Final Project

Profitability Ratio Analysis of Company A, Company B and

Company C in Same Industry for FY 20XX-20XX
(Bold, 16 font, Times New Roman style)

A REPORT
SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES,
VIRTUAL UNIVERSITY OF PAKISTAN
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION
(Bold, 12 font, Times New Roman style)

Submitted By

<<Student ID>>

<<Student Name>>
(Bold, 16 font, Times New Roman style)

Department of Management Sciences,

Virtual University of Pakistan
 Letter of Undertaking

You are required to fill in the Letter of Undertaking provided in

the ‘Download’ section of the course VULMS and attach here
the scanned copy after signing it.

Note: There is NO need to send us its hard copy through post or

any other means.
Dedication (Optional)
 Acknowledgement
Here you will write a brief paragraph to acknowledge the help
and support you received through out your project. You can
acknowledge the library staff, lecturer, family or any other
person who helped you in your project completion.
 Executive Summary
An executive summary is one among the several important parts
of a report. It is like a micro image of the research report because
it covers all the sections of the report. It may range from one to
two pages providing brief overview of the subject matter,
methods of analysis you used in the project, findings based on
your analysis and recommendation in the light of the findings. It
comprises several paragraphs which are numbered and deal with
the following sections:
NOTE: In this portion your actual work must be reflected.
Paragraph one (1) should deal with back ground of the study.
Paragraph two (2) should deal with the purpose and
methodology of the research/study.
Paragraph 3, 4 should deal with the findings of the study.
Last paragraphs should deal with recommendations of study and
action plan if any.
 Table of Contents
(Enlist the main headings and sub-headings of the project along with page
numbers)

Table of contents

Acknowledgment
Executive Summary
1. Chapter 1….……………………………...………………………..Page # 01
1.1…………………………………………………?
1.2…………………………………………………?
1.3…………………………………………………?
2. Chapter 2………………………………………………………….….?
2.1…………………………………………………?
2.2…………………………………………………?
2.3…………………………………………………?
3. Chapter 3 .……………………………………………..........................?
4. Chapter 4…..……………………………………………………….....?
1” 5. Chapter 5………………………………………………………..…….?
6. Chapter 6……………………………………………………………...?
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1½"
 Section I

Chapter 1) Introduction:
You are required to provide a brief introduction of the selected companies and their
business activities.

1.1 Financial Period Under-Consideration for Analysis:

You are required to mention the financial years for ratio analysis such as:
FY20XX-FY20XX

1.2 Objectives: You will carry out this Project to know the profitability of the selected
companies. This Project will highlight:

ƒ To analyze the ability of selected companies to earn profit over a period of time
ƒ To analyze the selected companies efficiency in managing their resource for
generating profit
ƒ To find out the reasons for generating profit over the years for selected companies
Note: If in any year, any of the three selected companies is facing loss, then to
find out the reasons of losses
ƒ To find out that how effectively selected companies are maximizing their profits
by controlling their costs/expenses
Note: At the end of the study, objectives must be assessed to see if they have been
met/achieved or not.
ƒ 1.3 Significance: You will state here the significance of this Project for the
stakeholders like investors, creditors and debtors, and the management. You will
state here why you want to carry out this type of Project.

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Chapter 2) Data Processing & Analysis
This section should provide solid or concrete foundations to the study. Quality and value
of the research report depends upon how precisely and accurately the data is collected,
processed, analyzed and interpreted so that fruitful conclusions may be drawn out of it. It
includes:
2.1 Data Collection Sources: (Describe the sources used for data collection)
2.2 Data Processing and Analysis Tools:
¾ Mention the methods used to extract and process the information gathered
ƒ Software used to process the data

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Chapter 3) Data Analysis
PROFITABILITY ANALYSIS of three organizations under consideration will be
conducted for the recent THREE financial years.

Profitability Ratio Analysis Project

In this project, you have to:
• Select three listed companies existing in the same industry
• Get their financial statements for the most recent three years and
• Perform the PROFITABILITY RATIOS’ analysis

The following ratios you are required to analyze:

Profitability Ratios
Profitability ratios measure the earning ability of a firm.
These include:
• Net Profit Margin
• Return on Assets
• DuPont Return on Assets
• Operating Income Margin
• Operating Assets Turnover
• Return on Operating Assets
• Sales to Fixed Assets
• Return on Total Equity
• Gross Profit Margin

Trend Analysis
Trend analysis studies the financial history of a firm for comparison. It is the
comparative analysis of a company's financial ratios over time. This helps to detect
problems or observe good management. Ratios are plotted on graph to see whether the
ratios are falling, rising, or remaining relatively constant.

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 Special Guidelines for Presentation of Ratio Analysis
Ratio analysis is a very important part of your final project and should be presented
properly.

