AEL Textile
Limited
Submitted to: Mam Sana Sarwar
Submitted by:
Department: Commerce (Banking & finance 5th)
Course: Financial Statement Analysis
Introduction:
AEL Textiles Limited (Formerly Arshad Energy Limited) is a public limited company
incorporated in Pakistan on 20 February 1994 under the repealed Companies Ordinance, 1984
(Now Companies Act, 2017). The Company is engaged in the business of generation and
distribution of electricity.
KEY PEOPLE
Awais Tariq (CEO)
Mustanser Ahmed (Chairperson)
Tariq Majeed (Company Secretary)
AEL Textiles Limited is a part of the Piece Goods, Notions, and Other Dry Goods Merchant
Wholesalers industry.
The name of the company has been changed from Arshad Energy Limited to AEL Textiles
Limited in April 2022. The principal activity of the company was the generation and distribution
of electricity which has been changed to dealing and trading textile products and materials.
Financial Data
The company’s financial data for 2023 shows that it has total employees and outstanding shares
The company’s net sales revenue and net profit (loss) for the period for 2022Q1, 2023Q1, and
2024Q1 are also available.
Ratios 2019 2020 2021 2022 2023
0.447748
1 Current Ratio 0.59012606 8 0.19302419 4.3691495 74.234183
0.120672
2 Quick Ratio 0.18836972 7 0.11990141 4.3691495 74.234183
0.007454
3 Cash Ratio 0.00540949 8 0.01211716 0.115696 69.496545
4 Working Capital -248456 -385702 -624945 636267 660212
5 Gross Profit Ratio 0 0 0 0 0.1122693
6 Interest Coverage Ratio 0 0 0 0 9868.6006
Return on Capital
7 Employed 0 0 0 0 0.0512791
8 Net Profit Margin 0 0 0 0 0.0758359
9 A/R Turnover Ratio 0.05794521 0 0.26192477 0 3.9413064
10 Days’ Sales in Receivables 0.00315977 0 0.00771624 0 0.0003528
11 Total Asset Turnover Ratio 3.28510995 0 0.01809817 0 0.4800425
12 Asset test ratio 0 0 0 0 0.0364045
13 Return on asset 0 0 0 0 0.0758359
14 Operating income margin 4.0457904 0 3.11931099 0 0.5127416
15 Operating asset turnover 0 0 0 0 0.0547721
16 Return on operating asset 0 0 0 0 5.9565154
17 Dupond Return on assets 0 0 0 0 5.9565154
Dupond on operating
18 assets 0 0 0 0 1.2094
0.443415
19 Debt to Asset Ratio 0.3471008 6 0.47903425 0.2288775 0.0135486
0.796672
20 Debt to Equity Ratio 53.1630281 6 1.01335322 0.2968108 0.0137346
Debt to Tangible Net 0.796672
21 Worth 53.1630281 6 1.01335322 0.2968108 0.0137346
39.36061
22 A/R Collection Period 23.9599789 4 27.3249848 151.23766 10.336047
INVENTORY 0.392388
23 TURNOVER RATIO 0.3955778 4 0.09014361 1.852693 0
INVENTORY 930.2006
24 TURNOVER IN DAYS 922.700931 8 4049.0944 197.01052 0
DAY'S SALE IN 1.399596
25 INVENTORY 1.39668337 7 1.53362651 0 0
1.399596
26 OPERATING CYCLE 922.704091 7 1.54134275 0 0
Ratio Analysis
Interpretations
Current Ratio
Current Ratio from 2019 to 2023 is erratic and raises questions about the reliability of the data,
particularly in 2022 and 2023.
The significant fluctuations in the ratio, especially the exceptionally high values in 2022 and
2023, warrant careful investigation and verification of financial statements. It's crucial to
consider potential errors, anomalies, or exceptional circumstances that may have influenced
these ratios.
Analyzing the company's liquidity position requires a detailed examination of the composition of
current assets and liabilities, as well as an understanding of any significant events or changes in
business operations during this period.
Quick Ratio
The overall trend in the Quick Ratio from 2019 to 2023 is characterized by fluctuations and
extreme values, particularly in 2022 and 2023.
The sudden and substantial increases in 2022 and 2023 are unusual and warrant careful
investigation and validation of financial statements. Such extreme ratios may indicate data
quality issues or exceptional circumstances that need to be identified and addressed.
Analyzing the composition of quick assets and liabilities, as well as understanding any
significant events or changes in business operations, is essential for a comprehensive
interpretation of the company's liquidity position.
Cash Ratio
Cash Ratio from 2019 to 2023 is characterized by fluctuations and extreme values, particularly in
2022 and 2023.
While there is an apparent improvement in the company's ability to cover short-term liabilities
with cash in 2022, the extreme value in 2023 raises concerns about the reliability of the data.
Further investigation and validation of financial statements are necessary to understand the
reasons behind these fluctuations.
Analyzing the company's cash management strategy, understanding the composition of current
liabilities, and considering industry benchmarks are essential for a comprehensive interpretation
of the company's liquidity position.
Working Capital
The Working Capital from 2019 to 2023 reflects a significant improvement, transitioning from
negative values to positive figures.
The negative working capital in the initial years (2019-2021) indicated challenges in managing
short-term obligations. However, the substantial positive working capital in 2022 and 2023
suggests a successful turnaround and improved liquidity management.
Analyzing the components of working capital, understanding the reasons behind fluctuations,
and considering industry benchmarks are crucial for a comprehensive interpretation of the
company's financial health.
Gross Profit Ratio
The overall trend in the Gross Profit Ratio from 2019 to 2023 shows a persistent absence of
gross profit in the initial years, followed by a sudden positive shift in 2023.
The sudden appearance of gross profit in 2023 suggests that the company might have
implemented corrective measures to enhance its profitability. However, the extended period
without gross profit raises concerns about the company's historical financial performance and
operational efficiency.
Detailed analysis of cost structures, sales strategies, and overall business operations is essential
to understand the factors contributing to the absence of gross profit in the initial years and the
subsequent improvement in 2023.
Interest Coverage ratio
Interest Coverage Ratio from 2019 to 2023 reveals an extended period of financial strain, marked
by an inability to cover interest expenses with operating profit, followed by a significant positive
shift in 2023. The prolonged period of an Interest Coverage Ratio of 0 indicates historical
financial challenges and potential difficulties in managing debt. The sudden improvement in
2023 suggests successful corrective actions, but the specific nature of these actions requires
further investigation.
Detailed analysis of the income statement, changes in operating profit, and debt management
strategies is crucial to understanding the factors contributing to the prolonged period of low or
zero interest coverage and the subsequent improvement in 2023.
Return On capital Employed
Capital Employed (ROCE) reveals an extended period of zero returns, followed by a sudden
positive shift in 2023. The prolonged period of an ROCE of 0 indicates historical inefficiencies
in utilizing capital to generate returns. The sudden improvement in 2023 suggests successful
corrective actions, but the specific nature of these actions requires further investigation.
Detailed analysis of the income statement, changes in operating profit, and operational strategies
is crucial to understanding the factors contributing to the prolonged period of zero return on
capital employed and the subsequent improvement in 2023.
Net Profit Margin
Net Profit Margin from 2019 to 2023 reveals an extended period of zero net profit margin,
followed by a sudden positive shift in 2023.
The prolonged period of a Net Profit Margin of 0 indicates historical challenges in achieving
profitability. The sudden improvement in 2023 suggests successful corrective actions, but the
specific nature of these actions requires further investigation. Detailed analysis of the income
statement, changes in revenue and expenses, and operational strategies is crucial to
understanding the factors contributing to the prolonged period of zero net profit margin and the
subsequent improvement in 2023.
A/R Turnover Ratio
A/R Turnover Ratio from 2019 to 2023 shows fluctuations, anomalies, and a significant
improvement in 2023.
