National Food limited

Balance sheet (ruppee in thousand)

from year 2006 t0 2010
2006
2007
2008
2009
non current assets
property, plant and
365,8 493,44 635,32 614,00
equipment
74
4
5
4
intangibles
4,064
2,779
2,194 35,668
long tern deposits
2,504
2,766
4,444
5,163
372,
498,9
641,9
654,8
442
89
63
35
cuurent assets
stores , spare parts and
loose tools
3,463
4,322
7,499
5,432
367,2 477,00 755,25 846,97
stock in trade
35
7
9
7
101,9 112,58 259,09 274,55
trade debts
40
5
1
6
13,58
advances
6 11,794 18,965 29,044
trade deposites and
prepayment
4,290
2,520
2,333
6,660
accrude interest / mark
up
1,637
other recivables
1,063 25,393
1,446
2,632
tax refunds due from /
adjusted with the
19,27
government
9 37,702 46,603 76,435
83,02
cash and bank balances
5 18,146 13,496 15,205
595,
689,4 1,104, 1,256,
518
69
692
941
967, 1,188, 1,746, 1,911,
total assets
960
458
655
776
share capital and reserves
issued, subscribed and
paid-up capital
capital reserve - share
premium
unappropriated profit

331,54
2

2010
794,77
1
25,688
4,509
824,9
68
5,360
1,502,
232
253,05
0
43,867
10,118
20,664
0
14,101
1,849,
392
2,674,
360

42,50
5

42,505

55,257

414,42
7

6,102
198,4
82
247,0
89

6,102
319,27
3
367,88
0

6,102 454,56 323,84 327,51

6
4
8
515,92 655,38 741,94
5
6
5

189,0
00

143,00
0

100,00
0

60,000

20,000

5,694
11,46
7

15,406

26,262

13,700

2,260

35,357

70,758

59,999

72,621
10,707
105,5
88
530,06
3
28,319
1,189,

non-current liabilities
long term financing
liabilities against assets
subject to finance lease
deferred tax
retirement benefit
obligation

206,
161

193,7
63

197,0
20

6,780
140,4
79

244,9
88
8,491
195,9

315,31
8
10,184
211,27

369,56
5
17,186
536,34

460,62
6
17,764
485,53

current liabilities
trade and other payables
accured interest / mark up

The balance sheet of National foods limited for the five years from 2006 to 2010 showed an increasing trend in the companys total
assets. This is the combined result of both constantly increasing fixed and current assets over the time that is reflected in the increasing
trend of total assets. The companys assets property, plant, equipment, inventory and accounts receivables all increased with the
exception to cash and bank balances which decreased over the period
On the other hand the companys total owner equity also increased as a result of raising shareholders investments. The exhibit also
shows that though the companys long term liabilities have fallen since 2005 but the current liabilities presented an increasing trend
over the period. The falling long term liability is attributed to repayment of long term financing by the firm whereas the rising current
liabilities is the result of nationals rapidly increasing accounts payables

National Food limited

income statement (ruppee in thousand)
from year 2006 t0 2010
2006
2007
2008
1,847,700. 2,391,058. 3,061,746.
sales
00
00
00
1,276,437. 1,572,574. 2,075,969.
cost of sales
00
00
00
571,263.0 818,484.0 985,777.0
gross profit
0
0
0
364,758.0 513,902.0 570,218.0
distribution cost
0
0
0
129,868.0
administrative expenses
-73,112.00 -91,297.00
0
other operating expenses
-8,753.00 -19,094.00 -17,815.00
other operating income
6,681.00
6,110.00 22,309.00
131,321.0 200,301.0 290,185.0
operating profit
0
0
0
finance costs
-24,850.00 -32,675.00 -56,238.00
167,626.0 233,947.0
0
0
claim recovery against raw material
supply
24,096.00 106,471.0 191,722.0 233,947.0
profit before taxation
0
0
0
taxation
-36,107.00 -62,430.00 -77,401.00
70,364.0
129,292.
156,546.
profit after taxation
0
00
00
earnings per share- basic and
diluted - rupees
16.55
23.40
28.33

2009
37,458,706
.00
2,632,255.
00
1,126,451.
00

220,702.00

2010
4,489,946.
00
3,163,199.
00
1,326,747.
00
909,818.0
0
164,303.0
0
-17,295.00
23,214.00
258,545.0
0
-99,364.00
159,181.0
0

220,702.00
-81,241.00
139,461.0
0

159,181.0
0
-72,622.00
86,559.0
0

4.21

2.09

665,664.00
152,110.00
-18,140.00
17,006.00
307,543.00
-86,841.00

Cc3
The companys net income statement reflects that the company has been making considerable profit over the five years and that to too
at the increasing rate. These rising net incomes are the result of increasing net sales at a rate that higher than at which the total costs
of the company has increased over the time.

Cc4
The five years cash flows of the company presented that national foods ltd incurred net decrease in cash in 2007 2008 and 2010. in
2007 though the company generated net cash inflow from operating activities but the sum of net cash outflows of both financing and
investing activities surpassed the inflow and company incurred the net decrease in net cash. Whereas in years 2008 and 2007 the
company faced the net cash outflows from all three operating, financing and investing activities resulting in a decrease in cash. The
company also had net increase in its cash in 2006 and 2009 because really high cash inflows from the operating activities.

sales
net
income
dividen
d
equity
Cc5

years 2006
-2010
19.5
20.4
-70.5
24.6

The above exhibit depicts that though the companys sales, net income and equity had a substantial positive growth
in five years but the dividend paid by the company encountered a really high rate of reduction over this period.

Cc6

Sales

2006
100

2007
100

2008
100

2009
100

2010
100

cost of sales
gross profit

distribution cost
administrative expenses
other operating expenses
other operating income
operating profit
finance costs
claim recovery against raw material
supply
profit before taxation
Taxation
profit after taxation

69.082
5
30.917
52
19.741
2
3.9569
2
0.4737
2
0.3615
85
7.1072
68
1.3449
2

5.7623
53
1.9541
6
3.8081
94

67.803
4
32.196
56

7.02708
47
3.00718
076

70.45071
37
29.54928
634

21.492 18.623
7
9
3.8182 4.2416
7
3
0.7985 0.5818
6
6
0.2555 0.7286
35
37
8.3770 9.4777
87
62
1.3665
5 1.8368
7.0105 7.6409
37
67
1.0077
55 8.0182 7.6409
91
67
2.6109
8 -2.528
5.4073 5.1129
13
65

1.77706
09
0.40607
38
0.04842
67
0.04539
933
0.82101
875
0.23183
13
0.58918
746

20.26345
08
3.659353
59
0.385193
94
0.517021
808
5.758309
788
2.213033
3
3.545276
491

0.58918
746
0.21688
15
0.37230
597

3.545276
491
1.617435
93
1.927840
558

65.769
34.231
04

The exhibit above presents all the income statement components as the percentage of the net sales of national food ltd. The cost of
sales as the proportion of the sales showed huge fluctuations over the years but the drastic fall in 2009 followed by a drastic increase in
2010 is point of focus. The same trend was traced by the other components of the statement such as gross profit, expenses and net
income, they all as the percentage of net sales decreased significantly in 2009 and later increased more significantly in 2010.

2006

2007

2008

2009

2010

37.798
46
0.4198
52
0.2586
88

41.519
68
0.2338
32
0.2327
39
41.986
25

36.373
81
0.1256
12
0.2544
29
36.753
85

32.116
94
1.8657
0.2700
63
34.252
71

29.718
18
0.9605
29
0.1686
01
30.847
31

0.3636
65
40.136
63
9.4732
0.9923
78
0.2120
39

0.4293
35
43.240
31
14.833
55
1.0857
9
0.1335
7

0.2841
34
2.4572
44
14.361
31
1.5192
16
0.3483
67

0.2004
22
56.171
64
9.4620
77
1.6402
8
0.3783
34

0.0827
87
2.6681
29
0.7726
77
63.246
15
17466
55

0.1376
73
3.9981
15
0.7953
34
65.747
29
19117
76

0.7726
71

non current assets

property, plant and equipment
Intangibles
long tern deposits

38.477
current assets
stores, spare parts and loose tools
stock in trade
trade debts
Advances
trade deposites and prepayment

0.3577
63
37.939
07
10.531
43
1.4035
7

cash and bank balances

0.4432
0.1691
19
0.1098
19
1.9917
15
8.5773
17

total assets

61.523
96796
0

2.1366
34
3.1723
46
1.5268
52
58.013
75
11884
58

4.3911
94
0.6303
98
20.505
19
25.526
78

3.5764
83
0.5134
38
26.864
47
30.954
4

3.1635 17.342 15.496

9
09
31
0.3493
53 26.024 16.939 12.246
94
43
59
29.537 34.281 27.742
89
53
9

19.525
6
0.5882
47
1.1846
56

12.032
4
1.2963
02
2.9750
32

5.7252
29
1.5035
6
4.0510
58

21.298
5

16.303
73

25.309
72
0.8772
06

26.531
69
0.8569
09

accrude interest / mark up

other recivables
tax refunds due from / adjusted with the
government

0
0.5272
66
69.152
69
26743
60

share capital and reserves

issued, subscribed and paid-up capital
capital reserve - share premium
unappropriated profit

non-current liabilities
long term financing
liabilities against assets subject to finance
lease
deferred tax

11.279
85

3.1384
43
0.7166
11
3.1383
91
0.3546
44
7.3480
89

0.7478
42
0.0845
06
2.7154
53
0.4003
57
3.9481
6

21.158
44
0.9839
38

24.094
14
0.9291
88

19.820
18
1.0589
08

retirement benefit obligation

current liabilities
trade and other payables
accured interest / mark up

The common size balance sheet illustrate that the non-current assets of the company as the percentage of its total assets increased
only in 2007 but later decreased till 2010. The current asset encountered a fall in just 2007 followed by rising trend till 2010. The total
owners equity as the percentage of total assets showed instability throughout the period. It increased and decreased alternately over
the years. The long-term liabilities percentage in fact rapidly decreased from 2005 to 2007 where as the current liabilities percentage
showed fluctuations over the time.
National Food limited
Trend Index of Selected
Accounts
from year 2006 =100
2006
cash and cash
equivalents
accounts
receivables

83025

2007

2008

21.86
110.4
4
129.8
9
115.7
8
121.7
8

16.26
254.1
6
205.6
6
185.5
0
200.8
3

2009

2010

18.31
16.98
269.3
101940
3
248.23
230.6
Inventory
367235
4
409.07
total current
211.0
assets
595518
7
310.55
total current
216.8
liabilities
514710
0
354.92
174.5
working capital
80808
77.53
87.84
2
27.92
134.8
173.6
167.8
plant assets , net
365874
7
5
2
217.23
184.4
177.4
273.5
other assets
45822
0
0
9
184.45
long term debts
206161
93.99
95.57
68.14
51.22
113.8
170.7
174.2
total liabilities
720871
3
3
9
268.07
148.8
208.8
265.2
owners equity
247089
9
0
4
300.27
129.4
165.7
2027.
net sales
1847700
1
1
32
243.00
cost of products
123.2
162.6
206.2
sold
1276437
0
4
2
247.81
140.8
156.3
182.4
distribution cost
364758
9
3
9
249.43
administrative
124.8
177.6
208.0
expenses
73112
7
3
5
224.73
131.4
226.3
349.4
finance costs
24850
9
1
6
399.86
total cost and
127.5
163.0
203.3
expense
1747910
5
6
9
249.10
earnings before
180.0
219.7
207.2
taxes
106471
7
3
9
149.51
183.7
222.4
198.2
net income
70364
5
8
0
123.02
The trend index indicates that the cash and cash equivalents for national food limited decreased over the years as compare to those in
2006 but the accounts receivables and inventory increased by large values hence leading to rising trend in total current assets as
compare to that of 2006. Both the total liabilities and total owners equity also show rising trend with reference to base year 2006.
Though the companys total cost and expenses increased with reference to 2006 but the increases in net sales throughout the years

were large enough to overcome the increase in expenses enabling national food limited to enjoy rising net income as compare to those
of base year 2006.

2006

2007

2008

2009

2010

current ratio

1.16

1.1

1.07

1.14

1.01

acid test ratio

0.43

0.33

0.33

0.31

0.18

20.78

22.29

16.47

14.08

17.02

3.53
17.324
35
101.98
3
119.30
74

3.73
16.150
74
96.514
75
112.66
55

3.37
21.857
92
106.82
49
128.68
28

3.29
25.568
18
109.42
25
134.99
07

2.69
21.15158
637
133.8289
963
154.9805
827

14.00

3.00

1.00

1.00

1.00

16.00
71.020
96

3.00
78.745
35

1.00
84.004
49

1.00
87.705
55

1.00
116.6477
861
22565

accounts receivable turnover

inventory turnover ratio
days sales in receivable
days sales in inventory
approximate conversion period
cash to current assets ratio
cash to current liabilities ratio
liquidity index
working capital
days purchases in accounts payable
average net trade cycle
cash provided by operations to average
current liabilities
Cc17 Liquidity ratio

80808

62654

70982

14103
0

28.62
90.684
95

36.34
76.326
59

31.84
96.842
48

20.05
114.93
8

23.49
131.4872
712

37.7

17.74

11.52

18.81

21.7

industry
avg

1.20

0.47

20.17

1.04

20.00

75.34

95.34

7.44

13.50

58.26

79934675
.90

47.16

44.41

13.83

While comparing the firms liquidity position with that of the other firms in the industry it can be clearly inferred from the lower current
and acid ratio test ratios of national food ltd in comparison to the industry averages that the liquidity position of the firm not as strong
as the other firms. Infact not only this but the company also have higher days sales in inventory, days sales in accounts receivable and
liquidity index than what on average other firms in industry have is also indicating toward the bad liquidity position of the company.

The current ratios throughout the five years time period are slightly above one with a stable trend indicating the company has just
enough short term funds to pay back its short term liabilities. Whereas the acid test ratio show bad liquidity position for national foods.
Which mean the company without inventory liquidation would not be able to pay back its short term obligations
Account receivable turnover showed considerable fluctuation over the period. The ratio increased in the first year, then decreased from
2007 to 2009 but then again in 2010 it increased by a small value. The general decreasing trend influenced the fluctuations over time
indicating companys inclination towards conservative credit policy for its customers. Days sales receivable also showed significant
fluctuation during the five year with a peak in 2009 attributed to the longer credit time period allowance to its customers in that year. But
just like accounts receivable turnover the decreasing trend prevailed generally in days sales receivable, which reinforces companys
partiality toward strict credit policy over time.
Then the inventory turnover ratio has generally decreased over the time hence indentifying increasing companys stock holdings over
the period. Similarly the days sales in inventory with the increasing trend also signified high idle stock in holding.
Approximation conversion period of the company increased over the time meaning that over the time rapidity with which inventory and
accounts receivables could be converted into cash decreased.
Cash to current asset ratio for nationals has fallen drastically from 2006 to 2010 revealing severe liquidity issue for the company as the
cash balances have reduced. Likewise the cash to current liabilities ratio has also radically fallen over the years exposing that the
company was unable to pay off larger portion of its short term liabilities from cash available. The liquidity crises faced by company over
the years is also verified by the companys worsening liquidity index which showed that nationals current assets are not readily
convertible into cash to pay back its current liabilities. Same can be inferred from the decreasing working capital due to the falling
current assets of the company over the time.
The days purchases in accounts payable increased since 2008 after which it decreased till 2010. This suggests that the companys
credit time to pay back its purchases has decreased over the years.
The average net trade cycle increased which means the companys liquidity position worsened over time. Similar position was depicted
by the generally decreased cash provided by operations to average current liabilities ratio over the five years.

The ratios overall presented that after 2007 the company encountered liquidity crises due to insufficient current assets , low cash
holdings , long credit payment period for its customers and low inventory liquidation reducing its ability to pay back its short term
obligations. The company it tried to tackle this by taking refuge under the implementation of strict credit policy for its customers but all in
vain as the inventory liquidation and low cash holdings are still the area of problem.

cash flow adequacy ratio

=

5 years sum of sources of cash from operation

5 year sum of capital expenditures, inventory additions, and cash dividends
1163454
805738+1145577+23579
0.589

cash re investment ratio cash provided by

=
operation dividends
total assets - current laibilities + accumulated depreciation
year 2006-year 2010
average

193909-4716
1697842-1023595-251059

20.4

year 2006

179277-6654
967960-514710+161691

28.0

year 2007

101276-8463
1188458-626815+189868

12.3

year 2008

95650-8242
1746655-1033710+240925

9.1

year 2009

202147-205
1911776-1115911+309823

18.2

year 2010

391195-15
2674360-1826827+352987

32.5

adequacy
reinvestment

Industr
y
0.5538
36
0.1129
14

The cash flow adequacy ratio for national food limited is below one which clearly refer to the fact the total amount of funds generated
from operation in five years are insufficient to cover the total capital expenditure , purchase of inventory and dividends paid over these
years.
The cash reinvestment ratio of the company fluctuated considerably over the years generally decreasing from 2006 to 2009 followed by
a rise in 2010. These changes overtime explain that the company improved its deteriorating ratio in 2010 by enlarging the portion of
cash reinvested in the growth business activity and asset replacement.

2006.
00
return on assets
return on common equity
return on long term debt and equity
financial leverage index
equity growth rate
dissagregation of return on
common equity
adjusted profit margin
asset turnover
financial leverage ratio

10.32
32.71
23.82

2007.
00
13.96
42.05
29.66

2008.
00
13.16
35.43
30.30

2009.
00
10.71
23.81
25.97

2010.00
6.59
12.39
19.73

3.17

3.01

2.69

2.22

1.88

32.40

41.69

35.24

23.81

12.39

0.04
1.91
4.50

5.41
2.01
3.87

5.11
1.75
3.95

0.04
19.59
3.26

industr
y
7.3802
81
12.126
82
14.867
61
1.2321
91

1.93
1.68
3.83

Invested capital ratios cc21

The ROA ratio for national though increased in 2007 but showed a general decreasing trend afterwards which reflected that the
companys management of assets to generate the net income has deteriorated over time.
The ROE ratio just like ROA increased in 2007 and considerably decreased in the last three years mainly due to rising total owner
equity. This shows that the company is unable to increase its net income in proportion to the rapidly increasing investments by its
shareholders.
The return on long term debt and equity similarly increased in the initial years but later decreased indicating that the efficiency of the
company by which it managed its debt and equity worsened over time.
The financial leverage of national food ltd on general decreased during the years reinforcing that the competency by which company
managed the debt has fallen over the five years. But remained above one in all the five years which mean the companys ability to
manage its debt has not worsen to extent irreparability,

The equity growth rate for the company showed the same trend as that of ROE because the dividend payout ratio remained constant
in these five years. Hence the growth rate increased initially and eventually decreased in the last years.
Firms assets management ratios are almost equibalent to the industry averages obtained implying that the firm is as efficiently
managing its assets as the other firms in the industry.

gross profit
margin
Operating profit
margin
net profit margin

30.92

34.23

32.20

29.97

29.55

7.11

8.38

9.48

0.08

5.76

25.52

27.48

25.28

2.46

26.52

28.10
7.57
10.11

The gross profit margin of the company on general decreased from 2007 to 2010. Though the net sales for the company increased
over the years but the companys rapidly increasing cost of goods sold led to falling gross profit margin. The operating profit margin
incurred a rapid fall in 2009 followed by a substantial increase in 2010. Similarly net profit margins too encountered a drastic fall in 2009
and recovered in 2010. All the three ratio indicate towards the declining profitability of the company.
The gross profit magin and operating profit margin of the firm is really near to those of industry averages of the ratios but as for net
profit magin of the company is far more than that of industry implying that the profitability of the firm is really good.