An example below will help out in presenting ratios’ analysis:

Sales to Fixed Asset Ratio:

This ratio tells about the management efficiency for fixed assets utilization in generating
company’s sales. It is calculated by dividing sales with fixed assets for a given year.
FORMULA:
Sales to Fixed Asset ratio = Sales / Fixed Assets
CALCULATION
   Year 20xx  Year 20xx  Year 20xx 
655,359,574,000 /  584,488,232,000 /  523,907,344,000 / 190, 
226,426,625,000   202,548,387,000   33,538,000  
Company A  = 2.894 times  = 2.886 times  = 2.748 times 
752,219,526,000 /  657,239,861,000 /  554,226,886,000 / 
340,994,479,000   284,034,788,000   261,316,870,000 
Company B  = 2.206 times  = 2.314 times  = 2.121 times  
Company C  852,229,456,000 /  357, 139,061,000 / 184,  554, 000,220,000 / 161, 
200,844,669,000   004,752,000  206,870,000 
= 4.24 times   = 1.94 times   = 3.44 times 

WORKING:
After the table, show how you have calculated the amounts given in numerator and
denominator (provide working for those items that require calculations).
e.g.

No need to provide working of sales as mentioned in Profit & Loss Account

Required to provide working of fixed assets (If not clearly mentioned in balance sheet)
Year 20xx:
Fixed Assets = Fixed Asset A + Fixed Asset B + Fixed Asset C + Fixed Asset D
= 5,555 + 6,666 + 7,777 + 8,888 = *****

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 GRAPHICAL REPRESENTATION AND TREND ANALYSIS
Plot the calculated ratio results on graph. You can use Bar chart or Line chart for
graphs. Do not use Pie chart.

Sales to Fixed Asset Ratio

4.5
4
3.5
3
Company A
2.5
Company B
2
Company C
1.5
1
0.5
0
1 2 3

Interpretation and comparison

In this section, interpret the graph shown above and explain the reasons/factors for
decreasing or increasing trend of this ratio. Also compare ratio of all three companies and
state which company is better in accordance with the ratio calculated.

Note:
You have to follow the same format for all the ratios that you will calculate. This format
will cover Ratio analysis and Trend analysis as in trend analysis ratios are plotted on
graphs to show the increasing/decreasing trends. So by following the above format you
will do both these analyses.
Remember, without formulas, working, graphs and interpretations your analysis
will NOT be accepted.

Instructions:
Please follow these instructions strictly:
• You must provide scanned copies of required financial statements used for
profitability analysis.
(If you have downloaded the financial statements from internet then its source or web
link should be provided. Scanned copies are not required in such case).

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 NOTE: Your work will not be considered or accepted in case you do not provide
scanned copies or source of original financial statements.
Scanned copies should be provided in the following format:
Resolution: 200 dpi
File type: JPEG
Size: 300-400 kb

• You must perform complete profitability ratio analysis of the selected companies for
the MOST RECENT THREE YEARS.
• You must provide all the supporting calculations, working and interpretation of
results obtained from each ratio.
• NOTE: Failure to provide the related financial statements, supporting calculations
and working of analyses in your project will affect the worth of your work and may
result in failure/rejection of the project.
• You must not perform the profitability analyses of companies having losses.
• While selecting companies for analyses, keep in mind that they are from same
industry for example; you cannot select one company from textile, one from cement
and one from Sugar. All three companies should be either from textile or from sugar
sector.
• You can get annual reports of companies from companies’ offices, stock exchanges
or from companies’ websites.

Chapter 4) Summary, Conclusion, Recommendations & Limitations:

4.2) Conclusion
Precisely state the final outcomes of the work. Conclusion/findings should be in short
yet comprehensive sentences/paragraphs. Each sentence/paragraph describing new idea
should be bulleted.

4.3) Recommendations
This section deals with your proposed solutions or plans to cover and remove all the
flaws and deficiencies that you think (in light of data processing and analysis) needs to
be removed or improved. Recommendations should be clear, specific and based on your

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findings. They must be logical and applicable.

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 Section II

a) Introduction of the student

ƒ Last Degree Obtained:
ƒ Organization’s Name:
ƒ Designation:
ƒ Experience (Years)

b) Appendix/Appendixes
These contain material related to the report but not included in the text because these
were lengthy or not directly relevant. These include:
ƒ scanned copies of financial statements etc. (IF applicable)
Note:
Scanned copies should be provided in the following format:
Resolution: 200 dpi
File type: JPEG
Size: 300-400 kb

c) Bibliography
A bibliography is a list of source materials on a particular subject. In a formal report it
shows what books and other library materials were consulted. As part of the reference
matter, it follows the appendix or appendices. APA format should be used for citing the
references.

Note: The APA format for reference citation is given in the DOWNLOADS tab of VU-
LMS of this course and in Lesson # 45 of the handouts of STA630. It is also advised to
consult the course of STA630 for a better understating of the research process.