FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Introduction

Mining Company is a producer who has the sole purpose of promoting consumption of the consumer. Mining Company and its quest for capital improvement are playing a major and vital role in the evolution of economic life. Mining Company brings positive change to towns in the U.S. They add to opposition amid retailers, stimulating the financial system, and they also carry more resources as well as tax revenue to at town, a number of which very much call for a positive change.

If you look at the pattern of the human race for as far back as possible, the general goal has been to increase the quality of life. Whatever it might be; health and medicine, living conditions, or food, people have always tried to improve it. Mining Company is simply another attempt at improving life by providing a large range of goods at lower costs than competing retailers. In turn, this produces competition between these retailers leading to improved selection and quality of product and goods, ultimately bringing the quality of life to a higher standing (Annual Report 2003).

Financial Ratio Analysis

It is quite evident that Mining Company is tough to beat if one is looking for stable earnings growth, excellent fundamentals and compelling valuations. It is an excellent proxy to the economic growth in America.

Mining Company is unique as a pure retailing and distribution company with almost no similar peers in the country. All other companies in the region have some form of integration (Downstream and upstream), which adds to their earnings volatility due to fluctuating prices. The icing on the cake is that MINING COMPANY is a US$ bull - domestic prices rise with currency weakness and fixed margins ensure higher profits. Earnings are immune from price fluctuations, sector fundamentals are excellent and deregulation is likely (Archer, 2003).

As the government regulates margins for retail companies, it is expected that the major determinant of value for MINING COMPANY will be the company's ability to sell additional products. It is hence important to Mining Company use of capital to determine if:

The company earns an adequate rate of return, and

Existing returns are sustainable or otherwise

Are Returns Adequate?

As the quality of any franchise is reflected in a consistent ability to earn above average returns, I have Mining Companyluated Mining Company on this criterion as well, trying my hands at calculating MINING COMPANY - Expected Value Added Analysis spreads for MINING COMPANY from 2002 onwards. MINING COMPANY is a way of measuring real corporate profits, that is, profits after taking into account the cost of all capital including equity.

Table 1: MINING COMPANY Spread Analysis

FY98A

FY99A

FY00A

FY01A

FY02A

FY03A

Effective Interest Cost (%)

9.0

21.4

4.1

8.3

9.8

14.4

Effective Tax Rate (%)

44.6

40.8

38.1

42.3

45.4

34.7

Debt/Total Capital (%)

42.6

27.9

34.8

34.2

32.0

26.7

Required Equity Return (%)

25.0

25.0

25.0

25.0

25.0

25.0

Cost of Debt after Tax (%)

5.0

12.7

2.6

4.8

5.3

9.4

WACC (%)

16.5

21.6

17.2

18.1

18.7

20.8

EBIT (PKR 'million)

865

1,350

1,734

2,701

3,998

3,109

EBIT (1-t) (PKR 'million)

480

799

1,074

1,559

2,153

2,031

Adjusted ROCE (%)

19.6

27.4

29.0

31.9

34.3

27.7

MINING COMPANY Spread (%)

3.1

5.8

11.9

13.8

15.5

6.8

Over the last six years, MINING COMPANY spreads have been positive and substantial. These results are impressive as I have used an aggressive required rate of return on 25%. I believe this is an aggressive estimate as I also ...