2006
total debt to equity
total debt ratio
long term debt to equity ratio
adjusted long-term debt to equity
equity to total debt
fixed assets to equity
current liabilities to total liabilities
earning to fixed charges
cash flow to fixed charges

0.90
0.23
0.79
0.79
1.11
1.51
0.71
5.28
7.21

2007
0.57
0.18
0.43
0.43
1.75
1.36
0.76
6.13
3.10

2008
0.35
0.10
0.24
0.25
2.84
1.24
0.84
5.16
-1.70

2009
0.19
0.07
0.11
0.13
5.19
1.00
0.89
3.54
2.33

2010
0.10
0.03
0.03
0.06
10.23
1.11
0.95
2.60
-3.21

industr
y
1.5475
65
0.3222
59
0.3196
25
0.1308
12
114.76
22
1.1375
64
0.6802
12
15.980
04
8.4960
74

The exhibit above explains the changes in capital structure of the company over the five years. The total debt to equity ratio decreased
substantially from 2006 to 2010 which implies that the company rather than borrowing to finance its growth over these years raised

funds from increasing its share holders equity. The decreasing debt ratio implies that the total debt of the company reduced over time
hence reducing the companys riskiness. Same can be inferred from the falling long-term debt to equity ratio that the company is
generating its funds more by raising the equity and this is also reducing companys riskiness. The current liabilities as the proportion of
total liabilities have increased over the years. The earning to fixed charges for the company decreased in the five years which indicates
the arising inability of the firm to cover its already low fixed charges from its earning. Not only this but the negative cash flow to fixed
charges further verifies the rising inability of the firm to provide proper coverage to its fixed charges.
The firms total debt to equity, total debt ratio , unadjusted and adjusted long term debt to equity ratio along with the equity to total debt
ratios are all below than that of the average ratios obtained from the industry.

price to earning
price to book
earnings yield
dividend yield
dividend payout
ratio

market
measu
res
2006
7.16
20.40
0.14
0.0013
2

2007
6.82
18.43
0.15
0.001
25

2008
10.02
30.42
0.10
0.000
53

0.01

0.01

0.01

2009
53.59
114.13
0.02
0.00000
274
0.00014
7

2010
28.21
32.93
0.04
0.00000
061
0.00001
7

The price to earnings ratio of the company fluctuated throughout the period with a peak in 2009. Though in general the ratio has
increased in 2010 in comparison to the year 2006 but it was after the peak in 2009 that the company encountered a significant fall in
the ratio. This fall in 2010 depicted the rise in investors unwillingness to pay high for each dollar of earning generated by the firm. In the
same way the price to book value had its peak value in 2009 and afterward declined by a large value in 2010. This fall of 2010 indicates
the undervaluation of the company in the stock market reflected through the share price of the firm. The earning yield was really low for
national food limited throughout the period attributing to the significant fall in both the earnings per share of the company along with its
share price. The dividend yield by the time the company reached in year 2010 became almost equal to zero reflecting the extremely
low dividends paid by company. Correspondingly the falling dividend payout ratio also reinforces the low amount of dividend paid as the
percentage of the companys earning.

2006

2007

2008

2009

sales to cash and

equivalents

22.25

131.7
7

226.8
6

247.2
0

sales to receivable

18.13

21.24

11.82

13.69

sales to inventories
sales to working capital

5.03
22.87

5.01
38.16

4.05
43.13

4.44
26.65

2010
indust
318.4
ry
1
92.16
17.74
18.60
2.99
198.9
4.40

8
sales to fixed assets

4.96

4.79

4.77

5.74

5.44

sales to other assets

40.32

28.30

37.66

29.98

53.12

1.91

2.01

1.75

19.59

1.68

3.59

3.81

2.96

3.37

2.46

sales to total assets

sales to short-term
laibilities

50.23
5.88
33.68
2.37
2.99

CC22
The exhibit above explains the assets utilization ratios for the company. The cash utilization ratio among all the
ratios showed the most improvement from 2006 to 2010, whereas the receivables and inventories utilization
ratios declined over the time. The working capital utilization due to the rapid increase in cash utilization also
increased. The fixed assets utilization ratio along with total assets utilization ratio remained almost the same
over the years. Simultaneously the sales to long-term liabilities ratio declined during the five years depicting
inefficient use of the current liabilities to generate sales.
These utilization ratios of the firm are either the same or higher than that of the other firms in the
industry. Its just the cash utilization ratio and working capital utilization ratio which have abornamlly high
values but all these imply the firm is effiecently utilsing its assets to grnrate sales.