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This report consists of my eight weeks internship at Azgard9 Limited which

is situated at Manga, Raiwind Road, near Lahore. Azgard is consistently
focusing on improving performance so that risks can be left far behind.
Azgard is a responsible entity which ishighly committed to comply with the
corporate, envoi mental laws and to conduct their business with utmost
honesty and sincerity. At Azgard it is believed that development can only be
achieved by equality and respect at work place. They have been doing it for
decades and there is no doubt they are reaping its benefits.

The Company’s management, combining innovative strategies, aggressive

marketing, creative synergy and visionary approach together with a lean
organizational structure capable of efficient response, succeeded in
establishing Azgard9 as the largest Denim Products Business in the country,
with sales to the tune of Rs.6, 628,341,926.

Azgard9 has been benefited by the management’s highly responsive

approach, increasing its profits significantly since its acquisition from the
Government of Pakistan. 2008 posed to be challenging, primarily owing to
the high raw material prices, comparatively less productive workforce as

compared to the major competing countries, rising fuel prices resulting in
higher domestic and International freight costs, and probable rise in
minimum wages, these factors are mitigated by Azgard9's stronger business
model within the Division and the Company.

In a rapidly changing educational environment, there is
a need to pragmatic tasks as well as the theoretical aspects
of the study because the practical work is considered an
indispensable with the theoretical study.

So keeping this essential Hailey College forced the

students towards the internship training as the final
requirement of degree.

So I also fulfilled this requirement by working in

Azgard-9 as an internee. During training in this concern I
enjoyed myself a lot because here I know how the
incredible work is done practically in big organizations. I
think by getting this training all the students really become
the real assets of the organizations where they will work in

At first I am thankful to Almighty ALLAH for His help to
complete my internship. I pay all of my praises to the great
Prophet of Islam, Hazrat Muhammad (P.B.U.H) with whose
name my heart is enlightened and I feel the surging waves
of real mirth, deep down my soul. Then I’m grateful for the
thorough support by my teachers for helping me determine
the objective of the report and guiding me though to get to
the end.

They made me grateful with his valuable suggestions from

time to time during my internship.

I really should thank every other employee of Azgard9,
whom I found during different phases of my internship. Most
of them have been very open and friendly with me and
provided me with the answers I needed from them. They
were the constant source of inspiration and encouragement
that helped in completion of my internship.

I am also grateful to Prof. Dr.Liaqat Ali, (Principal of Hailey College) who

gave me opportunity to work in such a prestigious organization, which is
well known in Pakistan




WORK DONE BY ME…………………………………………………………35

FINANCIAL ANALYSIS………………………………………………………37

CONCLUDING REMARKS……………………………………………………83































In the ancient legend “AZGARD” was one of none worlds in Norse

Mythology- it was protected by “Heimdall” the son of nine different

Mothers each attributing him with a particular skill and power – and thus

He would protect Azgard from the powers that be.

The significance of Nine for our company is not just based on this

Mythology but also connected with the auspicious nature of this number

Throughout many different elements in and out of the world today that

Be an auspicious and important number in Indian, Chinese, Japanese and

Greek cultures for various different reasons.

In Chinese culture the number Nine represents ‘Change’ and

‘Transformation’, as in the case with Azgard Nine which is changing and

Transforming itself into an entity with new goals, aspirations and targets.

Nine in much of ancient Greek methodology also has represented gestation

And fulfillment of creation as it does for us at Azgard Nine. The ‘fulfillment

Of creation’ for us being the forming of this global entity by nine members

on the ninth day of February sowing the seeds for an auspicious and rewarding
The Azgard Nine Limited Group was started as a family business over
four generations ago. The Sheikh family, Now in its Forth generation, in one
of the oldest business families in the sub continent with experience in many
different sectors and having a proven track record of successful leadership in
four continents. The gamily began its first operations in 1886 in shamkot, in
the Asian sub continent.

Although, now, A Public company the family still remains behind the
company in everyway, supporting and nurturing its growth into the future and

The current specialized yarn operation was set up in 1972 with the open
end spinning and denim weaving operations following in 1995. The final
frontier was the garments operation, which cane in to being in 1997.The
concept behind the group’s textile ambitions was to be a fully vertical apparel
solution provider based in a country that would be able to maintain its
competitive advantage in this field for the yards to come (Pakistan is the
fourth largest denim producer in the world with an annual production of
200,000,000 meters). This has now been achieved and Azgard in able to offer
these services as a single source supplier for all denim and specialized yarn

The future is squeezing the brand customers toward a sourcing solution

that stems from as small a global map as will allow. We believe it is feasible,
in order to not be spread too thin’, to consolidate a position in as few regions
as possible in the quest of r practical and economical global sourcing –
Azgard Nine limited is that perfect vehicle which can accommodate and

achieve this position, therefore realizing the vision that was incepted so many
years ago by the guardians of the Azgard group bring the resultant advantages
to you the customer.













 Mr. Mueen Afzal
 Mr. Ahmed H. Shaikh
Chief Executive
Chief Justice (Retd.) Mian Mahboob Ahmad
 Mr. Aehsun M.H. Shaikh
 Mr. Ali Jehangir Siddiqui
 Mr. Khalid A.H. Al-Sagar
 Mr. Mohammed Khaishgi

 Mr. Muhammad Ijaz Haider


 Mr. Abid Amin

 Chief Justice (Retd.) Mian Mahboob Ahmad
 Chairman
 Mr. Mueen Afzal

 Mr. Ahmed H. Shaikh
 Mr. Tariq Mohammad Khan
 Mr. Abid Amin
 Mr. Irfan Nazir
 Mr. Tahir Munir
 Mr. Atif Farooqi
 Mr. Usman Rasheed

 Mr. Ahmed H. Shaikh
 Mr. Ali Jehangir Siddiqui
 Mr. Tariq Mohammad Khan
 Mr. Ahmed H. Shaikh
 Mr. Tariq Mohammad Khan
 Mr. Salim Khan


 JS Bank Limited
 MCB Bank Limited
 Citibank N.A.
 ABN Amro Bank
 Faysal Bank Limited
 Habib Bank Limited
 Saudi Pak Industrial & Agricultural
 Investment Company (Private) Limited
 The Hong Kong and Shanghai
 Banking Corporation
 United Bank Limited
 Standard Chartered Bank Pakistan Limited
 NIB Bank Limited
 National Bank of Pakistan
 Allied Bank Limited
 My Bank Limited
 KASB Bank Limited
 Pak Oman Investment Company
 Saudi Pak Commercial Bank


 Hamid Law Associates


 Rahman Sarfaraz Rahim Iqbal Rafiq
 Chartered Accountants
 Faruq Ali & Co.
 Chartered Accountants

Ismail Aiwan-e-Science
Off Shahrah-e-Roomi
Lahore, 54600
Ph: +92 (0)42 111-786-645
Fax: +92 (0)42 5761791


Unit I
 2.5 KM off Manga, Raiwind Road,
District Kasur.
Ph: +92 (0)42 5384081
Fax: +92 (0)42 5384093
Unit II
 Alipur Road, Muzaffargarh.
Ph: +92 (0)661 422503, 422651
Fax: +92 (0)661 422652

Unit III
 20 KM off Ferozepur Road,
 6 KM Badian Road on Ruhi Nala
Der Khurd, Lahore.
Ph: +92 (0)42 8460333, 8488862


Mueen Azfal has been Chairman of the Azgard Board since March 2004. He also
serves on the boards of ICI Pakistan Limited, Pakistan Tobacco Co. Ltd., Murree
Brewery Co. Ltd., Al-Shifa Trust, Pakistan Philanthropy Centre, Pakistan Poverty
Alleviation Fund, Sanjan Nagar Trust, Beaconhouse National University Foundation
and Pakistan International Airlines Ltd. Mr. Azfal has extensive experience in the
civil service of Pakistan , including acting as Health Secretary between 1995 and
1996. Between 1996 and 1998, Mr. Afzal was Finance Secretary for the Pakistan
Ministry of Finance and Economic Affairs. Mr. Afzal holds an M.A. in Philosophy,
Political Science and Economics from Oxford University in Oxford, UK.

