By: Yasir Rehman

CHAPTER: 01

INTRODUCTION AND HISTORY OF THE COMPANY

THIS CHAPTER COVERS

1. Mission Statement Of the Company

2. Vision Statement Of the Company

3. Introduction of the Azgard Nine

4. History of Azgard Nine

5. History in a graph

6. Corporate Affairs

7. Company Information

8. Registered Offices

9. Business Strategy

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TEXTILE INDUSTRY OF PAKISTAN

When we think of manufacturing industry in Pakistan, it is the textile industry that
immediately comes to mid that is playing an important position in terms of the
employment generation and value added special contribution towards the exports. The
textile industry which is endowed its strong base of raw material has started its journey
from non existence in 1947 with meager size of 78000 spindles and merely 3000 looms
that is too in the unorganized sector, with only one textile unit and it could supply only
8% of the domestic demand derived from its population of 76 million people.
The industry has gone through a long way and now possesses 443 units, 8.4 million
spindles and 166,000 rotors, 20,000 shuttles less looms, 200,000 power looms, over 600
processing units and over 2500 garments units. The table given on the next page shows
the contributions of textile sector in the economic development of the country.

Economic Environment
The textile industry is one of the most important sectors of Pakistan. It contributes
significantly to the country's GDP, exports as well as employment. It is, in fact, the
backbone of the Pakistani economy.

Established capacity

The textile industry of Pakistan has a total established spinning capacity of 1550 million
kgs of yarn, weaving capacity of 4368 million square metres of fabric and finishing
capacity of 4000 million square metres. The industry has a production capacity of 670
million units of garments, 400 million units of knitwear and 53 million kgs of towels.

The industry has a total of 1221 units engaged in ginning and 442 units engaged in
spinning. There are around 124 large units that undertake weaving and 425 small units.
There are around 20600 power looms in operation in the industry. The industry also
houses around 10 large finishing units and 625 small units.

Pakistan's textile industry has about 50 large and 2500 small garment manufacturing
units. Moreover, it also houses around 600 knitwear-producing units and 400 towel-
producing units.

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Contribution to exports

According to recent figures, the Pakistan textile industry contributes more than 60% to
the country's total exports, which amounts to around 5.2 billion US dollars. The industry
contributes around 46% to the total output produced in the country.

In Asia, Pakistan is the 8th largest exporter of textile products.

Contribution to GDP and employment

The contribution of this industry to the total GDP is 8.5%. It provides employment to
38% of the work force in the country, which amounts to a figure of 15 million. However,
the proportion of skilled labor is very less as compared to that of unskilled labor.

TEXTILE INDUSTRY’S ECONOMIC CONTRIBUTION

DESCRIPTION CONTRIBUTION
EXPORTS 64% OF TOTAL EXPORTS (US $ 4.9
BILLION)
MANUFACTURING 46% OF TOTAL MANUFACTURING
EMPLOYMENT 38% OF TOTAL EMPLOYMENT
INVESTMENT 31% OF TOTAL INVESTMENT
MARKET CAPITALIZATION 7% OF TOTAL MARKET
CAPITALIZATION
INTEREST Rs. 4 BILLION PER ANNUM
SALARIES AND WAGES Rs. 40 BILLION PER ANNUM
CONTRIBUTION TO RESEARCH Rs. 116 MILLION PER ANNUM
AND DEVELOPMENT
GROSS DOMESTIC PRODUCT (GDP) 8.5% OF TOTAL GDP

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By: Yasir Rehman

Textile Industry Brief

PARTICULARS DESCRIPTIONS

Sector Textile Industry

Sector Life Cycle Growth stage

Type of Industry Cyclic

Growth rate 27.86%

Textile industry would be able to maintain its competitive

advantage in this field for the yards to come (Pakistan is the
fourth largest denim producer in the world with an annual
production of 200,000,000 meters). This has now been
Historical
achieved and Azgard9 in able to offer these services as a
Performance
single source supplier for all denim and specialized yarn
customers. Textile industry is fast growing industry, being
aided by Government of Pakistan, as it is associated with
Yarn.
Supplier (Row material), Consumer (Less purchasing
Threats
power), Political instability

Inflation rate, Interest rate, Environmental problems,

Risks & mitigation
Political instability

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CORPORATE INFORMATION

BOARD OF DIRECTORS
1. Mr. Mueen Afzal (Chairman)
2. Mr. Ahmed H. Shaikh (Chief Executive)
3. Chief Justice (Retd.) Mian Mahboob Ahmad
4. Mr. Aehsun M.H. Shaikh
5. Mr. Ali Jehangir Siddiqui
6. Mr. Khalid A.H. Al-Sagar
7. Mr. Mohammed Khaishgi

COMPANY SECRETARY
1. Mr. Muhammad Ijaz Haider

CHIEF FINANCIAL OFFICER

2. Mr. Abid Amin

AUDIT COMMITTEE
3. Chief Justice (Retd.) Mian Mahboob Ahmad

4. Mr. Mueen Afzal

MANAGEMENT TEAM
5. Mr. Ahmed H. Shaikh
6. Mr. Tariq Mohammad Khan
7. Mr. Abid Amin
8. Mr. Irfan Nazir
9. Mr. Tahir Munir
10. Mr. Atif Farooqi
11. Mr. Usman Rasheed

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By: Yasir Rehman

FINANCE COMMITTEE
12. Mr. Ahmed H. Shaikh
13. Mr. Ali Jehangir Siddiqui
14. Mr. Tariq Mohammad Khan
15. HUMAN RESOURSE COMMITTEE
16. Mr. Ahmed H. Shaikh
17. Mr. Tariq Mohammad Khan
18. Mr. Salim Khan

BANKERS

19. JS Bank Limited

20. MCB Bank Limited
21. Citibank N.A.
22. ABN Amro Bank
23. Faysal Bank Limited
24. Habib Bank Limited
25. Saudi Pak Industrial & Agricultural
26. Investment Company (Private) Limited
27. The Hong Kong and Shanghai
28. Banking Corporation
29. United Bank Limited
30. Standard Chartered Bank Pakistan Limited
31. NIB Bank Limited
32. National Bank of Pakistan
33. Allied Bank Limited
34. My Bank Limited
35. KASB Bank Limited
36. Pak Oman Investment Company
37. Saudi Pak Commercial Bank

LEGAL ADVISORS

38. Hamid Law Associates

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AUDITORS

39. Rahman Sarfaraz Rahim Iqbal Rafiq (Chartered Accountants)

40. TAX ADVISORS
Faruq Ali & Co. Chartered Accountants

REGISTERED OFFICE

41. Ismail Aiwan-e-Science Off Shahrah-e-Roomi Lahore, 54600 Ph:

+92 (0)42 111-786-645 Fax: +92 (0)42 5761791

Unit I

42. 2.5 KM off Manga, Raiwind Road, District Kasur. Ph: +92 (0)42
5384081 Fax: +92 (0)42 5384093

Unit II

43. Alipur Road, Muzaffargarh. Ph: +92 (0)661 422503, 422651 Fax:
+92 (0)661 422652

Unit III

44. 20 KM off Ferozepur Road, 6 KM Badian Road on Ruhi Nala

Der Khurd, Lahore. Ph: +92 (0)42 8460333, 8488862

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INTRODUCTION Of AZGARD NINE

The Origins and the inception in the ancient legend “AZGARD” was one of none worlds
in Norse Mythology- it was protected by “Heimdall” the son of nine different Mothers
each attributing him with a particular skill and power – and thus He would protect Azgard
from the powers that be.

The significance of nine for our company is not just based on this Mythology but also
connected with the auspicious nature of this number throughout many different elements
in and out of the world today that is an auspicious and important number in Indian,
Chinese, Japanese and Greek cultures for various different reasons.

In Chinese culture the number Nine represents ‘Change’ and ‘Transformation’, as in the
case with Azgard Nine which is changing and Transforming itself into an entity with new
goals, aspirations and targets.

Nine in much of ancient Greek methodology also has represented gestation and
fulfillment of creation as it does for us at Azgard Nine. The ‘fulfillment of creation’ for us
being the forming of this global entity by nine members on the ninth day of February
sowing the seeds for an auspicious and rewarding future.

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The Azgard Nine Limited Group was started as a family business over four
generations ago. The Sheikh family, Now in its Forth generation, in one of the
oldest business families in the sub continent with experience in many different
sectors and having a proven track record of successful leadership in four
continents. The gamily began its first operations in 1886 in shamkot, in the Asian
sub continent.

Although, now, A Public company the family still remains behind the
company in everyway, supporting and nurturing its growth into the future and
beyond.

The current specialized yarn operation was set up in 1972 with the open end
spinning and denim weaving operations following in 1995. The final frontier was
the garments operation, which came in to being in 1997.

The concept behind the group’s textile ambitions was to be a fully vertical
apparel solution provider based in a country that would be able to maintain its
competitive advantage in this field for the yards to come (Pakistan is the fourth
largest denim producer in the world with an annual production of 200,000,000
meters). This has now been achieved and Azgard in able to offer these services as
a single source supplier for all denim and specialized yarn customers.

The future is squeezing the brand customers toward a sourcing solution that
stems from as small a global map as will allow. We believe it is feasible, in order
to not be spread too thin’, to consolidate a position in as few regions as possible in
the quest of r practical and economical global sourcing – Azgard Nine limited is
that perfect vehicle which can accommodate and achieve this position, therefore
realizing the vision that was incepted so many years ago by the guardians of the
Azgard group bring the resultant advantages to you the customer.

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By: Yasir Rehman

MISSION

TEXTILE & APPAREL

TO RETAIN A LEADERSHIP

POSITION AS THE LARGEST VALUE ADDED

DENIM PRODUCTS COMPANY IN

PAKISTAN

VISION

TEXTILE & APPAREL

TO BECOME A MAJOR

GLOBAL FASHION APPAREL

COMPANY

Business Strategies

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Ginning
In Pakistan Cotton processing industry has catered to low quality products (lint, yarn and
fabric) over the past few decades. Whereas the Azgard9 producing well quality and
standard denim garments in Pakistan and export good quality products. Azgard9 is one
of the largest firms in the textile sector with good market share.

Ginning is the first mechanical process involved in the processing of cotton. During the
process lint (fibre) is separated from seed to cotton. The ginning industry has
mushroomed in the cotton growing area of Pakistan informally, without adequate
regulations. There are 1,221 ginning factories in the country with installed capacity of
more than one billion bales on a single shift basis and a total capacity of around 20
million bales on three shift bases, part of which lies unutilized. Out of 1,221 ginning
units, 75 percent are based in Punjab and 22 percent in Sindh and only 700-800 units are
operational with an average production of about 10 million bales per year.

Changing global demands and textile market profiles are demanding a shift to quality
products. In this, the ginning factory plays a pivotal role for determining quality of
cotton fibre as raw material for downstream industry. Yet this component of local textile
industry is the most neglected and antiquated.

Most Pakistani cotton continues to carry an unacceptable level of contamination. This

phenomenon is clearly reflected in the rising volume of imports from countries who
produce contamination free cotton or longer staple cotton which the saw gins of Pakistan
cannot handle.

By having an efficient raw material, Pakistan has the chance to produce textile products
of better quality and more economically by saving freight costs and avoiding supply
shortages as well as time lags. Unless up-gradation of this industry is undertaken, it
would not be possible to remain competitive in export markets.

Spinning sector

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This is the first process that adds value to cotton by converting into a new product i.e.
conversion from ginned cotton into cotton yarn. If spinning industry produces sub-
standard yarn, its effect goes right across the entire value chain.

Pakistan has the third largest spinning capacity in Asia with a spinning capacity of 5% of
the total world and 7.6% of the capacity in Asia and an annual growth rate of 6.2%,
while Azgard9 has the fifth largest spinning capacity in Pakistan. At present, cotton-
spinning sector is comprised of 458 textile units (50 composite units and 408 spinning
units). Almost 70 percent of total production is consumed in local industry and the rest is
being exported.

Major share holders of machinery market in this sector are Switzerland (Rieter),
Germany, Japan and China respectively.

Weaving & Made-up sector

The weaving sector is one of the most important sub-sectors. The exports of woven
fabrics and other related woven made-ups comprise a major portion of textile exports
from Pakistan. The weaving sector can be broadly classified into three main segments:

a. Composite Weaving units

b. Independent Shuttle less weaving units

c. The power Loom sector

Investments have taken place in shuttle less loom, both in integrated and in-dependent
weaving sector. During the period of 1999 – 2009 an investment of approximately USD
0.93 billion and USD 0.61 billion has been made in weaving and made-up sector
respectively. Further investment in this sector will be forthcoming in the medium term.

a. Composite Weaving Units:

The composite weaving units comprise of integrated textile mills having their own
spinning and dyeing facility. A total of fifty such units currently exist with an installed
capacity of about 10,416 Looms. Recent phenomenon of induction of shuttle-less looms,
viz. Projectile and Air jet looms, in this sector is a healthy sign. As a pace of investment
in-crease, the number of modern looms in this sector is on increase. However, the textile
millers still prefer to setup an independent weaving unit rather than integrated ones.

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b. Independent Shuttle less looms:

This is a new segment of weaving units, which is in the process of coming up on the
same pattern as independent spinning units. Motivated by market demand and
government incentives as well as shift towards high quality fabrics. The entrepreneurs
are establishing independent weaving units with shuttle-less looms. These looms are both
second hand and new ones and employ the modern technology of rapier, projectile and
air-jet looms.

c. The Power looms sector:

The Power loom sector has modernized and registered a robust growth over the two
decades. The growth in Power loom sector is to a larger extent a result of the government
policies pursued, as well as increased demand for the product. This sector is producing
comparatively low value added grey cloth of mostly inferior quality. The problem of the
Power loom sector revolve around access to credit facilities to modernize their
equipment as well as purchase of yarn especially when prices of yarn increase and the
prices of cloth increase with a time lag.

There is a need for training facilities and guidance to diversify their products, especially
to cater to the needs of the garment industry.

1.6.4 Knitting
The knitting (hosiery) is playing a pivotal role in the value addition of the textile sector.
There are about 18,000 Knitting Machines spread all over the country producing 80
million dozens of knitwear. The capacity utilization is approximately 70%. There is
greater reliance on the development of this industry as there are substantial value
additions in the form of knitwear. The products made in Pakistan includes T-Shirts,
jogging suits, jerseys, pyjamas, sport shirts, children wear, gloves, nightgowns,
tracksuits, sweaters and socks etc.

The knitwear industry is export oriented and highly value added. The bulk of knitwear
garments are mainly exported to developed countries like USA, Ger-many, UK, Canada,
France, etc. About 15% of the total output is consumed domestically.

1.6.5 Readymade Garment sector

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The garment industry provides highest value addition in the textile sector. This industry
is distributed in small, medium and large scale units most of them having 50 machines
and below, large units are now coming up in the organized sector of the industry. The
industry enjoys the facility of duty free import of machinery and income tax exemption.
This sector has further export performance for the future.

Pakistan with total exports of around USD 1 billion has a meager share of 1% in the
global market apparel market. The apparel export product mix from Pakistan is heavily
tilted towards men’s wear and knitted garments.

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INDUSTRY ANALYSIS

PORTER’S FIVE FORCES

Azgard9 is a Pakistani textile manufacturing and marketing company has a primary

target to textile for an analysis using Michael Porter’s 5-Forces Model (“5-Forces”).

We have applied the 5-Forces analysis into the respective divisions:

3.1.1 Supplier Power

3.1.2 Barriers to Entry

3.1.3 Threat of Substitutes

3.1.4 Buyer Power and Degree of Rivalry

3.1.5 Competitive rivalry

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Suppliers Power
Suppliers in this industry are not concentrated. They act as separate groups competing
for the same project through the bid system that is prevalent in textile Industry. Volume
is of significant concern. The Azgard9 is the large textile industry and is not affected in
terms of supply volume giving suppliers any leverage.

Buyer Power

Azgard9 is a premier brand and nationwide presence ensures sellout production to

Pakistani and international customers, due to flexible demand delivery and low down
payments.

Buyers have power over when they are concentrated, purchase a significant portion of
new production, and pose a credible threat to purchases from competitors.

Barriers to entry

Identifying the possibility and probability of new entrants in an industry is critical

because they can intrude on market share and profitability of existing competitors.
Economies of scale, product differentiation, capital requirements, switching costs and
government policy all affect the textile Industry.

The economies of scale realized by azgard9 make it almost impossible for new entrants.
The governmental red tape that must be overcome in this industry is paramount to the
success of a prospective textile Company.

Threats of substitute

The threat of substitutes entails a consideration of such things as switching costs, buyer
inclination to substitute and the price-performance trade-off of substitutes. Most
individuals would like to make an investment with the purchase of a particular product of
an organization.

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Degree of competitive rivalry

The growth rate of the textile market is tremendous especially azgard9; however, it is
limited in many respects. The growth for the demand and the production is enormous.
We believe the growth in the actual number of competitors is merely a related effect of
the costly barriers to entry. In recent days, the situation of textile industry is not very
good as shutting down of power looms due to electricity disaster.

The market is both mature and developing at the same time. The maturity of the market
can be illustrated by the Interventions and helps to carry out a cost benefit analysis of a
policy provided that governments know the tradeoff between efficiency and non
efficiency goals.

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EXTERNAL ENVIIRONMENT

PEST ANALYSIS

Political Changes

Political factors include government regulations and legal issues and define both formal
and informal rules under which the firms operate. The rule and regulations that the
TEXTILE industry follows are as follows:

Tax Policies

 General sales tax is enhanced from 15 % to 16 % including sales tax services

under the Provincial Sales Tax Ordinance, etc.
 Due to the increase in the general rates of sales tax, the rate sales tax on the
natural gas has been increased from 24 % to 25 %.
 The government has put special excise duty of 2 % as well.
 Duty on the services such as goods insurance, fire Insurance, theft Insurance,
marine Insurance, other Insurance, non-fund services provided by banking
companies or non-banking companies has been enhanced from 5 % to 10 %.
 The company confident that all pending issues will be ultimately resolved

without any additional liability.

The rate of tax for the collection at the import stage for all imports of goods has been reduced to
2 % from 5 %.

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Employment Laws:

The labor policy issued by the Government of Pakistan lays down the parameters for the
growth of trade unionism, the protection of workers' rights, the settlement of industrial
disputes, and the redress of workers' grievances.

The policy also provides for the compliance with international labor standards ratified by
Pakistan. At present, the labor policy as approved in year 2002 is in force.

Environment regulations

At present Pakistan textile industries follow the Pakistan Environmental Protection

Act,1997.

 The Pakistan government has now become conscious of the environmental

pollution.
 But still there are many factors that are prevailing up till now and are the cause of
the unrest.
 More over, the geographical region where Pakistan is located, having the
neighbors such as India and Afghanistan, and the pertaining international
situation regarding the war against terrorism, not only the direct investors have
stepped back even the investors who have made investments in the country are
backing up. These factors affected the textile industries in Pakistan.

Economic Factors:

Pakistan, with a population of about 18 million people has undergone a remarkable

macro economic growth during the last few years but the main and the core problems of
the economy are still unsolved. Inflation is one of the core problems. The inflation in the
year 2008 has recorded to be the highest according to the Federal Bureau of Statistic.
The consumers are mostly pessimistic about the economic conditions of the country as
the economy is going in downward direction these days. Economic factors can not be
excluded for operating any business including textile. Following are the factors affecting
the macro economy:

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By: Yasir Rehman

• Economic growth

• Inflation rate

• Interest rates

• Exchange rates
Economic Growth

The textile sector growth continued 7.85% in 2008-09, which is slightly more moderate
than 7.12% for the year 2007. Economic conditions are not very sound. The increasing
inflation, imposition of new taxes, rising fuel charges and changes in government
economic policies has discouraged investment in textile.

If Pakistan keeps on getting better grants and loans waivers or if any other economy
boosting factor such as controlled inflation rate and economic growth take place, it will
benefit the entire industry and also for azgard9 as well.

Inflation Rate

Inflation is one of these core problems. This thing is really hurting the purchasing power
of Pakistani consumers. The inflation in year 2009 has recorded to be the highest
according to the Federal Bureau of Statistics. Consumer Price jumped to 17.86% in
March 2009 according to the statistics given by Federal Bureau of Statistics.

Interest rate

The monetary policy of Pakistan is controlled by the state bank of Pakistan. The state
bank, in order to control the inflation has taken measures and tightened up the monetary
policies. Pakistan has raised its main interest rate to 13.5 % to help fight inflation.

Exchange Rate

The exchange rates of Pakistan with respect to the U.S. dollar, has declined. The
Pakistani rupee has depreciated since the proclamation of emergency rule in November
2007 and especially in current democratic govt. this rate is at very low side. In other
words we can say that the value of the rupee has fallen as the time passed by.

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Social Change

 Health consciousness among the people of Pakistan has been increasing day by
day.
 The citizens of Pakistan are getting aware of their duties in order to maintain the
healthy environment.
 Government is taking several steps in order to educate, how important it is for
the people to live in the healthy environment.
 The government discourages the operation of the industries with in the city by
charging these factories with environmental charges.
By the passage of time, the people as well along with the government are discouraging
such activities and demand for clean environment

Technology Change

• The Pakistani industries not only have to compete among them selves but with

the international market as well.

• Pakistan is steadily automating particularly its manufacturing sectors to stir

quality production and ensure skilled management, as it would ensure a good

place for the country in the global competitive market.

• Technological factors can lower barriers to entry, reduce minimum efficient

production levels, and influence outsourcing decisions.

In recent years, technology has been seen to be progressing at very fast rate all over the

world. It has helped to raise income and alleviate poverty in the developing countries.

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By: Yasir Rehman

Conclusion (PEST analysis and Azgard9)

As for as textile industry is concerned, there is much competition in political,

economical, social and technological factors especially price competition.

The political stability in Pakistan is at unrest. Due to this, the textile Factories along with
Azgard9 are facing problems regarding the investments they have made. The stock
market has shown sheer down fall since the political unrest. The day after day terrorist
attacks and the suicidal bombing have caused the unrest in the country as well. Along
with creating a sense of non security among the citizens of Pakistan, these activities have
proved to be hazardous to the textile sector as well.

The minimum wages has been increased by the government of Pakistan which is another
increase in the expense on behalf of the textile producers. There aren’t specified
strategies or labor laws that protect the labor wages at the factory. Azgard9 considers
employee satisfaction as a major contributor to their success in the market and therefore
has undertaken extensive planning to ensure the employed labor force is happy with
there salary packages.

The investors in the textile sector are well aware of the importance of technology in the
present day and they quite well realize the returns they can get using advance
technologies.

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By: Yasir Rehman

Internal Environment

SWOT Analysis

The SWOT analysis provides information that is helpful in matching the firm's resources
and capabilities to the competitive environment in which it operates. As such, it is
instrumental in strategy formulation and selection. The following diagram shows how a
SWOT analysis fits into an environmental scan:

Strength:
 The production of the textile products (Cotton, Yarn, and Polyester) in Azgard9
is completely automated.
 The company has imported the machinery for spinning process. The use of this
advance machinery has helped the company produce good quality garments with
much efficiency.
 Azgard9 factory is the only garments factory that produces both ready made
garments and finished products of yarn.
 Azgard9, having a good brand image, has the advantage to charge their customers
at a higher price than the other competitors.

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By: Yasir Rehman

 The price of Azgard9 garments is high in the international market as compared to

its local competitors who are involved in the exports as well.
 The company brand image is very strong in the market, both local and
international.
 The Azgard9 factory compensates its employees, better than all the other
industries.

Weakness

The absence of certain strengths may be viewed as a weakness. For example, each of the

following may be considered weaknesses of AZGARD9:

• Delay in capacity expansion

• Large investment needed for business expansion

• Wastage of raw material

• Workers leave the organization after working short time

• Lack of online market facility to access international buyers

• Disputes between Middle level and Lower management

• Relative weak position in textile market as compare to the other textile mills

in Pakistan

• The cost of freight charges further reduces the retention price of the garments,

hampering the profitability of the company.

• Wastes produce by the company may dangerous for human health.

OPPERTUNITIES

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By: Yasir Rehman

• Moving into new market segments that offer improved profits

• Large workshops for training and development.

• A developing market such as the Internet.

• A market vacated by an ineffective competitor.

• Support of the power looms unions

• Better Competitive Position.

• This has given Azgard9 a golden opportunity to capture the maximum market

with very less competition.

• The demand of garments and yarn outside Pakistan has been increasing rapidly,

providing Azgard9 a good chance to explore these markets.

• Azgard9 is also exploring new markets for the potential customers of ready made

garments, which will give Azgard9 a competitive edge against the competitors.

Threats

• Price wars with competitors.

• A new competitor in the home market.

• Fear of Privatization.

• Tuff Competition

• Globalization is the factor which brings the strong companies in Pakistan

• A competitor has a new, innovative product or service.

• The export to international market highly depends on diplomatic relations

between the countries.

Competitors have superior access to channels of distribution.

BOSTON COUNSELTING GROUP

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BCG MATRIX
The BCG growth-share Matrix is a portfolio planning model developed by Bruce
Henderson of the Boston Consulting Group in the early 1070’s. It is based on the
observation that a company’s business units can be classified into four categories based
on combinations of market growth and market share relative to the larges competitor,
hence the name “growth-share”. Market growth serves as a proxy for industry
attractiveness, and relative market share serves as a proxy for competitive advantage.
The growth-share matrix thus maps the business unit positions with in these two
important determinants of profitability.

For more effective planning and operations, a multi-business or multi-product

organization should be divided according to its major markets or products. Each such
entity is called a strategic business unit (SBU).

Using this matrix, an organization classified each of such SBU according to the factor
such as:

• Relative Market Share

• Business Growth Rate
The BCG matrix is shown below:

Conclusion

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By: Yasir Rehman

Under the light of BCG matrix, I can examine that Azgard9 is existing in the category of
Question MARK because of low market share 20% and high business growth rate. In
order to be the market leader, Azgard9 has to improve its market position.

Presently Azgard9 has 9% of the market share and is one of the leading brands in
Pakistan with a diverse customer base. Form above given information we can say that
Azgard9 has strong potential for growth but low market share .So product lines of
Azgard9 secured in category “Question marks” having high growth and low market
share.

FINANCIAL ANALYSIS OF THE COMPANY

THIS CHAPTER COVERS: -

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By: Yasir Rehman

1. PURPOSE OF FINANCIAL ANALYSIS

2. FINANCIAL REPORTING POLICIES
3. RATIO ANALYSIS
4. ADVANTAGES OF RATIO ANALYSIS
5. LIMITATION OF RATIO ANALYSIS
6. TYPES OF RATIO ANALYSIS
1. LIQUIDITY RATIO
2. TURNOVER RATIO
3. PROFITABILITY RATIO
4. LEVERAGE RATIO
7. HORIZONTAL ANALYSIS OF PROFIT & LOSS ACCOUNT
8. HORIZONTAL ANALYSIS OF BALANCE SHEET
9. VERTICAL ANALYSIS OF PROFIT & LOSS ACCOUNT
10. VERTICAL ANALYSIS OF BALANCE SHEET

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PURPOSE OF FINANCIAL ANALYSIS

1) In our course of financial management we are required to make a financial

analysis of any manufacturing company. The main purpose of these analyses is
that we are the business graduate and it is very necessary for us to apply our
knowledge in the practical way. For example if in future we are the manager of
any bank and a company wants to obtain a loan from our bank then we make
analysis of the company’s financial statement to access the capacity of paying us
interest on time as well as the principle which we lend that company through
analyzing the different ratio analyses, and to know that what is capital structure
of the company.

2) Then through the cash flow statement we are able to know that how much
cash is available with the company because profitability does not mean that the
company has the equal amount of cash. We also able to know that how much
cash is generated by the company from its operating activities, and how much
amount of cash is investing in the asset through which we can access the future
performance of the company.

3) Being as an investor if we are able to make an analysis of financial

statement then we can invest in that venture which is the best in terms of our
purpose.

4) Being as an investor before investing in any company we can analyze the

performance of the company through the vertical analyses and horizontal
analyses with the current and previous year or we can also comparison of the
company with the other company of the same age (Competitors) and applying the
same accounting techniques.

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By: Yasir Rehman

Financial Reporting Policies

Company policies with reference to accounting, finance and corporate

matters are governed by relevant corporate regulations, Companies
Ordinance 1984, and the code of corporate Government

It is company resolved to comply with International Accounting Standards

for the preparation of financial statements with any departure there from
being adequately disclosed.

Company is in the process of establishing and efficient Internal Audit

Department to enhance the scope of internal control and data generated by
the company, it also help in building the confidence of our creditors,
financial institutions and other interested organization

- 30 -
 By: Yasir Rehman

AZGARD NINE LIMITED

BALANCE SHEET

AS AT 31 DECEMBER 2008

2009 2008 2007 2006 2005

Rupees

EQUITY AND LIABILITIES

Share capital and reserves

3,827,1 3,788,8 3,788,83 1,737,3 1,737,3

Issued, subscribed and paid-up capital 18,540 22,900 8,900 08,680 08,680

3,532,46 3,530,6 3,578,2 403,3 362,

Reserves 9,002 26,122 62,182 31,469 142,241

2,764,49 2,400,6 1,807,0 952,46 410,6

Unappropriated profit 4,959 05,174 67,052 2,490 57,982

10,124,0 9,720,0 9,174, 3,093,1 2,510,1

82,501 54,196 168,134 02,639 08,903

Surplus on revaluation of property, plant 219,3 239,0 257,36 278,9 306,

and equipment 56,257 73,077 0,867 43,671 564,511

Non-current liabilities

Redeemable capital - Secured

Privately placed TFC,s 250,00 250,0

- - - 0,000 00,000

Term Finance Certificates (TFCs) - I 62,5 125,0 187,5

00,000 00,000 00,000 - -

Term Finance Certificates (TFCs) - II 1,832,1 2,141, 2,142,8 2,143,6

62,407 955,064 12,532 70,000 -

Term Finance Certificates (TFCs) - III 2,499,00 2,500,0

0,000 00,000 - - -

Less: Transaction costs (34,1 (33,1

87,500) 87,500) - - -

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 By: Yasir Rehman

4,359,47 4,733,7 2,330,3 2,393,67 250,0

4,907 67,564 12,532 0,000 00,000

Less: Current maturity shown under current 397,0 242,5 63,3 248,77 150,0
liabilities 13,346 82,192 57,468 0,802 00,000

3,962,4 4,491, 2,266,95 2,144,8 100,0

61,561 185,372 5,064 99,198 00,000

Long term finances - Secured

Habib Bank Limited ("HBL") 50,0 200,00 250,00 400,0

- 00,000 0,000 0,000 00,000

United Bank Limited ("UBL") 100,0 125,0 200,00 200,00 200,0

00,000 00,000 0,000 0,000 00,000

Citi Bank N.A - I 66,6 133,3 200,00 200,0

- 66,668 33,334 0,000 00,000

Citi Bank N.A - II 600,00

- - 0,000 - -

Citi Bank Bahrain 542,43 577,0

7,500 31,250 - - -

National Bank of Pakistan ("NBP") 1,250,0 1,500,0 1,500,0

00,000 00,000 00,000 - -

Deutsche Investitions - Und MBH 1,499,9 1,361, 1,207,3

85,000 550,000 50,000 - -

Faysal Bank Limited ("FBL") 7, 17,4

- 477,167 46,722 - -

Saudi Pak Industrial and Agricultural

- - -

Company Limited ("SAPIACO") 100,0

00,000 - - - -

KASB Bank Limited ("KASB") 250,00

0,000 - - - -

3,742,42 3,687,7 3,858,1 650,00 800,0

2,500 25,085 30,056 0,000 00,000

Less: Current maturity shown under 1,055,5 714, 338,9 116,6 150,0
80,000 173,833 13,068 66,666 00,000

current liabilities

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 By: Yasir Rehman

2,686,84 2,973,5 3,519,2 533,33 650,0

2,500 51,252 16,988 3,334 00,000

Liabilities against assets subject to finance lease

Present value of minimum lease payments 43,5 38,6 57,3 108,5 179,5
39,091 50,236 99,207 17,278 85,700

Less: Current portion shown under current 18, 24, 47,7 68,3 63,
liabilities 328,147 293,231 76,589 43,306 081,881

25,2 14, 9,6 40,1 116,

10,944 357,005 22,618 73,972 503,819

1,6 2,9 1,
Long term payables - - 43,889 07,643 147,729

Current liabilities

Current portion of non-current liabilities

Redeemable capital 397,0 242,5 63,3 248,77 150,0

13,346 82,192 57,468 0,802 00,000

Long term finances 1,055,5 714, 338,9 116,6 150,0

80,000 173,833 13,068 66,666 00,000

Liabilities against assets subject to finance 18, 24, 47,7 68,3 63,
lease 328,147 293,231 76,589 43,306 081,881

