Intra Industry Analysis on Financial Performance

Introduction

Fiscal public presentation of a house can be calculated with the aid of fiscal ratios. By utilizing ratios companies can find fiscal strength or failings every bit good as chances in the market or industry. Ratios can supply the existent image of the house ‘s fiscal place. Fiscal ratios aid analysts in geting insight cognition of house ‘s fiscal state of affairs. Datas from different fiscal statements were used to cipher the ratios. Fiscal ratios tell the investors future public presentation of houses by analysing past tendencies. Ratios helped direction to move more logically and made fiscal determination on more cognition and less hazardous.

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Research Problem

To analyse the fiscal public presentation and tendency in car sector of Pakistan.

Hypothesiss A

Preposition G1A: There is difference between the Profitability Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A1 = There is difference between the Gross Profit Margin of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1A2 = There is difference between the Operating Profit Margin of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A3 = There is difference Between the Net Net income Margin After Tax of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A4 = There is difference between the Net Net income Margin Before Tax of Fauji Fertilizer Company and Atlas Honda limited. A

H_G1A5 = There is difference between the Return on Equity After Tax of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1A6 = There is difference between the Return on Equity Before Tax of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A7 = There is difference between the Return on Investment of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1A8 = There is difference between the Return on Assets After Tax of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A9 = There is difference between the Return on Assets Before Tax of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A10 = There is difference between the Return on Net Assets of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1A11 = There is difference between the Return on Capital Employed of Fauji Fertilizer Company Limited and Atlas Honda limited. A

Preposition G1B: There is difference between the Liquidity Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1B1 = There is difference between the Current Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1B2 = There is difference between the Quick Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1B3 = There is difference between the Cash Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1B4 = There is difference between the Net Working Assets to Capital of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1B5 = There is difference between the Operation Cashflow Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

Preposition G1C: There is difference between the Activity/Efficiency Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1C1 = There is difference between the Inventory Turnover Days of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1C2 = There is difference between the Inventory Turnover Times of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1C3 = There is difference between the Account Receivable Turnover Days of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1C4 = There is difference between the Account Receivable Turnover Times of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1C5 = There is difference between the Fixed Assets Turnover of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1C6 = There is difference between the Total Assets Turnover of Fauji Fertilizer Company Limited and Atlas Honda limited. A

Preposition G1D: There is difference between the Debt/Leverage Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1D1 = There is difference between the Total Debt Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1D2 = There is difference between the Debt to Equity Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1D3 = There is difference between the Longterm Debt to Equity Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1D4 = There is difference between the Cash Coverage Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1D5 = There is difference between the Interest Coverage Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A

Preposition G1E: There is difference between the Market/Investment Ratios of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1E1 = There is difference between the Earning Per Share of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1E2 = There is difference between the Dividend Payout Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1E3 = There is difference between the Dividend Cover of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1E4 = There is difference between the Price Net incomes Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1E5 = There is difference between the Dividend Per Share of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1E6 = There is difference between the Dividend Yield of Fauji Fertilizer Company Limited and Atlas Honda limited. A A

H_G1E7 = There is difference between the Plowback Ratio of Fauji Fertilizer Company Limited and Atlas Honda limited. A

H_G1E8 = There is difference between the Growth in Equity form Plowback of Fauji Fertilizer Company Limited and Atlas Honda limited. A

Preposition G2A: There is difference between the Profitability Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A1 = There is difference between the Gross Profit Margin of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A2 = There is difference between the Operating Profit Margin of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A3 = There is difference Between the Net Net income Margin After Tax of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A4 = There is difference between the Net Net income Margin Before Tax of Fauji Fertilizer Company and Toyota Indus Motors Limited. A

H_G2A5 = There is difference between the Return on Equity After Tax of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A6 = There is difference between the Return on Equity Before Tax of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A7 = There is difference between the Return on Investment of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A8 = There is difference between the Return on Assets After Tax of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A9 = There is difference between the Return on Assets Before Tax of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A10 = There is difference between the Return on Net Assets of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2A11 = There is difference between the Return on Capital Employed of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

Preposition G2B: There is difference between the Liquidity Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2B1 = There is difference between the Current Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A A

H_G2B2 = There is difference between the Quick Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2B3 = There is difference between the Cash Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A A

H_G2B4 = There is difference between the Net Working Assets to Capital of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2B5 = There is difference between the Operation Cashflow Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

