Professional Documents
Culture Documents
Submitted to: Ms. Tarana Majid Lecturer, Faculty of Business Administration Eastern University Dhaka
Submitted by:
Imran Hossain
062200043 Md. Matiur Rahman Maruf 062200024 Farhana Banu 062200020 Hasan Mahmud 062200008 S.M. Roman Sharif 062200063
Date of submission:
11-05-2008
1.0 Introduction:
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In our country textile companies are doing very well business. So many competitors are in this sector. Lots of new companies entered this market. From all of them we choose two cement company for our report. We collect their financial statement & analyze them within three methods & we identify their comparative advantage.
1.1 Origin: This is the report comes from our FIN-245 subject. The
course instructor Ms. Tarana Majid orally authorized the task of preparing the report to a group of student. She gave this report to learn the way to analyze the financial statements. To follow the syllabus of our subject so we have to do some relevant study based on our report. Thats why this topic comes forward.
1.2 Scope: We worked on Ashraf textile mills ltd. & Saiham textile
mills ltd for our report.
1.4 Source of Data: For our report we collect data for finding &
analysis. At first we collected the annual report & take financial statements of two companies. We also collected some data from the internet.
ratio 1
2005
2006
2007
Series 1 0.323320.132040.16733 ye ar
From the graph we can see that Ashraf textile current ratio is 0.32 times in 2005 and 0.167 times in 2007. Here we see that current ratio has been decreased and go down in less than 1. On the other hand Saiham textile current ratio is 1.044 in 2003-04 & next two year stay remain but it also be below the 1 and from the Ashraf textile. In the last year for both company we suggested that the current liabilities cannot be covered if existing current asset are liquated at their book values.
ii)Quick Ratio: Current assets less inventories divided by current liabilities. It shows a firms ability to meet current liabilities with its most liquid assets.
Quick ratio(Saiham textile)
0.4 0.3 ratio 0.2 0.1 0 Series1 2003-2004 0.2643053 2004-2005 2005-2006
Quick ratio(Ashraf textile) 0.2 0.15 ratio 0.1 0.05 0 2005 2006 2007 Series1 0.197173 0.069725 0.138913 year
From the graph we can easily identify that in 2006 Ashraf textile & Saiham textile quick ratio is decreased dramatically. We say that in the last year of the both companys quick ratio increased. But Saiham textile has good position than the Ashraf textile.
De bt to Equity(Saiham te xtile )
1 R atio 0.5
2003-
2004-
2005-
If we consider the year 2007 of Ashraf textile, the ratio is -1.253 that creditors are providing for each tk 1. In the case of Saiham textile in 20052006 the ratio is 0.599 that creditors are providing. So we can say that Ashraf textile is in a better position than the Saiham textile.
ii) Debt-To-Total Asset Ratio: The debt to total asset ratio is derived by dividing a firms total debt by its total assets.
Sebt to Assets (As hraf textile) 6 4 ratio 2 0 ratio 0.2 0 De bt to As s e ts (Saiham te xtile ) 0.6 0.4
2005
2006
2007
2003-
2004-
2005-
From the graph we can realize that Ashraf textile ratio is more than Saiham textile in their last three year. We know that the higher the debt to assets ratio, the greater the financial risk; the lower the ratio, the lower the risk. So Ashraf textile has more risk than the Saiham textile.
4 ratio 3 2 1 0 200320042005-
This ratio serves as one measure of the firms ability to meet its interest payments and thus avoid bankruptcy. The higher the ratio the greater company could cover its interest payment without difficulty. So analyze after the two graphs we can said that Saiham textile has more interest coverage than the Ashraf textile Cement. Ashraf textile ratio is fluctuated highly in 2007.
From the graph we can say that Ashraf textile received their receivable money from the buyers within 101 days in 2005, 6 days in 2006 & 125 days in 2007. On the other, Saiham textile received within 14 day in 2003-2004, 6 day in 2004-2005 and 42 days in 2005-2006. Eventually we can say that Saiham textile was received money within short time rather than the Ashraf textile.
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ii) PAYABLE TURNOVER: There may be occasions when a firm wants to study in own promptness of payment to suppliers or that of a potential credit customer. This ratio is calculated by dividing purchase into total A/C payable.