1,470,9 981,0 450,0 433,78 363,

21,493 49,256 47,125 0,774 081,881

3,820,6 5,936,6 3,142,4 1,492,9

Short term borrowings 6,574,080,304 88,516 99,317 02,324 09,892

34,3 32,0
Derivative financial liabilities 50,536,909 69,582 21,606 - -

Trade and other payables

Trade creditors 525,8 584,6 418,6 104,8 195,

14,913 74,986 93,807 37,013 881,907

Payable to subsidiary company 213,

- - 380,444 - -

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 By: Yasir Rehman

Bills payable 537,4 201,6 195,0 394,6 360,5

52,118 28,543 65,104 01,913 44,669

Accrued liabilities 202,2 165,5 113, 76,3 54,7

79,471 33,306 135,650 80,977 92,260

Advances from customers 51, 25, 30,9 15,0 59,8

207,512 124,744 05,697 45,683 77,980

Workers' profit participation fund 18, 26,2 7,7 24,5 20,8

967,710 95,607 68,786 09,700 03,281

Workers' Welfare Fund

20,000 20,000 20,000 20,000 20,000

Customers duty surcharge

- - - - 800,301

Tax deducted at source 4,3 12, 22, 15,4 9,

81,582 365,729 143,171 70,450 064,521

Other payables 10,3 15, 14, 4,5 5,8

76,809 232,854 651,186 71,055 58,822

1,350, 1,030,8 1,015,7 635,4 707,6

500,115 75,769 63,845 36,791 43,741

Due to related parties - Unsecured 426,768,193 - - - -

Markup accrued on borrowings

Redeemable capital 120,0 105,5 86,4 28,6

08,159 96,533 63,805 56,424 -

Long term finances 187,2 150, 136,0 67,4

96,164 021,510 56,498 15,308 -

Short term borrowings 146,8 61, 73,8 58,7 26,6

13,269 593,740 58,235 17,720 87,284

Due to related parties 10,9

79,472 -

Liabilities against assets subject to finances 1, 8 1, 1,

lease 129,379 479,146 63,999 414,929 393,512

466,22 317,6 297,24 156,2 28,0

6,443 90,929 2,537 04,381 80,796

9, 22, 3
Unclaimed dividend 14,686,046 694,014 312,061 62,062 95,414

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 By: Yasir Rehman

Contingencies and commitments - -

10,461,546,78 6,276,136,68
27,371,673,266 23,632,588,968 22,983,054,051 9 6

ASSETS

Non-current assets

7,643,6 7,601,8 3,113,0 2,847,93

Property, plant and equipment 7,734,950,547 49,558 95,866 43,032 6,402

Capital work in progress

Building 126,7 40,6 484,36 22,0

82,291,559 43,808 57,400 3,296 60,697

Plant and machinery 41, 14,9 1,975,2 62,

836,379,334 244,046 65,044 92,610 231,641

167,987,85 84,292,33
918,670,893 4 55,622,444 2,459,655,906 8

Intangible assets

Development costs 20, 38, 47,9 64,2 81,

512,135 118,588 48,625 21,974 187,908

Software 13, 13, 12, 9,7 7,

024,081 024,081 596,184 15,302 187,681

33,5 51, 60,5 73,9 88,3

36,216 142,669 44,809 37,276 75,589

7,521,644,05 6,391, 6,303,48 93,5 2,6

Long term investments 1 905,201 8,906 17,562 66,296

20,2 19,9 29,7 18,

Long term deposits 19,777,502 39,502 06,757 45,135 517,830

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 By: Yasir Rehman

Current assets

Stores, spares and loose tools

Stores 147,7 88, 65,4 60,2 50,5

45,923 462,119 23,805 80,813 03,425

Spares 53, 36,8 34,8 27,0 21,4

783,115 42,528 57,431 69,375 43,068

Loose tools 1, 6
164,232 164,230 481,251 440,167 62,200

201,6 125,4 101,7 87,7 72,6

93,270 68,877 62,487 90,355 08,693

Stock in trade

Raw material 1,884,6 910,6 1,302,4 1,507,9 636,3

82,430 32,770 66,823 12,595 38,989

Work in process 1,037,8 799,9 342,64 237,7 220,3

17,334 92,413 0,598 42,221 79,606

Finished goods 1,111, 535,5 377,40 288,52 538,0

603,355 06,990 3,503 5,734 10,735

4,034, 2,246, 2,022,5 2,034,1 1,394,7

103,119 132,173 10,924 80,550 29,330

Trade receivables

Considered good

Local

- secured 50,6 59, 5 3 67

75,076 131,978 1,213,639 5,678,611 ,845,621

- unsecured 405,7 573,7 47 514, 313

96,100 22,054 1,151,490 990,993 ,607,956

456,4 632,8 522,3 550,66 381,4

71,176 54,032 65,129 9,604 53,577

Foreign

- 36 -
 By: Yasir Rehman

- secured 1,244,1 1,024,3 612,5 463,2 563,6

83,273 42,703 32,020 13,980 58,279

- unsecured 76,5
78,163 - - - -

1,320,7 1,024,3 612,5 463,2 563,6

61,436 42,703 32,020 13,980 58,279

1,777,2 1,657, 1,134, 1,013,8 945,

32,612 196,735 897,149 83,584 111,856

Considered doubtful 4,6 11, 4,2 4,2 4,2

97,881 098,746 49,348 49,348 49,348

1,781,9 1,668, 1,139, 1,018, 949,3

30,493 295,481 146,497 132,932 61,204

Provision for doubtful debts (4,6 (11, (4,24 (4,24 (4,2

97,881) 098,746) 9,348) 9,348) 49,348)

1,777,2 1,657, 1,134, 1,013,8 945,

32,612 196,735 897,149 83,584 111,856

388,9 555,68
Derivative financial assets 175,673,993 93,278 0,244 - -

Advances, deposits, prepayments and other receivables

Advances to suppliers - Unsecured, 218,8 558,3 338,7 407,6 158,

considered good 73,888 37,926 15,170 31,218 543,173

Advances to employees - Unsecured, 35,5 31, 33,0 31,0 19,3

considered good 31,785 967,447 22,422 59,330 57,526

Security deposit 3,7 7, 7,5 3, 9,

46,090 771,140 23,215 115,165 314,906

Margin deposits 61, 4,5 8,0 25,3 201,5

218,959 00,762 53,085 93,993 62,598

Prepayments 8,9 4, 7,7 9, 8,

39,720 223,701 20,379 144,119 873,451

Rebate receivable 95,8 74,9 43,3 56,9 26,6

43,350 92,940 40,387 47,188 24,906

Accrued gain on swap contract 4,

- 195,229 - - -

Return on investments in TFCs receivable 87,2 58, 104,7

19,798 869,781 25,479 - -

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 By: Yasir Rehman

Textile quota 24,9

- - - - 17,583

Octrai refundable 2,
- - - - 778,771

Sales tax recoverable 125,9 67, 106,2 81,7 141,

62,603 391,636 64,996 83,885 957,831

Letters of credit 114, 152,5 97,8 175,7 26,

453,218 85,907 24,575 10,254 571,132

Insurance claim 28,4 29,0 4, 14, 2,

93,266 09,077 107,165 462,187 462,187

Others receivables- Unsecured, considered 9,2 11, 2,8 5,9 4,0

good 32,385 098,746 84,379 79,992 52,709

789,5 1,004,9 754,1 811, 627,0

15,062 44,292 81,252 227,331 16,773

Current taxation

As at beginning of the year 51,0 3,3 27,9 64,8 44,8

50,683 42,068 96,650 24,871 24,871

Paid during the year 115, 119, 90,9 106,8 84,8

116,774 715,688 14,500 36,571 24,871

Provision for the year (102,2 (72,0 (115,5 (143,66 (64,8

18,852) 07,073) 69,082) 4,792) 24,871)

As at end of the year 63,9 51, 3,3 27,9 64,8

48,605 050,683 42,068 96,650 24,871

3,838,4 3,788,3 670,92 109,

Short term investments 4,018,853,586 44,830 15,521 7,050 148,931

Cash and bank balances

Cash in hand 4,6 1, 4,9 1,4 2,5

05,358 725,909 02,546 97,894 56,878

Cash at banks

in current accounts

local currency 76,4 35,6 564,24 34, 9,

58,037 55,637 7,327 116,304 563,317

foreign currency 8,9

96,680 - -

in saving accounts

local currency 7,9 1 10, 8,7

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 By: Yasir Rehman

917,667 66,360 ,141,431 028,160 87,582

foreign currency - US $1,177 (2007: US 1,

$ 1,392) 92,748 85,410 617,640 - -

82,0 45, 580,90 45,6 20,9

73,810 433,316 5,624 42,358 07,777

10,461,546,78 6,276,136,68
27,371,673,266 23,632,588,968 22,983,054,051 9 6

AZGARD NINE LIMITED

PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2008

2009 2008 2007 2006 2005

Rupees

Sales - Net

Local 1,966,476,028 1,262,415,23 817,705,90 791,644,93 1,646,343,97

1 3 2 4

Export 8,222,024,239 5,430,603,24 4,121,729,63 3,832,200,52 1,652,820,06

4 6 3 4

10,188,500,267 6,693,018,47 4,939,435,53 4,623,845,45 3,299,164,03

5 9 5 8

Add: Export rebate 33,384,958 12,031,45 6,949,19 - -

4 1

Less: Commission and brokerage 108,385,874 76,154,25 55,711,06 64,642,02 48,655,11

0 8 5 0

Sales tax - 553,75 991,69 136,731,07 94,596,50

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 By: Yasir Rehman

3 6 3 1

10,113,499,351 6,628,341,92 4,889,681,96 4,422,472,35 3,155,912,42

6 6 7 7

Cost of sales

Raw material consumed 4,849,764,538 3,225,277,37 2,525,051,20 1,820,580,74 1,748,032,33

3 5 2 9

Salaries, wages and benefits 971,980,356 729,678,27 510,904,02 354,746,90 283,661,01

8 4 7 4

Fuel and power 522,666,246 347,011,45 323,569,25 333,090,25 189,237,71

8 3 5 1

Stores, spares and loose tools consumed 279,174,956 165,164,81 111,348,58 152,724,50 48,628,54
3 3 7 0

Traveling, conveyance and entertainment 75,739,696 85,805,78 46,802,91 9,220,63 16,704,07

4 8 1 6

Rent, rates and taxes 21,041,783 3,954,33 10,172,16 5,141,45 2,070,58

7 0 6 9

Insurance 33,239,482 16,125,22 18,768,41 8,064,02 6,792,69

2 5 0 9

Repair and maintenance 50,141,690 43,581,32 36,763,52 22,665,13 10,793,30

4 7 1 6

Processing charges 58,626,887 28,735,16 29,898,23 22,330,52 17,529,44

0 9 8 3

Depreciation 524,442,914 527,625,99 238,492,94 253,998,84 164,167,46

4 3 2 7

Amortization 17,606,453 16,495,53 16,273,34 16,965,93 -

3 9 4

Printing and stationery 13,835,059 8,676,59 3,732,38 3,797,21 710,52

3 8 8 6

Communication 17,981,410 9,736,45 2,813,48 1,872,40 2,530,89

9 5 7 4

Others 37,903,583 28,575,92 22,547,06 17,745,76 6,921,23

4 3 8 2

7,474,145,053 5,236,444,25 3,897,137,55 3,022,944,34 2,497,779,83

2 2 6 6

Work in process

As at beginning of the year 799,992,413 342,640,59 227,469,46 220,379,60 172,868,79

8 5 6 4

Transfer from trial run production - - 10,272,75 - -

6

As at end of the year (1,037,817,33 (799,992,41 (342,640,59 (227,469,46 (220,379,60

4) 3) 8) 5) 6)

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 By: Yasir Rehman

(237,824,92 (457,351,81 (104,898,37 (7,089,85 (47,510,81

1) 5) 7) 9) 2)

Cost of goods manufactured 7,236,320,132 4,779,092,43 3,792,239,17 3,015,854,48 2,450,269,02

7 5 7 4

Finished goods

As at beginning of the year 535,506,990 377,403,50 265,079,15 538,010,73 472,496,89

3 9 5 2

Transfer from trial run - - 23,446,57 - 56,024,09

production/purchases 5 2

As at end of the year (1,111,603,35 (535,506,99 (377,403,50 (265,079,15 (538,010,73

5) 0) 3) 9) 5)

(576,096,36 (158,103,48 (88,877,76 272,931,57 (9,489,75

5) 7) 9) 6 1)

6,660,223,767 4,620,988,95 3,703,361,40 3,288,786,06 2,440,779,27

0 6 3 3

2,007,352,97 1,186,320,56 1,133,686,29 715,133,15

Gross Profit 3,453,275,584 6 0 4 4

Administrative and selling expenses

Salaries, wages and benefits 187,807,137 142,881,02 125,951,70 97,413,17 52,250,06

5 4 1 9

Traveling, conveyance and entertainment 51,902,512 52,011,99 65,821,57 54,340,96 16,005,57

2 4 3 9

Fuel and power 13,479,289 5,179,60 5,135,71 3,303,76 1,580,44

5 3 3 6

Repair and maintenance 10,035,005 10,140,34 5,835,05 3,581,98 2,514,31

4 9 8 5

Rent, rates and taxes 7,614,134 7,425,72 3,429,83 760,01 1,247,25

7 4 4 0

Insurance 3,115,432 4,617,60 2,374,34 1,764,07 450,14

0 6 4 5

Freight and clearing 240,972,890 123,071,36 113,662,86 80,684,01 48,598,51

3 4 9 1

Printing and stationery 4,793,296 4,188,03 3,648,30 3,449,92 2,114,50

3 2 4 2

Communication 33,805,936 25,045,99 22,178,41 19,112,92 11,295,39

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 By: Yasir Rehman

1 3 8 8

Advertisement and sales promotion 585,118 6,260,88 7,543,79 4,501,61 6,829,19

5 0 0 6

Legal and professional charges 18,912,524 31,288,59 8,685,37 6,452,58 2,127,43

7 3 5 2

Depreciation 14,063,223 8,661,79 7,169,79 10,031,52 6,338,32

0 6 3 4

Fee and subscription 11,911,399 5,915,42 8,032,64 3,441,90 2,636,28

2 8 8 8

Amortisation of textile quota - - - 23,564,40 22,964,73

3 2

Donations 50,000 2,100,00 100,00 4,694,17 110,94

0 0 2 4

Provision for doubtful debts - 448,53 - - -

3

Others 4,481,848 5,948,16 11,820,92 8,220,01 8,160,36

6 2 0 1

603,529,743 435,185,07 391,390,33 325,317,05 185,223,49

3 8 5 2

1,572,167,90 794,930,22 808,369,23 529,909,66

Operating profit 2,849,745,841 3 2 9 2

Other income - Net

Financial instruments

Gain on sale of investments 18,718,646 78,528,53 58,478,14 199,442,37 1,192,32

7 9 2 0

Unrealized loss on investments at fair value - (6,684,74 - 35,039,43 6,951,68

through profit or loss 5) 8 8

Impairment loss on investments available for - (1,650,72 (996,76 - -

sale 0) 8)

Markup on balances with related parties - 12,668,15 4,206,76 - -

7 8

Dividend income 589,730,500 588,645,00 1,058,711,50 38,934,46 -

0 3 2

Unrealized loss on derivative financial (11,321,45 (16,177,40 - 29,038,69 -

instruments 0) 7) 7

Foreign exchange gain 37,181,192 9,182,37 - - -

0

Loss on winding up of subsidiary (400,38 - - - -

4)

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 By: Yasir Rehman

Return on bank deposits 1,399,408 1,740,19 7,414,66 17,966,09 710,36

8 0 9 7

Non-financial instruments

Gain / (loss) on disposal of property plant and 964,001 198,32 (48,21 (6,661,77 266,00
equipment 5 5) 8) 5

Provision for Workers' Profit Participation (18,967,71 (26,295,60 (7,753,16 (24,509,70 (20,803,28
Fund 0) 7) 6) 0) 1)

Miscellaneous 2,844,386 1,070,77 1,205,23 2,992,76 743,95

5 6 2 5

620,148,589 641,224,88 1,121,218,16 292,242,35 (10,938,94

3 7 2 6)

Finance cost

Mark-up / interest on:

- redeemable capital 506,755,533 35,703,43 21,950,38 - -

2 5

- long term finances 1,096,850,098 257,460,35 285,288,52 93,647,62 23,198,01

9 7 4 1

- short term borrowings 770,336,216 712,480,00 302,086,67 176,264,63 74,804,69

2 9 2 4

- balances with related parties 10,979,472 - - -

-

- liabilities against assets subject to finance 8,224,128 3,684,90 7,795,62 9,724,29 16,644,21
lease 4 3 3 0

- workers' profit participation fund 4,601,731 318,83 1,014,85 326,58 818,98

9 2 2 0

2,397,747,178 1,009,647,53 618,136,06 279,963,13 115,465,89

6 6 1 5

Bank charges and commission 72,644,477 52,285,67 37,928,51 28,511,52 8,242,48

6 9 4 6

2,470,391,655 1,061,933,21 656,064,58 308,474,65 123,708,38

2 5 5 1

1,151,459,57 1,260,083,80 792,136,93 395,262,33

Profit before taxation 999,502,775 4 4 6 5

(102,218,85 (72,007,07 (115,569,08 (50,843,27 (20,000,00

Taxation 2) 3) 2) 1) 0)

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 By: Yasir Rehman

1,079,452,50 1,144,514,72 741,293,66 375,262,33

Profit after taxation 897,283,923 1 2 5 5

TREND PERCENTAGE ANALYSIS

8.1 BRIEF

Comparing analytical data for a current period with similar computation for prior years

afford some basis for judging whether the condition of the business is improving or

worsening. This comparison of data over time is sometimes called horizontal or trend

analysis, to express the idea for reviewing data for a number of consecutive periods.

The changes in financial statement items from a base year to following years are

expressed as trend percentages to show the extent and direction of change. Two steps

are necessary to compute trend percentages.

• First, a base year is selected and each item in financial statement for the base

year is given a weight of 100%.

• Second step is the express each item in the financial statement for following

years as a percentage of its base year amount.

