horizontal analysis, or trend analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and percentage form. Vertical analysis is the procedure of preparing and presenting common size statements.Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form. Accounting Ratios Definition, The ratios analysis is the most powerful tool of financial statement analysis. Ratios simply means one number expressed in terms of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. Ratios can be found out by dividing one number by another number. Ratios show how one number is related to another.

Advantages of Financial Statement Analysis:

There are various advantages of financial statements analysis. The major benefit is that the investors get enough idea to decide about the investments of their funds in the specific company. Secondly, regulatory authorities like International Accounting Standards Board can ensure whether the company is following accounting standards or not. Thirdly, financial statements analysis can help the government agencies to analyze the taxation due to the company. Moreover, company can analyze its own performance over the period of time through financial statements analysis.

Liquidity Ratios:
Liquidity ratios measure the short term solvency of financial position of a firm. These ratios are calculated to comment upon the short term paying capacity of a concern or the firm's ability to meet its current obligations. Following are the most important liquidity ratios. Current ratio Liquid / Acid test / Quick ratio

Definition of 'Current Ratio'

A liquidity ratio that measures a company's ability to pay short-term obligations. The Current Ratio formula is:

Definition of 'Liquidity'
1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity. Assets that can be easily bought or sold are known as liquid assets. Formula: Current asset inventory prepaid expenses _______________________________________ Current liabilities

Activity Ratios:
Activity ratios are calculated to measure the efficiency with which the resources of a firm have been employed. These ratios are also called turnover ratios because they indicate the

speed with which assets are being turned over into sales. Following are the most important activity ratios: Inventory / Stock turnover ratio Debtors / Receivables turnover ratio Average collection period Creditors / Payable turnover ratio Working capital turnover ratio Fixed assets turnover ratio

Definition:
Stock turn over ratio and inventory turn over ratio are the same. This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times. Stock turn over ratio/Inventory turn over ratio indicates the number of time the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its

The formula for inventory turnover:

The formula for average inventory:

Definition:
Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

Formula of Debtors Turnover Ratio:

Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors

Average Collection Period Ratio:

Definition:
The Debtors/Receivable Turnover ratio when calculated in terms of days is known asAverage Collection Period or Debtors Collection Period Ratio.

The average collection period ratio represents the average number of days for which a firm has to wait before its debtors are converted into cash.

Formula of Average Collection Period:

Following formula is used to calculate average collection period: (Trade Debtors No. of Working Days) / Net Credit Sales

Definition:
Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

Formula of Debtors Turnover Ratio:

Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors

Working capital:
Working capital is money available to a company for day-to-day operations. The formula for working capital is: Current Assets - Current Liabilities

Working Capital Turnover Ratio:

Definition:
Working capital turnover ratio indicates the velocity of the utilization of net working capital. This ratio represents the number of times the working capital is turned over in the course of year and is calculated as follows:

Formula of Working Capital Turnover Ratio:

Following formula is used to calculate working capital turnover ratio Working Capital Turnover Ratio = Cost of Sales / Net Working Capital

Fixed Assets Turnover Ratio:

Definition:
Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. The ratio is calculated by using following formula:

Formula of Fixed Assets Turnover Ratio:

Fixed assets turnover ratio turnover ratio is calculated by the following formula: Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets

Operating cycle: Accounts receivable turnover +inventory turnover

Sales to working capital: the sales to working capital ratio is included in thefinancial statement ratio analysis spreadsheets highlighted in the left column, formula:

Sales to Working Capital = sales / working capital Long term paying ability: A firms top executives review the corporate balance sheet to ensure that asset levels are adequate to repay debts in the short term and long term. Financial ratios help senior management gauge a firm's economic robustness.
Ratios: 1. Debt ratio 2. Debt to equity ratio 3. Times interest earned 4. Fixed charge coverage 5. Debt ratio: Debt to tangible net worth

The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. Formula:

Debt to equity ratio: The debt-to-equity ratio is a measure of the relationship between the capital contributed by creditors and the capital contributed by shareholders. It also shows the extent to which shareholders' equity can fulfill a company's obligations to creditors in the event of a liquidation. Formula:

Debt-to-Equity Ratio = Total Debt / Total Equity Times interest earned ratio: Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the total interest payable.

Definition of 'Fixed-Charge Coverage Ratio'

A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following:

debt to tangible networth:

This ratio calculates the relationship between a company's debt and its tangible net worth. By definition, it is a more conservative measure than the traditional "Debt / Worth" calculation. As with "Debt / Worth", the lower the ratio the higher the degree of relative capitalization and the lower the degree of leverage.

Formula: Total Liabilities / (Net Worth - Net Intangible Assets)

Analysis of profitability: Definition of 'Profitability Ratios'

A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative

Net Profit Ratio (NP Ratio):

Definition of net profit ratio:

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage.

