• ACCOUNTING 401

Sapphire Textile Mills Limited
Introduction to The Company
Sapphire Textile Mills Limited is a vertically integrated composite textile unit, manufacturing
cotton yarn, fabric and home textile products. STML is the flagship company of the Sapphire
Group and also one of the Lead Players in the Textile Composite sector and enjoying more
than 10% share in the sector's sales (listed Companies only).
STML was incorporated as a public limited company in Pakistan in 1969 and its shares are
listed on Karachi Stock Exchange. Manufacturing units of the Company are located in Sind
and Punjab and consist of 120,632 spindles, 3,120 rotors, 292 looms and 215 stitching
machines. Sapphire Textile Mills Limited is principally engaged in manufacturing and sales
of yarn, fabrics, home textile products and energy sales.

ANALYSIS
Here we discuss the ratios that we see above of the past 5 years of Sapphire and analyse the performance of
the company according to it.
LIQUIDITY RATIO
1. Current Ratio
2017 2016 2015 2014 2013
Current Ratio 1.19 1.20 1.18 1.40 1.49
The current ratio gives the ability of a company to pay back its liabilities with its assets. As such, current
ratio can be used to make a rough estimate of a company's financial health. In this analysis we see that in
2017 there is a 0.01 times decrees than last year; so, the company’s performance has decreased. As we
compare it to other years the current ratio of 2014 and 2013 were higher, meaning the company’s total assets
have decreased and liabilities have increased since 2015.
2. Acid- Test Ratio
2017 2016 2015 2014 2013
Acid-Test Ratio 1.04 0.86 0.77 0.83 0.76
Quick ratio also known as Acid test or Liquid Ratio tells if a company has the ability to pay its current or
liquid liabilities. By comparing we see that the company’s Acid-Test ratio has been increasing; indicating
that the company has a greater chance to pay off its current liabilities now.
3. Working Capital
2017 2016 2015 2014 2013
Working Capital 2.24 1.91 1.4 2.3 3.1
The working capital measures the company’s ability to meet short term obligations, it shows the difference
between the current assets and current liabilities. The working capital of 2017 is shown to be R.s 2.24
Billion which is much greater than the working capital of 2016 of R.s 1.91 Billion.
TURNOVER RATIO
1. Inventory Turnover Ratio
2017 2016 2015 2014 2013
 
Inventory Turnover
Ratio
2.88 3.85 2.24 3.6 2.87
Inventory Turnover measures how fast a company is selling inventory. When a company's inventory
turnover is decreasing it means that there is low rate in selling of inventory, while an increasing inventory
turnover means there is a high rate of selling of inventory. Here we see that there is a high decrease of
inventory turnover ratio in year 2017 (2.88) as compared to 2016(3.85). We see that the turnover ratio has
been fluctuating year by year.
2. No of Days in Inventory
2017 2016 2015 2014 2013
No of Days in
Inventory
127 95 163 107 127
It tells the average number of days the company holds its inventory before selling it. Like the Inventory
turnover; it has been fluctuating in recent years with the best rates of the past 5 years being during 2016.
3. A/R Turnover Ratio
2017 2016 2015 2014 2013
A/R Turnover Ratio 13.2 10.34 11.54 10.1 9.86
The Receivables Turnover ratio is a ratio measuring how efficiently a firm collect cash from credit
customers. It has gradually been increasing and rate being highest in 2017 of 13.2.
4. Days sales in Average A/R
2017 2016 2015 2014 2013
Days sales in
Average A/R
28 35 32 36 37
This ratio tells us that the average number of days it takes to collect receivables from customers. In this case
we see that the days have remained mostly constant from the years 2013-2016; with only a few days gap
measured at most. But in 2017 there is a great decrease in the number of days indicating the company’s large
A/R Turnover Ratio.
PROFITABILITY
1. Return on Sales