P ayable turnover(Ashraf textile)
P y le tu o e a a te tile a ab rn v r(S ih m x )
3 5
4 000 00 35 0000 3 000 00 25 0000 D y as 2 000 00 1 00 5 00 1 00 000 5 000 0 0 Se s1 rie 2005 1 38 2006 27 6 ye r a 2007 360420
Dy as
3 0 2 5 2 0 1 5 1 0 5 0 Sr s eie 1 2 0 -2 0 03 04 3 5 2 0 -2 0 04 05 1 0 ya er 2 0 -2 0 05 06 1 5
From the graph we can say that Ashraf textile paid their payable money to the sales within 138 days in 2005, 276 days in 2006 & 360420 days in 2007. On the other, Saiham textile paid within 35 day in 2003-2004, 10 day in 2004-2005 and 15 days in 2005-2006. Eventually we can say that Saiham textile was paid money within short time rather than the Ashraf textile. iii) INVENTORY ACTIVITY: To help determine how effectively the firm is managing inventory and also to gain an indication of the liquidity of inventory. This ratio is calculated by dividing inventory into COGS.
Inventory Activity(Ashraf textile) 400 300 Days 200
Days
250
200
1 50
1 00
50
369
Series1
2003-2004 1 70
2005-2006 1 76
The figures tell us how many days, on average, before inventory is turned into accounts receivable through sales. Here we see that Ashraf textile was faster than Saiham textile in case of inventory activity. iv) TOTAL ASSET TURNOVER: The relationship of net sales to total assets is known as the total asset turnover, or capital turnover.
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0.7 0.6 0.5 ratio 0.4 0.3 0.2 0.1 0 2005 2006 0.4476056 year 2007 0.050871 34
0.8 0.7 0.6 0.5 ratio 0.4 0.3 0.2 0.1 0 2003-2004 2004-2005 0.56348701 year 2005-2006 0.596901 8
Series1 0.6780095
Series1 0.77632571
The median total asset turnover for the industry is 1.66. For this ratio analysis we saw that Ashraf textile & Saiham textile both are less efficient than the industry in this regard. On the other hand Saiham textile is in a better position than the Ashraf textile.
4 3.5 3 2.5 ratio 2 1 .5 1 0.5 0 Series1 2005 2.1 829524 2006 2007
ratio
1 .83 1 .82 1 .81 1 .8 1 .79 1 .78 1 .77 1 .76 1 .75 1 .74 Series1 2003-2004 1 .773060426 2004-2005 1 .820902862 year 2005-2006 1 .7801 958 71
It is a measure of the efficiency of the firms operations, as well as an indication of how products are priced. From the above graphs we saw that Ashraf textile has relatively more effective at producing and selling products above cost.
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ii)PROFITABILITY RATIO IN RELATION TO INVESTMENT: this profitability ratio relates profits to investment. One of those measures is the rate of return on investment, or return on asset.
Profitability in relation to investm ent(Ashraf textile)
0
-0.5
ratio
-1
ratio 0.01
-1 .5
0.005 0 Series1
-2
2005
2006
2003-2004 0.023235772
The standard ratio compares for this is nearly 8%. From our analysis we found that Saiham textile ratio simply fluctuates. Their percentage is not so good. On the other handAshraf textile had negative percentage from 20052007.
5.0Conclusion:
We examine the analysis of Ashraf textile & Saiham textile mills ltd. We see that the liquidity position is nit good both of the company. Comparatively Saiham textile better than Ashraf textile mills ltd. Ashraf textile mills ltd. should change the credit policy & proper use of its assets. The profitability ratio of Ashraf textile mills ltd. Good than the Saiham textile mills ltd. The company should avoid the use of debt; otherwise company would be fall into bankruptcy.
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6.0Bibliography:
i) Annual report-Ashraf textile mills ltd. For the year of 2005, 2006 & 2007. -Saiham textile mills ltd. For the year of 20032004, 2004-2005 & 2005-2006. ii) Fundamental of financial management (Twelfth edition) -James C. Van Horne & John M Wachowicz, JR.
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