Preposition G2C: There is difference between the Activity/Efficiency Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2C1 = There is difference between the Inventory Turnover Days of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2C2 = There is difference between the Inventory Turnover Times of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2C3 = There is difference between the Account Receivable Turnover Days of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2C4 = There is difference between the Account Receivable Turnover Times of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2C5 = There is difference between the Fixed Assets Turnover of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2C6 = There is difference between the Total Assets Turnover of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

Preposition G2D: There is difference between the Debt/Leverage Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2D1 = There is difference between the Total Debt Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2D2 = There is difference between the Debt to Equity Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2D3 = There is difference between the Longterm Debt to Equity Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2D4 = There is difference between the Cash Coverage Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2D5 = There is difference between the Interest Coverage Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

Preposition G2E: There is difference between the Market/Investment Ratios of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited.

H_G2E1 = There is difference between the Earning Per Share of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2E2 = There is difference between the Dividend Payout Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2E3 = There is difference between the Dividend Cover of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2E4 = There is difference between the Price Net incomes Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2E5 = There is difference between the Dividend Per Share of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2E6 = There is difference between the Dividend Yield of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A A

H_G2E7 = There is difference between the Plowback Ratio of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A

H_G2E8 = There is difference between the Growth in Equity form Plowback of Fauji Fertilizer Company Limited and Toyota Indus Motors Limited. A A A

Preposition G3A: There is difference between the Profitability Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A1 = There is difference between the Gross Profit Margin of Fauji Fertilizer Company Limited and Wah Atlas Battery Limited. A A

H_G3A2 = There is difference between the Operating Profit Margin of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A3 = There is difference Between the Net Net income Margin After Tax of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A4 = There is difference between the Net Net income Margin Before Tax of Fauji Fertilizer Company and Atlas Battery Limited. A

H_G3A5 = There is difference between the Return on Equity After Tax of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A6 = There is difference between the Return on Equity Before Tax of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A7 = There is difference between the Return on Investment of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3A8 = There is difference between the Return on Assets After Tax of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A9 = There is difference between the Return on Assets Before Tax of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A10 = There is difference between the Return on Net Assets of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3A11 = There is difference between the Return on Capital Employed of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

Preposition G3B: There is difference between the Liquidity Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3B1 = There is difference between the Current Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3B2 = There is difference between the Quick Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3B3 = There is difference between the Cash Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3B4 = There is difference between the Net Working Assets to Capital of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3B5 = There is difference between the Operation Cashflow Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

Preposition G3C: There is difference between the Activity/Efficiency Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3C1 = There is difference between the Inventory Turnover Days of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3C2 = There is difference between the Inventory Turnover Times of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3C3 = There is difference between the Account Receivable Turnover Days of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3C4 = There is difference between the Account Receivable Turnover Times of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3C5 = There is difference between the Fixed Assets Turnover of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3C6 = There is difference between the Total Assets Turnover of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

Preposition G3D: There is difference between the Debt/Leverage Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3D1 = There is difference between the Total Debt Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3D2 = There is difference between the Debt to Equity Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3D3 = There is difference between the Longterm Debt to Equity Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3D4 = There is difference between the Cash Coverage Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3D5 = There is difference between the Interest Coverage Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

Preposition G3E: There is difference between the Market/Investment Ratios of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3E1 = There is difference between the Earning Per Share of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3E2 = There is difference between the Dividend Payout Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3E3 = There is difference between the Dividend Cover of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3E4 = There is difference between the Price Net incomes Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3E5 = There is difference between the Dividend Per Share of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3E6 = There is difference between the Dividend Yield of Fauji Fertilizer Company Limited and Atlas Battery Limited. A A

H_G3E7 = There is difference between the Plowback Ratio of Fauji Fertilizer Company Limited and Atlas Battery Limited. A

H_G3E8 = There is difference between the Growth in Equity form Plowback of Fauji Fertilizer Company Limited and Atlas Battery Limited.

Outline of the Study

Fauji fertiliser company ltd resulted in strong fiscal public presentation within chemical sector during 2005 to 2009. To measure the public presentation in intra industry ratios of Fauji fertiliser company ltd was compared with companies of car sector for the period of 2005 to 2009. The aim of the survey was to happen the tendency in fiscal public presentation of both industries. To analyze the fiscal public presentation five groups were formed from 35 fiscal ratios that include:

Profitability Ratios:

Gross net income border, Operating net income border, Net net income border after revenue enhancement, Net net income border before revenue enhancement, Return on equity after revenue enhancement, Return on equity before revenue enhancement, Return on investing, Return on assets after revenue enhancement, Return on assets before revenue enhancement, Return on net assets and Return on capital employed.