Ahmed H. Shaikh is a director of Azgard as well as PAFL and is Azgard's Chief

Executive Officer, positions he has held since January 2003. He also serves on the
boards of Ahmad Aehsun (Pvt.) Ltd., Naseer Mughis (Pvt.) Ltd. and Nafees
International Tekstil Sanayi ve Ticaret A.S. Mr. Shaikh has been associated with
Azgard since its inception in 1992. Mr. Shaikh holds a B.A. in Economics from
Brown University in Providence , Rhode Island , USA .

Aehsun M.H. Shaikh is a director of Azgard as well as PAFL and is Azgard's

Creative Director, positions he has held since January 1993. He also serves on the
board of Azsoft (Private) Limited. Mr. Shaikh has previously worked with Burke
Mills Inc., USA as Director from 1998 to 2000. Mr. Shaikh holds an M.A. in
Architecture from the Architectural Association School of Architecture, London,

Ali Jehangir Siddiqui has been one of Azgard's directors since August 2004. He has
also been the Chairman of PAFL's board of directors since July 2006.He is a
member of the board of directors and of the executive committee of Jahangir
Siddiqui & Company Limited. He currently serves on the board of Pakistan
International Container Terminal Ltd . and has served as a director for Crosby, an
investment banking firm in Hong Kong . Mr. Siddiqui holds a B.A. in Economics
from Cornell University in Ithaca , New York , USA .

Khalid A.J. Al-Sagar has been one of Azgard's directors since October 1997. He also
serves on the board of Kuwait Portland Cement Company, Kuwait Supply
Company, Modern Bakeries Co., Tele-Card Egypt, First National Bank and Bahrain
Flour Mills Co. Mr. Al-Sagar is a graduate from Bonn University , Germany .

Mohammed Kaishgi has been one of Azgard's directors since September 2005. He
also serves on the board of TRG Holdings, LLC. He was previously a Senior
Investment Officer for five years at the International Finance Corporation . Mr.

Kaishgi holds an M.B.A. from Harvard Business School and an M.A. in Philosophy,
Politics and Economics from Oxford University , Oxford , UK .

Chief Justice (Retired) Mian Mahboob Ahmad has been one of Azgard's directors
since March 2004. He also serves on the boards of Bank Ismali Pakistan Limited,
East West Insurance Co. Ltd., Metropolitan Life Assurance Co. of Pakistan Ltd. and
Jahangir Siddiqui & Co. Ltd. He has been associated with the judiciary in Pakistan
for over 20 years, having served in various positions including as Chief Justice of
the Lahore High Court and the Federal Shariah Court and as the Acting Governor of
Punjab. Chief Justice Ahmad holds a B.A. in Law from the University of Punjab in
Lahore , Pakistan


Ahmed Jaudet Bilal is Chief Executive Officer of PAFL. Mr. Bilal holds an M.B.A.
from Western International University in the United Kingdom . Before he assumed
his position at PAFL in July 2006, between 1996 and 1999 Mr. Bilal was the
director of Marketing and Acting Country Manager for American Cyanamid
Pakistan . Prior to this, he was the General Manager of Business Development for
Becton Dickinson Pakistan Limited between 1999 and 2002 and the Business
Manager, Decorative Paints division for ICI Pakistan Ltd. Between 2002 and 2006..

Abid Amin has been Azgard's Chief Financial Officer since February 2007.
Previously, he was a Partner at Riaz Ahmed Saqib and Co (Chartered Accountants)
from 1999 to 2002. He then joined Bosicor Pakistan Limited as head of treasury and
commercial and worked there from 2003 to 2005. Then, until he joined Azgard in
2007, he worked as Group General Manager, Treasury and Commercial with Dewan
Mushtaq Group. Mr. Amin is a graduate of St. Patrick's College, Karachi and passed
his Chartered Accountants Exam from the Institute of Chartered Accountants of
Pakistan in 1998.

Tariq Mohammad Khan is Azgard's Group Director of Finance and is also a director
of PAFL. Previously he worked with Dewan Mushtaq Group as Group General
Manager, Treasury and Commercial from 1992 to 2000. He then worked with
Baluchistan Glass Limited as Group Chief Financial Officer from 2001 to 2003. Mr.
Khan then joined Bosicor Pakistan Limited as Group General Manger-Finance in
2003, a position he held until the middle of 2005. Mr. Khan then returned to Dewan
Mushtaq Group, again as Group Director-Treasury and Commercial, a position he
held until joining Azgard in 2007. Mr. Khan passed his Chartered Accountants
Exam from the Institute of Chartered Accountants of Pakistan in 1993 and has also
been a Fellow of the Institute of Chartered Accountants of Pakistan since 2002.

Atif Farooqui is Azgard's Managing Director of the denim garments division. He

joined Azgard in November 2006 and has previously served as the Worldwide
Business Unit Manager, Spare Parts, Accessories and Upgrades for Picanol's

( Belgium ) (between July 2003 and August 2005). Between February 2000 and
June 2003 he served as Director of Markets, Zone 1 for PPG Industries UK Ltd.
Prior to this, Mr. Farooqui held various roles in ICI's UK.











The garments operation is the newest addition to complement the Azgard portfolio
and thus completes the fully vertical aspirations and visions of the group.

The operation is manned by the best team of specialists bought in from Italy the
garment "Mecca" of the world.

The department of garment division started its production in 1996. They are
fulfilling the initial minimum order quantity 7000 pieces. But, now the total
production of the garment division is per day 12000 pieces.
The garment operation is the newest addition to complement. The azgard-9
portfolio and thus completes the fully vertical aspirations and visions of the
 Record production for one day is 22500 pieces on dated 16 th March 2007.

 Achievement of stitching for the month of March 2007 is 329064 pieces.

(Manga Site)

 Achievement of stitching for the month of April 2007 is 301441 pieces.

(Manga Site)

Garments Division Process Flow

The human capital that created this operation was drawn from the "best of breed"
talent pools across the globe in order to bridge the gap between the third and the first
world nations. We have gained our Laundry technology and expertise from Italy the
creative leaders in garment washing, our sales teams have been selected so they are
regionally specific to wherever our customers are located in the world; our
machinery has been sourced from Switzerland, Italy, Japan, and the USA. Architects

and engineers have been commissioned from the United Kingdom to allow us to
compete with the "best of the best" globally.

The department of denim division started its production in 1995. And they are
yearly produce 14.4 million meters of fabric.
The primary focus and concentration of the denim division is to produce value
added fashion forward advanced denim fabrics which are in line with the marker
leaders located around the world. But at a prose point that truly offers the best buy
to our customers. We are nominated to be the only supplier in Pakistan for some of
the largest and most prestigious customers from around the world.
Azgard-9 has state of the art manufacturing facilities employing rope dyeing and air
jet weaving technology. Our total capacity will be 26 million linear meters by year’s
end 2005.
Azgard9 launches its denim fabric new collection Bi Annually keeping in view the
fashion needs and market trends. The last collection was focused on the following

1. 100% Organic Cotton.

2. A large range of New Finishes were developed

3. New colors were added in the range in which the worth mentioning are

I. The Japanese Indigo a pure indigo Deep Blue shade.

II. Grey Cast: A blend of black and blue to give a peculiar grey blue tone.
4. Controlled Stretched fabrics

In denim, the fabric production is

per month = 2.4 million meters
Per annum = 28.8 million meters

Achieved looms efficiency 95% + which previously were around 90%.

We have the capacity to produce above approx100, 000 (hundred thousand) meters
per day. Introduced/developed & designed new weaves structures like Diamond,
Herringbone, Reversible, Basket, Met Weaves and Stripes. Also we will introduce
light weight qualities from 4.5 oz to 8 oz (Cross Hatch & Fancy wear Denim).

We are also planning to introduce a computerized monitoring system, the (RTMS)

Real Time Monitoring System. The software development is in process. This system
is highly beneficial in order to increase the production and the efficiency of the
looms. Through this we can monitor the loom efficiency, loom production, weft and
warp breakages and the weaver's performance. After implementing this
automated system, we can get the production details FOR THE last 6 month OR 1
year record of the loom's quality wise, beam wise and lot wise through this system.
Another system that we are planning to introduce is AUTOMATED Supply Chain
Management System (Production Planning Software). This system will help us in
having a complete update of the Fabric Shipment that will guide us that how much
fabric of the shipment is in stock and how much need to be produced. Also this will
help us in yarn stock, for example how much weft and warp yarn is required & also
the chemicals stock update. We have strictly implemented to wear Ear Plugs & Face

Masks in the weaving sheds for safety measures.

Denim Fabric Process Flow Chart

The department of specialized yarn started its production in 1972. And they
are yearly producing 67 million/ LBS per year. And the department of
spinning division started its production in 1995, its produce 400 bags per
The company focus is on producing fashion oriented yarns developed in
close cooperation with our customers and our raw material suppliers so that
we can provide products, which are already in demand in the market place.
The range includes both Greige cotton and dyed cotton yarns, blended
yarns and pure synthetic yarns we also offer organic cotton yarns for those
customers who demand it. We are cotton ASA certified and can provide
certificates upon request. Our open end yarns are used primarily in the
denim sector. They lend themselves perfectly for these applications and
have achieved a very high degree of brand loyalty in the markers in which
they are sold. Technical data bout machinery and plant equipment and
capacities is available in the “technical data” section. Old Auto-clave
machine in OE Spinning, Manga site has been re-started after installing new
parts. This conditions yarns more effectively in a much shorter time than
conventional method. Weigh bridge installation for convenience of the

Spinning Process

The new finishing and packing area has a straight layout compared to the previous
one, which is directly concerned with the flow of work….the better ,smooth and
defined the work flow is the more efficiently one can produce …specially when we
are producing approximately 15000pcs/day working in 2 shifts and intend to take it
up to 35000/day…also the space utilization is far superior and better than the
previous one…keeping in view our space shortages hindering expansion, this can be
said as an achievement in its own.

Water Proofing at FPR

The FPR waterproofing was successfully completed covering the major areas of
washing shed and the corridors. The said project will prevent any major loss during
the forthcoming rains. The said waterproofing was done utilizing the existing
material as much as possible to reduce the cost.

DOP Offices

Main purpose of denim office project is to centralize management staff of Denim

Business unit under one roof. The offices shall provide a much better working
environment to Denim staff and improve the communication process

EUP update

Entrance uplift project's holding is over and Projects has resumed the working on
the new receiving bay, social security dispensary, security office and security room
which shall be built according to corporate standards and also embellish the outlook
of Manga site.

The Garments Production Enhancement project is related to garments division at
FPR which consists of using existing abandoned three story building. Currently the
GDP is located in finishing hall which causes a lot of operational issues as well as
cramped area for production. In the existing area GDP does not have separate
allocated space for production. High fashion garment require separate GDP area.
After completing this project the garments will have a smooth production flow
which will enhance production to 15,000 garments /day. The project will include
installation of a new 2000kg lift for shifting of garments upward in the three story
building and shoots for quick garment downward shifting.

Tube-well @ FPR

At FPR unit, a water turbine 1 cusec is being installed as a standby source to nullify
any production loss incase of failure of the existing tube-well. Keeping in view the
past problems faced because of present turbine, the new turbine has been thoroughly
reviewed from technical aspects, ensuring the smooth operation of facility whenever
required. Thorough research is in process for Waste Burning Boiler feasibility by
the Projects & Utilities team. The in-house waste from Denim, garments and
spinning is being fired and tested for its capabilities of steam generation. A waste
burning boiler at a Mureedke Board mill is being utilized for research purposes.

An engine at Muzaffargarh had been giving detonation problems from the last
couple of months. Allied engineering team is continuously experimenting and
confident to get a solution by the end of the month.

Major overhaul of a compressor has been carried out at manga, refreshing the air
coolers, after coolers, motor alignment and inspecting and rectifying all intricate

In-house chemical treatment and cleaning of heat exchanger assembly of another

engine has been successfully carried out. The engine had rising manifold
temperature problems.

The power house

team addressed to the issue by taking measures and successfully brought down the
temperature back to its limits.

LFC (Local fabrication cell) has finished two more projects for its internal
customers. Wooden tables for metal free finishing area have been completed and
delivered. A steel shed for spinning dept and a hot air exhaust duct are being worked
upon currently, which should be delivered by the end of the May.


It was pleasure for me to do work in multinational organization,
I was mainly entrusted with the duties of the area of purchases and
payables in the finance department of weaving division of Azgard-9.

1. Collect all the related documents for the purchase of the yarn and
store. And keep these documents in respective files for the proper
maintenance of record and for the subsequent audit of the area.
2. To book the invoices received for the yarn and store purchase into
the Accounts Payable module of Oracle. In this way, the ledgers
of different suppliers are kept updated.

3. I was exposed to the use of Oracle Applications’ Responsibility

namely Accounts Payable.
4. It helps to book the supplier’s standard invoice. But at the same
time it holds all the subsidiary ledgers of the suppliers along with
their control account.

5. It helps to produce a number of standard and customized reports

for different purposes as required by the management. This

reporting system in oracle is its very distinguished feature and is
at the heart of the Management Information System.

6. I learnt a number of SOPs or standard operating procedures that

are in practice at the store and godown of M/s KML. These
include receipt of goods through inward gate pass or IGP, entry of
goods into oracle, printing of store receipt voucher, store issuance
to production or administration through store issue note or SIN,
goods returned to store through store return note or SRN, raising
indents for new purchases through Store Indents, etc.

7. I learnt as to how the oracle value the store at the period-end

through weighted average method & gives its value through its
standard report.

Financial Reporting Policies

Company policies with reference to accounting,

finance and corporate matters are governed by relevant

corporate regulations, Companies Ordinance 1984, and the

code of corporate Government

It is company resolved to comply with International

Accounting Standards for the preparation of financial

statements with any departure there from being adequately


Company is in the process of establishing and efficient Internal Audit

Department to enhance the scope of internal control and data

generated by the company, it also help in building the confidence of

our creditors, financial institutions and other interested organization


The term "accounting ratios" is used to describe significant relationship between

figures shown on a balance sheet, in a profit and loss account, in a budgetary control
system or in any other part of accounting organization. Accounting ratios thus
shows the relationship between accounting data.

Ratio analysis is very important while measuring the performance of the

business. These ratios are carried out from the Income statement and balance sheet.
Many parties including management, investors and Government are interested in
these ratios. The purpose of analysis is to measure the performance of the company
and financial health of the organization.

Advantages of Ratios Analysis

Ratio analysis is an important and age-old technique of financial analysis. The

following are some of the advantages of ratio analysis:

Simplifies financial statements:

It simplifies the comprehension of financial statements. Ratios tell the whole

story of changes in the financial condition of the business

Facilitates inter-firm comparison:

It provides data for inter-firm comparison. Ratios highlight the factors associated
with successful and unsuccessful firm. They also reveal strong firms and weak
firms, overvalued and undervalued firms.

Helps in planning:

It helps in planning and forecasting. Ratios can assist management, in its basic
functions of forecasting for Planning, co-ordination, control and communications.

Makes inter-firm comparison possible:

Ratios analysis also makes possible comparison of the performance of different

divisions of the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.

Help in investment decisions:

It helps in investment decisions in the case of investors and lending decisions in

the case of bankers etc.

Limitations of Ratios Analysis

The ratios analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand, they suffer from
serious limitations.

Limitations of financial statements: Ratios are based only on the information

which has been recorded in the financial statements. Financial statements
themselves are subject to several limitations. Thus ratios derived, there from, are
also subject to those limitations. For example; non-financial changes though
important for the business are not relevant by the financial statements. Financial
statements are affected to a very great extent by accounting conventions and
concepts. Personal judgment plays a great part in determining the figures for
financial statements.

Comparative study required: Ratios are useful in judging the efficiency of the
business only when they are compared with past results of the business. However,
such a comparison only provide glimpse of the past performance and forecasts for
future may not prove correct since several other factors like market conditions,
management policies, etc. may affect the future operations.