The anomalies in 2020 and 2022 raise concerns about data accuracy and may need further
investigation to identify the reasons behind the unusual values. The improvement in 2021 and the
substantial increase in 2023 indicate positive developments in the company's credit and
collection processes. Detailed analysis of credit policies, receivables management, and changes
in customer behavior is crucial for a comprehensive understanding of the factors contributing to
the A/R Turnover Ratio trends.
Day’s Sale in receivables
Days Sales in Receivable from 2019 to 2023 shows fluctuations, anomalies, and a slight
improvement in 2023.The anomalies in 2020 and 2022 raise concerns about data accuracy and
may need further investigation to identify the reasons behind the unusual values. The slight
improvement in 2023 indicates positive developments in the company's credit and collection
processes. Detailed analysis of credit policies, receivables management, and changes in customer
behavior is crucial for a comprehensive understanding of the factors contributing to the Days
Sales in Receivable trends.
Asset Turnover Ratio
Total Asset Turnover Ratio from 2019 to 2023 shows fluctuations, anomalies, and a positive shift
in 2023.
The anomalies in 2020 and 2022 raise concerns about data accuracy and may need further
investigation to identify the reasons behind the unusual values. The positive shift in 2023
indicates improvements in the company's efficiency in using assets to generate revenue. Detailed
analysis of changes in business operations, sales strategies, and industry benchmarks is crucial
for a comprehensive understanding of the factors contributing to the Total Asset Turnover Ratio
trends.
Asset Test Ratio
Asset Test Ratio from 2019 to 2023 is marked by anomalies, with reported values of 0 in the
initial years followed by a positive value in 2023. The consistent absence of values in 2019 to
2022 raises serious concerns about the data quality and completeness. The sudden positive value
in 2023 underscores the need for meticulous scrutiny of financial statements and data sources.
Detailed investigation and validation of financial data are imperative to identify and rectify any
data-related issues affecting the reporting of the Asset Test Ratio.
Assets (ROA)
Assets (ROA) from 2019 to 2023 reveals an extended period of zero returns, followed by a
sudden positive shift in 2023.The prolonged period of an ROA of 0 indicates historical
challenges in achieving profitability. The sudden improvement in 2023 suggests successful
corrective actions, but the specific nature of these actions requires further investigation.
Detailed analysis of the income statement, changes in revenue and expenses, and operational
strategies is crucial to understanding the factors contributing to the prolonged period of zero
return on assets and the subsequent improvement in 2023.
Operating Income Margin
Operating Income Margin from 2019 to 2023 reveals fluctuations, anomalies, and a positive shift
in 2023. The anomalies in 2020 and 2022 raise concerns about data accuracy and may need
further investigation to identify the reasons behind the atypical values. The positive shift in 2023
indicates improvements in the company's ability to achieve operating profit compared to the
preceding years.
Detailed analysis of changes in operating expenses, revenue, and overall business strategies is
crucial for a comprehensive understanding of the factors contributing to the Operating Income
Margin trends.
Operating Asset Turnover
Operating Asset Turnover from 2019 to 2023 is marked by anomalies, with reported values of 0
in the initial years followed by a positive value in 2023.The consistent absence of values in 2019
to 2022 raises serious concerns about the data quality and completeness. The sudden positive
value in 2023 underscores the need for meticulous scrutiny of financial statements and data
sources. Detailed investigation and validation of financial data are imperative to identify and
rectify any data-related issues affecting the reporting of the Operating Asset Turnover.
Return on Operating Assets
Return on Operating Assets from 2019 to 2023 reveals an extended period of zero returns,
followed by a sudden positive shift in 2023.
The prolonged period of an absence of returns indicates historical challenges in achieving
operational profitability. The sudden improvement in 2023 suggests successful corrective
actions, but the specific nature of these actions requires further investigation. Detailed analysis of
the income statement, changes in operating profit, and operational strategies is crucial to
understanding the factors contributing to the prolonged period of zero return on operating assets
and the subsequent improvement in 2023.
DuPont's ROA
DuPont's ROA from 2019 to 2023 reveals an extended period of zero returns, followed by a
sudden positive shift in 2023.
