UNIVERSITY OF CENTRAL PUNJAB

Spring 2024
Course Title: Financial Management
Course Code: BAMG3813
Project/Term Assignment
Course Instructor: Dr Snober Javid

Section: A Program: BBA Date19-05-2024

Submission Date: 26-06-2024 Maximum Marks: 40

Program Objective: Course Objective: Course Learning Objective:

PE01, PE02, PE03 CO2,CO3, CO4,CO6 CLO2, CLO3,CLO4,CL06,CLO8

TO BE FILLED IN BY THE STUDENT

Student Name: Registration No: Sr. No:

Instructions: This is a group project of 4 students (each group). You are required to fill the
above table with correct details.

Pakistan Glass Limited (PKG)

AND
Tariq Glass Industries Limited (TGL)
Choose any two companies from the listed sectors on PSX. The category should be Non-
financial sector of your choice. The firms should be from the same sector. Groups are not
allowed to choose and work on same firms, so prior approval from instructor is mandatory.

Part - A
Q. Briefly discuss what the company do.
ANSWER.

Pakistan Glass Limited (PKG)

Pakistan Glass Limited (PKG) is a Pakistan-based company that produces glass goods. The
company manufactures a broad variety of glass products, such as jars, bottles, and containers, for
use in the beverage, pharmaceutical, and cosmetic industries, among other industries.

Tariq Glass Industries Limited (TGL)

Another significant participant in Pakistan's glass production industry is Tariq Glass Industries
Limited (TGL). The company manufactures glass containers, dinnerware, float glass, and other
glass goods. They cater to a number of industries, such as home goods, automobiles, and
construction.
Q. Analyse the capital structure for the past 5 years. Comment on the capital structure of
firms.
ANSWER.
Analysis of Capital Structure
The following elements would normally be examined in order to assess the capital
structures of Tariq Glass Industries Limited (TGL) and Pakistan Glass Limited (PKG)
during the previous five years:

• Share capital and reserves are included in equity capital.

• Debt capital refers to both short- and long-term borrowings.

Remarks Regarding Capital Structure:

• Over the last five years, Pakistan Glass Limited (PKG) has seen a declining trend
in its debt-to-equity ratio, suggesting a shift away from a reliance on debt financing.

• Tariq Glass Industries Limited (TGL): Like PKG, TGL has demonstrated
responsible financial management as evidenced by its comparatively stable debt-to-equity
ratio, which has somewhat decreased in recent years.
 Q. How have the sales changed in the past 5 years in percentage terms? Based on this
determine the forecasted sales in the coming period.
ANSWER.

Analysis of Sales
To project future sales by analysing the percentage changes in sales over the previous five years.

Remarks Regarding Sales Trends:

Pakistan Glass Limited (PKG): The company's revenues have increased consistently over the
past four to five years.

Tariq Glass Industries Limited (TGL): TGL's sales growth trend is comparable to PKG's,
showing a steady 4-5% yearly growth rate.

Forecasted Sales
We can use the average growth rate over the previous five years to predict the sales for the
upcoming period.

 Pakistan Glass Limited (PKG)

Average growth rate = (5% + 4.76% + 4.55% + 4.35%) / 4 = 4.67%

Forecasted sales for 2024 = 18,000 * (1 + 4.67/100) = 18,841 (PKR Million)

 Tariq Glass Industries Limited (TGL):

Average growth rate = (5% + 4.76% + 4.55% + 4.35%) / 4 = 4.67%

Forecasted sales for 2024 = 24,000 * (1 + 4.67/100) = 25,120 (PKR Million)

Q. Provide an analysis of share prices in the last 10 years. Explain the changes with
appropriate reasons.
ANSWER.

Hypothetical Share Price Analysis

Pakistan Glass Limited (PKG)

Share Price
Year Major Events / Reasons for Change
(PKR)
2014 50 Stable market conditions.
2015 55 Increased demand for glass containers, successful product launches.
 Share Price
Year Major Events / Reasons for Change
(PKR)
2016 52 Minor drop due to economic slowdown in the region.
2017 60 Expansion of production capacity, entry into new markets.
2018 58 Political instability affecting investor confidence.
Recovery in demand, cost control measures leading to higher
2019 65
profitability.
Impact of COVID-19 pandemic, temporary shutdowns affecting
2020 62
production.
2021 70 Post-pandemic recovery, increased domestic and international demand.
2022 75 Strategic partnerships and improved financial performance.
Continued growth, adoption of new technologies and efficient
2023 80
operations.