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 By: Yasir Rehman

AZGARD NINE LIMITED

PROFIT AND LOSS ACCOUNT (Trend Analysis)
FOR THE YEAR ENDED 31 DECEMBER 2008
2009 2008 2007 2006 2005
Rupees
Sales - Net
Local 119.45% 76.68% 49.67% 48.09% 100.00%
Export 497.45% 328.57% 249.38% 231.86% 100.00%
308.82% 202.87% 149.72% 140.15% 100.00%

Add: Export rebate 480.42% 173.13% 100.00% 0.00% 0.00%

Less: Commission and brokerage 222.76% 156.52% 114.50% 132.86% 100.00%
Sales tax 0.00% 0.59% 1.05% 144.54% 100.00%
320.46% 210.03% 154.94% 140.13% 100.00%
Cost of sales
Raw material consumed 277.44% 184.51% 144.45% 104.15% 100.00%
Salaries, wages and benefits 342.66% 257.24% 180.11% 125.06% 100.00%
Fuel and power 276.20% 183.37% 170.99% 176.02% 100.00%
Stores, spares and loose tools consumed 574.10% 339.65% 228.98% 314.06% 100.00%
Traveling, conveyance and entertainment 453.42% 513.68% 280.19% 55.20% 100.00%
Rent, rates and taxes 1016.22 190.98% 491.27% 248.31% 100.00%
%
Insurance 489.34% 237.39% 276.30% 118.72% 100.00%
Repair and maintenance 464.56% 403.78% 340.61% 209.99% 100.00%
Processing charges 334.45% 163.93% 170.56% 127.39% 100.00%
Depreciation 319.46% 321.39% 145.27% 154.72% 100.00%
Amortization 103.78% 97.23% 95.92% 100.00% 0.00%
Printing and stationery 1947.16 1221.15 525.30% 534.42% 100.00%
% %
Communication 710.48% 384.70% 111.17% 73.98% 100.00%
Others 547.64% 412.87% 325.77% 256.40% 100.00%
299.23% 209.64% 156.02% 121.03% 100.00%
Work in process
As at beginning of the year 462.77% 198.21% 131.59% 127.48% 100.00%
Transfer from trial run production 0.00% 0.00% 100.00% 0.00% 0.00%
As at end of the year 470.92% 363.01% 155.48% 103.22% 100.00%
500.57% 962.63% 220.79% 14.92% 100.00%
Cost of goods manufactured 295.33% 195.04% 154.77% 123.08% 100.00%

Finished goods
As at beginning of the year 113.34% 79.87% 56.10% 113.87% 100.00%
Transfer from trial run production/purchases 0.00% 0.00% 41.85% 0.00% 100.00%
As at end of the year 206.61% 99.53% 70.15% 49.27% 100.00%

6070.72 1666.04 936.57% -2876.07% 100.00%

% %
272.87% 189.32% 151.73% 134.74% 100.00%
Gross Profit 482.89% 280.70% 165.89% 158.53% 100.00%
Administrative and selling expenses

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Salaries, wages and benefits 359.44% 273.46% 241.06% 186.44% 100.00%

Traveling, conveyance and entertainment 324.28% 324.96% 411.24% 339.51% 100.00%
Fuel and power 852.88% 327.73% 324.95% 209.04% 100.00%
Repair and maintenance 399.11% 403.30% 232.07% 142.46% 100.00%
Rent, rates and taxes 610.47% 595.37% 274.99% 60.94% 100.00%
Insurance 692.10% 1025.80 527.46% 391.89% 100.00%
%
Freight and clearing 495.84% 253.24% 233.88% 166.02% 100.00%
Printing and stationery 226.69% 198.06% 172.54% 163.16% 100.00%
Communication 299.29% 221.74% 196.35% 169.21% 100.00%
Advertisement and sales promotion 8.57% 91.68% 110.46% 65.92% 100.00%
Legal and professional charges 888.98% 1470.72 408.26% 303.30% 100.00%
%
Depreciation 221.88% 136.66% 113.12% 158.27% 100.00%
Fee and subscription 451.82% 224.38% 304.70% 130.56% 100.00%
Amortisation of textile quota 0.00% 0.00% 0.00% 102.61% 100.00%
Donations 45.07% 1892.85 90.14% 4231.12% 100.00%
%
Provision for doubtful debts 0.00% 100.00% 0.00% 0.00% 0.00%
Others 54.92% 72.89% 144.86% 100.73% 100.00%
325.84% 234.95% 211.31% 175.63% 100.00%
Operating profit 537.78% 296.69% 150.01% 152.55% 100.00%
Other income - Net
Financial instruments
Gain on sale of investments 1569.93 6586.20 4904.57% 16727.25 100.00%
% % %
Unrealized loss on investments at fair value 0.00% -96.16% 0.00% 504.04% 100.00%
through profit or loss
Impairment loss on investments available for sale 0.00% 165.61% 100.00% 0.00% 0.00%
Markup on balances with related parties 0.00% 301.14% 100.00% 0.00% 0.00%
Dividend income 1514.67 1511.89 2719.21% 100.00% 0.00%
% %
Unrealized loss on derivative financial instruments -38.99% -55.71% 0.00% 100.00% 0.00%
Foreign exchange gain 404.92% 100.00% 0.00% 0.00% 0.00%
Loss on winding up of subsidiary 100.00% 0.00% 0.00% 0.00% 0.00%
Return on bank deposits 197.00% 244.97% 1043.78% 2529.13% 100.00%
Non-financial instruments
Gain / (loss) on disposal of property plant and 362.40% 74.56% -18.13% -2504.38% 100.00%
equipment
Provision for Workers' Profit Participation Fund 91.18% 126.40% 37.27% 117.82% 100.00%
Miscellaneous 382.33% 143.93% 162.00% 402.28% 100.00%
-5669.18% -5861.85% -10249.78% -2671.58% 100.00%
Finance cost
Mark-up / interest on:
- redeemable capital 2308.64 162.66% 100.00% 0.00% 0.00%
%
- long term finances 4728.21 1109.84 1229.80% 403.69% 100.00%
% %
- short term borrowings 1029.80 952.45% 403.83% 235.63% 100.00%
%
- balances with related parties 100.00% 0.00% 0.00% 0.00% 0.00%
- liabilities against assets subject to finance lease 49.41% 22.14% 46.84% 58.42% 100.00%
- workers' profit participation fund 561.89% 38.93% 123.92% 39.88% 100.00%

2076.58 874.41% 535.34% 242.46% 100.00%

%

Bank charges and commission 881.34% 634.34% 460.16% 345.91% 100.00%

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 By: Yasir Rehman

1996.95 858.42% 530.33% 249.36% 100.00%

%

Profit before taxation 252.87% 291.32% 318.80% 200.41% 100.00%

Taxation 511.09% 360.04% 577.85% 254.22% 100.00%

Profit after taxation 239.11% 287.65% 304.99% 197.54% 100.00%

Net Sale
This is the amount of net revenues earned from sales of goods during the
particular period. It is determined by deducting sales tax from own
manufactured and purchased products or services rendered of that period.
Fiscal year 2005 is considered as base for analyzing the net sales which are
consider as base for the analysis.
Amounts 2009 2008 2007 2006 2005
Net Sale 320.46% 210.03% 154.94% 140.13% 100.00%

Net Sale

320.46%
350.00%

300.00%
210.03%
250.00%

200.00% 154.94% 140.13%

100.00%
150.00%

100.00%

50.00%

0.00%
2009 2008 2007 2006 2005

Explanation:
SALES are showing continuous upward trend. There is a huge increase in
sales in 2009(320.46%) and then about 210.03% in the year 2008 due to increase in
exports and starting of many business expansion projects indicating the firm's efficiency

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By: Yasir Rehman

to cover losses producing from retention of garments in FY 2009. This shows a good
picture for investors and lenders to take interest in azgard9.

COST OF GOODS SOLD

This is the amount of purchase price and direct expenses of the merchandise sold
during the particular period. It is determined by adding beginning inventory of material
and net purchases with the deduction of ending inventory from both. Fiscal year 2005 is
considered as base for analyzing the cost of good sold which are consider as base for
the analysis.

Amounts 2009 2008 2007 2006 2005

CGS 272.87% 189.32% 151.73% 134.74% 100.00%

CGS

272.87%
300.00%

250.00%

189.32%
200.00% 151.73% 134.74%

150.00% 100.00%

100.00%

50.00%

0.00%
2009 2008 2007 2006 2005

Interpretation

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By: Yasir Rehman

Cost of good Sold are showing healthy trend. It’s increasing year by year and reaches to
the 272.87% in FY09 as compared to the FY05 and further explanations are given as
under.

FY2006: Cost of good sold of the FY06 grew by 134.74%mainly due to high purchase
prices of row material consumed in process,

FY2007: Cost of good sold for the year was grown by 151%supported by higher unit
price of wool, yarn.

FY2008: Cost of good sold for the year 08 higher by 189%as compared to the base
year 2005,due to mainly to higher production of polycoton and popline This is mainly
due to the market plan that focused on consumption of yarn at grass root level.

FY2009: Cost of good sold of the year 2009, 272% compared with 189% in 2008, Cost
of good sold grow much because of increase in raw material consumed in business
process and in manufacturing cost.

Gross Profit
Amounts 2009 2008 2007 2006 2005
482.89 280.70% 165.89% 158.53% 100.00%
Gross Profit %

Gross Profit

600.00%

482.89%
500.00%

400.00%

280.70%
300.00%

200.00% 165.89% 158.53%

100.00%
100.00%

0.00%
2009 2008 2007 2006 2005

Interpretation

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By: Yasir Rehman

Gross profits are showing positive trend. It’s increasing year by year and reaches to the
482.89% in FY09 as compared to the FY05 and further explanations are given as under.

Gross profit of the FY06 grew by 158%mainly due to high double weft volume and
supported by higher unit selling prices of all products. The FY08 proved to be good one
forAzgard9 due to mainly to higher turnover of wool and cotton. This is mainly due to the
market plan that focused on consumption of cotton fabric at grass root level.

Azgard9 gives strongest results to date in 2009. Gross profit of the year 2009, 482.89%
compared with 2008,

Net Profit
Amounts 2009 2008 2007 2006 2005
239.11 287.65% 304.99% 197.54% 100.00%
Profit after taxation %

Net Profit

350.00% 287.65% 304.99%

300.00% 239.11%

250.00% 197.54%

200.00%

150.00% 100.00%

100.00%

50.00%

0.00%
2009 2008 2007 2006 2005

Explanation:
Net profit after taxes is showing fluctuating outcomes in FY 2006, 197.54%, and in
FY2007 it is 304.99% and 287.65% in year 2008. This small decrease in net profit of
Azgard9 is due to heavy taxes levied by the government and then this trend is showing

negative response in FY 2009 which is 239.11%. Overall it shows a good picture for

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 By: Yasir Rehman

investors and lenders to make investment in Azgard9. I expect that Azgard9 gave
realistic results in future.

AZGARD NINE LIMITED

BALANCE SHEET
(Trend Analysis)
AS AT 31 DECEMBER 2009
2009 2008 2007 2006 2005
Rupees
EQUITY AND LIABILITIES

Share capital and reserves

Issued, subscribed and paid-up capital 220.29% 218.09% 218.09% 100.00% 100.00%
Reserves 975.44% 974.93% 988.08% 111.37% 100.00%
Unappropriated profit 673.19% 584.58% 440.04% 231.94% 100.00%

403.33% 387.24% 365.49% 123.23% 100.00%

Surplus on revaluation of property, plant

and equipment 71.55% 77.98% 83.95% 90.99% 100.00%

Non-current liabilities

Redeemable capital - Secured

Privately placed TFC,s 0.00% 0.00% 0.00% 100.00% 100.00%
Term Finance Certificates (TFCs) - I 33.33% 66.67% 100.00% 0.00% 0.00%
Term Finance Certificates (TFCs) - II 100.00% 99.92% 99.96% 100.00% 0.00%
Term Finance Certificates (TFCs) - III 99.96% 100.00% 0.00% 0.00% 0.00%
Less: Transaction costs 103.01% 100.00% 0.00% 0.00% 0.00%

1743.79% 1893.51% 932.13% 957.47% 100.00%

Less: Current maturity shown under current

liabilities 264.68% 161.72% 42.24% 165.85% 100.00%

2144.90
3962.46% 4491.19% 2266.96% % 100.00%

Long term finances - Secured

Habib Bank Limited ("HBL") 0.00% 12.50% 50.00% 62.50% 100.00%

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United Bank Limited ("UBL") 50.00% 62.50% 100.00% 100.00% 100.00%

Citi Bank N.A - I 0.00% 33.33% 66.67% 100.00% 100.00%
Citi Bank N.A - II 0.00% 0.00% 100.00% 0.00% 0.00%
Citi Bank Bahrain 94.00% 100.00% 0.00% 0.00% 0.00%
National Bank of Pakistan ("NBP") 83.33% 100.00% 100.00% 0.00% 0.00%
Deutsche Investitions - Und MBH 124.24% 112.77% 100.00% 0.00% 0.00%
Faysal Bank Limited ("FBL") 0.00% 42.86% 100.00% 0.00% 0.00%
Saudi Pak Industrial and Agricultural 0.00% 0.00% 0.00% 0.00% 0.00%
Company Limited ("SAPIACO") 100.00% 0.00% 0.00% 0.00% 0.00%
KASB Bank Limited ("KASB") 100.00% 0.00% 0.00% 0.00% 0.00%

467.80% 460.97% 482.27% 81.25% 100.00%

Less: Current maturity shown under 703.72% 476.12% 225.94% 77.78% 100.00%
current liabilities
413.36% 457.47% 541.42% 82.05% 100.00%

Liabilities against assets subject to finance lease

Present value of minimum lease payments 24.24% 21.52% 31.96% 60.43% 100.00%
Less: Current portion shown under current
liabilities 29.05% 38.51% 75.74% 108.34% 100.00%

21.64% 12.32% 8.26% 34.48% 100.00%

Long term payables 0.00% 0.00% 143.23% 253.34% 100.00%

Current liabilities

Current portion of non-current liabilities

Redeemable capital 264.68% 161.72% 42.24% 165.85% 100.00%
Long term finances 703.72% 476.12% 225.94% 77.78% 100.00%
Liabilities against assets subject to finance
lease 29.05% 38.51% 75.74% 108.34% 100.00%

405.12% 270.20% 123.95% 119.47% 100.00%

Short term borrowings 440.35% 255.92% 397.66% 210.49% 100.00%

Derivative financial liabilities 157.82% 107.33% 100.00% 0.00% 0.00%

Trade and other payables

Trade creditors 268.43% 298.48% 213.75% 53.52% 100.00%
Payable to subsidiary company 0.00% 0.00% 100.00% 0.00% 0.00%
Bills payable 149.07% 55.92% 54.10% 109.45% 100.00%
Accrued liabilities 369.18% 302.11% 206.48% 139.40% 100.00%
Advances from customers 85.52% 41.96% 51.61% 25.13% 100.00%
Workers' profit participation fund 91.18% 126.40% 37.34% 117.82% 100.00%
Workers' Welfare Fund 100.00% 100.00% 100.00% 100.00% 100.00%
Customers duty surcharge 0.00% 0.00% 0.00% 0.00% 100.00%
Tax deducted at source 48.34% 136.42% 244.28% 170.67% 100.00%
Other payables 177.11% 260.00% 250.07% 78.02% 100.00%

190.84% 145.68% 143.54% 89.80% 100.00%

Due to related parties - Unsecured 100.00% 0.00% 0.00% 0.00% 0.00%

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Markup accrued on borrowings

Redeemable capital 138.80% 122.13% 100.00% 0.00% 0.00%
Long term finances 277.82% 222.53% 201.82% 100.00% 0.00%
Short term borrowings 550.12% 230.80% 276.75% 220.02% 100.00%
Due to related parties 100.00% 0.00% 0.00% 0.00% 0.00%
Liabilities against assets subject to finances
lease 81.05% 34.38% 62.00% 101.54% 100.00%

1660.30% 1131.35% 556.27% 100.00%

Unclaimed dividend 15391.92% 10159.95% 23384.47% 379.46% 100.00%
Contingencies and commitments 0.00% 0.00% 0.00% 0.00% 0.00%

436.12% 376.55% 366.20% 166.69% 100.00%

2009 2008 2007 2006 2005
ASSETS

Non-current assets

Property, plant and equipment 271.60% 268.39% 266.93% 109.31% 100.00%

Capital work in progress

Building 2195.59
373.02% 574.52% 184.30% % 100.00%
Plant and machinery 3174.10
1343.98% 66.28% 24.05% % 100.00%

2918.01
1089.86% 199.29% 65.99% % 100.00%
Intangible assets
Development costs 25.27% 46.95% 59.06% 79.10% 100.00%
Software 181.20% 181.20% 175.25% 135.17% 100.00%

37.95% 57.87% 68.51% 83.66% 100.00%

282100.86 239729.77 236413.70 3507.40

Long term investments % % % % 100.00%

Long term deposits 106.80% 109.30% 107.50% 160.63% 100.00%

Current assets

Stores, spares and loose tools

Stores 292.55% 175.16% 129.54% 119.36% 100.00%
Spares 250.82% 171.82% 162.56% 126.24% 100.00%
Loose tools 24.80% 24.80% 223.69% 66.47% 100.00%

277.78% 172.80% 140.15% 120.91% 100.00%

Stock in trade
Raw material 296.18% 143.10% 204.68% 236.97% 100.00%
Work in process 470.92% 363.01% 155.48% 107.88% 100.00%
Finished goods 206.61% 99.53% 70.15% 53.63% 100.00%

289.24% 161.04% 145.01% 145.85% 100.00%

Trade receivables
Considered good

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 By: Yasir Rehman

Local
- secured 74.69% 87.16% 75.49% 52.59% 100.00%
- unsecured 129.40% 182.94% 150.24% 164.21% 100.00%

119.67% 165.91% 136.94% 216.80% 100.00%

Foreign
- secured 220.73% 181.73% 108.67% 82.18% 100.00%
- unsecured 100.00% 0.00% 0.00% 0.00% 0.00%