Ratios alone are not adequate. Ratios are only indicators; they cannot be taken as
final regarding good or bad financial position of the business. Other things have also
to be seen.

Problems of price level changes: A change in price level can affect the validity
of ratios are calculated for different time periods. In such a case the ratio analysis
may not clearly indicate the trend in solvency and profitability of the company. The
financial statements, therefore, be adjusted keeping in view the price level changes
if a meaningful comparison is to be made through accounting ratios.

Lack of adequate standard: No fixed standard can be laid down for ideal ratios.
There are no well accepted standards or rule of thumb for all ratios which can be
accepted as norm. It renders interpretation of the ratios difficult.

Limited use of single ratios: A single ratio, usually, does not convey much of a
sense. To make a better interpretation, a number of ratios have to be calculated
which is likely to confuse the analyst than help him in making any good decision.

Personal bias: Ratios are only means of financial analysis and not an end in
itself. Ratios have to interpret and different people may interpret the same ratio in
different way.

Incomparable: Not only industries differ in their nature, but also the firms of the
similar business widely differ in their size and accounting procedures etc. It makes
comparison of ratios difficult and misleading.

Ratio Analysis

Ratio analysis involves the methods of calculating and interpreting financial

ratios to access the firm’s performance and status. The basic inputs to ratio analysis
and firm’s income statement and balance sheet for the periods to be examined.


Two types of Ratio Analysis are generally carried out,

1. Cross Sectional Approach, in this approach, the effectiveness of business is

compared with the competitors business of the same period.
2. Time Series Analysis in which the performance of company over a period is

Ratio Analysis categories:

A) Liquidity

B) Turnover

C) Profitability

D) Leverage

Liquidity ratios are the ratios for testing short term solvency or financial position
of a business. These are designed to test the ability of the business to meet its short
term obligation promptly. A class of financial metrics that is used to determine a
company's ability to pay off its short-terms debts obligations. Generally, the higher
the value of the ratio, the larger the margin of safety that the company possesses to
cover short-term debts.

Current Ratio:
Current ratio may be defined as the relationship between current assets and
current liabilities. This ratio is also known as "working capital ratio". It is a measure
of general liquidity and is most widely used to make the analysis for short term
financial position or liquidity of a firm. It is calculated by dividing the total of the
current assets by total of the current liabilities.


The two basic components of this ratio are current assets and current liabilities.
Current assets include cash and those assets which can be easily converted into cash
within a short period of time, generally, one year, such as marketable securities or
readily realizable investments, bills receivables, sundry debtors, (excluding bad
debts or provisions), inventories, work in progress, etc. Prepaid paid expenses
should also be included in current assets because they represent payments made in

advance which will not have to be paid in near future. Current liabilities are those
obligations which are payable within a short period of tie generally one year and
include outstanding expenses, bills payable, sundry creditors, bank overdraft,
accrued expenses, short term advances, income tax payable, dividend payable, etc.
However, some times a controversy arises that whether overdraft should be regarded
as current liability or not. Often an arrangement with a bank may be regarded as
permanent and therefore, it may be treated as long term liability. At the same time
the fact remains that the overdraft facility may be cancelled at any time.
Accordingly, because of this reason and the need for conversion in interpreting a
situation, it seems advisable to include overdrafts in current liabilities.

Limitations of Current Ratio:

This ratio is measure of liquidity and should be used very carefully because it
suffers from many limitations. It is, therefore, suggested that it should not be used as
the sole index of short term solvency

1. It is crude ratio because it measures only the quantity and not the quality
of the current assets.
2. Even if the ratio is favorable, the firm may be in financial trouble,
because of more stock and work in process which is not easily convertible into cash,
and, therefore firm may have less cash to pay off current liabilities.
3. Valuation of current assets and window dressing is another problem.
This ratio can be very easily manipulated by overvaluing the current assets. An
equal increase in both current assets and current liabilities would decrease the ratio

and similarly equal decrease in current assets and current liabilities would increase
current ratio.


This ratio is a general and quick measure of liquidity of a firm. It represents the
margin of safety or cushion available to the creditors. It is an index of the firm’s
financial stability. It is also an index of technical solvency and an index of the
strength of working capital.

A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time and when they become due. On the other
hand, a relatively low current ratio represents that the liquidity position of the firm is
not good and the firm shall not be able to pay its current liabilities in time without
facing difficulties. An increase in the current ratio represents improvement in the
liquidity position of the firm while a decrease in the current ratio represents that
there has been deterioration in the liquidity position of the firm. A ratio equal to or
near 2: 1 is considered as a standard or normal or satisfactory. The idea of having
doubled the current assets as compared to current liabilities is to provide for the
delays and losses in the realization of current assets. However, the rule of 2:1 should
not be blindly used while making interpretation of the ratio. Firms having less than 2
: 1 ratio may be having a better liquidity than even firms having more than 2 : 1
ratio. This is because of the reason that current ratio measures the quantity of the
current assets and not the quality of the current assets. If a firm's current assets
include debtors which are not recoverable or stocks which are slow-moving or
obsolete, the current ratio may be high but it does not represent a good liquidity

current ratio current assets/current liabilities

Year 2008 2007 2006 2005 2004
Azgard 9 1.08 1.51 1.14 1.09 1.25
Sapphire 1.28 1.66 1.21 1.21 1.31
Nishat 1.19 1.74 1.38 1.24 0.37


Current Ratio clears the extent to which the claim of short term creditors can be
met by assets that are to become cash within a year. The best standard ratio is 2:1 so,
the Azgard Nine has current ratio below standard. There is a mixed trend from 2004
to 2008. Current Ratio of Sapphire is also like Azgard Nine and Nishat.

Current ratio shows that how many times current assets are available to meet its
current liabilities. Azgard Nine current ratio shows mixed trend and it has grater
than 1:1 but only in 2007 it is higher than other years. Sapphire also shows mixed
trend in current ratio. Nishat current ratio shows increasing trend in 2004, 2005 and
in 2006 and in 2007 but decreases 2008 which shows that it has less current assets or
current liabilities increases.

Liquidity or Quick Ratio:

Liquid ratio is also termed as "Liquidity Ratio”,” Acid Test Ratio" or "Quick
Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to
the ability of a firm to pay its short term obligations as and when they become due


The two components of liquid ratio (acid test ratio or quick ratio) are liquid
assets and liquid liabilities. Liquid assets normally include cash, bank, sundry
debtors, bills receivable and marketable securities or temporary investments. In
other words they are current assets minus inventories (stock) and prepaid expenses.
Inventories cannot be termed as liquid assets because it cannot be converted into
cash immediately without a loss of value. In the same manner, prepaid expenses are
also excluded from the list of liquid assets because they are not expected to be
converted into cash. Similarly, Liquid liabilities means current liabilities i.e., sundry
creditors, bills payable, outstanding expenses, short term advances, income tax
payable, dividends payable, and bank overdraft (only if payable on demand). Some
time bank overdraft is not included in current liabilities, on the argument that bank
overdraft is generally permanent way of financing and is not subject to be called on
demand. In such cases overdraft will be excluded from current liabilities.


The quick ratio/acid test ratio is very useful in measuring the liquidity position
of a firm. It measures the firm's capacity to pay off current obligations immediately
and is more rigorous test of liquidity than the current ratio. It is used as a
complementary ratio to the current ratio. Liquid ratio is more rigorous test of
liquidity than the current ratio because it eliminates inventories and prepaid
expenses as a part of current assets. Usually high liquid ratios and indication that the
firm is liquid and has the ability to meet its current or liquid liabilities in time and on
the other hand a low liquidity ratio represents that the firm's liquidity position is not
good. As a convention, generally, a quick ratio of "one to one" (1:1) is considered to
be satisfactory.