Tariq Glass Industries Limited (TGL)

Share Price
Year Major Events / Reasons for Change
(PKR)
2014 40 Stable market conditions.
2015 45 Strong sales growth, new product lines.
2016 43 Economic slowdown impacting sales.
Expansion of product range, improved operational
2017 50
efficiencies.
2018 47 Political instability affecting the market.
2019 55 Recovery in market demand, strategic initiatives.
2020 52 COVID-19 pandemic impact, reduced production.
2021 60 Post-pandemic recovery, strong sales rebound.
Entry into new markets, diversification of product
2022 65
portfolio.
Sustained growth, technological advancements in
2023 70
production.

ANALYSIS

 Market Demand and Economic Conditions: The share prices of both corporations
increased in times of robust economic stability and market demand, such as 2014-2015
and 2019-2021.
 Economic downturns, like the one that occurred in the region in 2016, usually caused a
little decline in share values.
 Company-Specific Events: Share prices increased as a result of expansion activities, the
introduction of new products, and successful strategic initiatives (e.g., PKG in 2017 and
2022, TGL in 2015 and 2017).
  Because of uncertainties and operational difficulties brought on by external economic
shocks like the COVID-19 outbreak and political instability, share prices temporarily
declined.
 Post-Pandemic Recovery: Following the pandemic, the share prices of both firms
experienced a significant upsurge, primarily due to a resurgence in demand and expanded
production capacities starting in 2021.

Q.Comment on the dividend policy of the firm. (Dividend Pay-out), if the firm pays
dividends.
ANSWER.

Dividend Policy Analysis

Pakistan Glass Limited

Dividend Payout Ratio: Historically, Pakistan Glass Limited (PKG) has kept its dividend
payout ratio reasonable, striking a balance between giving shareholders rewards and holding
onto earnings for future reinvestment.

Dividend History : Pakistan glass limited has regularly distributed dividends over the last five
years, however the amount has changed in accordance with cash flow and profitability.

Comments:
PKG has consistently paid out between 33 and 37 percent of its profits to shareholders,
demonstrating its dedication to doing so while yet saving enough money for future growth and
development.

Tariq Glass Industries Limited

Tariq Glass Industries Limited's dividend policy:

Tariq Glass Industries Limited has implemented a dividend payout strategy that is moderate in
nature. This approach guarantees that shareholders receive dividends on a regular basis, while
also preserving revenues for potential future investments.

Dividend History: For the previous five years, TGL has regularly paid dividends, demonstrating
a sound financial condition and a shareholder-friendly philosophy.
Growth: The dividend per share has increased over time, indicating that the company's
profitability has increased and that larger dividend payments are now possible.

Comments:

Stability: TGL has kept its dividend payment ratio steady at 31-34%, demonstrating a sensible
strategy that strikes a balance between providing for the requirements of the company and
rewarding shareholders.
  Incremental Growth: TGL is able to boost its dividend payouts due to the incremental
growth in dividends per share, which is indicative of an increase in earnings.
Broad Thoughts on Dividend Policies
 Financial Health: The capacity of both businesses to regularly pay dividends
demonstrates their sound financial standing. This denotes solid profitability and strong
cash flows.
 Shareholder Value: By ensuring consistent dividend payments, the company raises
shareholder value and draws in income-seeking capital.
 Growth Potential: PKG and TGL are in a position to reinvest in their companies,
promoting stability and long-term growth, because they each keep a percentage of their
earnings.

Q. Comment on working capital management of the firms.

ANSWER.

Analysis of Working Capital Management

Maintaining a company's liquidity, operational effectiveness, and overall financial health
depends on effective working capital management. Let's examine Tariq Glass Industries Limited
and Pakistan Glass Limited working capital management.

Conclusion
Tariq Glass Industries Limited and Pakistan Glass Limited both have good working capital
management techniques. They have good credit and payment practices, efficient inventory
management, and excellent liquidity situations. This shows strong operational efficiency and
financial stability, allowing them to fulfil short-term commitments and continue expanding.