234.32% 181.73% 108.67% 82.18% 100.00%

188.04% 175.34% 120.08% 107.28% 100.00%

Considered doubtful 110.56% 261.19% 100.00% 100.00% 100.00%

187.70% 175.73% 119.99% 107.24% 100.00%

Provision for doubtful debts 110.56% 261.19% 100.00% 100.00% 100.00%

188.04% 175.34% 120.08% 107.28% 100.00%

Derivative financial assets 31.61% 70.00% 100.00% 0.00% 0.00%

Advances, deposits, prepayments and other receivables

Advances to suppliers - Unsecured,
considered good 138.05% 352.17% 213.64% 257.11% 100.00%
Advances to employees - Unsecured,
considered good 183.56% 165.14% 170.59% 160.45% 100.00%
Security deposit 40.22% 83.43% 80.77% 33.44% 100.00%
Margin deposits 30.37% 2.23% 4.00% 12.60% 100.00%
Prepayments 100.75% 47.60% 87.01% 103.05% 100.00%
Rebate receivable 359.98% 281.66% 162.78% 213.89% 100.00%
Accrued gain on swap contract 0.00% 100.00% 0.00% 0.00% 0.00%
Return on investments in TFCs receivable 83.28% 56.21% 100.00% 0.00% 0.00%
Textile quota 0.00% 0.00% 0.00% 0.00% 100.00%
Octrai refundable 0.00% 0.00% 0.00% 0.00% 100.00%
Sales tax recoverable 88.73% 47.47% 74.86% 57.61% 100.00%
Letters of credit 430.74% 574.25% 368.16% 661.28% 100.00%
Insurance claim 1157.23% 1178.18% 166.81% 587.37% 100.00%
Others receivables- Unsecured, considered
good 227.81% 273.86% 71.17% 147.56% 100.00%

125.92% 160.27% 120.28% 129.38% 100.00%

Current taxation
As at beginning of the year 113.89% 7.46% 62.46% 144.62% 100.00%
Paid during the year 135.71% 141.13% 107.18% 125.95% 100.00%
Provision for the year 157.68% 111.08% 178.28% 221.62% 100.00%

As at end of the year 98.65% 78.75% 5.16% 43.19% 100.00%

Short term investments 3681.99% 3516.70% 3470.78% 614.69% 100.00%

Cash and bank balances

Cash in hand 180.12% 67.50% 191.74% 58.58% 100.00%
Cash at banks
in current accounts
local currency 799.49% 372.84% 5900.12% 356.74% 100.00%

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 By: Yasir Rehman

foreign currency 0.00% 0.00% 100.00% 0.00% 0.00%

in saving accounts
local currency 10.44% 90.65% 12.99% 114.12% 100.00%
foreign currency - US $1,177 (2007: US 5.73% 5.28% 0.00% 0.00%
$ 1,392) 100.00%

392.55% 217.30% 2778.42% 218.30% 100.00%

436.12% 376.55% 366.20% 166.69% 100.00%

Total Assets
Amounts 2009 2008 2007 2006 2005
Total Assets 436.12% 376.55% 366.20% 166.69% 100.00%

Total Assets

436.12%
450.00%
376.55% 366.20%
400.00%
350.00%
300.00%
250.00%
166.69%
200.00%
100.00%
150.00%
100.00%
50.00%
0.00%
2009 2008 2007 2006 2005

Interpretation

Total assets are showing positive horizontal trend. It’s increasing year by year and
reaches to the 436.2% in FY09 as compared to the FY05 and further explanations are
given as under.

Total assets of the FY06 grew by 166%.this increase mainly due to decrease in non
current assets in 2006 reason behind that is decrease in long term investments by the
Azgard9.

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By: Yasir Rehman

The FY07 and FY08 proved to be good one for firm, growth is almost equal to
400%.This increase occur mainly due to increase in fixed assets. Specially increase in
biological assets at 100%.

Azgard9 delivered strongest results to date in 2009. Total assets reaches at

436.12%increasing rate as compared to the FY2005. This increase occurs mainly due
to the purchase of new technology in the form of fixed assets. Biological assets are
also increased in 2009.

VERTICAL ANALYSIS

“An analysis of percentage financial statements where all balance sheet items are
divided by total assets and all income statement items are divided by net sales or
revenue”

The expression of individual financial statement item as percentages of total helps

the analyst spot trends with respect to the relative importance of these items over time.

Balance Sheet

Vertical analysis is also called common size analysis. The common size balance
sheet is also called 100% balance sheet. The total of assets is the base figures
representing 100%. Every item of the balance sheet is related vertically to reflect the
vertical mix against the total. The analysis represents internal composition of assets and
liabilities. The common size balance sheet analysis reveals the sources of capital and all
other sources and the application of sources to assets of the company.

Profit And Loss Account

Similar method as applied for balance sheet is also applicable to profit and loss
account. The various items of profit and loss account are related as percentage to sales.
For example, items like, cost of goods sold. Operating expenses, gross profit, taxation
etc. are reduced to percentages by treating the sales as 100 %. These ratios are also called
vertical ratios and mix percentages.

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By: Yasir Rehman

AZGARD NINE LIMITED

BALANCE SHEET (Vertical
Analysis)
AS AT 31 DECEMBER 2009
2009 2008 2007 2006 2005
Rupees

EQUITY AND LIABILITIES

Share capital and reserves

Issued, subscribed and paid-up capital 13.98% 16.03% 16.49% 16.61% 27.68%
Reserves 12.91% 14.94% 15.57% 3.86% 5.77%
Unappropriated profit 10.10% 10.16% 7.86% 9.10% 6.54%

36.99% 41.13% 39.92% 29.57% 39.99%

Surplus on revaluation of property,

plant and equipment 0.80% 1.01% 1.12% 2.67% 4.88%

Non-current liabilities

Redeemable capital - Secured

Privately placed TFC,s 0.00% 0.00% 0.00% 2.39% 3.98%
Term Finance Certificates (TFCs) - I 0.23% 0.53% 0.82% 0.00% 0.00%
Term Finance Certificates (TFCs) - II 6.69% 9.06% 9.32% 20.49% 0.00%
Term Finance Certificates (TFCs) - III 9.13% 10.58% 0.00% 0.00% 0.00%
Less: Transaction costs -0.12% -0.14% 0.00% 0.00% 0.00%

15.93% 20.03% 10.14% 20.49% 0.00%

Less: Current maturity shown under

current liabilities 1.45% 1.03% 0.28% 2.38% 2.39%

14.48% 19.00% 9.86% 20.50% 1.59%

Long term finances - Secured

Habib Bank Limited ("HBL") 0.00% 0.21% 0.87% 2.39% 6.37%
United Bank Limited ("UBL") 0.37% 0.53% 0.87% 1.91% 3.19%
Citi Bank N.A - I 0.00% 0.28% 0.58% 1.91% 3.19%

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By: Yasir Rehman

Citi Bank N.A - II 0.00% 0.00% 2.61% 0.00% 0.00%

Citi Bank Bahrain 1.98% 2.44% 0.00% 0.00% 0.00%
National Bank of Pakistan ("NBP") 4.57% 6.35% 6.53% 0.00% 0.00%
Deutsche Investitions - Und MBH 5.48% 5.76% 5.25% 0.00% 0.00%
Faysal Bank Limited ("FBL") 0.00% 0.03% 0.08% 0.00% 0.00%
Saudi Pak Industrial and Agricultural 0.00% 0.00% 0.00%
Company Limited ("SAPIACO") 0.37% 0.00% 0.00% 0.00% 0.00%
KASB Bank Limited ("KASB") 0.91% 0.00% 0.00% 0.00% 0.00%

13.67% 15.60% 16.79% 6.21% 12.75%

Less: Current maturity shown under 3.86% 3.02% 1.47% 1.12% 2.39%
current liabilities
9.82% 12.58% 15.31% 5.10% 10.36%

Liabilities against assets subject to finance lease

Present value of minimum lease payments 0.16% 0.16% 0.25% 1.04% 2.86%
Less: Current portion shown under current
liabilities 0.07% 0.10% 0.21% 0.65% 1.01%

0.09% 0.06% 0.04% 0.38% 1.86%

Long term payables 0.00% 0.00% 0.01% 0.03% 0.02%

Current liabilities

Current portion of non-current liabilities

Redeemable capital 1.45% 1.03% 0.28% 2.38% 2.39%
Long term finances 3.86% 3.02% 1.47% 1.12% 2.39%
Liabilities against assets subject to finance
lease 0.07% 0.10% 0.21% 0.65% 1.01%

5.37% 4.15% 1.96% 4.15% 5.79%

Short term borrowings 24.02% 16.17% 25.83% 30.04% 23.79%

Derivative financial liabilities 0.18% 0.15% 0.14% 0.00% 0.00%

Trade and other payables

Trade creditors 1.92% 2.47% 1.82% 1.00% 3.12%
Payable to subsidiary company 0.00% 0.00% 0.93% 0.00% 0.00%
Bills payable 1.96% 0.85% 0.85% 3.77% 5.74%
Accrued liabilities 0.74% 0.70% 0.49% 0.73% 0.87%
Advances from customers 0.19% 0.11% 0.13% 0.14% 0.95%
Workers' profit participation fund 0.07% 0.11% 0.03% 0.23% 0.33%
Workers' Welfare Fund 0.00% 0.00% 0.00% 0.00% 0.00%
Customers duty surcharge 0.00% 0.00% 0.00% 0.00% 0.01%
Tax deducted at source 0.02% 0.05% 0.10% 0.15% 0.14%
Other payables 0.04% 0.06% 0.06% 0.04% 0.09%

4.93% 4.36% 4.42% 6.07% 11.28%

Due to related parties - Unsecured 1.56% 0.00% 0.00% 0.00% 0.00%

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Markup accrued on borrowings

Redeemable capital 0.44% 0.45% 0.38% 0.27% 0.00%
Long term finances 0.68% 0.63% 0.59% 0.64% 0.00%
Short term borrowings 0.54% 0.26% 0.32% 0.56% 0.43%
Due to related parties 0.04% 0.00% 0.00% 0.00% 0.00%
Liabilities against assets subject to
finances lease 0.00% 0.00% 0.00% 0.01% 0.02%

1.70% 1.34% 1.29% 1.49% 0.45%

Unclaimed dividend 0.05% 0.04% 0.10% 0.00% 0.00%

Contingencies and commitments 0.00% 0.00% 0.00% 0.00% 0.00%

100.00% 100.00% 100.00% 100.00% 100.00%

ASSETS

Non-current assets

Property, plant and equipment 28.26% 32.34% 33.08% 29.76% 45.38%

Capital work in progress

Building 0.30% 0.54% 0.18% 4.63% 0.35%
Plant and machinery 3.06% 0.17% 0.07% 18.88% 0.99%

3.36% 0.71% 0.24% 23.51% 1.34%

Intangible assets
Development costs 0.07% 0.16% 0.21% 0.61% 1.29%
Software 0.05% 0.06% 0.05% 0.09% 0.11%

0.12% 0.22% 0.26% 0.71% 1.41%

Long term investments 27.48% 27.05% 27.43% 0.89% 0.04%

Long term deposits 0.07% 0.09% 0.09% 0.28% 0.30%

Current assets

Stores, spares and loose tools

Stores 0.54% 0.37% 0.28% 0.58% 0.80%
Spares 0.20% 0.16% 0.15% 0.26% 0.34%
Loose tools 0.00% 0.00% 0.01% 0.00% 0.01%

0.74% 0.53% 0.44% 0.84% 1.16%

Stock in trade
Raw material 6.89% 3.85% 5.67% 14.41% 10.14%
Work in process 3.79% 3.39% 1.49% 2.27% 3.51%
Finished goods 4.06% 2.27% 1.64% 2.76% 8.57%

14.74% 9.50% 8.80% 19.44% 22.22%

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Trade receivables
Considered good

Local
- secured 0.19% 0.25% 0.22% 0.34% 1.08%
- unsecured 1.48% 2.43% 2.05% 4.92% 5.00%

1.67% 2.68% 2.27% 5.26% 6.08%

Foreign
- secured 4.55% 4.33% 2.67% 4.43% 8.98%
- unsecured 0.28% 0.00% 0.00% 0.00% 0.00%

4.83% 4.33% 2.67% 4.43% 8.98%

6.49% 7.01% 4.94% 9.69% 15.06%
Considered doubtful 0.02% 0.05% 0.02% 0.04% 0.07%
6.51% 7.06% 4.96% 9.73% 15.13%
Provision for doubtful debts -0.02% -0.05% -0.02% -0.04% -0.07%
6.49% 7.01% 4.94% 9.69% 15.06%
Derivative financial assets 0.64% 1.65% 2.42% 0.00% 0.00%

Advances, deposits, prepayments and other receivables

Advances to suppliers - Unsecured,
considered good 0.80% 2.36% 1.47% 3.90% 2.53%
Advances to employees - Unsecured,
considered good 0.13% 0.14% 0.14% 0.30% 0.31%
Security deposit 0.01% 0.03% 0.03% 0.03% 0.15%
Margin deposits 0.22% 0.02% 0.04% 0.24% 3.21%
Prepayments 0.03% 0.02% 0.03% 0.09% 0.14%
Rebate receivable 0.35% 0.32% 0.19% 0.54% 0.42%
Accrued gain on swap contract 0.00% 0.02% 0.00% 0.00% 0.00%
Return on investments in TFCs receivable 0.32% 0.25% 0.46% 0.00% 0.00%
Textile quota 0.00% 0.00% 0.00% 0.00% 0.40%
Octrai refundable 0.00% 0.00% 0.00% 0.00% 0.04%
Sales tax recoverable 0.46% 0.29% 0.46% 0.78% 2.26%
Letters of credit 0.42% 0.65% 0.43% 1.68% 0.42%
Insurance claim 0.10% 0.12% 0.02% 0.14% 0.04%
Others receivables- Unsecured,
considered good 0.03% 0.05% 0.01% 0.06% 0.06%

2.88% 4.25% 3.28% 7.75% 9.99%

Current taxation
As at beginning of the year 0.19% 0.01% 0.12% 0.62% 0.71%
Paid during the year 0.42% 0.51% 0.40% 1.02% 1.35%
Provision for the year -0.37% -0.30% -0.50% -1.37% -1.03%
As at end of the year 0.23% 0.22% 0.01% 0.27% 1.03%

Short term investments 14.68% 16.24% 16.48% 6.41% 1.74%

Cash and bank balances
Cash in hand 0.02% 0.01% 0.02% 0.01% 0.04%
Cash at banks
in current accounts
local currency 0.28% 0.15% 2.46% 0.33% 0.15%
foreign currency 0.00% 0.00% 0.04% 0.00% 0.00%
in saving accounts
local currency 0.00% 0.03% 0.00% 0.10% 0.14%

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foreign currency - US $1,177 (2007:

US $ 1,392) 0.00% 0.00% 0.01% 0.00% 0.00%

0.30% 0.19% 2.53% 0.44% 0.33%

100.00% 100.00% 100.00% 100.00% 100.00%

AZGARD NINE LIMITED

PROFIT AND LOSS ACCOUNT
(Vertical Analysis)
FOR THE YEAR ENDED 31 DECEMBER 2009

2009 2008 2007 2006 2005

Rupees

Sales - Net

Local
Export

Add: Export rebate

Less: Commission and brokerage

Sales tax

100.00% 100.00% 100.00% 100.00% 100.00%

Cost of sales
Raw material consumed 47.95% 48.66% 51.64% 41.17% 55.39%
Salaries, wages and benefits 9.61% 11.01% 10.45% 8.02% 8.99%
Fuel and power 5.17% 5.24% 6.62% 7.53% 6.00%
Stores, spares and loose tools consumed 2.76% 2.49% 2.28% 3.45% 1.54%
Traveling, conveyance and entertainment 0.75% 1.29% 0.96% 0.21% 0.53%
Rent, rates and taxes 0.21% 0.06% 0.21% 0.12% 0.07%
Insurance 0.33% 0.24% 0.38% 0.18% 0.22%
Repair and maintenance 0.50% 0.66% 0.75% 0.51% 0.34%
Processing charges 0.58% 0.43% 0.61% 0.50% 0.56%
Depreciation 5.19% 7.96% 4.88% 5.74% 5.20%
Amortization 0.17% 0.25% 0.33% 0.38% 0.00%
Printing and stationery 0.14% 0.13% 0.08% 0.09% 0.02%
Communication 0.18% 0.15% 0.06% 0.04% 0.08%
Others 0.37% 0.43% 0.46% 0.40% 0.22%

73.90% 79.00% 79.70% 68.35% 79.15%

Work in process
As at beginning of the year 7.91% 5.17% 4.65% 4.98% 5.48%
Transfer from trial run production 0.00% 0.00% 0.21% 0.00% 0.00%
As at end of the year -10.26% -12.07% -7.01% -5.14% -6.98%

-2.35% -6.90% -2.15% -0.16% -1.51%

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Cost of goods manufactured 71.55% 72.10% 77.56% 68.19% 77.64%

Finished goods
As at beginning of the year 5.29% 5.69% 5.42% 12.17% 14.97%
Transfer from trial run production/purchases 0.00% 0.00% 0.48% 0.00% 1.78%
As at end of the year -10.99% -8.08% -7.72% -5.99% -17.05%

-5.70% -2.39% -1.82% 6.17% -0.30%

65.85% 69.72% 75.74% 74.37% 77.34%

Gross Profit 34.15% 30.28% 24.26% 25.63% 22.66%

Administrative and selling expenses

Salaries, wages and benefits 1.86% 2.16% 2.58% 2.20% 1.66%
Traveling, conveyance and entertainment 0.51% 0.78% 1.35% 1.23% 0.51%
Fuel and power 0.13% 0.08% 0.11% 0.07% 0.05%
Repair and maintenance 0.10% 0.15% 0.12% 0.08% 0.08%
Rent, rates and taxes 0.08% 0.11% 0.07% 0.02% 0.04%
Insurance 0.03% 0.07% 0.05% 0.04% 0.01%
Freight and clearing 2.38% 1.86% 2.32% 1.82% 1.54%
Printing and stationery 0.05% 0.06% 0.07% 0.08% 0.07%
Communication 0.33% 0.38% 0.45% 0.43% 0.36%
Advertisement and sales promotion 0.01% 0.09% 0.15% 0.10% 0.22%
Legal and professional charges 0.19% 0.47% 0.18% 0.15% 0.07%
Depreciation 0.14% 0.13% 0.15% 0.23% 0.20%
Fee and subscription 0.12% 0.09% 0.16% 0.08% 0.08%
Amortisation of textile quota 0.00% 0.00% 0.00% 0.53% 0.73%
Donations 0.00% 0.03% 0.00% 0.11% 0.00%
Provision for doubtful debts 0.00% 0.01% 0.00% 0.00% 0.00%
Others 0.04% 0.09% 0.24% 0.19% 0.26%

