IndustryProfitability Ratios Gross profit to salesPercent29.12%38.38%Operating Cost to salesPercent79.12%32.31%Profit before tax to salesPercent25.45%31.55%Net profit after tax to salesPercent21.84%22.87%Return on Equity after taxPercent11.17%25.79%Return on Capital EmployedPercent11.67%9.14%Liquidity RatiosCurrent RatioTimes1.42 : 11.93:1Quick/Acid Test RatioTimes0.95 : 11.32:1Cash to Current LiabilitiesTimes0.66 : 13.36:1Activity/Turnover RatiosInventory turnoverTimes3.154.01No. of days in InventoryDays115.8747.10Debtor turnoverTimes21.4243.4No. of days in ReceivablesDays17.0435.97Creditor turnoverTimes2.1118.30No. of days in PayablesDays172.9926.89Operating CycleDays(40.08)59.09Total assets turnoverTimes0.380.69Fixed assets turnoverTimes0.840.16Investment Valuation RatiosEarnings per share (A. Tax)Rupees32.4421.96Price / Earnings ratio (after tax)Times11.7311.03Dividend Payout ratioPercent20.04%24.07%Price to Book RatioPercent1.302.56Capital Structure RatiosFinancial leverage ratioTimes0.00 : 1-Debt to Equity ratioTimes0.00 : 10.7 : 1Interest Coverage ratioTimes-0.26 : 1
STRATEGIC ANALYSIS OF LUCKY CEMENT LIMITEDRATIO ANALYSIS OF LUCKY CEMENT Ltd.PROFITABILITY RATIOSGROSS PROFIT TO SALES:Lucky Cement Limited is not efficiently using its raw materials and labor during the production process and notearning much profit after paying cost of goods sold because the gross profit margin of the company isdecreasing that is 29.12 percent and the industry ratio is 38.38 percent. This indicates that a company isunderpricing. Without an adequate gross profit margin a company cannot pay for its operating expenses. Inessence, it is not generating strong sales relative to its cost of goods sold which is your cost to make or acquireproducts. This is a problem, since you need strong gross profit to achieve operating and net profits.OPERATING COST TO SALES PROFIT:Lucky Cement Ltd has a higher operating cost of sales ratio i.e. 79.12% in the current year as compared to theindustry average (which is 32.31%). It means the company’s income is not much profitable for the investor andthe investor is willing to invest in other companies of the cement industry.The five years trend of the company shows that there is a decreasing trend in the years 2015-2017, the ratiodecreases from 66.23% to 59.35% which means the company operated its business efficiently; however, in 2018the ratio increased by almost 19.33% (from 59.35 to 70.82%), the company’s revenue increased by 4% andoperating cost by 9.45% in 2018. It shows the downturn in the performance of the company as more operatingexpenses are incurred.PROFIT BEFORE TAX TO SALES (PBT):PBT is increasing in 2014-2017 but in 2018-19 it is decreasing because of higher cost mainly due to increase inprices of coal and other fuel prices. As compare to industry benchmark company’s PBT is declined due tohigher cost.PROFIT AFTER TAX TO SALES:The profit after tax to sales ratio i.e. 21.84% in the current year is lower as compared to the industry average(which is 22.87%). It means the company’s profit per sales rupees after deducting all expenses is not muchprofitable for the investors and they are willing to invest in other big names of the cement industry.
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- Spring '20
- Farrukh Aslam
- Financial Ratio, Lucky Cement