Abstract
Industrial sectors such as Textile, Sugar, Chemical, Cement, Energy and Refinery play a vital role in every economy. Foreign and local investors are always interested in selecting suitable portfolios for security and higher returns of their investments. However it may not be possible for a number of reasons. Consultants and stock brokers use their professional knowledge as well as experience to identify suitable areas of investment. It is still extremely difficult for them to assist their clients for better mix of portfolios especially in changing performance of these sectors in an economy. This research is focused on providing an approach for making such decisions based on evaluating and comparing financial ratios of various industrial sectors with respect to each other. Data for a period of five years for all the sectors from published reports of state bank of Pakistan was collected. Financial ratios such as current ratio, debt equity ratio, return on investment, and return on equity, inventory turnover ratio, net profit margin, and asset turnover ratio were calculated. Time series plots were made to observe variations. Each industry sector was also analyzed individually on the basis of all these ratios to find the effectiveness in prediction of results. Real time performance and comparison of sectors showed that investment decision making could be much easier while following this approach.