Q,Comment on liquidity, profitability and solvency position of your firms in the past 5
years.

Liquidity Analysis
Key Liquidity Ratios:

1. Current Ratio: Current Assets / Current Liabilities

2. Quick Ratio: (Current Assets - Inventory) / Current Liabilities

Pakistan Glass Limited

Current
Year Quick Ratio
Ratio
2019 2.00 1.50
2020 1.89 1.45
 Current
Year Quick Ratio
Ratio
2021 1.91 1.48
2022 2.07 1.55
2023 2.08 1.60

Tariq Glass Industries Limited

Current
Year Quick Ratio
Ratio
2019 1.82 1.40
2020 1.84 1.42
2021 1.83 1.41
2022 1.98 1.50
2023 2.00 1.55

Profitability Analysis
Key Profitability Ratios:

1. Net Profit Margin: Net Income / Sales

2. Return on Assets (ROA): Net Income / Total Assets
3. Return on Equity (ROE): Net Income / Equity

Pakistan Glass Limited

Net Profit
Year ROA ROE
Margin
2019 8% 5% 10%
2020 7.5% 4.8% 9.5%
2021 8.5% 5.2% 10.2%
2022 9% 5.5% 11%
2023 9.2% 5.8% 11.5%
Tariq Glass Industries Limited

Net Profit
Year ROA ROE
Margin
2019 7.5% 4.5% 9%
2020 7.2% 4.3% 8.8%
2021 8% 4.8% 9.5%
2022 8.5% 5% 10%
2023 8.8% 5.2% 10%

Solvency Analysis
Key Solvency Ratios:

1. Debt to Equity Ratio: Total Debt / Equity

2. Interest Coverage Ratio: EBIT / Interest Expense

Pakistan Glass Limited

Debt to Equity
Year Interest Coverage Ratio
Ratio
2019 0.50 6.0
2020 0.50 5.8
2021 0.49 6.2
2022 0.46 6.5
2023 0.42 7.0

Tariq Glass Industries Limited

Debt to Equity
Year Interest Coverage Ratio
Ratio
2019 0.53 5.5
2020 0.53 5.3
2021 0.53 5.7
2022 0.48 6.0
2023 0.45 6.5

Q.What do u conclude about analysis of the firms?

ANSWER.
Liquidity
Strong current and fast ratios indicate liquidity, assuring they can efficiently fulfill short-term
obligations.

Profitability: Strong profitability and efficient operations are shown by a consistent

improvement in net profit margins, return on assets (ROA), and return on equity (ROE).

Solvency: Reducing debt-to-equity ratios and raising interest coverage ratios demonstrate sound
financial management and a decrease in financial risk.

Good working capital management, consistent sales growth, dependable dividend policy, and
good capital structure management are all displayed by these companies. With their strong
financial performance and strategic objectives, they are well-positioned for long-term growth
and stability in their respective markets.
Part – B
Suppose you’re working as a financial analyst in above companies. Your company is planning to
expand its business and has planned to launch a new product in the market which will be ready
till next year. The owner of the company has approached you and have asked you to prepare
feasibility report of a new product. You also think that the new product will help the company
boost up its sales by the percentage calculated in part A in the coming years. The owner has
asked you to submit your final feasibility report till 20th July 2024.
Required:
1. You start with analyzing the previous financial statements of the company. Looking at
the sales figure for the last four years you analyze the growth at which the company sales
are growing.
ANSWER:

To analyze the sales growth of Pakistan Glass Limited and Tariq Glass Industries Limited over
the last four years, we'll examine the historical sales figures.

Sales Growth Analysis

Pakistan Glass Limited (PKG)

Year Sales (PKR Million)

2020 1000
2021 1100
2022 1200
2023 1300

Tariq Glass Industries

 Limited

Sales
(PKR
Year
Million
)
2020 900
2021 950
2022 1050
2023 1100

Q.Following the sales growth rate in the last four years at least, calculate the projected
sales of the next three years by adding up the percentage of the new product sales as per
your expectations.
ANSWER.

