Analysis of Financial Statements: Burewala & Crescent Textile Mills

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Analysis of Financial Statements: Burewala & Crescent Textile Mills

 

Net Profit Margin

 

Net profit margin, also known as the return on sales is used as a measure of profitability. It gives a measure of net income generated by sales.

 

 

1997 1998 1999 2000 2001
Burewala 0.111 0.108 0.088 0.081 0.085
Crescent 0.00017 0.000677 -0.00026 0.001052 0.000763

 

 

The margin does not show a very good picture. The reasons are different charges to the revenues including the debt charges. A big portion of the cost comprises of the cost of goods sold(almost 90 % of total revenues). The sales are growing at a very steady pace without much problems as there is a very stable market for the products. As for Burewala the sales dropped for a while a few years back when they stopped their exports, now they are focusing only in the local market. The sales here are, however, increasing. The margin is not very high and there is a minimal level of returns.

 

 

Total Asset Turnover

This ratio gives the activity of assets and the ability of the firm to generate sales through their use.

 

1997 1998 1999 2000 2001
Burewala 0.926 0.751 0.777 0.8 0.841
Crescent 1.226943 0.967958 0.952816 0.972058 2.153362

 

As for Crescent there have been years of very high profitability, as the ratio has exceeded 1.00 for several periods.
The total asset turnover shows that for both the companies the assets have not been fully utilized to generate sales mostly. The ratio, however, is much strong as it is mostly very close to 1.00 for both the companies which shows a very healthy trend.

 

In the case of Burewala, the trend has been close to 1.00 but never exceeded the average figures.

 

Return On Assets

 

Return on assets is a measure of the firm’s ability to generate profits from the assets. It shows a very good relationship of net income and the assets that generate that income.

 

1997 1998 1999 2000 2001
Burewala 0.103 0.081 0.068 0.065 0.071
Crescent 0.02 0.07 -0.02 0.001 0.07

 

 

This return on assets in case of Burewala has not been very promising. There have been operating losses for quite some periods. There have been fluctuations in it in a few years but more or less the standard deviation has been very close.

 

As for Crescent, it showed quite a few losses. The return is low which shows that the assets have not being utilized to thier maximum.

 

 

Gross Profit Margin

 

Gross profit margin gives the true picture of the profits and margins on sales. It show  the real picture of the CGS, showing which way it has gone and by what proportions.

 

1997 1998 1999 2000 2001
Burewala 0.106 0.06 0.04 0.035 0.037
Crescent 0.1556 0.142702 0.182529 0.191655 0.204233

 

 

The gross profit margin for both the companies are very low due to high cost of goods sold. The profits of Crescent are relatively better than Burewala. There was a very rapid increase in the margin for Crescent in the last three years. As for Burewala the trend is very much stable.

 

 

 

Current Ratio

 

Current ratio is a very good measure of liquidity of the firm. It shows how well can the company meet its short term obligations and thus how healthy it is.

 

1997 1998 1999 2000 2001
Burewala 2.4137972 3.1265539 2.56291538 3.28173711 3.297741901
Crescent 1.055 1.041 1.108 1.107 1.091

 

Both the companies show a very stable and potent position as far as meeting there short term obligations. Burewala has shown much better position in its current asset to liability as compared to Crescent, yet it has a very small asset to liability base as compared to Crescent.

 

 

Debt Ratio

 

This gives a comparison between company’s total liabilities and total assets. Basically gives the percentage of assets financed through debt.

 

1997 1998 1999 2000 2001
Burewala 0.307 0.259 0.305 0.25 0.267
Crescent 0.62781 0.664208 0.684181 0.682142 0.67711

 

 

Crescent textile has a very wide creditor base with almost 60-65 % of its assets financed through debt at different times. This asset/Debt base is good in the long term for Crescent.

 

As for Burewala it has only 30 % through debt. This is a very good sign as far as day-to-day obligations are concerned as it is less reliant on outsiders for its financing.

 

Debt/Equity Ratio

This is another good measure of the firm’s long term debt paying ability.

 

1997 1998 1999 2000 2001
Burewala 0.444 0.3491 0.4401 0.338 0.341
Crescent 1.684026 1.97803 2.166371 2.146062 2.097027

In case of Burewala we can see that it is dependant to a very insignificant level upon borrowed funds, a thing that is considered good at times but involves too much of risk.

 

As for Crescent the liabilities are more than equity. There are higher interest rates as the debt goes higher.