Liquidity Ratios:

Current ratio, Quick ratio, Cash ratio, Net working assets to capital and Operating cashflow ratio.

Activity/Efficiency Ratios:

Inventory turnover yearss, Inventory turnover times, Account receivable yearss, Account receivable times, Fixed assets turnover and entire assets turnover.

Debt/Leverage Ratios:

Entire debt ratio, Debt to equity ratio, Longterm debt ratio, Cash coverage ratio and Interest coverage ratio.

Market/Investment Ratios:

Net incomes per portion, Dividend per portion, Dividend screen, Price net incomes ratio, Dividend per portion, Dividend output, Plowback ratio and Growth in equity from plowback.

LITERATURE REVIEW

Historical Timeline of Financial Ratios:

In the beginning of 19th century indispensable betterment in ratio analysis occurred. In this period few developments are endogenous. First, big figure of ratios was conceived in comparing to earlier periods. Second, proper ratio standards were appeared. In this respect most celebrated was current ratio standard. Third, different analysts felt the demand for inter-firm analysis and for that purpose the demand for comparative ratio standard was felt. Despite these developments ratio analysis has been used for analysis in this period and analysis necessitating the demand of utilizing ratio analysis merely used current ratio.

Two really of import exogenic developments in this period because of which demand of ratios has surfaced were federal income revenue enhancement codification in 1913 and the constitution of the Federal Reserve System in 1914. These two developments besides helped to better the content of fiscal statements every bit good as increased the demand of fiscal statements.

In 1920s, involvement in ratio analysis increased dramatically. Many publications on the subject of ratio analysis published during this period. Different recognition bureaus, trade brotherhoods, universities and persons seeking analyses compiled industry informations on ratio analysis.

Justin ( 1924 ) argued that the method of garnering industry informations and ciphering norms were called “ Scientific ratio analysis ” . The word “ scientific ” in the rubric was non wholly right because no grounds had been found that the hypothesis preparation and hypothesis proving really carried out.

Horrigan ( 1968 ) claimed that ratios analysis had come into being since early ages and the chief ground of the development of ratio analysis was its usage in the analysis of the belongingss of ratios in 300 B.C. in recent clip it is used as a standard tool for the analysis of fiscal statement. In 19th century chief grounds of utilizing ratio analysis were power of fiscal establishments and switching of direction to professional directors. Ratio analysis used for two intents that are recognition and managerial. In managerial attack profitableness and in recognition attack capacity of house to pay debts is the chief point of focal point. Generally, ratio analysis is used recognition analysis.

There was rapid enlargement of fiscal cognition in 19th century and to analyze this quickly spread outing cognition analyst foremost compared similar points so moved further and compared current assets and liabilities as good with other ratios. In that period current ratio was the most important ratio among all other available ratios. To analyse the operating consequences dupont analysis was besides used. The consequence divided into three parts and so compared with other companies to indicate out the job and strong countries of concern.

Bliss ( 1923 ) said that basic relationship within the concern is indicated by the ratios and developed complete theoretical account based on the ratios. The purpose theoretical account was non mature but divine others to get down working on this theory.

Different critics of ratio analysis besides appeared. Gilman ( 1925 ) has following concerns on ratio analysis ( 1 ) ratios are bond with clip and changed as clip passed so can non be interpreted ( 2 ) ratios are non natural step for judging the public presentation companies manipulated them ( 3 ) ratios easy affect the head of viewing audiences and conceal the existent place and ( 4 ) ratios swing widely that besides affect the dependableness.

Foulke ( 1931 ) created and promoted ain set of fiscal ratios successfully. This set of fiscal ratios was printed and quickly known as of import and outstanding group of ratios.

Fitzpatrick ( 1932 ) with the aid of 13 different type of ratios analysis 120 failed houses and found that three out of 13 ratios predict the failure of houses with precise truth while other ratios besides shown some anticipation power.

Rasmer and Foster ( 1931 ) used eleven ratios to analyze that the successful houses has higher ratios than unsuccessful houses. Although this survey was immature but immatureness was ignored by sing the critical part this survey has in the rating of utility of ratios. Security and exchange committee of America was formed in 1934. This besides expanded the flow and figure of fiscal statements and with the aid of this peripheral factor importance of ratio analysis farther enhanced and realized.