5.97% 6.57% 8.00% 7.36% 5.87%

Operating profit 28.18% 23.72% 16.26% 18.28% 16.79%

Other income - Net

Financial instruments

Gain on sale of investments 0.19% 1.18% 1.20% 4.51% 0.04%

Unrealized loss on investments at fair value 0.00% -0.10% 0.00% 0.79% 0.22%
through profit or loss
Impairment loss on investments available for 0.00% -0.02% -0.02% 0.00% 0.00%
sale
Markup on balances with related parties 0.00% 0.19% 0.09% 0.00% 0.00%
Dividend income 5.83% 8.88% 21.65% 0.88% 0.00%
Unrealized loss on derivative financial -0.11% -0.24% 0.00% 0.66% 0.00%
instruments
Foreign exchange gain 0.37% 0.14% 0.00% 0.00% 0.00%
Loss on winding up of subsidiary 0.00% 0.00% 0.00% 0.00% 0.00%
Return on bank deposits 0.01% 0.03% 0.15% 0.41% 0.02%

Non-financial instruments

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Gain / (loss) on disposal of property plant and 0.01% 0.00% 0.00% -0.15% 0.01%
equipment
Provision for Workers' Profit Participation Fund -0.19% -0.40% -0.16% -0.55% -0.66%
Miscellaneous 0.03% 0.02% 0.02% 0.07% 0.02%

6.13% 9.67% 22.93% 6.61% -0.35%

Finance cost
Mark-up / interest on:
- redeemable capital 5.01% 0.54% 0.45% 0.00% 0.00%
- long term finances 10.85% 3.88% 5.83% 2.12% 0.74%
- short term borrowings 7.62% 10.75% 6.18% 3.99% 2.37%
- balances with related parties 0.11% 0.00% 0.00% 0.00% 0.00%
- liabilities against assets subject to finance 0.08% 0.06% 0.16% 0.22% 0.53%
lease
- workers' profit participation fund 0.05% 0.00% 0.02% 0.01% 0.03%

23.71% 15.23% 12.64% 6.33% 3.66%

Bank charges and commission 0.72% 0.79% 0.78% 0.64% 0.26%

24.43% 16.02% 13.42% 6.98% 3.92%

Profit before taxation 9.88% 17.37% 25.77% 17.91% 12.52%

Taxation -1.01% -1.09% -2.36% -1.15% -0.63%

Profit after taxation 8.87% 16.29% 23.41% 16.76% 11.89%

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ANALYTICAL REVIEW OF VERTICLE PROFIT & LOSS ACCOUNT

Amounts 2009 2008 2007 2006 2005

CGS 65.85% 69.72% 75.74% 74.37% 77.34%

Gross Profit 34.15% 30.28% 24.26% 25.63% 22.66%

Net Profit 8.87% 16.29% 23.41% 16.76% 11.69%

CGS, GP, Net Profit

90.00% 25.00%
80.00%
70.00% 20.00%

60.00%
15.00%
50.00%
40.00%
10.00%
30.00%
20.00% 5.00%
10.00%
0.00% 0.00%
2009 2008 2007 2006 2005

CGS G.P Net Profit

As we can see from the vertical profit and loss account the Cost of sales decreased in
2008 by 69% and it decreased by 65% in 2009.

Gross profit increased in 2008 by 30% as compared to 2007 and in 2007 it had decreased
by 24% as compared to 25% in 2006.

In year 2008 the profit/loss after taxation was fluctuated and showing a mixed trend in
last five years. As in it starts with 11.69% in 2005 and showing an increasing trend up to
2007, but in 2008 it decreased again and lowest in 2009 which is 8.87%.

Net Profit is highest in 2007 which is 23.41%. Whether there is a decreased in net profit
of Azgard9 in last two years but I expect that there is a rising boom in profits of the
company in future.

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Finally the company is improving with the passage of time. Although the profits are not
very adequate but the management is very confident that they are working hard and the
company will prosper in coming years as most of the capital work has been completed.

RATIO ANALYSIS

The term "accounting ratios" is used to describe significant relationship between

figures shown on a balance sheet, in a profit and loss account, in a budgetary control
system or in any other part of accounting organization. Accounting ratios thus shows the
relationship between accounting data.

Ratio analysis is very important while measuring the performance of the business.
These ratios are carried out from the Income statement and balance sheet. Many parties
including management, investors and Government are interested in these ratios. The
purpose of analysis is to measure the performance of the company and financial health of
the organization.

Advantages of Ratios Analysis

Ratio analysis is an important and age-old technique of financial analysis. The following

are some of the advantages of ratio analysis:

Simplifies financial statements:

It simplifies the comprehension of financial statements. Ratios tell the whole story of
changes in the financial condition of the business

Facilitates inter-firm comparison:

It provides data for inter-firm comparison. Ratios highlight the factors associated with
successful and unsuccessful firm. They also reveal strong firms and weak firms,
overvalued and undervalued firms.

Helps in planning:

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It helps in planning and forecasting. Ratios can assist management, in its basic functions
of forecasting for Planning, co-ordination, control and communications.

Makes inter-firm comparison possible:

Ratios analysis also makes possible comparison of the performance of different

divisions of the firm. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.

Help in investment decisions:

It helps in investment decisions in the case of investors and lending decisions in the
case of bankers etc.

Limitations of Ratios Analysis

The ratios analysis is one of the most powerful tools of financial management. Though
ratios are simple to calculate and easy to understand, they suffer from serious limitations.

Limitations of financial statements: Ratios are based only on the information which has
been recorded in the financial statements. Financial statements themselves are subject to
several limitations. Thus ratios derived, there from, are also subject to those limitations.
For example; non-financial changes though important for the business are not relevant by
the financial statements. Financial statements are affected to a very great extent by
accounting conventions and concepts. Personal judgment plays a great part in
determining the figures for financial statements.

Comparative study required: Ratios are useful in judging the efficiency of the business
only when they are compared with past results of the business. However, such a
comparison only provide glimpse of the past performance and forecasts for future may
not prove correct since several other factors like market conditions, management
policies, etc. may affect the future operations.

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Ratios alone are not adequate. Ratios are only indicators, they cannot be taken as final
regarding good or bad financial position of the business. Other things have also to be
seen.

Problems of price level changes: A change in price level can affect the validity of ratios
are calculated for different time periods. In such a case the ratio analysis may not clearly
indicate the trend in solvency and profitability of the company. The financial statements,
therefore, be adjusted keeping in view the price level changes if a meaningful
comparison is to be made through accounting ratios.

Lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are
no well accepted standards or rule of thumb for all ratios which can be accepted as norm.
It renders interpretation of the ratios difficult.

Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To
make a better interpretation, a number of ratios have to be calculated which is likely to
confuse the analyst than help him in making any good decision.

Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios
have to interpret and different people may interpret the same ratio in different way.

Incomparable: Not only industries differ in their nature, but also the firms of the similar
business widely differ in their size and accounting procedures etc. It makes comparison
of ratios difficult and misleading.

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Ratio Analysis

Ratio analysis involves the methods of calculating and interpreting financial ratios to
access the firm’s performance and status. The basic inputs to ratio analysis and firm’s
income statement and balance sheet for the periods to be examined.

TYPES OF RATIO ANALYSIS

Two types of Ratio Analysis are generally carried out,

1. Cross Sectional Approach, in this approach, the effectiveness of business is

compared with the competitors business of the same period.
2. Most companies use the Time Series Analysis in which the performance of
company over a period is measured.

Ratio Analysis categories:

A) Liquidity

B) Turnover

C) Profitability

D) Leverage

LIQUIDITY RATIOS:

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Liquidity ratios are the ratios for testing short term solvency or financial position of a
business. These are designed to test the ability of the business to meet its short term
obligation promptly. A class of financial metrics that is used to determine a company's
ability to pay off its short-terms debts obligations. Generally, the higher the value of the
ratio, the larger the margin of safety that the company possesses to cover short-term
debts.

Current Ratio:

Current ratio may be defined as the relationship between current assets and current
liabilities. This ratio is also known as "working capital ratio". It is a measure of general
liquidity and is most widely used to make the analysis for short term financial position or
liquidity of a firm. It is calculated by dividing the total of the current assets by total of
the current liabilities.

Components:

The two basic components of this ratio are current assets and current liabilities.
Current assets include cash and those assets which can be easily converted into cash
within a short period of time, generally, one year, such as marketable securities or readily
realizable investments, bills receivables, sundry debtors, (excluding bad debts or
provisions), inventories, work in progress, etc. Prepaid paid expenses should also be
included in current assets because they represent payments made in advance which will
not have to be paid in near future. Current liabilities are those obligations which are
payable within a short period of tie generally one year and include outstanding expenses,
bills payable, sundry creditors, bank overdraft, accrued expenses, short term advances,
income tax payable, dividend payable, etc. However, some times a controversy arises
that whether overdraft should be regarded as current liability or not. Often an
arrangement with a bank may be regarded as permanent and therefore, it may be treated
as long term liability. At the same time the fact remains that the overdraft facility may be
cancelled at any time. Accordingly, because of this reason and the need for conversion in
interpreting a situation, it seems advisable to include overdrafts in current liabilities.

Limitations of Current Ratio:

This ratio is measure of liquidity and should be used very carefully because it suffers
from many limitations. It is, therefore, suggested that it should not be used as the sole
index of short term solvency

1. It is crude ratio because it measures only the quantity and not the quality of the
current assets.
2. Even if the ratio is favorable, the firm may be in financial trouble, because of
more stock and work in process which is not easily convertible into cash, and, therefore
firm may have less cash to pay off current liabilities.
3. Valuation of current assets and window dressing is another problem. This ratio
can be very easily manipulated by overvaluing the current assets. An equal increase in

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both current assets and current liabilities would decrease the ratio and similarly equal
decrease in current assets and current liabilities would increase current ratio.

Significance

This ratio is a general and quick measure of liquidity of a firm. It represents the
margin of safety or cushion available to the creditors. It is an index of the firm’s financial
stability. It is also an index of technical solvency and an index of the strength of working
capital.

A relatively high current ratio is an indication that the firm is liquid and has the
ability to pay its current obligations in time and when they become due. On the other
hand, a relatively low current ratio represents that the liquidity position of the firm is not
good and the firm shall not be able to pay its current liabilities in time without facing
difficulties. An increase in the current ratio represents improvement in the liquidity
position of the firm while a decrease in the current ratio represents that there has been
deterioration in the liquidity position of the firm. A ratio equal to or near 2: 1 is
considered as a standard or normal or satisfactory. The idea of having doubled the
current assets as compared to current liabilities is to provide for the delays and losses in
the realization of current assets. However, the rule of 2:1 should not be blindly used
while making interpretation of the ratio. Firms having less than 2 : 1 ratio may be having
a better liquidity than even firms having more than 2 : 1 ratio. This is because of the
reason that current ratio measures the quantity of the current assets and not the quality of
the current assets. If a firm's current assets include debtors which are not recoverable or
stocks which are slow-moving or obsolete, the current ratio may be high but it does not
represent a good liquidity position.

current ratio current assets/current liabilities

year 2009 2008 2007 2006 2005
Azgard 9 1.08 1.51 1.14 1.09 1.25

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1.6 1.51

1.4 1.25
1.14 1.09
1.2 1.08

0.8

0.6

0.4

0.2

0
2009 2008 2007 2006 2005

Comments:

Current Ratio clears the extent to which the claim of short term creditors can be met by
assets that are to become cash within a year. The best standard ratio is 2:1 so, the Azgard
Nine has current ratio below standard. There is a mixed trend from 2005 to 2009.

Current ratio shows that how many times current assets are available to meet its current
liabilities. Azgard Nine current ratio shows mixed trend and it has grater than 1:1 but
only in 2007 it is higher than other years.

Liquidity or Acid Test or Quick Ratio:

Liquid ratio is also termed as "Liquidity Ratio”,” Acid Test Ratio" or "Quick Ratio".
It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability
of a firm to pay its short term obligations as and when they become due

Components:

The two components of liquid ratio (acid test ratio or quick ratio) are liquid assets
and liquid liabilities. Liquid assets normally include cash, bank, sundry debtors, bills
receivable and marketable securities or temporary investments. In other words they are
current assets minus inventories (stock) and prepaid expenses. Inventories cannot be
termed as liquid assets because it cannot be converted into cash immediately without a
loss of value. In the same manner, prepaid expenses are also excluded from the list of
liquid assets because they are not expected to be converted into cash. Similarly, Liquid
liabilities means current liabilities i.e., sundry creditors, bills payable, outstanding
expenses, short term advances, income tax payable, dividends payable, and bank
overdraft (only if payable on demand). Some time bank overdraft is not included in
current liabilities, on the argument that bank overdraft is generally permanent way of

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financing and is not subject to be called on demand. In such cases overdraft will be
excluded from current liabilities.

Significance:

The quick ratio/acid test ratio is very useful in measuring the liquidity position of a
firm. It measures the firm's capacity to pay off current obligations immediately and is
more rigorous test of liquidity than the current ratio. It is used as a complementary ratio
to the current ratio. Liquid ratio is more rigorous test of liquidity than the current ratio
because it eliminates inventories and prepaid expenses as a part of current assets. Usually
high liquid ratios and indication that the firm is liquid and has the ability to meet its
current or liquid liabilities in time and on the other hand a low liquidity ratio represents
that the firm's liquidity position is not good. As a convention, generally, a quick ratio of
"one to one" (1:1) is considered to be satisfactory.

quick ratio (current assets-stock)/current liabilities

year 2009 2008 2007 2006 2005
0
Azgard 9 1.15 0.88 0.64 0.71
.69

1.4
1.15
1.2

1 0.88
0.64 0.71
0.8 0.69

0.6

0.4

0.2

0
2009 2008 2007 2006 2005

Comments:

The acid test ratio is also below standard due to heavy short term borrowings. Azgard
Nine acid test ratio decreased in year 2006 and in 2008. The rise in current liabilities is
due to the expansion of project and short and long term financing. Azgard Nine liquidity
is less than standard except in year 2008. Azgard Nine position is not at considerable
point. It shows decreasing trend in 2006 and in 2009 and less than 1:1. But it has
increasing position in 2008.

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By: Yasir Rehman

Turnover/ Activity ratios:

Activity ratios are measures of how well assets are used. Activity ratios -- which are, for
the most part, turnover ratios -- can be used to evaluate the benefits produced by specific
assets, such as inventory or accounts receivable. Or they can be use to evaluate the
benefits produced by all a company's assets collectively.

These measures help us gauge how effectively the company is at putting its investment
to work. A company will invest in assets – e.g., inventory or plant and equipment – and
then use these assets to generate revenues. The greater the turnover, the more effectively
the company is at producing a benefit from its investment in assets

Inventory days.

The number of day’s inventory is also known as average inventory period and inventory
holding period. A high number of days inventory indicates that there is a lack of demand
for the product being sold. A low days inventory ratio (inventory holding period) may
indicate that the company is not keeping enough stock on hand to meet demands. The
number of day’s inventory and inventory turnover ratios are included in the financial
statement ratio analysis spreadsheets highlighted in the left column, which provide
formulas, definitions, calculation, charts and explanations of each ratio.

Inventory Days Inventory Days = Inventory / Cost of Sales*365

year 2008 2007 2006 2005 2004
Azgard 9 221.08 177.42 199.34 225.76 208.57

250
221.08 225.76
208.57
199.34
200
177.42

150

100

50

0
2009 2008 2007 2006 2005

Comments:

Azgard Nine inventory days increased in 2006 as compare to 2005 and decreased in
2007 and in 2008 and show increasing in 2009 which shows that management is not
efficient for managing inventory period.

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By: Yasir Rehman

Debtors Turnover Ratio or Receivables Turnover Ratio:

Debtor’s turnover ratio indicates the velocity of debt collection of a firm. In simple
words it indicates the number of times average debtors (receivable) are turned over
during a year.

Significance of the Ratio:

This ratio indicates the number of times the debtors are turned over a year. The higher
the value of debtor’s turnover the more efficient is the management of debtors or more
liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient
management of debtors or less liquid debtors. It is the reliable measure of the time of
cash flow from credit sales. There is no rule of thumb which may be used as a norm to
interpret the ratio as it may be different from firm to firm.

Debtor's day Trade debtors/Credit sales*365

year 2009 2008 2007 2006 2005
Azgard 9 64 91 85 84 109

85

84 2009
2008
193 2007
91 2006
109
2005

64

Comments:

Graph shows that Azgard Nine has a good debtor management to receive the debt or
collect the receivables and shows positive trend. It starts in 2005 with 109 but decreases
gradually in years 2006 and 2007, then again increases in 2008 by 91. but in 2009 it
covers good results as it is decreased by 64.