Although liquidity ratio is more rigorous test of liquidity than the current ratio,
yet it should be used cautiously and 1:1 standard should not be used blindly. A
liquid ratio of 1:1 does not necessarily mean satisfactory liquidity position of the
firm if all the debtors cannot be realized and cash is needed immediately to meet the

current obligations. In the same manner, a low liquid ratio does not necessarily
mean a bad liquidity position as inventories are not absolutely non-liquid. Hence, a
firm having a high liquidity ratio may not have a satisfactory liquidity position if it
has slow-paying debtors. On the other hand, a firm having a low liquid ratio may
have a good liquidity position if it has fast moving inventories. Though this ratio is
definitely an improvement over current ratio, the interpretation of this ratio also
suffers from the same limitations as of current ratio

quick ratio (current assets-stock)/current liabilities

8 2007 2006 2005 2004
1. 0. 0. 0.7
Azgard 9
0.69 15 88 64 1
1. 0. 0. 0.7
0.72 17 73 59 6
1. 0. 0. 0.3
0.84 33 96 78 7


The acid test ratio is also below standard due to heavy short term borrowings.
Azgard Nine acid test ratio decreased in year 2005 and in 2008. The quick ratio of
Sapphire shows that there is no sufficient liquid asset is available to discharge and
settle its current obligation except in year 2007. The rise in current liabilities is due
to the expansion of project and short and long term financing.

Azgard Nine liquidity is less than standard except in year 2007. Sapphire and
Nishat liquidity is not on considerable point. Azgard Nine liquid ratio is more than
Sapphire and Nishat which shows that it has more liquidity. Nishat liquidity position
is not considerable because it is near to 1 in year 2006 and 2007 which shows that it
has liquid assets to meet its current liabilities. Azgard Nine position is not at
considerable point. It shows decreasing trend in 2005 and in 2008 and less than 1:1.
But it has increasing position in 2004, 2006 and in 2007.

Turnover/ Activity ratios:

Activity ratios are measures of how well assets are used. Activity ratios -- which
are, for the most part, turnover ratios -- can be used to evaluate the benefits
produced by specific assets, such as inventory or accounts receivable. Or they can be
use to evaluate the benefits produced by all a company's assets collectively.

These measures help us gauge how effectively the company is at putting its
investment to work. A company will invest in assets – e.g., inventory or plant and
equipment – and then use these assets to generate revenues. The greater the
turnover, the more effectively the company is at producing a benefit from its
investment in assets

Inventory days

The number of day’s inventory is also known as average inventory period and
inventory holding period. A high number of days inventory indicates that their is a
lack of demand for the product being sold. A low days inventory ratio (inventory
holding period) may indicate that the company is not keeping enough stock on hand
to meet demands. The number of day’s inventory and inventory turnover ratios are
included in the financial statement ratio analysis spreadsheets highlighted in the left
column, which provide formulas, definitions, calculation, charts and explanations of
each ratio.

Inventory Days Inventory Days = Inventory / Cost of Sales*365

Year 2008 2007 2006 2005 2004
Azgard 9 221. 177.4 199.3 225.76 208.5
08 2 4 7
138. 89.3 96.7 143.4 64.3
85 6 4 6 2
91. 79.1 80.0 114.4
90 0 0 6 -


Azgard Nine inventory days increased in 2005 as compare to 2004 and

decreased in 2006 and in 2007 and show increasing in 2008 which shows that
management is not efficient for managing inventory period.

The above diagram shows that in 2004 and 2005 Sapphire has high inventory
days required converting stock in sale which shows that Sapphire management is not
efficient but it decreases with the passage of times and increase in year 2008 and
Nishat trend is equal to Sapphire. They were show increase in 2005 and low in 2006
and in 2007 and it increases in 2008.

Debtors Turnover Ratio or Receivables Turnover Ratio:

Debtor’s 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.

Significance of the Ratio:

This ratio indicates the number of times the debtors are turned over a year. The
higher the value of debtor’s turnover the more efficient is the management of
debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies
inefficient management of debtors or less liquid debtors. It is the reliable measure of
the time of cash flow from credit sales. There is no rule of thumb which may be
used as a norm to interpret the ratio as it may be different from firm to firm.

Debtor's day Trade debtors/Credit sales*365

Year 2008 2007 2006 2005 2004
Azgard 9 91 85 84 109
Sapphire 51 54 67 56
Nishat 18 23 28 56


Graph shows that Azgard Nine has not a good debtor management to receive the
debt or collect the receivables and shows positive trend and debtor’s collection
period is grater than creditor’s period. Sapphire position is also considerable but
Nishat management has more efficient to collect their receivables whish shows
efficient debtor management and in 2004 it is at highest point which indicates
unfavorable situation regarding to debtor collection period.

Creditors / Accounts Payable Turnover Ratio:

This ratio is similar to the debtor’s turnover ratio. It compares creditors with the
total credit purchases. It signifies the credit period enjoyed by the firm in paying
creditors. Accounts payable include both sundry creditors and bills payable. Same as
debtor’s turnover ratio, creditor’s turnover ratio can be calculated in two forms,
creditors’ turnover ratio and average payment period.

Significance of the Ratio:

The average payment period ratio represents the number of days by the firm to
pay its creditors. A high creditor’s turnover ratio or a lower credit period ratio
signifies that the creditors are being paid promptly. This situation enhances the
credit worthiness of the company. However a very favorable ratio to this effect also
shows that the business is not taking the full advantage of credit facilities allowed by
the creditors.

Creditors days Trade Creditors/Credit Sales*365

Year 2008 2007 2006 2005 2004
Azgard 9 49 57 93 65 80
Sapphire 18 15 31 39 25
Nishat 22 20 21 26 45


Azgard Nine creditor’s days increase in 2004 to 2006 and decrease in 2005 to
2007 and in 2007 and 2008. Azgard Nine credit management is better than Nishat
and Sapphire it has 93 days for payment which shows it efficiency in 2006. If we
compare creditor’s days to debtors day than we can see that Azgard Nine and Nishat
is going better to manage its resources

Total Assets Turnover Ratio

The total assets turnover ratio measures the use of all assets in terms of sales, by
comparing sales with net total assets. This interactive tutorial walks you through the
calculations as well as where on the financial statements to find the numbers.

Formula Sales/ Total Assets

Year 2008 2007 2006 2005 2004
0. 0. 0. 0.
Azgard 9
0.37 28 21 42 50
0. 0. 0. 1.
0.79 82 86 73 29
0. 0. 0. 1.
0.51 43 53 52 40


In the above graph we can see that total asset turnover ratio of Azgard Nine
Company showing mix trend in the year 2004 to year 2008. Total asset turnover
ratio is at highest level in year 2004 and as it compare it with Nishat and Sapphire it
is not good even in the last two year 2007, 2008 so we can say it is not using its
assets for generating the revenue in a better way than Sapphire and Nishat cement in
2004 to 2008 and 2004 Sapphire total asset turnover ratio at top so they use much of
it for generating revenue.

But Azgard Nine overall situation regarding to total asset turnover ratio is bad
than other two competitor.

Fixed Assets Turnover Ratio:

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

Formula Cost of sales / Fixed Assets

Year 2008 2007 2006 2005 2004
0 0 0. 1. 0.
Azgard 9
.86 .60 49 06 86
2 2 1. 1. 2.
.19 .10 94 52 92
1 1 1. 1. 2.
.53 .35 29 01 92


It shows the utilization of fixed assets, Azgard Nine decreasing the utilization of
its fixed assets but it has lower times than Sapphire which has more utilization of
fixed assets and at highest level in 2004. Nishat shows the decreasing trend in year
2005 and after it increasing trend still 2008. Nishat has less utilization than Sapphire
and high utilization then Azgard Nine.

Profitability Ratios:

Profitability ratios (also referred to as profit margin ratios) compare components

of income with sales. They give us an idea of what makes up a company's income
and are usually expressed as a portion of each dollar of sales. The profit margin
ratios we discuss here differ only by the numerator. It's in the numerator that we
reflect and thus evaluate performance for different aspects of the business: The
gross profit margin is the ratio of gross income or profit to sales. This ratio indicates
how much of every dollar of sales is left after costs of goods sold.

Gross Profit (GP) Ratio:

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a
percentage. It expresses the relationship between gross profit and sales.