Components of net profit ratio:

The two basic components of the net profit ratio are the net profit and sales. The net profits are obtained after deducting income-tax and, generally, non-operating expenses and incomes are excluded from the net profits for calculating this ratio. Thus, incomes such as interest on investments outside the business, profit on sales of fixed assets and losses on sales of fixed assets, etc are excluded.

Formula:
Net Profit Ratio = (Net profit / Net sales) 100

Definition of 'Asset Turnover'

The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Formula:

Definition of 'Return On Assets - ROA'

An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". The formula for return on assets is:

Return on Equity (ROE) Return on Equity (ROE) = Net Income -------------------------------------------Average Stockholders' Equity

Average Stockholders' Equity = (Beginning Stockholders' Equity + Ending Stockholders' Equity) / 2 Return on Common Equity (ROCE) Return on Common Equity = Net Income -------------------------------------------Average Common Stockholders' Equity

Average Common Stockholders' Equity = (Beginning Common Stockholders' Equity + Ending Common Stockholders' Equity) / 2

Earnings Per Share (EPS) Earnings Per Share = Operating income margin: Net Income --------------------------------------------Number of Common Shares Outstanding

Net Operating margin is a measurement of what proportion of a company's

revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. efficiency.

fit margin .A ratio used to measure a company's pricing strategy and operating

Calculated as:

R eturn

on Operating Assets

Description: The return on operating assets measure only includes in the denominator those assets actively used to create revenue. This focuses management attention on the amount of assets actually required to run the business, so that it has a theoretical targeted asset level to achieve. A typical result of this measurement is an ongoing campaign to eliminate unnecessary assets.
Formula: Net Income Assets used to create revenue

Operating Asset Turnover Operating asset turnover is the ratio of net sales divided by operating assets. The formula of the ratio is given by: Operating Asset Turnover= net sales/operating assets.

Return on Assets (Du Pont)

Return on assets (ROA) is a percentage of the after-tax income as compared to the total assets of the company. Management at Du Pont came up with Return on Assets (Du Pont), an approach that determines the impact of asset turnover and profit margin on profits. This interactive tutorial explains the concept by walking you through the calculations, including where to find the numbers on the financial statements.
Formula:

Operating income margin . operating asset turnover

Definition of 'Return On Investment - ROI'

A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio Formula:

Definition of 'Gross Profit Margin' A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. Also known as "gross margin". Calculated as:

analysis for investor:

Definition of 'Degree Of Financial Leverage - DFL'

A leverage ratio summarizing the affect a particular amount of financial leverage has on a company's earnings per share (EPS). Financial leverage involves using fixed costs to finance the firm, and will include higher expenses before interest and taxes (EBIT). The higher the degree of financial leverage, the more volatile EPS will be, all other things remaining the same. The formula is as follows:

Definition of 'Earnings Per Share - EPS'

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Calculated as:

Definition of 'Price-Earnings Ratio - P/E Ratio'

A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as: Market Value per Share Earnings per Share (EPS)

Dividend Payout Ratio:

Dividend payout ratio is calculated to find the extent to which earnings per share have been used for paying dividend and to know what portion of earnings has been retained in the business. It is an important ratio because ploughing back of profits enables a company to grow and pay more dividends in future.

Formula of Dividend Payout Ratio:

Following formula is used for the calculation of dividend payout ratio Dividend Payout Ratio = Dividend per Equity Share / Earnings per Share A complementary of this ratio is retained earnings ratio. Retained earning ratio is calculated by using the following formula: Retained Earning Ratio = Retained Earning Per Equity Share / Earning Per Equity Share

Definition of 'Retention Ratio'

The percent of earnings credited to retained earnings. In other words, the proportion of net income that is not paid out as dividends. Calculated as:

Definition of 'Dividend Yield'

A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follows:

Definition of 'Book Value Per Common Share'

A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula:

analysis for the cash flow statement:

cash Flow to Current Portion of Long-Term Debt

Cash Flow to CPLTD = Net Income + Depreciation + Amortization Current Portion of Long-Term Debt The Cash Flow to Current Portion of Long-Term Debt ratio measures the coverage of next years principal payments by last years cash available to service them (using accrual accounting.)

Cash Flow To Debt Ratio:

This coverage ratio compares a company's operating cash flow to its total debt, which, for purposes of this ratio, is defined as the sum of short-term borrowings, the current portion of long-term debt and long-term debt. This ratio provides an indication of a company's ability to cover total debt with its yearly cash flow from operations. The higher the percentage ratio, the better the company's ability to carry its total debt. Formula:

Definition of 'Free Cash Flow Per Share'

A measure of a company's financial flexibility that is determined by dividing free cash flow by the total number of shares outstanding. This measure serves as a proxy for measuring changes in earnings per share. Calculated as:

Operating cash flow/cash dividends:

he larger the operating cash flow coverage for these items, the greater the company's ability to meet its obligations, along with giving the company more cash flow to expand its business, withstand hard times, and not be burdened by debt servicing and the restrictions typically included in credit agreement formula: