Blog: ACC501 Business Finance Assignment No. 1 solution

Semester “Fall 2011”

“ Business Finance (ACC501) ”

Assignment No. 01 Marks: 20

Objectives of the Assignment:

If a student completes this assignment with full understanding of ratio analysis, he/she would be able:

• To read and extract the required information from the financial statements.

• To calculate, compare and interpret the results of the ratios.

• To apply the concepts effectively in the upcoming courses of Finance.

• To prepare well for the courses of internship or final project of Finance.

RATIO ANALYSIS

The Crescent Textile Mills Ltd. (Crestex) is one of the leading public limited companies incorporated under the Companies Ordinance 1984. Its shares are quoted on all the Stock Exchanges in Pakistan. The Crestex is engaged in business of textile manufacturing comprising of made ups, processed fabric, greige fabric and yarn made from raw cotton and synthetic fiber(s). Crestex also operates a cold storage and a power generation house. The financial statements of the company reveal that it is one of the financially viable companies of the textile industry in Pakistan.

Q1. Using the audited financial statements with accompanying information for the year ended June 30, 2010 provided in the Annual Report 2010 of The Crescent Textile Mills, you are required to conduct “Time-series Analysis” of solvency measures of the company by computing and interpreting the results of the following ratios for the years 2009 & 2010:

�� Total Debt Ratio

�� Debt-Equity Ratio

�� Times Interest Earned (TIE) Ratio

Note:

“Time series Analysis” refers to the analysis of ratios of the same company for different time periods. Interpretations carry reasonable marks so they should not only be based upon individual figures but also on the comparison of the ratios for both years.

Similarly, Kohinoor Textile Mills Ltd. (KTML) is one of the leading companies in the same business sector and having close competition with Crestex.

Q2. Using the audited financial statements with accompanying information for the year ended June 30, 2010 provided in the Annual Reports 2010 of The Crescent Textile Mills and Kohinoor Textile Mills, you are required to conduct “Cross company Analysis” of liquidity measures of the companies by computing and interpreting the results of the following ratios for Crestex & KTML for the year 2010 only:

�� Current Ratio

�� Quick Ratio (Acid-test Ratio)

�� Cash Ratio

Note:

Cross company analysis refers to the comparison of the ratios of two or more companies within same business sector (industry) for the same period. Interpretations carry reasonable marks so they should not only be based upon individual figures but also on the comparison of the ratios for both companies.

It is important to note that annual reports for the year 2010 should be used for analysis. The annual reports are available on the following companies’ websites:

Crescent Textile Mills: www.crescenttextile.com

Kohinoor Textile Mills: www.kmlg.com

The annual reports must be downloaded from the companies’ websites only. Annual reports downloaded from any other source would not be acceptable.

Points to Remember:

• The financial statements in the annual report 2010 not only contain the data for the year 2010 but also for the year 2009.

• The term “Total Debt” refers to the total liabilities of the company.

• Interest expense includes mark up on short-term and long-term borrowings which can be found in the details of Finance Cost under Notes to the Financial Statements e.g. Note # 32 in the annual report 2010 of Crescent Textile Mills.

• Inventory is mentioned as Stock-in-trade in the balance sheet.

Schedule

Opening Date and Time October 21, 2011 At 05:00 P.M. (Afternoon)

Due Date and Time October 28, 2011 At 11:59 P.M. (Mid-Night)


Solution:

Another Solution:
Download it: ACC501 Assignment Solution