Marwin ( 1942 ) by utilizing several ratios analyzed fiscal tendencies of immense successful and unsuccessful houses. Compared normal ratios of industry with average ratios of big unsuccessful houses and happen out that the three ratios current ratio, net working capital to entire assets and net worth to debt were able to anticipate failure before existent failure happened. The survey showed the existent power of anticipation of ratio analysis and consequences were still dependable.

Walter ( 1957 ) included hard currency flow statement points in ratio analysis. At the terminal of universe war fund statement came into being and with fund statement fund statement ratios was besides produced.

Hickman ( 1958 ) used times involvement earned ratio and net net income ratio to foretell the default rate on corporate bond.

Saulnier ( 1958 ) found that a house with low current ratio and debt ratio has greater opportunity to default so houses with high ratios.

Moore and Atkinson ( 1961 ) pointed out the relationship between capacity to pay and fiscal ratios and shows consequences of ratio analysis influence the adoption ability of houses.

Beaver ( 1967 ) besides examined the anticipation power of ratio analysis and point out ratios ability to foretell failure every bit early as five old ages before the collapsed. Statistical technique used in the survey was more powerful than earlier surveies and fund statement informations was used to cipher ratio. This survey set the foundation for future research on ratio analysis.

Sorter and Becker ( 1964 ) examined the relationship between psychological theoretical account and corporate personality of fiscal ratios and happen out that long-established corporation maintain greater liquidness and solvency ratios.

Gombola and Ketz ( 1983 ) found that the fund and income statement were produced for different intent and profitableness ratios did non hold the information that hard currency flow ratios provide. In other words both ratios gave of import every bit good as different information from one and other.

In 1940s many states expressed involvement in ratio analysis. Current ratio was used in recognition direction in Australia after intense examination. In England information was collected from different organisation and kind in “ pyramid ” in order to used that informations in ratio analysis so that determination made on more rational footing. On the other manus British method is more direction oriented than American system that is recognition oriented. Indian and Canadian system is similar to American system and same sort of ratios and standards has been used. In Japan information was available in grouping on the footing of industry and sizes of houses. China and Russia used several ratios as control step in investing and working capital.

Empirical Study of fiscal ratios:

Pinches and Mingo ( 1973 ) evaluated the construction of ratios and found that ratios can be divided into different groups. Present general categorization of fiscal ratios on logical footing. Results concluded that the ratios can be divided into four groups that are fiscal purchase, short-run capital intensity, return on investing and long-run capital intensity.

Stevens ( 1973 ) besides studied the subject of ratio categorization and grouped the fiscal ratios in four classs that include activity, liquidness, purchase and profitableness.

Pinches, Mingo, and Caruthers ( 1973 ) and Pinches, Eubank, Mingo, and Caruthers ( 1975 ) carried on farther work on the topic and categorized the fiscal ratios in seven factors that included receivable turnover, capital turnover, short-run liquidness, return on investing, stock list turnover, fiscal purchase and hard currency place.

Libby ( 1975 ) besides studied the division of fiscal ratios and condenses that division from seven to five. Five divisions included liquidness, activity, hard currency place, profitableness and assets balance. Johnson ( 1979 ) further studied the research of Pinches ( 1973 ) and added another factor that is decomposition step into seven factors.

Twelve different factors or division of fiscal ratios were presented in five different surveies. On the footing of five published surveies mixture of fiscal ratios were really clip consuming because the consequences of published surveies were really diverse.

Chen and Shimerda ( 1981 ) deeply examined five published surveies and happen out that some of the 12 factors that had been presented in the surveies were same and merely name was changed. Therefore, 12 factors were grouped into seven factors. Seven factors were hard currency place, fiscal purchase, stock list turnover, short-run liquidness, return on investing, receivable turnover and capital turnover.

Statistical Significance of Financial Ratios:

Horrigan ( 1965 ) analyzed the correlativity between assorted fiscal ratios and found that high correlativity is present among ratios. A fluctuation was besides found depending on the industry. Collinearity was considered varied to a great extent among industries and hence posed separate advantages and disadvantages. Extraction of information by supplying fewer ratios is helped in collinearity, but on the other manus, choice for appropriate ratios and its reliable application in driving coveted consequences is hard to implement. Analysis besides explained that consequences frequently mislead since correlativity does non vouch the true value of a ratio. Therefore, accent on utilizing fewer ratios appeared in order to undertake the mistakes in statistical analysis. Ratios are believed to reflect different values for different facets of a house, which in most instances impossible to be shared with other set of ratios. For choice of accurate ratios, Chen and Shimerda ( 1981 ) insisted that choice of most reliable ratios helps cut down the determination mistake by decently using the analysis capableness of a ratio.

