financial leverage

LOGO

Financial Leverage of Pakistani Companies

Final Project Presentation


Topic Introduction

Randomly Selected Companies Financial Statements Equity and Debt Proportions Financial Analysis Comments/Conclusion


Leverage


Operating Leverage

Financial Leverage

Combined Leverage

Types Of Leverage


High Leverage

Financial Leverage

Low Leverage


Dawood

SapphireNoon

Pepsi

Nishat

Companies

Randomly Selected


Sapphire Textile Limited

Comments

Introduction

Mission

Values

Proportions

Ratios

Data Collection


Sapphire Textile IntroductionSapphire Textile Introduction

NewestInnovation

TechnologyLargest

ManufacturersTextile Company


Mission

To build flexible manufacturing capabilities in the textile industry to cater to the growing and evolving global demands, keeping a lead position in our business, maintaining our values based on good business and ethics, and at the same time contributing in the development of the community in which we work and live in.

ValuesP eople R elationship I ntegrity D iversity E nvironment


Data Collected

Sources of BorrowingUtilization of Borrowing

Rate of Interest

Reason of Debt Financing

Other Sources of Financing

Meeting Debt Requirement


2005 2006 2007 2008

Shareholder’s Equity

2797.114 3893.928 6018.868 5577.492

Long term Debt

1174.78 934.54 722.264 446.199

total3971.894 4828.468 6740.95 6023.691

Proportion of Equity

70% 81% 89% 93%

Proportion of Debt

30% 19% 11% 7%

Equity and Debt Proportions


2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Equity

Debt


Debt Equity Ratio

Debt Equity Ratio = Long Term Debt/ Shareholder’s Equity

Ratios 2005 2006 2007 2008

Debt to Equity

0.42 0.24 0.12 0.08


Debt to Equity0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2005

2006

2007

2008


Debt to Capital Ratio

Debt to Capital = Debt/Shareholder’s Equity + Debt

Ratio 2005 2006 2007 2008

Debt to Capital

0.30 0.19 0.11 0.07


Debt to Capital0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

2005

2006

2007

2008


Debt to Asset Ratio

Debt to Assets Ratio = Debt/Total Assets

Ratio 2005 2006 2007 2008

Debt to Assets 0.16 0.10 0.06 0.04


Debt to Assets0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

2005

2006

2007

2008


Financial Leverage

Ratio 2005 2006 2007 2008

Financial Leverage

30:70 19:81 11:89 7:93


CommentsIncreaseIn Profits

LowLeverage

Reliance On Equity

Ratios Decreasing


NoonPakistanLimited

Comments

Introduction

Mission

Vision

Proportions

Ratios

Data Collection


Noon Pakistan Limited IntroductionNoon Pakistan Limited Introduction

NurpurUHT

Tetrapakplant

First Milk Powder

IncorporatedIn 1966


Mission

Noon is committed to supplying the consumer and our customers with the finest, high-quality products and to leading the industry in healthy and nutritious products.Noon supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies.

Vision

Our vision at Noon is to be a transformative force in our community and world at large and to serve as a model of a sustainable business alternative that nurtures social and economic well-being in an environmentally sensitive manner


Data Collected


Rate of Interest





2005 2006 2007 2008


127514 109018 108758 169836

Long term Debt

250731 329699 286235 303591

total378245 438717 394993 473427


34% 25% 28% 36%

Proportion of Debt

66% 75% 72% 64%



2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

80%

Equity

Debt


Debt Equity Ratio


Ratios 2005 2006 2007 2008

Debt to Equity

0.74 0.85 0.65 0.85


Debt to Equity0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2005

2006

2007

2008




Ratio 2005 2006 2007 2008

Debt to Capital

0.66 0.75 0.72 0.64


Debt to Capital0.58

0.6

0.62

0.64

0.66

0.68

0.7

0.72

0.74

0.76

2005

2006

2007

2008


Debt to Asset Ratio


Ratio 2005 2006 2007 2008

Debt to Assets 0.48 0.59 0.52 0.41


Debt to Assets0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2005

2006

2007

2008


Financial Leverage

Ratio 2005 2006 2007 2008

Financial Leverage

66:34 25:75 28:72 36:64


Interest Coverage Ratio

Interest Coverage Ratio = EBIT/Interest Payment

Ratio 2005 2006 2007 2008

Interest Coverage

3.15 0.61 1.5 2.37


Interest Coverage0

0.5

1

1.5

2

2.5

3

3.5

2005

2006

2007

2008


CommentsLow Profits

HighLeverage

Reliance On Debt

Ratios Increasing


PepsiCo

Comments

Introduction

Mission

Values

Proportions

Ratios

Data Collection


PepsiCo IntroductionPepsiCo Introduction

Food & Beverages

World Leader

EnvironmentallyResponsibleCompany


Mission

Our mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

VisionOur vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.


