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OXFORD BROOKES UNIVERSITY

RESEARCH AND ANALYSIS REPORT

“AN

EVALUATION

OF

THE

BUSINESS

AND

FINANCIAL PERFORMANCE OF D.G. KHAN CEMENT COMPANY LIMITED (DGKCC) BETWEEN 1 JULY 2004 AND 30 JUNE 2007”

(Word count: 6,498)

Presented by: KAMRAN KHALID ACCA reg. # 1431751 September 2008

CONTENTS
Page No.

1. Research Objectives and Overall Research Approach 1.1 – Topic Chosen and the Selected Organisation 1.2 – Project Objectives 1.3 – Research Questions 1.4 – Research Approach 2. Information gathering and business/accounting techniques 2.1 – Information Gathering 2.1.1 – Sources of Information and Methods used to Collect Information 2.1.2 – Limitations of Information Gathering 2.1.3 – Ethical Issues and their Resolution 2.2 – Business/Accounting Techniques 2.2.1 – Financial Ratio Analysis 2.2.2 – SWOT Analysis 2.2.3 – Porter’s Five Forces 3. Results, Analysis, Conclusions and Recommendations 3.1 – Business Description 3.2 – Cement 3.2.1 – The Cement Industry of Pakistan 3.3 – The Economy 3.4 – Ratio Analysis 3.4.1 – Sales Analysis 3.4.2 – Profitability Ratios 3.4.3 – Return-on-investment Ratios

4 4 5 5 6 7 7

7 8 9 9 9 11 11 12 12 13 13 14 15 15 16 19

3.4.4 – Activity Ratios 3.4.5 – Liquidity Ratios 3.4.6 – Financial Leverage Ratios 3.4.7 – Valuation Ratios 3.5 – SWOT Analysis 3.6 – Porter’s Five Forces 3.7 – Conclusion 3.8 – Recommendations List of References Appendices Appendix A – Financial Statement Extracts Appendix B – Questionnaire and Response

20 21 22 24 26 27 29 31 32

34 36

PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH
1.1 – TOPIC CHOSEN AND THE SELECTED

ORGANSIATION
After careful consideration of my strengths and weaknesses and discussions with my mentor I have selected the topic “The business and financial performance of an organisation over a three year period” for my Research & Analysis Project. The focus of my research report is “D.G. Khan Cement Company Limited (DGKCC)” which is currently the second largest cement manufacturing unit in Pakistan. This report evaluates the financial and business performance of DGKCC, over a three year period (FY2005-FY2007), using various analytical tools. It considers both financial and non-financial factors and also includes the impact of other major internal and external events on the company’s performance. The analytical techniques used are: the financial ratio analysis, SWOT analysis and the Porter’s Five Forces analysis. 1.1.1 – REASONS FOR SELECTION Following are the reasons for choosing this particular topic and organisation: Ratio analysis has been an area of great interest to me since I studied it for the first time in Certified Accounting Technician course. The other two techniques: the SWOT analysis and Porter’s five forces are highly important strategic management tools and carry huge weightage in the professional level subjects of ACCA. Thinking of applying these theories in the practical world motivated me to select this topic.

Cement industry stands in the second place in Pakistan’s economy, after textile. Therefore, analysing the cement industry helps to gain a better understanding of Pakistan’s economy. I used to wonder why do not I see advertisements of cement products in my country yet it is a basic commodity. This made me curious to know more about the cement industry. DGKCC has been the industry leader since 1990s but lost its top slot to “Lucky Cement Limited (LCL)” during 2005. This arouse interest in me to analyse the performance of DGKCC and find out the reasons of losing its market share. Selecting the second largest company allowed me to benchmark its performance against the industry leader – LCL.

1.2 – PROJECT OBJECTIVES
To gain an understanding of the cement industry of the country. To analyse the business and financial performance of DGKCC over a period of 3 years (FY2005-FY2007) giving sufficient consideration to its profitability, liquidity, asset management, financial leverage and...
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