The basic components of the calculation of gross profit ratio are gross profit and
net sales. Net sales mean those sales minus sales returns. Gross profit would be the
difference between net sales and cost of goods sold. Cost of goods sold in the case
of a trading concern would be equal to opening stock plus purchases, minus closing
stock plus all direct expenses relating to purchases. In the case of manufacturing
concern, it would be equal to the sum of the cost of raw materials, wages, direct
expenses and all manufacturing expenses. In other words, generally the expenses
charged to profit and loss account or operating expenses are excluded from the
calculation of cost of goods sold.


Gross profit ratio may be indicated to what extent the selling prices of goods per
unit may be reduced without incurring losses on operations. It reflects efficiency
with which a firm produces its products. As the gross profit is found by deducting
cost of goods sold from net sales, higher the gross profit better it is. There is no
standard GP ratio for evaluation. It may vary from business to business. However,
the gross profit earned should be sufficient to recover all operating expenses and to
build up reserves after paying all fixed interest charges and dividends.

Formula Gross profit/Sales*100

Year 2008 2007 2006 2005 2004
3 30 24. 25. 22.
Azgard 9
4.15 .28 26 63 66
1 13 9. 11. 4.
1.57 .02 60 32 96
1 16 16. 18. 4.
5.41 .56 54 77 96


Gross profit of Azgard Nine Company increasing in 2004 to 2005 and also in
year 2007 and 2008 but decrease in 2006, Due to inflation and economic instability
in Pakistan and irregular power supply of WAPDA in 2007 and 2008. Gross Profit
ratio of three competitors show increasing trend in 2004 to 2005 due to good
economic and financial situation of world and good market situation in Pakistan.
Sapphire position is more considerable up to 2005 but shows decreasing trend in
2006, 2007 and 2008, and Nishat situation for increase year 2007 but it decrease in
all other years.

Operating Profit Ratio:

Operating ratio is the ratio of cost of goods sold plus operating expenses to net
sales. It is generally expressed in percentage. It measures the cost of operations per
dollar of sales. This is closely related to the ratio of operating profit to net sales.


The two basic components for the calculation of operating ratio are operating
cost (cost of goods sold plus operating expenses) and net sales. Operating expenses
normally include (a) administrative and office expenses and (b) selling and
distribution expenses. Financial charges such as interest, provision for taxation etc.
are generally excluded from operating expenses.


Operating ratio shows the operational efficiency of the business. Lower

operating ratio shows higher operating profit and vice versa. An operating ratio
ranging between 75% and 80% is generally considered as standard for
manufacturing concerns. This ratio is considered to be a yardstick of operating
efficiency but it should be used cautiously because it may be affected by a number
of uncontrollable factors beyond the control of the firm. Moreover, in some firms,
non-operating expenses from a substantial part of the total expenses and in such
cases operating ratio may give misleading results.

Formula Operating Profit Margin = Operating profit /Sale*100

Year 2008 2007 2006 2005 2004
Azgard 9 28.18 23.72 16.26 18.38 16.79
Sapphire 14.42 8.60 8.68 10.43 5.35
Nishat 37.91 12.66 12.10 17.58 7.56


Azgard Nine company operating profit increasing in 2004 to 2005 and 2007 to
2008 and decreasing in 2006. Operating profit of all three organization show
increasing trend in 2004, 2005 and 2007 to 2008 but decreases in 2006 due to
increase in operating expenses.

Net Profit/ (Loss) Before Tax:

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


NP ratio is used to measure the overall profitability and hence it is very useful to
proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall
not be able to achieve a satisfactory return on its investment.

This ratio also indicates the firm's capacity to face adverse economic conditions
such as price competition, low demand, etc. Obviously, higher the ratio the better is
the profitability. But while interpreting the ratio it should be kept in minds that the
performance of profits also is seen in relation to investments or capital of the firm
and not only in relation to sales.

Formula Net profit before tax/Sales*100

Year 2008 2007 2006 2005 2004
Azgard 9 9.88 17.37 25.77 17.91 12.52
Sapphire 6.88 3.49 3.31 7.15 3.45
Nishat 33.20 7.89 10.71 17.88 9.45


The Net Profit margin tells us the ability of a company to generate the earning
after meeting all costs of business. There is an increase in net profit in 2006 as
compare to 2004 to 2006. In year 2008 company suffered a minimum net profit. The
ratio has decreased as compare to previous year due to increase in cost and
expansion of project and finance cost. Sapphire shows the increasing trend in 2005
and in year 2007 to 2008 it decrease in year 2006. Nishat top net profit is in year

Net Profit/ (Loss) after Tax:

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


NP ratio is used to measure the overall profitability and hence it is very useful to
proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall
not be able to achieve a satisfactory return on its investment. This ratio also
indicates the firm's capacity to face adverse economic conditions such as price
competition, low demand, etc. Obviously, higher the ratio the better is the
profitability. But while interpreting the ratio it should be kept in mind that the
performance of profits also be seen in relation to investments or capital of the firm
and not only in relation to sales.

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 after tax/Sales*365
year 2008 2007 2006 2005 2004
Azgard 8.8 16.2 23.4 16.7 11.8
9 7 9 1 6 9
Sapphir 6.3 2.3 1.6 5.4 2.3
e 4 6 9 1 1
31.8 7.0 9.9 16.4 10.5
6 5 5 2 9


The Net Profit margin tells us the ability of a company to generate the earning
after meeting all costs of business. There is an increase in net profit in 2006 and in
2005 as compare to 2005 and 2004 respectively. In year 2008 company earned a
minimum net profit in last five years. The ratio has decreased as compare to
previous year due to increase in sale and expansion of project and finance cost. The
other organization has mix trend.

Return on Assets:

Where asset turnover tells an investor the total sales for each $1 of assets, return
on assets [or ROA for short] tells an investor how much profit a company generated
for each $1 in assets. The return on assets figure is also a sure-fire way to gauge the
asset intensity of a business. Companies such as telecommunication providers, car
manufacturers, and railroads are very asset-intensive, meaning they require big,
expensive machinery or equipment to generate a profit. Advertising agencies and
software companies, on the other hand, are generally very asset-light (in the case of
a software companies, once a program has been developed, employees simply copy
it to a five-cent disk, throw an instruction manual in the box, and mail it out to

Formula Net Income / Total Assets*100

year 2008 2007 2006 2005 2004
Azgard 9 3.28 4.57 4.94 7.03 5.96
Sapphire 5.01 1.94 1.46 3.95 2.97
Nishat 16.19 3.06 5.24 8.52 14.81


This ratio measures the return of total investment of the business. Azgard Nine
company show mix trend and in 2005 it is at maximum point than others.
Decreasing trend from year 2006 to year 2008. Nishat company return on asset is
much better than Azgard Nine and Sapphire. It decreases in 2005 to 2007 and than
increase in 2008, it is at highest point in 2008, Sapphire also increases in 2004 to
2005 and than it little decrease in 2006 and at goes down in 2007 and becomes
increase in 2008.

Return on Capital Employed (ROCE) Ratio:
Capital employed and operating profits are the main items. Capital employed
may be defined in a number of ways. However, two widely accepted definitions are
"gross capital employed" and "net capital employed". Gross capital employed
usually means the total assets, fixed as well as current, used in business, while net
capital employed refers to total assets minus liabilities. On the other hand, it refers
to total of capital, capital reserves, revenue reserves (including profit and loss
account balance), debentures and long term loans.

Formula Profit before interest and taxation / Capital Employed *100

2008 2007 2006 5 2004
Azgard 9 5.87 6.60 8.27 13.00 10.73
Sapphire 10.41 4.46 5.07 8.85 7.25
Nishat 24.42 4.25 7.29 12.98 (30.48)


Azgard Nine return on capital employed is high 2004 and it increase in 2005 but
it has decreased in 2006 to 2008. Sapphire return on capital employed increase in
2004 to 2005 and decreases in 2006 and in 2007 and then it go for increase in 2008.
Nishat has less return on capital employed is less than its competitors from 2004 to
2007. And at begging Nishat is going to negative its return of capital employed. In
2008 due to economic crises Sapphire and Azgard Nine return on equity becomes
higher then its competitors.


