APPLIED FINANCIAL ANALYSIS (ACCT 411)
Cash Flow Statement Analysis
Limitations of Analysis
We have chosen Packages Limited as the Company for the purposes of our analysis. We’ll be also analyzing Cherat Packaging Limited as the competitor firm, reason being that there always needs to be a benchmark according to which analysis can be done. Packages Limited started in 1956 as a joint venture between the Ali Group of Pakistan and Akerlund & Rausing of Sweden. It provides high quality packaging materials for exceptional value to individual as well as different businesses. Packages is the only company in Pakistan that offers a complete range of packing goods which includes offset printed cartons, shipping containers and flexible packing materials to individuals and businesses worldwide. Unilever and Pakistan Tobacco Company are the two major clients of Packages, while other medium sized businesses are also on the clientele database of Packages. Over 3000 people are employed by the company and its sales revenue totaled to US $ 257 million in 2011.Packages is listed on all three stock exchanges of Pakistan. Packages have been active in research and development thus leading to the introduction of improved and newer products. Packages have been working on the track laid down by the vision of the company that was established at the time this company was formed. The vision of the company is to “Position ourselves to be a regional player of quality packaging, paper & paperboard and consumer products. Improve on contemporary measures including cost, quality, service, speed of delivery and mobilization. Keep investing in technology, systems and human resource. To effectively meet the challenges every new dawn brings. Develop relationships with all our stakeholders based on sustainable cooperation, upholding ethical values, which the shareholders, management and employees represent and continuously strive for.” Cherat Packaging on the other hand deals with producing paper bags for the cement company. Established back in 1991 the company is listed in the Karachi and Lahore Stock Exchanges. Besides catering to just domestic market Cherat Packaging also exports its bags to United Arab Emirates. Based on its vision: “to be a preferred supplier of paper sacks for cement industry combined with efficient manufacturing facilities and satisfied customers” Cherat strives to win over its customers base. Although not a perfect competitor of Packages due to its size and range of products we chose this company because it appeared amongst the rest as the most useful competitor. Furthermore, since it is a listed company hence served better for the purpose of our project. The following now details our work for this project.
Having finalized two comparable firms what we did next was to analyze the financial statements of both the companies. For our analysis part we resorted to the concepts learned in class and applied those to the statements of these two companies to have a better understanding for the analytical perspective. To begin with we first had a look at the financial statements of Packages Limited and had a detailed look on the notes to the financial statements so as to identify the accounting policies and practices used. We carefully scrutinized the whole financials to see if there were any differences in practices that would useful for an analyst. This step served to be the most critical one since Packages was already following adequate practices that didn’t create much impact had another practice been used. Beginning with the income statement we first saw whether revenue was recognized following the aggressive approach or conservative....
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