The prolonged period of an absence of returns indicates historical challenges in achieving
profitability. The sudden improvement in 2023 suggests successful corrective actions, but the
specific nature of these actions requires further investigation. Detailed analysis of the income
statement, changes in revenue and expenses, and operational strategies is crucial to
understanding the factors contributing to the prolonged period of zero ROA and the subsequent
improvement in 2023.
DuPont's Return on Operating Assets
DuPont's Return on Operating Assets from 2019 to 2023 reveals an extended period of zero
returns, followed by a sudden positive shift in 2023. The prolonged period of an absence of
returns indicates historical challenges in achieving operational profitability. The sudden
improvement in 2023 suggests successful corrective actions, but the specific nature of these
actions requires further investigation.
Detailed analysis of the income statement, changes in operating profit, and operational strategies
is crucial to understanding the factors contributing to the prolonged period of zero Return on
Operating Assets and the subsequent improvement in 2023.
Debt to Asset Ratio
Debt to Asset Ratio from 2019 to 2023 reveals fluctuations, an increase, and a substantial
decrease in the later years.
The increase in 2020 and 2021 suggests a higher reliance on debt for financing, potentially for
strategic purposes. The subsequent decrease in 2022 and a significant drop in 2023 indicate a
shift towards lower debt levels, possibly due to debt reduction efforts or changes in the
company's financial strategy. Detailed analysis of the company's debt management practices,
financial strategy, and industry benchmarks is crucial for a comprehensive understanding of the
factors contributing to the Debt to Asset Ratio trends.
Debt to Equity Ratio
Debt to Equity Ratio from 2019 to 2023 reveals fluctuations, a substantial decrease, and a shift
towards a more balanced capital structure. The high ratio in 2019 indicated significant financial
leverage, but the subsequent decrease in 2020 signaled a move towards a more conservative
capital structure. The increase in 2021 raised concerns, but the subsequent decreases in 2022 and
2023 indicate a deliberate effort to reduce debt levels.
Detailed analysis of the company's debt management practices, equity structure, and financial
strategy is crucial for a comprehensive understanding of the factors contributing to the Debt-to-
Equity Ratio trends.
Debt to Tangible Net Worth
Debt to Tangible Net Worth ratio from 2019 to 2023 reveals fluctuations, a substantial decrease,
and a shift towards a more balanced and conservative capital structure.
The high ratio in 2019 indicated significant financial leverage, but the subsequent decrease in
2020 signaled a move towards a more conservative capital structure. The increase in 2021 raised
concerns, but the subsequent decreases in 2022 and 2023 indicate a deliberate effort to reduce
debt levels, particularly concerning tangible assets. Detailed analysis of the company's debt
management practices, tangible assets, and financial strategy is crucial for a comprehensive
understanding of the factors contributing to the Debt to Tangible Net Worth ratio trends.
A/R Collection Period
A/R Collection Period from 2019 to 2023 reveals fluctuations, an increase in 2022, and a
significant improvement in 2023. The increase in 2020 and the subsequent decrease in 2021 may
be indicative of adjustments in credit terms or changes in customer payment behavior. The sharp
increase in 2022 is a red flag, while the substantial improvement in 2023 suggests successful
corrective actions.
Detailed analysis of credit management practices, customer payment behavior, and changes in
collection procedures is crucial for a comprehensive understanding of the factors contributing to
the A/R Collection Period trends.
Inventory Turnover Ratio
Inventory Turnover Ratio from 2019 to 2023 reveals fluctuations, a drastic decline in 2021, a
significant improvement in 2022, and an anomaly in 2023.
The consistent low ratios in 2019 and 2020 indicate challenges in inventory management. The
dramatic decrease in 2021 is a red flag, while the substantial improvement in 2022 suggests
successful corrective actions. The anomaly in 2023 requires further investigation to ensure data
accuracy. Detailed analysis of inventory management practices, production efficiency, and
changes in demand patterns is crucial for a comprehensive understanding of the factors
contributing to the Inventory Turnover Ratio trends.
