Financial Analysis of Pakistan Tobacco Company

Abstract

Tobacco industry is a major contributor in the Pakistan economy. Although cultivation of tobacco is done on a small scale in Pakistan, it is a major source of revenue, employment and foreign exchange for the economy. Almost 80,000 people are employed in the cultivation of this crop. Pakistan Tobacco Company is one of the key market players in this industry, and we hence decided to conduct our financial analysis on this company’s liquidity and profitability, to know how and why. In order to do so, we started with the analysis of the industry as a whole and how this industry contributed to the Gross Domestic Product. In order to analyze the company’s internal health we first limited our analysis to FY03 till FY06, and made comparative financial statements of the balance sheet, profit and loss account and the income statement. We then carried out a Common Size Analysis, Trend Statement Analysis and Ratio Analysis of its Financial Statements. To gain a wider knowledge about the company in comparison with the industry, we chose another major company in the industry, namely, Lakson Tobacco Company comparing its profitability, short term liquidity and long term liquidity. The analysis of the company is followed by a conclusion about the overall strength of the company and its position in the industry.