Dispersion was besides found varied among statistical analysis of different houses. Wider scattering consequences in trouble in reading of the consequences and makes the ratios instead useless in analysing and deducing the coveted consequences. Different fortunes were responsible for fluctuation in scattering. Common factors that cause inconsistent behaviour of such consequences are industry, seasons, economic conditions, fiscal place, geographical location, and concern criterions implemented within the organisation.

Fiscal Ratios Serviceability:

Fiscal ratios are utile non merely in analysing the public presentation of a house, it besides helps in planing the hereafter programs and execution of right stairss that farther better the place and public presentation of the company and makes it easier to make its long term ends and aims. On the other manus, ratios besides help in placing the grounds if a company is enduring losingss or resulted in a lessening in end product. Assorted surveies have discussed assorted techniques for analysing and decently using the ratios for doing it utile for the company. Different scenarios have besides been covered, such as, the bankruptcy and liquidness, fiscal places compared to the industry, and profitableness of the company with regard to expected return.

Patton ( 1982 ) analyzed that anticipation of future hard currency flows is helped by fiscal ratios. Analysis of all around public presentation of company with regard to the programs implemented and expected end product is besides helped by the ratios. It helps the company in doing farther determinations that straight contribute to the growing of hard currency flows.

Winakor and Smith ( 1935 ) pointed out that in most instances of failure, the working capital to entire assets ratio get down worsening ten old ages before the existent failure and therefore became the most precise index of judging the insolvency. Other ratio had considerable anticipation power in footings of gauging future default or failure of houses included long-run solvency ratios.

Altman ( 1968 ) found that with 90 per centum truth belly-up houses can be separated from successful houses with the aid of ratio analysis before the bankruptcy. In other words, the failed houses are marked before the failure with the aid of fiscal ratio analysis. Other fiscal troubles were non every bit unsafe compared to failure, and were besides predictable in progress with the aid of ratio analysis.

Patton ( 1982 ) argued that recognition analysts with aid of historical informations of client used fiscal ratios analysis to happen out client ‘s hard currency flows and return rate to do recognition determination more dependable.

Hickman ( 1958 ) said that issues that include default rate and return rate on bonds exactly and accurately solved with the aid of net net income border and involvement coverage ratio.

Jen ( 1964 ) pointed out the public-service corporation of ratio analysis and said that while giving loans to little houses, debt ratios and net net income ratios used as a assessment tool and different fiscal jobs and troubles can be solved by utilizing fiscal ratio analysis.

Jackendoff ( 1962 ) concluded that the profitable and non profitable houses utilizing fiscal ratios can be separated and fiscal ratios are higher for profitable houses than not profitable houses.

Hsieh and Wang ( 2001 ) said that utilizing fiscal ratios of different house ‘s public presentation can be evaluated by comparing fiscal ratios within different houses or industry.

Karacaer and Kapusuzoglu ( 2008 ) said that every fiscal ratio gives different information within the parametric quantities of that peculiar ratio and impact fiscal place of the house but profitableness and liquidness ratios has more permanent consequence on company ‘s fiscal place.

Department of commercialism carried out surveies in several trade industries in 1956. Result showed that profitable houses have higher short-run liquidness and solvency ratios. On the footing of surveies conducted by different analysts proved that usually fiscal ratios were higher for profitable houses.

RESEARCH METHODS

Method of Data Collection

Secondary information was used for transporting out this research. Secondary information was collected from web sites of Fauji Fertilizer Ltd, Atlas Honda Limited, Atlas Battery Limited and Toyota Indus Motors Limited.

Sample Size

The informations selected from Annual Reports of 10 companies from the old ages 2005 to 2009.

Research Model

Statistical Technique

Independent Sample T-test technique was used to prove the hypothesis.