In real sense, ordinarily shareholders are the real owners of the company. They
assume the highest risk in the company. (Preference share holders have a preference
over ordinary shareholders in the payment of dividend as well as capital. Preference
share holders get a fixed rate of dividend irrespective of the quantum of profits of

the company). The rate of dividends varies with the availability of profits in case of
ordinary shares only. Thus ordinary shareholders are more interested in the
profitability of a company and the performance of a company should be judged on
the basis of return on equity capital of the company. Return on equity capital which
is the relationship between profits of a company and its equity, can be calculated as

Equity share capital should be the total called-up value of equity shares. As the
profit used for the calculations are the final profits available to equity shareholders
as dividend, therefore the preference dividend and taxes are deducted in order to
arrive at such profits.


This ratio is more meaningful to the equity shareholders who are interested to
know profits earned by the company and those profits which can be made available
to pay dividends to them. Interpretation of the ratio is similar to the interpretation of
return on shareholder's investments and higher the ratio better is.

Formula [(Net profit after tax − Preference dividend) / Equity share capital] × 100
YEARS 2008 2007 2006 2005 2004
Azgard 9 8.86 11.11 12.48 23.97 14.95
Sapphire 11.08 3.59 3.45 10.32 7.40
Nishat 24.41 4.02 7.73 14.58 2.62


In 2005 Azgard Nine Company return on equity ratio is at highest point and
better, in 2006 to 2008 it decreases. Sapphire Company also shows mixed trend. It is
going higher in 2005 and than decrease in 2006 to 2007 and it becomes higher in
2008. Nishat company return on equity ratio has mix trend. In 2004 it is at lower
side and than it increase in 2005 and it decrease in 2006 and it goes down and
become more down in 2007 and go to highest point in 2008. It is the highest point
then competitors.

A company can finance its assets either with equity or debt. Financing
through debt involves risk because debt legally obligates the company to pay
interest and to repay the principal as promised. Equity financing does not obligate
the company to pay anything -- dividends are paid at the discretion of the board of

directors. There is always some risk, which we refer to as business risk, inherent in
any operating segment of a business. But how a company chooses to finance its
operations -- the particular mix of debt and equity -- may add financial risk on top of
business risk financial risk is the extent that debt financing is used relative to equity.
Financial leverage ratios are used to assess how much financial risk the company
has taken on. There are two types of financial leverage ratios: component
percentages and coverage ratios. Component percentages compare a company's debt
with either its total capital (debt plus equity) or its equity capital. Coverage ratios
reflect a company's ability to satisfy fixed obligations, such as interest, principal
repayment, or lease payments.


Debt-to-Equity ratio indicates the relationship between the external equities or
outsiders funds and the internal equities or shareholders funds. It is also known as
external internal equity ratio. It is determined to ascertain soundness of the long
term financial policies of the company.

Debt to Equity Ratio Short Term Debt + Long Term Debt

Total Shareholders Equity

YEAR 2008 2007 2006 2005 2004

Azgard 9 2.42 1.79 2.51 2.01 1.29
Sapphire 26.86 19.14 17.66 15.54 12.35
Fiber 22.06 14.34 12.62 12.21 10.99


Azgard Nine debt to equity ratio is lowest point in 2004 and after that it has
decrease its situation in next coming years and increases the ratio, but Sapphire and
Nishat shows increasing trend from 2004 to 2008 which shows that they increasing
there debts for expansion of project and their short and long term debts increased.
It shows that Azgard nine position in debt to equity is better then its competitors.


Interest coverage ratio is also known as debt service ratio or debt service
coverage ratio. This ratio relates the fixed interest charges to the income earned by
the business. It indicates whether the business has earned sufficient profits to pay
periodically the interest charges.

Significance of debt service ratio:

The interest coverage ratio is very important from the lender's point of view. It
indicates the number of times interest is covered by the profits available to pay
interest charges.

Formula Net Profit Before Interest and Tax / Fixed Interest Charges
YEAR 2008 2007 2006 2005 2004
0.40 1.08 1.92 2.43 2.73
0.84 0.46 0.31 1.65 1.35
Nishat 7.05 1.66 2.33 4.99 5.54


Interest Cover Ratio shows that how many times interest is earned by the
company. Azgard Nine Company shows decreasing trend from 2004 to 2008 which
indicates negative sign for the company and it has unavailability the funds to pay
interest expense. Sapphire company is in equal position to Azgard Nine, in 2006 and
2007 Interest cover ration of all the company is not very healthy and it shows that
the financial costs are very high and earnings are very low. Management must look
into the matter and should improve this ratio. In year 2008 Nishat Company earned
7.05 times interest which is higher among all year and easy to pay the interest


Relationship of gains from investments (including realized capital gains) resulting

from insurance operations to earned premiums.


Earnings per share ratio (EPS Ratio) are a small variation of return on equity
capital ratio and are calculated by dividing the net profit after taxes less preference
dividend by the total number of equity shares.


The earnings per share are a good measure of profitability and when compared
with EPS of similar companies, it gives a view of the comparative earnings or
earnings power of the firm. EPS ratio calculated for a number of years indicates
whether or not the earning power of the company has increased.

Formula Profit after tax/No. of shares

YEAR 2008 2007 2006 2005 2004
Azgard 9 2.65 3.26 4.97 7.42 4.31
Sapphire 30.76 10.77 6.70 14.37 8.58
Nishat 38.42 7.58 10.22 12.86 5.17


The earning per share of three companies shown mixed trend in above diagram,
earning per share of Azgard Nine company increase in 2005 as compare it to 2004
and it is at highest point in this year and than it decrease in 2006, and it goes more
down in 2007 and 2008 which mean there is no earning and it going down. Sapphire
and Nishat has also same trends but Nishat has better earning per share ratio as
compare it to Sapphire and Azgard Nine. It is at highest point in 2008. The earning
per share has increased as compared to the previous year. These companies should
better mange its financial position and improve its performance to get out this fall in
earning per share.

The earnings per share for the most recent 12-month period divided by the
current market price per share. The earnings yield (which is the inverse of the P/E
ratio) shows the percentage of each dollar invested in the stock that was earned by
the company.

Formula Earning Per Share / Market Price Per Share * 100

YEARS 2008 2007 2006 2005 2004
Azgard 9 4.30 6.26 22.54 23.19 19.16
Sapphire 42.46 11.64 9.57 15.97 12.26
Nishat 44.69 5.87 9.75 16.92 9.79


Earning Yield of Azgard Nine, Nishat and Sapphire was at lowest point in 2007
due to economic crises. But it has very good condition in 2004 to 2006.Azgard Nine
is at lowest point in 2008 due to economic and financial crises and purchase a
project of fertilizers. Return on investment of Sapphire and Nishat were very high in
2008.of all these competitors but Sapphire shows a good trend but Azgard nine is
less than Sapphire and Nishat.

YEARS 2008 2007 2006 2005 2004

Azgard 9 52.10 22.05 32.00 22.50
Sapphire 92.50 70.00 90.00 70.00
Nishat 129.20 104.80 76.00 52.80


Graph shows that market value of share of Nishat Company is high in 2006 to
2007 as compare to Azgard nine and Sapphire. In 2007 it is at highest point, market

value of Azgard Nine and Sapphire show mixed trend and Azgard Nine market
value of share at high point in 2008 and Sapphire high market value in 2007.


Price earning ratio (P/E ratio) is the ratio between market price per equity share
and earning per share. The ratio is calculated to make an estimate of appreciation in
the value of a share of a company and is widely used by investors to decide whether
or not to buy shares in a particular company

Significance of Price Earning Ratio:

Price earnings ratio helps the investor in deciding whether to buy or not to buy
the shares of a particular company at a particular market price

Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the
management should look into the causes that have resulted into the fall of this ratio.