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By: Yasir Rehman

Creditors / Accounts Payable Turnover Ratio:

This ratio is similar to the debtor’s turnover ratio. It compares creditors with the total
credit purchases. It signifies the credit period enjoyed by the firm in paying creditors.
Accounts payable include both sundry creditors and bills payable. Same as debtor’s
turnover ratio, creditor’s turnover ratio can be calculated in two forms, creditors’
turnover ratio and average payment period.

Significance of the Ratio:

The average payment period ratio represents the number of days by the firm to pay its
creditors. A high creditor’s turnover ratio or a lower credit period ratio signifies that the
creditors are being paid promptly. This situation enhances the credit worthiness of the
company. However a very favorable ratio to this effect also shows that the business is
not taking the full advantage of credit facilities allowed by the creditors.

Creditors days Trade Creditors/Credit Sales*365

year 2009 2008 2007 2006 2005
Azgard 9 49 57 93 65 80

49 57 93 65 80
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2009 2008 2007 2006 2005

Comments:

Azgard Nine creditor’s days increase in 2005 to 2007 and decrease in 2006 to 2008 and
in 2009. Azgard Nine credit management is better in 2007; it has 93 days for payment
which shows it efficiency in 2007. If we compare creditor’s days to debtors day than we
can see that Azgard Nine is going better to manage its resources

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By: Yasir Rehman

Total Assets Turnover Ratio.

The total assets turnover ratio measures the use of all assets in terms of sales, by
comparing sales with net total assets. This interactive tutorial walks you through the
calculations as well as where on the financial statements to find the numbers.

Formula Sales/ Total Assets

year 2009 2008 2007 2006 2005
0 0.2 0.2 0.4
Azgard 9 0.50
.37 8 1 2

0.6
0.5
0.5
0.37 0.42
0.4
0.28
0.3
0.21
0.2

0.1

0
2009 2008 2007 2006 2005

Comments:

In the above graph we can see that total asset turnover ratio of Azgard Nine Company
showing mix trend in the year 2005 to year 2009. Total asset turnover ratio is at highest
level in year 2005 and as it compare with 2007 in which it is lower as 0.21.

But Azgard Nine overall situation regarding to total asset turnover ratio is bad than other
competitor.

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By: Yasir Rehman

Fixed Assets Turnover Ratio:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio
measures the efficiency and profit earning capacity of the concern. Higher the ratio,
greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of
fixed assets

Formula Cost of sales / Fixed Assets

year 2009 2008 2007 2006 2005
0.8 0.6 0.4 1.0 0.8
Azgard 9
6 0 9 6 6

1.2
1.06

1
0.86 0.86
0.8
0.6
0.6 0.49

0.4

0.2

0
2009 2008 2007 2006 2005

Comments:

It shows the utilization of fixed assets, Azgard Nine decreasing the utilization of its fixed
assets and it has lower times in 2007 which is 0.49.somore utilization of fixed assets and
at highest level in 2006 as it is 1.06.A decreasing trend in year 2007 and after it
increasing trend still 2009. It shows an equal trend in 2005 and 2009 that is of 0.86.

I expect that by showing an increasing trend in last two years Azgard9 manage its fixed
assets more efficiently in future.

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By: Yasir Rehman

Profitability Ratios:

Profitability ratios (also referred to as profit margin ratios) compare components of

income with sales. They give us an idea of what makes up a company's income and are
usually expressed as a portion of each dollar of sales. The profit margin ratios we discuss
here differ only by the numerator. It's in the numerator that we reflect and thus evaluate
performance for different aspects of the business: The gross profit margin is the ratio of
gross income or profit to sales. This ratio indicates how much of every dollar of sales is
left after costs of goods sold.

Gross Profit (GP) Ratio:

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a
percentage. It expresses the relationship between gross profit and sales.

Components:

The basic components of the calculation of gross profit ratio are gross profit and net
sales. Net sales mean those sales minus sales returns. Gross profit would be the
difference between net sales and cost of goods sold. Cost of goods sold in the case of a
trading concern would be equal to opening stock plus purchases, minus closing stock
plus all direct expenses relating to purchases. In the case of manufacturing concern, it
would be equal to the sum of the cost of raw materials, wages, direct expenses and all
manufacturing expenses. In other words, generally the expenses charged to profit and
loss account or operating expenses are excluded from the calculation of cost of goods
sold.

Significance:

Gross profit ratio may be indicated to what extent the selling prices of goods per unit
may be reduced without incurring losses on operations. It reflects efficiency with which
a firm produces its products. As the gross profit is found by deducting cost of goods sold
from net sales, higher the gross profit better it is. There is no standard GP ratio for
evaluation. It may vary from business to business. However, the gross profit earned
should be sufficient to recover all operating expenses and to build up reserves after
paying all fixed interest charges and dividends.

Formula Gross profit/Sales*100

year 2009 2008 2007 2006 2005
34. 30.2 24.2 25.6 22.6
Azgard 9
15 8 6 3 6

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By: Yasir Rehman

40% 34%
35% 30.28%
30% 24.26% 25.63%
22.66%
25%
20%
15%
10%
5%
0%
2009 2008 2007 2006 2005

Comments:

Gross profit of Azgard Nine Company increasing in 2006 and also in year 2008 and 2009
but decrease in 2007, Due to inflation and economic instability in Pakistan and irregular
power supply of WAPDA. Gross Profit ratio show increasing trend in 2008 to 2009 due
to good economic and financial situation of world and good market situation in Pakistan.

Operating Profit Ratio:

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is
generally expressed in percentage. It measures the cost of operations per dollar of sales.
This is closely related to the ratio of operating profit to net sales.

Components:

The two basic components for the calculation of operating ratio are operating cost (cost
of goods sold plus operating expenses) and net sales. Operating expenses normally
include (a) administrative and office expenses and (b) selling and distribution expenses.
Financial charges such as interest, provision for taxation etc. are generally excluded from
operating expenses.

Significance:

Operating ratio shows the operational efficiency of the business. Lower operating ratio
shows higher operating profit and vice versa. An operating ratio ranging between 75%
and 80% is generally considered as standard for manufacturing concerns. This ratio is
considered to be a yardstick of operating efficiency but it should be used cautiously
because it may be affected by a number of uncontrollable factors beyond the control of
the firm. Moreover, in some firms, non-operating expenses from a substantial part of the
total expenses and in such cases operating ratio may give misleading results

Formula Operating Profit Margin = Operating profit /Sale*100

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By: Yasir Rehman

year 2009 2008 2007 2006 2005

Azgard 9 28.18 23.72 16.26 18.38 16.79

30% 28%
23.72%
25%

18.38%
20%
16.26% 16.79%

15%

10%

5%

0%
2009 2008 2007 2006 2005

Comments:

Azgard Nine company operating profit increasing in 2006, 2008 and 2009 and
decreasing in 2007. Operating profit of organization show increasing trend in 2005, 2006
and 2008 to 2009 but decreases in 2007 due to increase in operating expenses.

I expect that Azgard9 must control its operating expense to maintain a good position and
hold a reliable market share in the industry.

Net Profit/ (Loss) after Tax:

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as
percentage

Significance:

NP ratio is used to measure the overall profitability and hence it is very useful to
proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not
be able to achieve a satisfactory return on its investment. This ratio also indicates the
firm's capacity to face adverse economic conditions such as price competition, low
demand, etc. Obviously, higher the ratio the better is the profitability. But while
interpreting the ratio it should be kept in mind that the performance of profits also be
seen in relation to investments or capital of the firm and not only in relation to sales.

Components of net profit ratio:

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By: Yasir Rehman

The two basic components of the net profit ratio are the net profit and sales. The net
profits are obtained after deducting income-tax and, generally, non-operating expenses
and incomes are excluded from the net profits for calculating this ratio. Thus, incomes
such as interest on investments outside the business, profit on sales of fixed assets and
losses on sales of fixed assets, etc are excluded.

Formula Net profit after tax/Sales*365

year 2009 2008 2007 2006 2005
Azgard 9 8.87 16.29 23.41 16.76 11.89

25% 23.41%

20%
16.29% 16.76%

15%
11.89%
9%
10%

5%

0%
2009 2008 2007 2006 2005

Comments:

The Net Profit margin tells us the ability of a company to generate the earning after
meeting all costs of business. There is an increase in net profit in 2006 and in 2007 as
compare to 2005. In year 2009 company earned a minimum net profit in last five years.
The ratio has decreased as compare to previous year due to increase in sale and
expansion of project and finance cost. The other organization has mix trend.

Return on Assets:

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By: Yasir Rehman

Where asset turnover tells an investor the total sales for each $1 of assets, return on
assets [or ROA for short] tells an investor how much profit a company generated for
each $1 in assets. The return on assets figure is also a sure-fire way to gauge the asset
intensity of a business. Companies such as telecommunication providers, car
manufacturers, and railroads are very asset-intensive, meaning they require big,
expensive machinery or equipment to generate a profit. Advertising agencies and
software companies, on the other hand, are generally very asset-light (in the case of a
software companies, once a program has been developed, employees simply copy it to a
five-cent disk, throw an instruction manual in the box, and mail it out to stores).

Formula Net Income / Total Assets*100

year 2009 2008 2007 2006 2005
Azgard 9 3.28 4.57 4.94 7.03 5.96

8
7.03
7
5.96
6
4.57 4.94
5
3.28
4

0
2009 2008 2007 2006 2005

Comments:

This ratio measures the return of total investment of the business. Azgard Nine company
show mix trend and in 2006 it is at maximum point than others. Decreasing trend from
year 2007 to year 2009. It decreases in 2007 to 2009 and increase in 2006, it is at highest
point in 2006, which is 7.03, and at lowest in 2009 at 3.28.

Return on Capital Employed (ROCE) Ratio:

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By: Yasir Rehman

Capital employed and operating profits are the main items. Capital employed may be
defined in a number of ways. However, two widely accepted definitions are "gross
capital employed" and "net capital employed". Gross capital employed usually means the
total assets, fixed as well as current, used in business, while net capital employed refers
to total assets minus liabilities. On the other hand, it refers to total of capital, capital
reserves, revenue reserves (including profit and loss account balance), debentures and
long term loans.

Formula Profit before interest and taxation / Capital Employed *100

year 2009 2008 2007 2006 2005
Azgard 9 5.87 6.60 8.27 13.00 10.73

14.00% 13%

12.00% 10.73%

10.00%
8.27%
8.00%
5.87% 6.60%
6.00%

4.00%

2.00%

0.00%
2009 2008 2007 2006 2005

Comments:

Azgard Nine return on capital employed is high 2005 and it increase in 2006 but it has
decreased in 2007 to 2009. This return on capital employed increase in 2005 to 2006 and
decreases in 2007 and in 2009. Azgard Nine return on equity becomes higher then its
competitors.

RETURN ON EQUITY CAPITAL (ROE) RATIO:

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By: Yasir Rehman

In real sense, ordinarily shareholders are the real owners of the company. They assume
the highest risk in the company. (Preference share holders have a preference over
ordinary shareholders in the payment of dividend as well as capital. Preference share
holders get a fixed rate of dividend irrespective of the quantum of profits of the
company). The rate of dividends varies with the availability of profits in case of ordinary
shares only. Thus ordinary shareholders are more interested in the profitability of a
company and the performance of a company should be judged on the basis of return on
equity capital of the company. Return on equity capital which is the relationship between
profits of a company and its equity, can be calculated as follows.

Equity share capital should be the total called-up value of equity shares. As the profit
used for the calculations are the final profits available to equity shareholders as dividend,
therefore the preference dividend and taxes are deducted in order to arrive at such profits.

[(Net profit after tax − Preference dividend) / Equity share capital] ×

Formula 100
YEARS 2009 2008 2007 2006 2005
Azgard 9 8.86 11.11 12.48 23.97 14.95

30
23.97
25

20
14.95
12.48
15
8.86 11.11

10

0
2009 2008 2007 2006 2005

Comments:

In 2006 Azgard Nine Company return on equity ratio is at highest point and better, in
2007 to 2009 it decreases. Company shows mixed trend. It is going higher in 2005 and
than decrease in 2007 to 2009 and it becomes higher in 2006. It is the highest point then
competitors.

LEVERAGES RATIOS:

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A company can finance its assets either with equity or debt. Financing through debt
involves risk because debt legally obligates the company to pay interest and to repay the
principal as promised. Equity financing does not obligate the company to pay anything --
dividends are paid at the discretion of the board of directors. There is always some risk,
which we refer to as business risk, inherent in any operating segment of a business. But
how a company chooses to finance its operations -- the particular mix of debt and equity
-- may add financial risk on top of business risk financial risk is the extent that debt
financing is used relative to equity. Financial leverage ratios are used to assess how
much financial risk the company has taken on. There are two types of financial leverage
ratios: component percentages and coverage ratios. Component percentages compare a
company's debt with either its total capital (debt plus equity) or its equity capital.
Coverage ratios reflect a company's ability to satisfy fixed obligations, such as interest,
principal repayment, or lease payments.

DEBT TO EQUITY RATIO:

Debt-to-Equity ratio indicates the relationship between the external equities or outsiders
funds and the internal equities or shareholders funds. It is also known as external internal
equity ratio. It is determined to ascertain soundness of the long term financial policies of
the company.

Debt to Equity Ratio Short Term Debt + Long Term Debt

Total Shareholders Equity

YEAR 2009 2008 2007 2006 2005

Azgard 9 2.42 1.79 2.51 2.01 1.29

2.5

1.5

0.5

0
2009 2008 2007 2006 2005

Comments:

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By: Yasir Rehman

Azgard Nine debt to equity ratio is lowest point in 2005 and after that it has decrease its
situation in next coming years and increases the ratio, except in year 2008 when debt to
equity ratio of Azgard9 is lower to 1.79 and then increases in 2009 by 2.42for expansion
of project and their short and long term debts increased.

It shows that Azgard nine position in debt to equity is better then its competitors.

DEBT SERVICE RATIO OR INTEREST COVERAGE RATIO:

Interest coverage ratio is also known as debt service ratio or debt service coverage ratio.
This ratio relates the fixed interest charges to the income earned by the business. It
indicates whether the business has earned sufficient profits to pay periodically the
interest charges.

Significance of debt service ratio:

The interest coverage ratio is very important from the lender's point of view. It indicates
the number of times interest is covered by the profits available to pay interest charges.

Interest Coverage Ratio

Net Profit Before Interest and Tax / Fixed Interest
Formula Charges
YEAR 2009 2008 2007 2006 2005
Azgard 9 0.40 1.08 1.92 2.43 2.73

0.4
1.08
2.73 2009
2008
2007
2006
1.92
2005

2.43

Comments:

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By: Yasir Rehman

Interest Cover Ratio shows that how many times interest is earned by the company.
Azgard Nine Company shows decreasing trend from 2005 to 2009 which indicates
negative sign for the company and it has unavailability the funds to pay interest expense.
Azgard Nine, in 2008 and 2009 Interest cover ration of the company is not very healthy
and it shows that the financial costs are very high and earnings are very low.
Management must look into the matter and should improve this ratio. In year 2009
Company earned 0.40 interests which are lower among all year not easy to pay the
interest expense.

INVESTMENTS / SHARE HOLDER RATIOS:

Relationship of gains from investments (including realized capital gains) resulting from
insurance operations to earned premiums.

EARNINGS PER SHARE (EPS) RATIO:

Earnings per share ratio (EPS Ratio) are a small variation of return on equity capital ratio
and are calculated by dividing the net profit after taxes less preference dividend by the
total number of equity shares.

Significance:

The earnings per share are a good measure of profitability and when compared with EPS
of similar companies, it gives a view of the comparative earnings or earnings power of
the firm. EPS ratio calculated for a number of years indicates whether or not the earning
power of the company has increased.

Formula Profit after tax/No. of shares

YEAR 2009 2008 2007 2006 2005
Azgard 9 2.65 3.26 4.97 7.42 4.31

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Price Earning Ratio

2.65
4.31

2009
3.26
2008
2007
2006
2005
7.42 4.97

Comments:

The earning per share of company shown mixed trend in above diagram, earning per
share of Azgard Nine company increase in 2006 as compare it to 2005 and it is at highest
point in this year and than it decrease in 2007, and it goes more down in 2008 and 2009
which mean there is no earning and it going down. The company should better mange its
financial position and improve its performance to get out this fall in earning per share.

EARNINGS YIELD
The earnings per share for the most recent 12-month period divided by the current
market price per share. The earnings yield (which is the inverse of the P/E ratio) shows
the percentage of each dollar invested in the stock that was earned by the company.

Formula Earning Per Share / Market Price Per Share * 100

YEARS 2009 2008 2007 2006 2005
Azgard 9 4.30 6.26 22.54 23.19 19.16

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By: Yasir Rehman

4.3
6.26
19.16

2009
2008
2007
2006
22.54 2005

23.19

Comments:

Earning Yield of Azgard Nine was at lowest point in 2009 due to economic crises. But it
has very good condition in 2005 to 2007.Azgard Nine is at lowest point in 2009 due to
economic and financial crises and purchase a project of fertilizers.

Market Value of Share

MARKET VALUE OF SHARE

YEARS 2009 2008 2007 2006 2005
Azgard 9 61.56 52.10 22.05 32.00 22.50

22.5

61.56 2009
32 2008
2007
2006

22.05 2005

52.1

Comments:

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By: Yasir Rehman

Graph shows that market value of share of Azgard Company is high in 2008 to 2009 as
compare to 2006 and 2008. In 2009 it is at highest point, market value of Azgard Nine
show mixed trend and Azgard Nine market value of share at high point in 2009 and at
lower point in 2007 at 22.05.