Data Collected


Rate of Interest





2005 2006 2007 2008


14320 15447 17325 12203

Long term Debt

2313 2550 4203 7858

total16633 17997 21528 20061


86% 86% 80% 61%

Proportion of Debt

14% 14% 20% 39%



2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Equity

Debt


Debt Equity Ratio


Ratios 2005 2006 2007 2008

Debt to Equity

0.161 0.165 0.24 0.21


Debt to Equity0

0.05

0.1

0.15

0.2

0.25

0.3

2005

2006

2007

2008




Ratio 2005 2006 2007 2008

Debt to Capital

0.14 0.14 0.20 0.39


Debt to Capital0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2005

2006

2007

2008


Debt to Asset Ratio


Ratio 2005 2006 2007 2008

Debt to Assets 0.07 0.085 0.121 0.21


Debt to Assets0

0.05

0.1

0.15

0.2

0.25

2005

2006

2007

2008


Financial Leverage

Ratio 2005 2006 2007 2008

Financial Leverage

14:86 14:86 20:80 39:61




Ratio 2005 2006 2007 2008

Interest Coverage

23.13 26.94 32.01 21.07


Interest Coverage0

5

10

15

20

25

30

35

2005

2006

2007

2008


CommentsLow Profits

HighLeverage

Reliance On Debt

Ratios Increasing


Nishat Textile Limited

Comments

Introduction

Mission

Values

Proportions

Ratios

Data Collection


Nishat Textile IntroductionNishat Textile Introduction

Core Business

PrincipalActivity

MultinationalOperations5 Listed

Companies


Mission

To provide quality products to customers and explore new markets to promote/expand sales of the Company through good governance and foster a sound and dynamic team, so as to achieve optimum prices of products of the company for sustainable and equitable growth and prosperity of the company.

VisionTo transform the Company into a modern and dynamic yarn, cloth and processed cloth and finished product manufacturing Company with highly professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

To transform the Company into a modern and dynamic power generating company with highly professionals and fully equipped to play a meaningful role on sustainable basis in the economy of Pakistan.


Data Collected


Rate of Interest





2005 2006 2007 2008


16563.14 32935.5 49269.2 35452.7

Long term Debt

2858.16 3015.38 1773.82 1047.79

total19421.30 35950.58 51043.02 36500.5


86% 92% 97% 98%

Proportion of Debt

14% 08% 03% 02%



2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Equity

Debt


Debt Equity Ratio


Ratios 2005 2006 2007 2008

Debt to Equity

0.17 0.09 0.03 0.02


Debt to Equity0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

2005

2006

2007

2008




Ratio 2005 2006 2007 2008

Debt to Capital

0.14 0.08 0.03 0.02


Debt to Capital0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

2005

2006

2007

2008


Debt to Asset Ratio


Ratio 2005 2006 2007 2008

Debt to Assets 0.13 0.09 0.04 0.02


Debt to Assets0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

2005

2006

2007

2008


Financial Leverage

Ratio 2005 2006 2007 2008

Financial Leverage

14:86 08:92 03:97 02:98




Ratio 2005 2006 2007 2008

Interest Coverage

4.9 2.6 2.5 7.4


Interest Coverage0

1

2

3

4

5

6

7

8

2005

2006

2007

2008


CommentsIncreaseIn

Profits

LowLeverage

Reliance On Equity

Ratios Decreasing


DawoodHercules

Comments

Introduction

Mission

Values

Proportions

Ratios

Data Collection


Dawood Hercules IntroductionDawood Hercules Introduction

First Manufacturing

Co

Tallest IndustrialStructure

LatestTechnology

IncorporatedIn 1968


Mission & Vision

• To excel in the fertilizer and allied business at national and international level by maintaining highest standards of product quality thereby playing our role in the development of the country's economy and adding value to the shareholders' investment.

• To offer consistent dividends to the shareholders.• To chalk out a plan to improve production techniques and quality standards.• To provide career grooming opportunities to the talented professionals.• To become a good corporate citizen.• To develop long-term relationship with the employees.• To create high performing Organizational Environment in which ideas are generated and nurtured.• To inculcate honest and ethical behavior.• To create safe, healthy environment and friendly atmosphere for the employees.• To improve quality of life for the employees.• To make the farmer community prosper.


Data Collected


Rate of Interest





2005 2006 2007 2008


9355.24 9273.14 18889.33 17382.66

Long term Debt

- - 6500 6302.5

total9355.24 9273.14 25389.33 23685.16


100% 100% 75% 74%

Proportion of Debt

0% 0% 25% 26%



2005 2006 2007 20080%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Equity

Debt


Debt Equity Ratio


Ratios 2005 2006 2007 2008

Debt to Equity

- - 0.34 0.36


Debt to Equity0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2005

2006

2007

2008




Ratio 2005 2006 2007 2008

Debt to Capital

- - 0.25 0.26


Debt to Capital0

0.05

0.1

0.15

0.2

0.25

0.3

2005

2006

2007

2008


Debt to Asset Ratio


Ratio 2005 2006 2007 2008

Debt to Assets - - 0.22 0.24


Debt to Assets0

0.05

0.1

0.15

0.2

0.25

0.3

2005

2006

2007

2008


Financial Leverage

Ratio 2005 2006 2007 2008

Financial Leverage

0:100 0:100 25:75 26:74




Ratio 2005 2006 2007 2008

Interest Coverage

3.87 1.81 1.36 2.82


Interest Coverage0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2005

2006

2007

2008


CommentsIncreaseIn Profits

LowLeverage

Reliance On Equity

Ratios Decreasing


Risk factor

Reliance on equity

Raise capital

Low leveragedcompanies

• Sapphire• Nishat

• Dawood

High leveragedcompanies

• PepsiCo• Noon

Findings

Overall Performance


Low leverage

Reduce risk of bankruptcy

Increase borrowing capacity

High availability of lenders

Recommendations

financial leverage

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