Formula Market price per equity share / Earnings per share

YEARS 2008 2007 2006 2005 2004
Azgard 9 23.23 15.98 4.44 4.31 5.22
Sapphire 2.36 8.59 10.45 6.26 8.16
Nishat 2.24 17.04 10.25 5.91 10.21


Price earning ratio of Azgard Nine decreasing from 2004 to 2006 which is not
beneficial for the company also unfavorable for the investor and encourage the
investors to invest but increase in 2007 and 2008 and at very good position in 2007
and then become better in 2008, Sapphire and Nishat shows mixed trend, Sapphire
company maximum price earning ratio in 2006 and lowest in 2008 and Nishat price
earning ratio never goes negative and it is at high point in 2007 which encourage the
investor, it shows that there is increase in market value of share and decrease in
value of earning per share.


Azgard nine limited fulfills all its targets of supplies in the market and also
expands its production with the needs of market. In these days company is in its
growth stage. Now the company has three production units including two units for
textile produce and one for Fertilizers. The growth in demand of garments in Asia,
India and Middle East, particularly supply deficit in Europe and USA has geared up
export opportunities for garment Industry of Pakistan. Supply deficit in Europe has
resulted in significant demand for Pakistani garment due to Europe’s geography.
European’s import authority standards have approved Azgard nine for import to
Europe. This demand will also be supported by closing down of some garment units
in Europe due to their strict laws governing pollution control and other environment
hazards. Being one of the big garment units of Pakistan and due to its high quality
Azgard Nine is the prime of choice of the International buyers all over the world.
Azgard Nine is committed to provide high quality garment to its international
customers and is being exported to Germany, India, Middle East, Europe and Africa.
Azgard Nine conveniently meets all the International standards including American,
British, Indian and European standards. Azgard Nine is an ISO 9001-2000 and ISO
14001-2004 certified company and follows all rules and regulations of the
government. Company’s social performance is also good. It has good cooperation
with community and the environment. It is only one company of Pakistan that has
install water filtration plant in its production units in MANGA MANDI. Company
has a good relation with their workers and also trying for their welfare.

Company Life Cycle

Last Five Years Sales of the Company


In the above graph you can see in the year 2008 sale of the company at highest point
and it is showing increasing trend from 2004 so company sale is at increasing side in
the year of 2004 to 2008 there is no much difference between the sale this increasing
trend due to expansion of plant and due to the consumption and the demand in the
market so we can say that Azgard nine’s product’s demand is increasing in the local
market and international market.
Azgard9 is good growing company in the world, but now it is going downward
because of some reasons.


 Vertical Composite Unit

 Multinational Company dealing with worldwide big brands (e.g.:
 Unique washing and dying

 Two power supply units

 Health and safety Environment problems
 Manual cutting
 Company is going to launch a new local brand in 2009
 TQM Implementation is one of its big opportunities.
 Competitors ( CBL, US Denim)
 Political instability in Pakistan

As we know that energy is key factor for any production unit,
and in Pakistan there is lack of energy. This is the main cause of less
production in the country; Azgard9 is also facing such type of issues that are
under consideration of the committee.

Government of Pakistan is increasing the rate of taxes and duties, which

is main reason for low imported raw material.

The all representatives of the whole textile sector in the country, taking
serious notice of the prevailing energy crisis, stated that as a consequence
of load shedding the textile production capacity of various sub-sectors has
been reduced by up to 30 per cent.
The representatives of the all textile associations presented their serious
concerns on the huge losses being incurred due to electricity load shedding
and the strident rise in the Electricity tariff.
They said that the industry has already been crippled due to unprecedented
load shedding during winter months.
The joint meeting of All Pakistan Textile Mills Association (APTMA), Pakistan
Textile Exporters Association (PTEA), All Pakistan Textile Processing Mills
Association (APTPMA), Pakistan Cotton Power Looms Association
(PCPLA), All Pakistan Textiles Sizing Industries Association (APSIA), and
Council of Loom Owners Faisalabad, was held at APTMA House to
formulate a joint strategy to address the alarming electricity crisis being
faced by the textile industry.
The meeting chaired by Javaid Shafiq Siddiqi, Acting Chairman APTMA,
was largely participated by the representatives of Textile Industry
Associations and related segments including Hosiery, Shuttleless looms etc.

The meeting unanimously decided to constitute a joint working group of
electricity management for the textile industry in the larger interests of the
value chain of the textile industry

The joint working group will meet shortly to chalk out a detailed plan to
pursue the following goals; immediate total exemption from Electricity load
shedding for the textile industry value chain; Rationalization and reduction of
electricity tariff and immediate withdrawal of all pending determinations of
NEPRA for all DISCOs for the textile industry.

 There is a need of strong communication within each department and

between the departments.

 Locate all the sub-departments of HR at same place. It will help to

increase coordination between departments.

 There should be separate uniform for workers of each department within

a specific business unit.

 Attendance procedure should be more appropriate. Finger prints should

be taken from the employees.

 Internees should be free to visit all departments.

 There should be proper equipment provided to employees and workers

to prevent noise pollution and dusty areas. The workers should be strictly

bound to use these equipments.

 Stipend should be given to internees.

 There should be separate equipment for Training room.

 There should be separate cafeteria for female employees.

 There should be proper mosque for employees.

The textile & apparel sector is amongst the largest and most significant in
Pakistan’s economy, accounting for over 60% of total merchandise exports
and providing employment to 38% of large scale manufacturing sector

There is an abundant supply of local raw material as Pakistan is the 4 th

largest producer in the world. There is also an abundance of local labor
available at a competitive cost when benchmarked against regional

Against this backdrop the industry remains largely fragmented with few
large scale integrated players. Worldwide denim production capacity is over
6 billion linear meters. Denim is the world’s largest cotton textile product with
estimated per annum global sales of 4 billion units.

Azgard Nine is Pakistan’s largest denim products business by sales with

a fully vertically integrated Manufacturing chain. From cotton to retail ready
apparel products. In house capability for spinning. Weaving, Design,
finishing and stitching enables control over the entire value chain and
provides a significant competitive advantage in facilitating faster speed to
market and control over product quality.

With Longstanding relationship with global retailers and brands, and an

ability to rapidly build up manufacturing capacity, Azgard nine is well poised
to cater to an expected increase in global demand for denim products.
The year 2008 proved very challenging due to a globally recessionary
climate affecting all facets of the business. While the business remained
under pressure, Azgard Nine was able to protect its value added services to
its products portfolio. The key focus remained on meeting and indeed finding
ways to exceed customer expectations.

In addition to Azgard Nine’s vertical manufacturing capabilities which

were already providing customers solution concepts was added. The
company now offers the client a choice of full product development, product
design and a complete logistics solution. Traditionally the customer has
been sourcing supply of the product only. Now the client has the option to
source a full supply chain solution directly from the Company. This value
enhancement helped Azgard Nine to grow with its existing customers and
add new customers as well during a difficult period.

Urea industry in 2008 remained structurally short despite a 5% increase

in production over 2007 (reaching 4.98 Million Tomes). Late arrival of
imports further compounded the shortage across all the provinces. Total
imports by the Trading Corporation of Pakistan (TCP) during 2008
aggregated 450000 tons. The shortage was managed by collaboration
between the federal & provincial Governments and Fertilizer industry by
systematically rationing the available stocks. The government of Pakistan, in
an effort to counter shortages utilized the network of national fertilizer
marketing limited (NFML) & Utility Stores Corporation of Pakistan for selling
50% of local production during Nov-Dec 2008. Pak American fertilizers ltd.
played an active role in coordination with the relevant Government
departments to ensure availability of fertilizer in various districts of Punjab
and NWFP.

Industry Urea sales in 2008 saw an increase of 11% over 2007 and
reached 5.5 million tons. This increase is attributed to demand switch by
farmers from phosphates to urea due to the unprecedented price increase of
phosphate in the international market.

The fertilizer industry supported the farmers in passing on various

subsidies received. The fertilizer industry also contributed an additional
subsidy of Rs. 20.7 billion given by the Government of Pakistan (GOP) in
shape of lower gas prices to the fertilizer industry in 2008. The GOP also
provided additional subsidy of Rs. 14.5 Billion on account of subsidy on
import urea. Thus local Urea prices during 2008 averaged US$ 165.7 per
tom, significantly lower than the average international urea price of US$ 550
per ton in 2008