Financial Ratio And Trend Analysis Of Fauji Fertilizer Bin Qasim LTD

Abstract

ABSTRACT Today, fertilizer sector is one of the most important sectors in Pakistan and play a vital role in GDP growth, it is of utmost importance to evaluate the solvency of this sector. This project is aimed to analyze the financial health of Fauji fertilizer bin Qasim ltd through ratio analysis and trend analysis. We have employed the tools of ratio analysis along with trend analysis for FFBL. The trend has been analyzed from year 2000 till 2009 while the ratio analysis has been done for the year 2009 and is being compared to the industry average of the same year. FFBL has declining liquidity ratios coupled with a lagging from the industry median. The turnover ratio shows a poor performance from inventory and asset point of view for which the credit policy should be revised; its bad debt losses and the company’s collection experience should be analyzed. These two points show that there is a problem in comparison of industry performance. Moreover, one should investigate the inventory management and obsolescence of inventory and any imbalances in the makeup of inventory. Sluggish asset turnover and ROI, ROE and ROA lower than the average industry firm is also a bad sign. But the brighter aspect is its valuation ratios which show greater return to its investors and high price to earning ratio, high ROE and Dividend per share. Investors are happy to buy its shares. Hence, the ratio analysis of FFBL shows a mix picture and FFBL should improve it by gaining operational efficiency and capitalizing on its expanded capacity.