PRICE EARNING RATIO (P/E RATIO):

Price earning ratio (P/E ratio) is the ratio between market price per equity share and
earning per share. The ratio is calculated to make an estimate of appreciation in the value
of a share of a company and is widely used by investors to decide whether or not to buy
shares in a particular company

Significance of Price Earning Ratio:

Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares
of a particular company at a particular market price

Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the
management should look into the causes that have resulted into the fall of this ratio.

Formula Market price per equity share / Earnings per share

YEARS 2009 2008 2007 2006 2005
Azgard 9 23.23 15.98 4.44 4.31 5.22

25 23.23

20
15.98

15

10
4.44 4.31 5.22
5

0
2009 2008 2007 2006 2005

Comments:

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By: Yasir Rehman

Price earning ratio of Azgard Nine decreasing from 2005 to 2007 which is not beneficial
for the company also unfavorable for the investor and encourage the investors to invest
but increase in 2008 and 2009 and at very good position in 2008 and then become better
in 2009, it shows that there is increase in market value of share and decrease in value of
earning per share.

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HORIZONTAL AND VERTICAL ANALYSIS

Common
Stateme
nts
Analysis

Common Common
Size Base Year
Analysis Analysis

Horizont
Vertical
al
Analysis
Analysis

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HORIZONTAL ANALYSIS

"In the base statement of previous year every item is given 100% and is subsequent
years these are changed to the related percentages as per base years.”

Importance

Comparative statement can be prepared for several years in a columnar form. The
changes from period to period can be reflected by establishing a base year and making it
100%. Thereafter all such changes are reflected in percentages. This analysis is
invaluable to management and other analysts because the absolute large data are
condensed into percentages. The purpose of horizontal analysis is to highlight the
changes.

Balance Sheet

The purpose o balance sheet is to reflect financial position of an entity on a particular

date. The balance sheet consists of assets, which are the property of the entity, the
liabilities, which are the debts payable to outside investors or suppliers of goods and
services, and the shareholder’s equity, which represents owners’ interest in the entity. At
any given date, assets must be equal to the contributions of the creditors and owners.

Profit And Loss Account

Profit and loss account is also named income statement or income statement or
income and expenditure account or statement of operations and encompasses all sources
of revenue, gain and losses and expenses for a particular period, grouped into various
headings as per charts of accounts of a company. In other words, it summarizes the
results of operations for an accounting period. The net income is closed by transfer to
balance sheet after paying the dividends and appropriations. Sometimes an appropriation
is made to general reserve and still some portion is left as retained earning. The
procedure of horizontal analysis of profit and loss account is same as of balance sheet.

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Non-Current Assets

As we can see from the horizontal balance sheet analysis of two years, the total non-
current assets have shown increasing trend. In 2007 it increases 1% from 2006 and it
increases in 2008 by 14% as compare to 2007. This shows heavy investment in fixed
assets by the management.

Operating fixed assets showed decreasing trend in 2007 by 6.53% and it decreases
8.02% in 2008. Capital work in process increased by 430.94% in year 2007, increased by
18.06% in year 2008 respectively. Lon-term loans and advances has shown an increasing
trend in 2007 by 1682.45%in 2007 and decreased by 16.60%. Its long term deposits
decreased in 2007 by 76.08% and increases in 2008 by 14.18%.

Current Assets

Store, spare and tools has shown Increased in 2007 as compare to 2006 by 23% and
increased in 2008 by 61%, which shows that company is in good position as liquidity
point of view. Stock in trade shows increasing trend and increased in 2007 by 11% and
in 2008 increased by 80%. This average stock of inventory is indication of good
inventory management. Trade debts has shown increasing trend in 2007 as compare to
2006 by 46% and it increased by 7% in 2008.Receivable management is efficient in 2008
by showing decreasing trend. Loans and advances showed an increasing trend it
increased in 2007 by 17% and in 2008 it decreases 21%. Cash and cash in bank have also
shown decreasing trend in 2007 and increasing trend in 2008.

Equity and Liabilities

Share capital show a changing trend in 2007 by 0% and 1% increasing trend in 2008.
Reserves have decreased in year 2007 by 1% and no change in 2008, which shows that
company, has utilized all its reserves for expansion of project. Accumulated profit
increased in 2007 by 33% and increased in 2008 by 15%.

Non-Current Liabilities

Non-current liabilities have also shown an increasing trend in 2007 and decrease
trend in 2008. There is a sharp increase year 2007 and a decrease in year 2008. Long
term security deposits and retention money also decreases in 2007 by 16% and decreased
in 2008 by 10% as compare to 2006 and 2007 respectively. Liabilities against assets

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increases in2007 by 49% and decreased in 2008 by 76% as compare to 2006 and 2008
respectively.

Current Liabilities

Total current liabilities have also shown a decreasing trend in 2007 and an increasing
trend in 2008. This is also inline with decrease and increase in current assets of the
company. Short term financing is taken to meet the working capital requirements.
Company is not meeting its obligation on regular basis which is evident from an increase
in the current portion of long term debts under current liabilities head of the balance
sheet.

Trade payables decreased in 2007 but increased in 2008 by 31%. Markup on secured
loans also increased in 2007 by 63% in 2007and 47% in 2008 respectively. Short term
borrowing also decreased by 36% in 2007 and an increased by 72% in 2008 as compare
to 2006 and 2007 respectively.

Finally, size of the company has increased during the last five years. More
investment is made in capital assets. Company is in expansion phase since the base year.
Investment in new expansion project and technology is being made in order to keep pace
with changing business environment.

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ANALYTICAL REVIEW OF VERTICLE ANALYSIS OF BALANCE SHEET

ASSETS

Non-Current Assets

As we can see from the vertical balance sheet of the company total fixed assets are
constant in relation to total assets with little variations. The management is more
focusing on working capital management than on fixed asset in last three years as shown
by the vertical balance sheet.

Property, plant and equipment have shown a mix trend with improvement in year
2006 which was 33% and then a increase in 2007 which was 32% and after that
improvement in last year 2008 that was 28% Capital work in progress was increased in
2006 as compare to 2007, Store spare held for capital expenditures increase in 2007 and
2008. Long-term deposits increased by 0.09% in 2006 and 0.06% and 0.03% increased in
2007 and 2008.

Current Assets

Total current assets have shown an increasing trend over the last three year period.
Stores and spares declined in year 2007 after that it has shown an increasing trend. In
2006 it increased by 7.97%, n 20073.02% and in 2008 it was 5.40%.

Stock in trade has shown an increasing trend while in the last year it shows a little
decline. Stock in trade is about 2.93% of the total current assets in 2006 and it was
2.03% of total assets in 2007 and 1.34% in 32008. Stores and spares have the largest
portion among all current assets. Receivable had 3.09% o total assets in 2006 and they
were 1.90% in 2007 and 3.13% in 2008. Trade debtors were 0.70% in 2006, 0.35% in
2007 and 0.12% in 2008. Cash and cash equivalent were 21.34% in 2006, 2.15% in 2007
and 0.29% n 2008. This trend shows that more funds are tied in receivable, inventories
and in stores & spares.

EQUITY AND LIABILITIES

Share capital and reserves have shown decreasing trend. Un-appropriated profit has
shown decreasing trend and company had beard loss in 2008. The company is now
focused on its expansion of projects to increase its capacity of production and improving
since year 2005. Currently company is not paying dividends to shareholders. Issued,
subscribed and paid up capital was 30.05% of total liabilities in 2006 but reduced up to
16.54% in 207 and it was 15.35% in 2008. Reserves were also decreased due to bonus
issue they were 12.65%, 6.44% and 3.09% in 2006, 2007 and 2008 respectively.

Non-Current Liabilities

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Total long-term liabilities of the company have shown increasing trend in relation to
total liabilities except marginally increase in year 2008. The company is focusing on
equity financing than debts due to the higher financing costs. Liabilities against assets
have shown a mix trend over the last three year period.

Long term financing was 7.71% in 2006, 43.93% in 2007 and 39.11% in 2008 to all
of its liabilities.

Current Liabilities

Short term liabilities have shown an increasing trend during the last three years as
shown in the vertical balance sheet of the company. Trade and other payables have
shown an increasing trend with a marginal increase in last year. Trade payables deceased
in 2007 and 2008; in 2006 they were 7.38%, 2.91%in 2007 and 3.21% in 2008. Sort
term financing increased, it was 1.86% in 2006, 2.38% in 2007 and 14.387% in 2008.

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CHAPTER # 03

1. Company Analysis

2. Company Life Cycle

3. Company award of the year 2008

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COMPANY ANALYSIS:

Azgard nine limited fulfills all its targets of supplies in the market and also expands
its production with the needs of market. In these days company is in its growth stage.
Now the company has three production units including two units for textile produce and
one for Fertilizers. The growth in demand of garments in Asia, India and Middle East,
particularly supply deficit in Europe and USA has geared up export opportunities for
garment Industry of Pakistan. Supply deficit in Europe has resulted in significant demand
for Pakistani garment due to Europe’s geography. European’s import authority standards
have approved Azgard nine for import to Europe. This demand will also be supported by
closing down of some garment units in Europe due to their strict laws governing
pollution control and other environment hazards. Being one of the big garment units of
Pakistan and due to its high quality Azgard Nine is the prime of choice of the
International buyers all over the world. Azgard Nine is committed to provide high
quality garment to its international customers and is being exported to Germany, India,
Middle East, Europe and Africa. Azgard Nine conveniently meets all the International
standards including American, British, Indian and European standards. Azgard Nine is
an ISO 9001-2000 and ISO 14001-2004 certified company and follows all rules and
regulations of the government. Company’s social performance is also good. It has good
cooperation with community and the environment. It is only one company of Pakistan
that has install water filtration plant in its production units in MANGA MANDI.
Company has a good relation with their workers and also trying for their welfare.

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Company Life Cycle

Last Five Years Sales of the Company

Comments:

In the above graph you can see in the year 2008 sale of the company at highest point
and it is showing increasing trend from 2004 so company sale is at increasing side in the
year of 2004 to 2008 there is no much difference between the sale this increasing trend
due to expansion of plant and due to the consumption and the demand in the market so
we can say that Azgard nine’s product’s demand is increasing in the local market and
international market.

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CHAPTER # 04

1. Five Years Review

2. Recommendation

3. Conclusion

4. Bibliography

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FIVE YEARS REVIEW

Explanation:

In the above chat we can see the profit position of the company during the year 2004
to 2008 in these five years company profitability position is better in 2006 as compare it
with other years, so we can say that company was in much better position in 2006.

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Review

For last five year review,

In 2004, the profitability of the Company has increased considerably in year 2004
due to stability in the prices of Products and increase in capacity utilization. Company
has earned after tax profit of Rs. 375.262 million after accounting for all charges.

To meet the increasing demand for the product of Azgard Nine and maintain its
shares in the market, company has planned to purchase a new Garment plant within the
premises of Kasur. Company has started work on this new plant and its give help to
meeting the demand to local and international markets.

In 2005, sale revenue was Rs. 4422.472 million reflecting a growth of 40% over last
year. The cost of sales has increased by 35% during the year, which is mainly due to
persistent Prices hike in coal and furnace oil. The company has earned after tax profit of
Rs 741.293 million. The profitability of the company has increased considerably in the
current year due to stability in the prices of products and increase in capacity utilization.

In 2006, sales revenue is Rs. 4889.68 million reflecting a growth of 11% over last
year. The company has earned after tax profit of Rs. 1144.51 million. The profitability of
the company has increased considerably in the current year due to better retention prices
and new plant capacity utilization.

In 2007, sales revenue for 2007 was Rs.6628.34 million reflecting increase of 36%
from last year. The company has earned after tax profit of Rs. 1079.45 million. The
profitability of the company has increased considerably in the current year due to better
demand.

In 2008, sales revenue was 10113.49 million reflecting an increase of 53% from
previous year. The company has earned after tax profit of Rs. 897.28 million. Down fall
in the profitability of the company is mainly attributable to increase in cost of input
prices of coal and diesel etc.

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RECOMMENDATIONS

1. The most important thing for improvement is that Company should Re-arrange
the responsibilities and authorities of all the major departments. Along with this
there should be a proper check and balance system in order avoid from any sort
of departmental overlapping.
2. The location of Head office is very critical for Company. It should near to
Factory in order to handle all the operations in better way.
3. Company should remove unionized employees which are providing problems to
management. For this purpose they should use Golden Hand Shake or other
options.
4. The selection criteria should also be improved. The company should select the
educated and experienced employees and along with there should be a proper
training system for them.
5. The Company should be maintain and established the internal audit and
accounting system according to the standard and requirement of the company
ordinance 1984.

The implementations of all these points can lead the company towards more productive
way and after this its market growth and market share will enhance.

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CONCLUSION

The textile & apparel sector is amongst the largest and most significant in Pakistan’s
economy, accounting for over 60% of total merchandise exports and providing
employment to 38% of large scale manufacturing sector workforce.

There is an abundant supply of local raw material as Pakistan is the 4 th largest

producer in the world. There is also an abundance of local labor available at a
competitive cost when benchmarked against regional competitors.

Against this backdrop the industry remains largely fragmented with few large scale
integrated players. Worldwide denim production capacity is over 6 billion linear meters.
Denim is the world’s largest cotton textile product with estimated per annum global sales
of 4 billion units.

Azgard Nine is Pakistan’s largest denim products business by sales with a fully
vertically integrated Manufacturing chain. From cotton to retail ready apparel products.
In house capability for spinning. Weaving, Design, finishing and stitching enables
control over the entire value chain and provides a significant competitive advantage in
facilitating faster speed to market and control over product quality.

With Longstanding relationship with global retailers and brands, and an ability to
rapidly build up manufacturing capacity, Azgard nine is well poised to cater to an
expected increase in global demand for denim products.

The year 2008 proved very challenging due to a globally recessionary climate
affecting all facets of the business. While the business remained under pressure, Azgard
Nine was able to protect its value added services to its products portfolio. The key focus
remained on meeting and indeed finding ways to exceed customer expectations.

In addition to Azgard Nine’s vertical manufacturing capabilities which were already

providing customers solution concepts was added. The company now offers the client a
choice of full product development, product design and a complete logistics solution.
Traditionally the customer has been sourcing supply of the product only. Now the client
has the option to source a full supply chain solution directly from the Company. This
value enhancement helped Azgard Nine to grow with its existing customers and add new
customers as well during a difficult period.

Urea industry in 2008 remained structurally short despite a 5% increase in production

over 2007 (reaching 4.98 Million Tomes). Late arrival of imports further compounded
the shortage across all the provinces. Total imports by the Trading Corporation of
Pakistan (TCP) during 2008 aggregated 450000 tons. The shortage was managed by
collaboration between the federal & provincial Governments and Fertilizer industry by
systematically rationing the available stocks. The government of Pakistan, in an effort to

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counter shortages utilized the network of national fertilizer marketing limited (NFML) &
Utility Stores Corporation of Pakistan for selling 50% of local production during Nov-
Dec 2008. Pak American fertilizers ltd. played an active role in coordination with the
relevant Government departments to ensure availability of fertilizer in various districts of
Punjab and NWFP.

Industry Urea sales in 2008 saw an increase of 11% over 2007 and reached 5.5
million tons. This increase is attributed to demand switch by farmers from phosphates to
urea due to the unprecedented price increase of phosphate in the international market.

The fertilizer industry supported the farmers in passing on various subsidies received.
The fertilizer industry also contributed an additional subsidy of Rs. 20.7 billion given by
the Government of Pakistan (GOP) in shape of lower gas prices to the fertilizer industry
in 2008. The GOP also provided additional subsidy of Rs. 14.5 Billion on account of
subsidy on import urea. Thus local Urea prices during 2008 averaged US$ 165.7 per tom,
significantly lower than the average international urea price of US$ 550 per ton in 2008

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BIBLIOGRAPHY

REFERENCE & SOURCES USED

1. http://www.nishatmillsltd.com/nishat/invest.html

2. http://www.nonprofitsassistancefund.org/files/MNAF/ToolsTemplates/NonprofitF
inancialRatios.pdf

3. http://www.azgard9.com/html/financial-info/2008/Security%20Analys_g%20-
%20Q1.pdf

4. http://www.azgard9.com/html/financial-info/2008/Consolidated%20ANL.pdf

5. http://www.azgard9.com/html/financial-info/2008/Azgard
%209%20AR07%20Consolidati%20(2).pdf

6. http://www.azgard9.com/html/financial-info/2007/ANNUAL%20REPORT-
2006%20PAGE%2021%20TO%20110.pdf

7. http://www.azgard9.com/html/financial-information.htm

8. http://www.sapphire.com.pk/cstmaccounts.htm

9. http://www.sapphire.com.pk/home.htm

10. http://www.kse.com.pk/market-data/history_by_date1.php?id=1&sid=1.20

11. Financial Management by (BPB)

12. Financial Reporting by (BPB)

13. www.investopedia.com

14. www.accountingformanagment.com

References

Special Thanks to

Mr. Muhammad Irfan

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CHAPTER # 05

Annexure:

1. Five Years Balance Sheet of Azgard Nine Pvt limited Company

2. Five Years Profit and Loss account of Azgard Nine Pvt limited Company

3. Five Years Balance Sheet of Sapphire Mills limited Company

4. Five Years Profit and Loss account of Sapphire Mills limited Company

5. Five Years Balance Sheet of Nishat Mills limited Company

6. Five Years Profit and Loss account of Nishat Mills limited Company

7. Ratio Working of Azgard Nine, Sapphire and Nishat Company

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