Financial Analysis

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INTRODUCTION OF NISHAT MILLS LIMITED
NML is the flagship company of the Nishat Group; Nishat Mills Limited is one of the largest vertically integrated textile companies in Pakistan. In 2011, the firm completed 50 years of being listed on the Karachi Stock Exchange, and has been a force to be reckoned with in the Textile Industry. The company owns 198,120 spindles along with 655 Air-jet looms, two stitching units for home textile as well as one for garments, making it one of the most modern textile manufacturers in the country. * A Nishat Mills Limited is an export-oriented organization. NML exports more than 90% of its products mainly to the Far East, Europe and United States. The Company’s total export for the year 2012 was Rs. 34.65 billion. * NML Revenue for the year 2012 =35.28bn

* Net Sales year 2012(Rs in thousands): 44,924,101
(Source: Annual Report Profit and Loss Statement 2012 Page # 36) * No. Of Employees : 13,064 approx
BUSINESSES OF NISHAT MILLS LIMITED
The Company operates in six business segments:
* SPINNING
Spindles = 198120
Spinning units = 8
Production capacity =185 tons/ day for both cotton & blended yarns. * WEAVING
Air jet Looms =670
Production capacity =9 million meters of fabric /month. * PROCESSING
Production capacity = 90 million meters of fabric per annum.

* GARMENTS
High end sewing machines = 1627
Production Capacity = 7020 million garments / annum. Stitching Unit = 1
* HOME TEXTILE
New generation sewing machines= 938
Home textile units = 2
Production Capacity = 24 million meters/annum. * POWER GENERATION
Capacity =89 MW Fuel for power generation = Gas, Furnace Oil, Diesel and Steam. Diesel/ Furnace oil Engines =18
Gas Engines =23
Gas steam Turbines =4
CAPITAL STRUCTURE
Capital structure composition plays a vital role as one false decision can lead to long term financial distress and even to bankruptcy. The capital structure decision is at the center of many other decisions in the area of corporate finance. These include dividend policy, project financing, issue of long term securities, financing of mergers, buyouts and so on. One of the many objectives of a corporate financial manager is to ensure the lower cost of capital and thus maximize the wealth of shareholders. Capital structure is one of the effective tools of management to manage the cost of capital. When analyzing capital structure we take into account the long term and short term debt employed by the firm. Capital structure can be defined as the debt-to-equity ratio of the firm which provides insights into how risky a firm is. Capital structure of the firm is the mixture of debt and equity a firm deploys to finance its assets. The goal of financial managers is to enhance value of the firm which is positively related to the management of its capital structure, the more effectively managed the capital structure of the firm the greater its value. The modern theory of capital structure began with the distinguished paper of Modigliani and Miller (1958). The Modigliani-Miller theorem which is the foundation of modern corporate finance pointed out direction these theories should take by telling us the conditions under which capital structure becomes irrelevant. The theorem at its heart is an irrelevant proposition: There are conditions provided by Miller and Modigliani theorem under which a firm’s financial decisions do not affect its value. The proposition is based on the assumptions like neutral taxes, no capital market friction, symmetric access to credit markets and that...
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