Market Ratio Analyses of Attock Cement Limited, Cherat Cement Limited and Dewan Cement Limited for Financial years 2008, 2009 and 2010

Table of contents

Section I

Chapter 1) Introduction:
1.1 Financial period under consideration for analysis
1.2 Objectives
1.3 Significance

Chapter 2) Data processing and analysis:
2.1 Data collection sources
2.2 Data processing and analysis tools

Chapter 3) Data analysis:
Market ratios
Dividend per share
Earning per share
Price \ Earning ratio
Percentage of earnings retained
Dividend payout
Dividend yield
Book value per share
Trend analysis

Chapter 4) Conclusion and recommendations:
4.1 Conclusion
4.2 Recommendations

Bibliography

Section I

Chapter 1) Introduction:

Market ratio analysis is a very important tool in interpreting the financial statements of listed companies. It provides the necessary data to make better investment choices. The results show the financial strength and return on investment. These two factors play a major role in providing a better comfort level to the investors regarding the safety and security of their investment and what return to expect.

This project aims at providing assistance to prospective investors by comparing market ratio analysis for the three listed companies in the cement manufacturing industry and interpreting the results of these comparisons.

This project will compare the results for three years (2008, 2009 and 2010) for Attock Cement Limited, Cherat Cement Limited and Dewan Cement Limited focusing on the market ratio analysis.

This will hopefully result in the data which will be useful for the prospective investors, the management, creditors and debtors in knowing the financial strength and return on investments for these three companies.

This study will be useful for the general public in terms of availability of ready information regarding data on market ratios.

Most of the material, that is, data and narration has been taken directly from the primary sources to keep the integrity and accuracy of the material intact.

References have been provided at the end of each narration and for data using APA style referencing.

1.1 Financial period under consideration for analysis

This study shall take into consideration the financial years 2008, 2009 and 2010 for the analysis of market ratios for Attock Cement Pakistan Limited (ACPL), Cherat Cement Limited (CHCC) and Dewan Cement Limited (DCL).

1.2 Objectives

We will carry out this Project to know the position of the selected companies in the market.

This Project will highlight that:

Why companies need to manage a good market position?

We shall see how effective these companies have been in addressing the following needs.

The companies need to manage the good market position because of following reasons:

Value: Main purpose of all the companies is to maximize the value for shareholders and therefore it is imperative that they keep a good market position so that the share prices keep rising and result in increased value for shareholders.

Management as shareholder: Most of the times management of the company is also the shareholder of the company and therefore would be interested in managing a good market position so that the share price stays at the most optimum level.

Shareholders: Shareholders elect the management of the company and if the company is unable to manage the market position in most efficient way then the shareholders may decide to change the management.

Financing: Financial strength of a company is normally judged by looking at how it is doing in the market. If a company manages good market position then it would be easier for it to get credit and at a better rate otherwise it becomes hard for the companies to get credit and even if they get the credit the terms are normally unfavourable. If the market position of the company is good then it can also raise capital by offering more shares to the public to raise the capital which cannot be achieved by a company whose market position is not good.

Takeovers: Higher share prices discourage hostile takeovers as these become more costly for the prospective buyers. Also, better market position means it would be advantageous for the company if it intends to buy another company because it can then offer shares in lieu of cash to the company it intends to buy.

Publicity: If the company enjoys a good market position then it is given more coverage in the media as compared to the companies which do not manage a good market position. This media coverage is free advertisement for the company which is extra benefit at no extra cost.

Which one of the selected companies is enjoying the stable market position?

We shall see which company showed better market position.

What are the dividend policies of the selected companies?

We shall see which one of the following policies is being adopted by the selected companies:

Residual payout.

Fixed / constant payout ratio.

Fixed / stable Rupee dividend.

Fixed / stable Rupees per share.

Fixed / stable Rupees per share plus any other payouts.

What will be the effects of proposed financing i.e. on earning per share etc?

We shall see if there is a need for the change in proposed financing, if yes, then how this would affect EPS.

Type of financing affects the EPS by increasing or decreasing it. For example, more debt decreases earnings and therefore decreases EPS and more capital increases EPS because interest does not have to be paid. Of course, this depends on profitability of the company. If company is not making good profits then more capital would also not increase EPS, in fact, it would reduce EPS because now there would be more shares to divide the earnings among.

What are the bases due to which companies are able to maintain the market positions?

We shall see if the companies were able to use the following bases effectively to maintain their market position.

The bases due to which companies are able to maintain the market position are:

Profitability.

Dividend payout.

Increased book value.

Capital structure.

What reasons work behind the ineffective market position of the companies?

We shall see the reasons behind ineffective market position of the companies under study.

Ineffective / inefficient management.

Reputation.

Dividend payout.

Decreased book value.

At the end of this interesting study, we shall assess whether our objectives have been met / achieved or not.

This project will be carried out to assess the position of these companies in the market.

The purpose of this research is to provide assistance to the prospective investors by doing detailed work on market ratios and their analyses.

This would also provide the management with the relevant data to make better decisions in line with the market norms by way of comparison with other two companies.

This would also be beneficial for the creditors and the debtors by providing them with the level of financial strength which these companies have.

This research will be based on annual audited financial statements of these listed companies.

The financial statements will be taken from the Karachi Stock Exchange and the official websites of these companies for ensuring the authenticity and sanctity of the data.

Market ratio analysis would be performed and all major ratios would be worked out in detail along with the detailed workings for these ratios.

1.3 Significance

This project would benefit the investors by providing them with readily available study on market ratios.

It would be beneficial to management, creditors and debtors as it would highlight the strengths and weaknesses by analyzing the major market ratios.

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