Inventory Turnover in Days
Inventory Turnover in Days from 2019 to 2023 reveals fluctuations, a dramatic increase in 2021,
a significant improvement in 2022, and an anomaly in 2023. The consistently high figures in
2019 and 2020 indicate prolonged inventory turnover, potentially impacting cash flow and
profitability. The drastic increase in 2021 is a red flag, while the substantial improvement in 2022
suggests successful corrective actions. The anomaly in 2023 requires further investigation to
ensure data accuracy. Detailed analysis of inventory management practices, production
efficiency, and changes in demand patterns is crucial for a comprehensive understanding of the
factors contributing to the Inventory Turnover in Days trends.
Days' Sales in Inventory
Days' Sales in Inventory from 2019 to 2023 reveals consistency, a slight increase in 2021, and
anomalies in 2022 and 2023.
The consistent low figures in 2019 and 2020 are positive indicators of efficient inventory
turnover. The increase in 2021, although marginal, warrants investigation into the underlying
factors. The anomalies in 2022 and 2023 require thorough scrutiny to ensure data accuracy.
Detailed analysis of inventory management practices, production efficiency, and changes in
demand patterns is crucial for a comprehensive understanding of the factors contributing to the
Days' Sales in Inventory trends.
Operating Cycle
Operating Cycle from 2019 to 2023 reveals fluctuations, anomalies in 2020, 2022, and 2023, and
a slight increase in 2021. The consistent high figures in 2019 indicate a longer operating cycle,
potentially impacting liquidity and overall efficiency. The anomalous decrease in 2020 raises
concerns about the accuracy of reported figures. The anomalies in 2022 and 2023 require
thorough scrutiny to ensure data accuracy.
Detailed analysis of the operating cycle components, financial reporting practices, and potential
changes in business operations is crucial for a comprehensive understanding of the factors
contributing to the Operating Cycle trends.
Conclusion
Financial position based on the provided ratios involves considering the various aspects of its
financial performance. Here's a comprehensive analysis:
Liquidity:
The Current Ratio shows a fluctuating trend over the years, ranging from 0.59 to 74.23. The
significant increase in 2023 is notable. The Quick Ratio and Cash Ratio exhibit similar trends,
indicating a potential improvement in the company's short-term liquidity.
Profitability:
Net Profit Ratio has consistently shown positive values, suggesting the company has been
generating profits. The slight increase from 2019 to 2022 and a subsequent decrease in 2023
should be investigated.
Efficiency in Asset Management:
A/R Turnover Ratio and Days Sale in Receivables show variations, especially in 2020 and 2022.
These ratios reflect the company's ability to manage receivables and collect cash efficiently.
Asset Utilization:
Total Asset Turnover Ratio shows fluctuations, indicating changes in how efficiently the
company utilizes its assets to generate sales.
Debt Management:
Debt to Asset Ratio has decreased significantly in 2023, suggesting a reduction in reliance on
debt. Debt to Equity Ratio also shows a decreasing trend, indicating a move towards a more
balanced capital structure. Debt to Tangible Net Worth reflects a similar trend, suggesting a more
conservative approach.
Profitability Ratios:
Return on Capital Employed and Return on Assets show zeros or very low values, indicating a
need for further investigation into the company's ability to generate profits from its capital and
assets.
Operating Efficiency:
Operating Income Margin and Operating Asset Turnover show fluctuations. The return on
operating assets is also inconsistent.
Inventory Management:
Inventory Turnover Ratio and Days' Sales in Inventory reveal challenges in managing inventory,
with drastic improvements in 2022.
Overall Financial Health:
The company's financial health appears to have experienced fluctuations and anomalies in certain
ratios, especially in 2020, 2022, and 2023. Liquidity has improved in 2023, but anomalies in
other ratios, especially inventory-related ratios, raise questions about data accuracy or potential
operational issues.
Recommendations for Further Analysis:
Conduct a detailed review of financial statements to ensure accuracy, especially in 2020, 2022,
and 2023.Investigate the reasons behind drastic changes and anomalies, such as the anomalous
figures in operating cycle components and inventory-related ratios. Analyze the company's
profitability drivers, asset utilization strategies, and operational efficiency.
