Financial Statement Analysis of Pakistan Hotels Developers Limited and Pakistan Services Limited

Introduction of the Project The presentation is based on the financial data analysis of two Pakistani listed companies engaged in the business of hotel industry, Pakistan Hotels Developers Limited (hereinafter referred to as PHDL) and Pakistan Services Limited (hereinafter referred to as PSL). Three years data has been analyzed in order to reach at a comprehensive conclusion to avoid any unusual fluctuation confront the company.

Objectives and Significance Objectives Objectives We will discuss balance sheet, P & L accounts, Cash flow statement and each and every important aspect of both the companies. So that we can be in a better position to comments on hotel industry of our country Significance Hotel industry is the back bone of tourism, and it is an industry of huge dimensions in its own place. It consumes large amounts of inputs and services, thus, creating strong economic stimuli for the economy of the country.

Data Collection a)Data Collection Sources:- Primary Sources: Following are the two main primary sources used: 1)Annual Reports 2)Interviews Secondary Sources: Secondary sources used are: 1) Study text 2) Articles 3) Internet b)Data Collection Tools:- Interviews, books, and websites are main tools which have been described above under the heading of data collection sources.

Data Processing Data Processing:- The evaluation process will primarily involve the use of ratio analysis which will further be broken down in to: 1)Graphical Analysis:- Use of graphs to show comparison of past with current data, with competitors, using financial statement absolute figures. 2) Vertical Analysis:- Each expense is analyzed on the basis of turnover in respect of income statement whereas balance sheet items are analyzed over total of assets and equities in respect of any individual asset or equity. 2) Vertical Analysis:- Each expense is analyzed on the basis of turnover in respect of income statement whereas balance sheet items are analyzed over total of assets and equities in respect of any individual asset or equity. 3) Horizontal Analysis:- To analyze trend of components of financial statements using 2006 as base year. 4)Future Planning:- It will broadly include the company’s future plans in terms of increasing financial performance and achieving financial goals.

Data Analysis Financial analysis views the financial or commercial worth of the entity from the perspective of all stakeholders. It helps to measure the progress made by an enterprise through analyzing the needs of each individual who has a financial interest in the company. Financial analysis views the financial or commercial worth of the entity from the perspective of all stakeholders. It helps to measure the progress made by an enterprise through analyzing the needs of each individual who has a financial interest in the company. Trends and performance can be represented pictorially in the form of absolute figures which provides us with the opportunity to evaluate the growth and decline in businesses activities: Trends and performance can be represented pictorially in the form of absolute figures which provides us with the opportunity to evaluate the growth and decline in businesses activities:

Equities side of Balance Sheet of PHDL

Assets side of Balance Sheet of PHDL

P & L of PHDL

Cash Flow Statement of PHDL

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Ratio Analysis of PHDL Note: (Rupees '000)

Common Size Analysis PHDL Horizontal Analysis- Equities side of Balance Sheet

Common Size Analysis PHDL Horizontal Analysis- Assets side of Balance Sheet

Common Size Analysis PHDL Horizontal Analysis-P & L Account

Vertical Analysis Analysis PHDL Equities side of Balance Sheet

Vertical Analysis Analysis PHDL Assets side of Balance Sheet

Graphical Analysis Sales & Services - PHDL Cost of Sales & Services - PHDL

Graphical Analysis Gross Profit - PHDL Net Profit Margin- PHDL

Equities side of Balance Sheet of PSL

Assets side of Balance Sheet of PSL

P & L of PSL

Cash Flow Statement of PSL

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Ratio Analysis of PSL Note: (Rupees '000)

Common Size Analysis PSL Horizontal Analysis- Equities side of Balance Sheet

Common Size Analysis PSL Horizontal Analysis- Assets side of Balance Sheet

Common Size Analysis PSL Horizontal Analysis- P & L

Vertical Analysis Analysis PSL Equities side of Balance Sheet

Vertical Analysis Analysis PSL Assets side of Balance Sheet

Vertical Analysis Analysis PSL P & L Account

Graphical Analysis Sales & Services - PSL Cost of Sales & Services - PSL

Graphical Analysis Gross Profit - PSL Net Profit Margin- PSL

Conclusion/Findings The objective of this report was to analyze the current financial position of PHDL & PSL in the light of financial data of preceding three years of its performance. The objective of this report was to analyze the current financial position of PHDL & PSL in the light of financial data of preceding three years of its performance. The analysis concluded: Graphical analysis of sales revenue, cost of sales and gross profit reflected sound financial position of PSL as compare to PHDL. But if we see these analysis with due consideration then PHDL is in much better position because its current gross profit is about 54% of sales while this ratio of PSL is only about 34%. The liquidity situation of the PHDL has been tremendously improved over its prior years, although it is a good sign but it might also indicate that PHDL is not using its current resources adequately to generate profits as compared to PSL. PHDL has sound financial position indicating that it has a good credit rating, would have no problems if it plans to obtain further loan for expansion but even for this lender would first need to assess the norms of industry & risks associated with project before providing them further loan.

Conclusion/Findings The competitor was a market leader so its performance was obviously better than PHDL in almost all ways, but PHDL is making efforts to improve its existing performance; it have not yet been able to come to the standard of PSL but with the continuous efforts from management it will soon be able to raise its standards. By interviewing few personnel in management, I came to know PHDL is making future plans for expansion by setting up a new hotel project in Lahore city which will contribute greatly to the financial growth of the company; however this plan has been deferred for some period. Pakistan is a beautiful country with holiday resorts and hotels like regent plaza. Through better and improved facilities for marketing, the world has come to know of this fact. As a result, foreign tourism has been on a rise causing the increase in the demand and consequently, the appreciation of Pakistani currency. It is possible that the appreciation of currency would make hotelling expensive and might lead to a reduction in the overall foreign demand of the hotel industry in the future.

Recommendations PHDL is working very efficiently in terms of inventory control, but it needs to give attention to improving its credit control system or revise the payment terms of the debtors; whereas the working capital period also need to be improved. PHDL is working very efficiently in terms of inventory control, but it needs to give attention to improving its credit control system or revise the payment terms of the debtors; whereas the working capital period also need to be improved. Although being listed in two stock exchanges PHDL’s investment ratio does not promotes the investors to invest, if it wants to expand it should provide opportunities for general public to invest. Hence, PHDL will be able to obtain further finances for expansion from the shareholders instead of the lending institutes.

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