Consequence

Findingss and Interpretation of the consequences

In this research 4 companies and 35 fiscal ratios was used. 4 companies have divided into 3 groups. Fauji Fertilizer Company ‘s ratio has been compared with all other companies to happen out the tendency in fiscal public presentation of these companies during 2005 to 2009. Findingss and readings of consequences are given below:

In Group 1 ( Fauji Fertilizer and Atlas Honda ) Gross net income border, Operating net income border, Net net income border after revenue enhancement, Net net income border before revenue enhancement, Return on equity after revenue enhancement, Return on equity before revenue enhancement, Return on investing, Return on assets after revenue enhancement, return on assets before revenue enhancement, Return on net assets, Return on capital employed, Current ratio, Net working assets to capital, Inventory turnover yearss, Fixed assets turnover, Entire assets turnover, Interest coverage ratio, Dividend screen, Dividend per portion and Dividend output are significantly different and hypothesis are accepted. Quick ratio, Cash ratio, Operation cashflow ratio, Inventory turnover times, Account receivable turnover yearss, Account receivable turnover times, Entire debt ratio, Debt to equity ratio, Longterm debt to equity ratio, Cash coverage ratio, Gaining per portion, Dividend Payout ratio, Price net incomes ratio, Plowback ratio and Growth in equity from plowback are not significantly different and hypothesis are rejected.

In Group 2 ( Fauji Fertilizer and Indus motors ) Gross net income border, Operating net income border, Net net income border after revenue enhancement, Net net income border before revenue enhancement, Return on equity after revenue enhancement, Return on equity before revenue enhancement, Return on net assets, Current ratio, Quick ratio, Cash ratio, Net working assets to capital, Inventory turnover yearss, Fixed assets turnover, Entire assets turnover, Longterm debt to equity ratio, Gaining per portion, Dividend Payout ratio, Dividend screen, Price net incomes ratio, dividend output and Plowback ratio are significantly different and hypothesis are accepted.

Tax return on investing, Return on assets after revenue enhancement, return on assets before revenue enhancement, Return on capital employed, Operation cashflow ratio, Inventory turnover times, Account receivable turnover yearss, Account receivable turnover times, Dividend per portion and Growth in equity from plowback are not significantly different and hypothesis are rejected.

In Group 3 ( Fauji Fertilizer and Atlas battery ) Gross net income border, Operating net income border, Net net income border after revenue enhancement, Net net income border before revenue enhancement, Return on equity after revenue enhancement, Return on equity before revenue enhancement, Return on investing, Return on assets after revenue enhancement, return on assets before revenue enhancement, Return on net assets, Current ratio, Net working assets to capital, Inventory turnover yearss, Fixed assets turnover, Entire assets turnover, Cash coverage ratio, Interest coverage ratio, Dividend Payout ratio, Dividend screen, Dividend per portion, dividend output and Plowback ratio are significantly different and hypothesis are accepted.

Tax return on capital employed, Quick ratio, Cash ratio, Operation cashflow ratio, Inventory turnover times, Account receivable turnover yearss, Account receivable turnover times, Entire debt ratio, Debt to equity ratio, Longterm debt to equity ratio, Gaining per portion, Price net incomes ratio and Growth in equity from plowback are not significantly different and hypothesis are rejected.

CONCLUSION, DISCUSSIONS, IMPLICATIONS AND FUTURE RESEARCH

Decision

Consequences from this survey proved that the fiscal tendency, public presentation and ratios of the companies that have been used in the survey were alone. In other words fiscal consequences of both industries were diverse and differed and no company within car sector resulted in strong fiscal public presentation that matched the public presentation of Fauji Fertilizer Company limited.

Discussion

Fiscal ratios helped to divide profitable houses from non profitable houses that were confirmed from past surveies. This survey besides concluded that the profitable houses have higher fiscal ratios than not profitable houses. Financial ratios have been used since early ages but still lack clear theoretical construction for choosing suited ratios for analysis. Lot of work has been done in this field but still immense possibilities of betterment are available.

Deductions and Recommendations

Financial ratio analysis is a good pick for unsophisticated and immediate analysis of fiscal place of the company with considerable anticipation power. With the aid of fiscal ratio analysis future public presentation of the company can be predicted by analyzing the past tendency of public presentation. This allows the investors and stockholders to put on the footing of existent fact and figures instead than on different premises. To cut down the fluctuation in the ratios and do the consequences dependable, the figure of companies used in the survey must be increased.

Future Research

Ratios analysis assists the companies in deriving insight cognition every bit good as external chances to calculate future investing tendencies. This analysis facilitates the companies to concentrate on weak points and better them every bit good as takes benefits from strong points. Ratios besides help the investors and stockholders to calculate return. Reducing mistakes and inefficiency of ratio analysis can greatly assist in increasing the truth and utility in future surveies.

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