Kohinoor Mills Limited
Kohinoor Mills Limited
Submitted By:
Faisal Qaiser Shehzad
Section: C
Instructor: Sumaira Sajjad
Lahore School of Economics
Working capital is a financial measurement that shows the amount of operating liquidity available to a business. The working capital of KML was a positive 598649621 showing that the business had plenty of current assets available to it in order to meet its current obligations. It remained negative from FY09-FY11 after which things started to get better and the working capital became positive. The company had initially relied on heavy short term borrowings which they paid off heavily in 2012 and despite that the current assets have declined over the period, the working capital has become positive.
The current ratio measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12months) by comparing the firm's current assets to its current liabilities. A current ratio of 2:1 is acceptable in most industries. The higher the ratio, the more capable the company is to pay its obligations. The current ratio of KML remained below 1 from 2009-2011 but crossed 1 in 2012 due to a sharp decline in the short term borrowings.
KML have been maintaining a low amount of its most liquid assets (cash + short term investments) as a percentage of total assets which is not a good sign. This might pose a liquidity risk in the future. The value of these most liquid assets as a percentage of current liabilities has got better over the period but still needs to improve to avoid liquidity risk.
The asset test ratio shows the most liquid/ near cash assets that the company holds in order to pay off its current obligations. This ratio for KML has remained below zero for the entire period which signifies that it is not holding enough current liquid assets to pay its current liabilities and this signifies liquidity risk for KML.
The AR turnover shows how quickly the company is converting their receivables into cash.
Submitted By:
Faisal Qaiser Shehzad
Section: C
Instructor: Sumaira Sajjad
Lahore School of Economics
Working capital is a financial measurement that shows the amount of operating liquidity available to a business. The working capital of KML was a positive 598649621 showing that the business had plenty of current assets available to it in order to meet its current obligations. It remained negative from FY09-FY11 after which things started to get better and the working capital became positive. The company had initially relied on heavy short term borrowings which they paid off heavily in 2012 and despite that the current assets have declined over the period, the working capital has become positive.
The current ratio measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12months) by comparing the firm's current assets to its current liabilities. A current ratio of 2:1 is acceptable in most industries. The higher the ratio, the more capable the company is to pay its obligations. The current ratio of KML remained below 1 from 2009-2011 but crossed 1 in 2012 due to a sharp decline in the short term borrowings.
KML have been maintaining a low amount of its most liquid assets (cash + short term investments) as a percentage of total assets which is not a good sign. This might pose a liquidity risk in the future. The value of these most liquid assets as a percentage of current liabilities has got better over the period but still needs to improve to avoid liquidity risk.
The asset test ratio shows the most liquid/ near cash assets that the company holds in order to pay off its current obligations. This ratio for KML has remained below zero for the entire period which signifies that it is not holding enough current liquid assets to pay its current liabilities and this signifies liquidity risk for KML.
The AR turnover shows how quickly the company is converting their receivables into cash.