Every company is most associated with its profitability. Most of the important tools of financial ratio analysis is profitability ratio that are used to find out the any company bottom line and its return to its investors. In fact profitability measures are very important to any company management and owners too. Profitability ratios show a firm overall efficiency and financial performance.
This study also related to profitability ratio analysis of Lucky cement, Kohat cement and Attock companies. The aim of this study was to analyze the selected company’s performance with the help of profitability ratio analysis. Data was gathered from the three company website and some official documents like balance sheet, income statements, and cash flow statements have been used to draw the required result. These studies have achieved all the objectives with the help of secondary data and result has been displayed at data analysis portion. The true pictures regarding to selected companies financial position have been noted during this study.
According to study finding of net profit margin, it has been found that net profit margin ratio of Lucky cement is good than kohat cement and attock cement. In 2nd, Net profit margin ratio of attock cement has found good than Kohat cement. The finding also tells us that gross profit margin ratio of Lucky cement is winning position over Kohat cement and attock cement. In the 2nd position the gross profit margin ratio of Attock cement is good than Kohat cement.
The return on asset ratio of lucky cement and Attock cement has found effective and better than Kohat cement in year 2010 and year 2011 but in year 2012 return on assets ratio of Kohat cement is higher than other two companies. In another ratio finding, operating income margin ratio in year 2012 of Kohat is higher than Lucky cement and Attock cement. But in year 2010 and 2011 operating income margin ratio of Lucky cement is good than other two companies. Return on operating assets ratio result is also indicating that return on operating assets ratio of Attock cement is better than Lucky and Kohat cement.
In fact Profitability ratio helps to measure the any company’s performance with the help necessary ratios. This study has conducted over the three companies, Lucky cements, Attock cement and Kohat cement. Mentioned companies are competitors of each others, So the main purpose of this research is to find out which company has more ability to earn profit over other companies. Therefore this topic has been selected for all profitability ratio analysis.
Profitability ratio mostly used to know any company’s ability to generate profits as compare to expenses over a specific period. In other words we can say that this technique gives a true picture of ability of the organization to operate with a surfeit of operating revenue over the operating expenses.
This study has many optional benefits for the people; firstly this research will help to the people to able to understand how selected companies earn profit over a period of time. The 2nd outcomes of this research will be it will enhance the knowledge of the readers to understand how selected companies are more efficient in managing their resources for generating profit. So this research will show you, whole pictures of selected companies its performance. This study will also help the investors and shareholders to take good and effective financial decision regarding to investment after reviewing this documents. On the other hands, all the mentioned companies could also get benefits from this research to improve their poor areas after reviewing the result of this research.
For calculation of profitability ratio, all the calculation was carried out on excel sheet and result of ratios were displayed on MS word for reporting. Data was displayed on tabulation form as well as in graphically form as per project’s requirement.
According to the analysis of return on total equity which determines how much company its getting from the owners’ funds invested in the business. High ROE ratio is favorable for the company and gets more stakeholders trust in the management. We can see that kohat cement ratios is high as compare to other companies due to increase in its income which results from reduction in its non operating expenses.
While Attock and lucky cement are not fortunate as Kohat and the ratio of lucky cement is less than other companies because of increase in its general expenses of operations. So, the ratios of lucky cement are 12.50% in 2010, 14.29% in 2011 and 20.39% in 2012 as far as -16.71% in 2010, 3.03% in 2011 and 44.20% in the year 2012. Attock cement ratios are 18.84% in the year 2010, 11.80% in the year 2011 and 21.67% in the year 2012.
According to the analysis of sale to fixed asset ratio which determine the percentage of sales which to be achieved from usage of fixed assets. We can see that Attock cement ratio is increasing as compare to other companies due to increase in its sales through more stock turnover and productive usage of its assets. Whereas Kohat company ratio shows increasing trend from the year 2011 to 2012 and lucky cement shows same trend as well but ratios of both the companies are less than Attock because of they fails to get more sales from the usage of their fixed assets.
The ratios are of the companies as lucky cement gets 0.79 times, 0.82 times and 1.06 times in the years 2010, 2011 and 2012 and kohat cement company gets 0.52 times in the year 2010, 0.84 times in the year 2011 and 1.33 times in the year 2012. So as far as attock cement is concerned it gets ratio 1.83 times in the year 2010, 1.79 times in 2011 and 1.96 times in the year 2012.