 

 

Net Profit Margin

 

 

Net profit margin, also known as the return on sales is used as a measure of profitability. It gives a measure of net income generated by sales.

 

 

1997 1998 1999 2000 2001
Burewala 0.111 0.108 0.088 0.081 0.085
Crescent 0.00017 0.000677 -0.00026 0.001052 0.000763

 

 

 

The margin does not show a very good picture. The reasons are different charges to the revenues including the debt charges. A big portion of the cost comprises of the cost of goods sold(almost 90 % of total revenues). The sales are growing at a very steady pace without much problems as there is a very stable market for the products. As for Burewala the sales dropped for a while a few years back when they stopped their exports, now they are focusing only in the local market. The sales here are, however, increasing. The margin is not very high and there is a minimal level of returns.

 

 

 

Total Asset Turnover

 

This ratio gives the activity of assets and the ability of the firm to generate sales through their use.

 

1997 1998 1999 2000 2001
Burewala 0.926 0.751 0.777 0.8 0.841
Crescent 1.226943 0.967958 0.952816 0.972058 2.153362

 

The total asset turnover shows that for both the companies the assets have not been fully utilized to generate sales mostly. The ratio, however, is much strong as it is mostly very close to 1.00 for both the companies which shows a very healthy trend.

As for Crescent there have been years of very high profitability, as the ratio has exceeded 1.00 for several periods.

In the case of Burewala, the trend has been close to 1.00 but never exceeded the average figures.

 

 

 

 

 

Return On Assets

 

Return on assets is a measure of the firm’s ability to generate profits from the assets. It shows a very good relationship of net income and the assets that generate that income.

 

1997 1998 1999 2000 2001
Burewala 0.103 0.081 0.068 0.065 0.071
Crescent 0.02 0.07 -0.02 0.001 0.07

 

 

This return on assets in case of Burewala has not been very promising. There have been operating losses for quite some periods. There have been fluctuations in it in a few years but more or less the standard deviation has been very close.

 

As for Crescent, it showed quite a few losses. The return is low which shows that the assets have not being utilized to thier maximum.

 

 

 

Gross Profit Margin

 

Gross profit margin gives the true picture of the profits and margins on sales. It show  the real picture of the CGS, showing which way it has gone and by what proportions.

 

1997 1998 1999 2000 2001
Burewala 0.106 0.06 0.04 0.035 0.037
Crescent 0.1556 0.142702 0.182529 0.191655 0.204233

 

 

The gross profit margin for both the companies are very low due to high cost of goods sold. The profits of Crescent are relatively better than Burewala. There was a very rapid increase in the margin for Crescent in the last three years. As for Burewala the trend is very much stable.

 

 

 

 

Current Ratio

 

Current ratio is a very good measure of liquidity of the firm. It shows how well can the company meet its short term obligations and thus how healthy it is.

 

1997 1998 1999 2000 2001
Burewala 2.4137972 3.1265539 2.56291538 3.28173711 3.297741901
Crescent 1.055 1.041 1.108 1.107 1.091

 

Both the companies show a very stable and potent position as far as meeting there short term obligations. Burewala has shown much better position in its current asset to liability as compared to Crescent, yet it has a very small asset to liability base as compared to Crescent.

 

 

Debt Ratio

 

This gives a comparison between company’s total liabilities and total assets. Basically gives the percentage of assets financed through debt.

 

1997 1998 1999 2000 2001
Burewala 0.307 0.259 0.305 0.25 0.267
Crescent 0.62781 0.664208 0.684181 0.682142 0.67711

 

Crescent textile has a very wide creditor base with almost 60-65 % of its assets financed through debt at different times. This asset/Debt base is good in the long term for Crescent.

 

As for Burewala it has only 30 % through debt. This is a very good sign as far as day-to-day obligations are concerned as it is less reliant on outsiders for its financing.

 

Debt/Equity Ratio

 

This is another good measure of the firm’s long term debt paying ability.

 

1997 1998 1999 2000 2001
Burewala 0.444 0.3491 0.4401 0.338 0.341
Crescent 1.684026 1.97803 2.166371 2.146062 2.097027

 

In case of Burewala we can see that it is dependant to a very insignificant level upon borrowed funds, a thing that is considered good at times but involves too much of risk.

 

As for Crescent the liabilities are more than equity. There are higher interest rates as the debt goes higher.

 

 

 

 

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