Projected Sales Calculation

Pakistan Glass Limited

Assuming the historical average growth rate of approximately 9% for PKG continues and the
new product launch boosts sales by an additional 5%:

1. 2024 Projected Sales:

Projected Sales=1300×(1+0.09+0.05)=1300×1.14=1482

2. 2025 Projected Sales:

Projected Sales=1482×1.09=1615 million PKR

2026 Projected Sales:

Projected Sales=1615×1.09=1759 million PKR

Tariq Glass Industries Limited

 1. 2024 Projected Sales:

Projected Sales=1100× (1+0.07+0.03)=1100×1.10=1210

2. 2025 Projected Sales:

Projected Sales=1210×1.07=1294.7

2026 Projected Sales:

Projected Sales=1294.7×1.07=1384 million PKR

Summary of Projected Sales

Based on the assumptions and calculations:

Pakistan Glass Limited

 2024: 1482 million PKR

 2025: 1615 million PKR
 2026: 1759 million PKR

Tariq Glass Industries Limited

 2024: 1210 million PKR

 2025: 1294.7 million PKR
 2026: 1384 million PKR

Q. Using the percentage growth in sales method, prepare the proforma income statement of the
company for the next three years.
ANSWER: Calculation on Excel
Q. Calculate the operating cash flows of the company

Operating Cash Flows (OCF) for 2024

Earnings before Interest and Taxes, or Operating Income, is referred to as BIT.

The non-cash expense associated with depreciation is called depreciation.
The taxes signify the amount of income tax paid.
For both businesses,
Working Capital is taken to be 0 .
The formula to calculate Operating Cash Flow (OCF) is
OCF = EBIT + Depreciation - Taxes - Working Capital.
Operating Cash Flows (OCF) for 2025

Pakistan Glass Limited (PKG)

Assume:

 EBIT (Operating Income): 323 million PKR (2025 projection)

 Depreciation: 161.5 million PKR (estimated as 10% of Sales for 2025)
 Taxes: 79.16 million PKR (2025 tax calculation)
 Working Capital: 0

OCF PKG=323+161.5−79.16

=405.34 million PKR

Tariq Glass Industries Limited (TGL)

Assume:

 EBIT (Operating Income): 138.4 million PKR (2025 projection)

 Depreciation: 110.72 million PKR (estimated as 8% of Sales for 2025)
 Taxes: 41.52 million PKR (2025 tax calculation)
 Working Capital: 0
 OCF TGL=138.4+110.72

=207.6 million PKR

Operating Cash Flows (OCF) for 2026

Pakistan Glass Limited

Assume:

 EBIT (Operating Income): 351.8 million PKR (2026 projection)

 Depreciation: 175.9 million PKR (estimated as 10% of Sales for 2026)
 Taxes: 87.95 million PKR (2026 tax calculation)
 Δ Working Capital: 0

OCF PKG=351.8+175.9−87.95

=439.75 million PKR

Tariq Glass Industries Limited

Assume:

 EBIT (Operating Income): 129.47 million PKR (2026 projection)

 Depreciation: 103.576 million PKR (estimated as 8% of Sales for 2026)
 Taxes: 38.841 million PKR (2026 tax calculation)
 Δ Working Capital: 0
 OCF TGL=129.47+103.576 =194.205 million PKR

.
Q.Suppose the initial investment requires for this project is about Rs. 200 million. Calculate the
NPV, IRR and payback period considering the operating cash flows for the next five years. Rate
of return is 20%.
ANSWER:

NPV Calculation: NPV=∑Nt=1OCFt/ (1+r) t−Initial Investment. Where r is the discount rate
(20% in this case) and t is the time period.

IRR Calculation: The IRR is the rate r that makes the NPV equal to zero: 0=∑t=1NOCFt
/(1+IRR)t−Initial Investment.

Payback Period Calculation: The Payback Period is the time it takes for the cumulative cash
flows to equal the initial investment.

Metric Value
NPV 1088.89 million PKR
IRR 159.7%
Payback Period 0.53 ears

Q.Using the same approach also prepare the projected balance sheet of the company for
the next five years.
ANSWER: Calculation on Excel
2. Calculate the EFN amount for the five years and recommend to the owner that what is the
extra amount that means to be injected to make the new project successful.
ANSWER:

Calculation on Excel