Assignment on Financial Statement Ratio Analysis

Executive Summary We gladly present you our report titled “Financial Ratio Analysis”. Our report also refers as an analytical report of accounting. We have made the report on the two listed company annual report analysis as you had given us to analyse by help of your suggestions. This report implies the companies’ activity, liquidity, solvency, profitability, valuation financial ratios that helps to get a proper picture of the companies. We have selected the company named- RAK Ceramics BD LTD & Berger Paints Bangladesh Limited. We have discussed all of the ration in the analysis & findings content. We have described the recommendation as much as possible. We believe that the knowledge and experience we gathered during the report will extremely helpful in our future professional and academic life. We will be grateful to you if you accept the assignment.

Page No- 1

Table of Contents

No. 1.

2.

3. 4. 5. 7.

Contents Introduction (i) Background of the Report (ii) Objectives of the Report (iii) Limitations of the Report (iv) Methodology

Page No. 3 4 5 6

Organisational Profile (i) RAK CERAMICS (BD) Limited

7

(ii) Berger Paints Bangladesh Limited

8

Findings and Analysis Recommendation Conclusion References

9 25 26 27 Page No- 2

Background of the Report We assign the report to know and analyze the current (2015 & 2015) financial situation of two companies and discuss how to turn their financial condition into satisfactions. This report helps us to get new experience for preparing a report. We can get a result so that we can analyze and solve many problems. We have used 5 categories financial ratios so that we can easily analyze the whole financial statement of the previous years annual report of two listed companies. These categories are(1)

Activity Ratio- measure how efficiency a company performs day-to-day tasks

(2)

Liquidity Ratio- measure the company’s ability to meet its short term obligations.

(3)

Solvency Ratio- measure a company’s ability to meet long term obligations.

(4)

Profitability Ratio- measure the company’s ability to generate profitable sales from its resources.

(5)

Valuation Ratio- measure the quantity of an asset or flow.

We have assigned a recommendation part for this report so that we can discuss financial positive and negative impact of a company. We also have tried to focus proper comment/note for each ratio.

Page No- 3

Objectives of the Study It is very important to set an objective for preparing our report. The main objective of the report is to analyse the annual reports of two listed company- RAK Ceramics & Berger Paints BD LTD. So at first we have to collect the previous annual reports of two companies. We have tried to solve accurate ratio analyse so that we can achieve our objective. The study finds out the way haw we can analyze a report and find out the strong & weak sides of financial situation of a company. So we have analyzed 5 categories ratio analysis (which includes current ratio, quick ratio, cash ratio, inventory turnover ratio, payable turnover ratio, fixed asset turnover ratio, debt-to-asset ratio, debt-to-capital ratio P/E, P/CF etc)

Page No- 4

Limitations of the Study Time Limitation: Our report submission date was 21 August 2016. We got the presentation topic two/three weeks back. Unfortunately that was not enough time to complete this presentation on a high note. If there was more time, we could have done it much better. Student Cooperation: Some Students of our class did not cooperate with us at all. They were afraid that it is very much hard to analyze annual report. So we tried to solve the ratios without proper helping hand. Knowledge Gap: We did this kind of report for the very first time and it was obvious that there will be some knowledge gap. Absence of Necessary Documents: As it was our first time doing this kind of report and also we do not know anyone who have done this sort of report before. Therefore we did not have the proper documents that was needed (except annual report of 20142015).

Page No- 5

Methodology Sources of Data: We collected data to prepare our repot from 2 types of data:(1)

Primary Data: Primary data are measurement observed and recorded as part of an original study. There are two basic methods of obtaining primary dataQuestioning and Observation. We have collected primary data from the companies (RAK Ceramics BD LTD & Berger Paints Bangladesh Limited) own websites. The companied have published their 2014 & 2015 annual repoerts who are thought to have the desired information. So we have get proper and efficient information from its websites.

(2)

Secondary Data: Secondary data is data collected by someone other than the user. We have collected as a secondary data from lecturer sheet and useful webinks like Wikipedia, Slideshare (Linkedin) etc.

Page No- 6

Organizational Profile RAK Ceramics BD LTD RAK Ceramics (Bangladesh) Limited is the country’s largest and most respected tiles and sanitary ware brand. The Company was incorporated in Bangladesh on 26 November, 1998 as a private limited company under the Companies Act, 1994 as a UAE-Bangladesh joint venture project. It has started its commercial production on 12 November 2000. It has converted into public limited company on 10 June 2008 and listed in the stock exchanges of Bangladesh on 13th June 2010. The Company has anchored this position on the basis of its market-leading capacities, world-class manufacturing technologies, high production utilization, optimized cost structures, vibrant sales and distribution network and robust customer engagement programs.

Page No- 7

Products- Ceramic tiles, sanitary ware, taps and kitchen fittings, tableware, tile adhesives, interior ancillary products.

Berger Paints Bangladesh LTD Berger Paints Ltd is the second largest Paint Company in India and a market leader in Industrial Paint for the past 45 years with a consistent track record of being one of the fastest growing paint companies, quarter on quarter, for the past few years. Headquartered at Kolkata it has 10 manufacturing units and over 110 stock points. The company also has an international presence in 4 countries – Russia, Poland, Nepal and Bangladesh. With employee strength of over 2,800 and a countrywide distribution network of 25,000+ dealers, Berger is established in the sector with a varied portfolio of paints and tailor-made customer services.

Products- Paints, Coatings, Wallpaper, Construction Chemicals and allied products.

Page No- 8

Findings and Analysis Ratio Analysis- RAK Ceramics Inventory Turnover Ratio

=

Cost of Goods Sold Average Inventory

2015

=

2014

2896890000

=

2239844230

=1.293

3255270000 1835354727

=1.773

* The inventory turnover ratio rate of 2014 is greater than 2015. Receivable Turnover

=

Revenue Average Receivables

2015

6329964274

=

638387373

=9.916

2014

=

5508640000 580719781

=9.486

* Receivable turnover ratio of two years is almost average and well. The receivable turnover ratio of 2015 has been improved before the year of 2014.

Page No- 9

Payables Turnover

=

Purchases Average Trade Payables

2015

2014

2896889441

=

=

44500470

=65.098

3072036921 2738540

=1121.78

*The payables turnover ratio was well times in 2014. Working Capital Turnover

=

Revenue Average Working Capital

2015

=

2014

6329964274

=

1545379710

=4.096

5508640000 289116566

=19.053

*Indicates the number of times the working capital is turned over. The rate of the ration of 2014 is well. Fixed Asset Turnover

=

Revenue Average Net Fixed Asset

2015

6329964274

=

2311590599

=2.739

2014

=

5508640000 2013734249

=2.735

*the ratio establishes between fixed asset and sales. The ideal rate for the ratio is 5. So fixed asset turnover ability is not so high. Page No- 10

Total Asset Turnover

=

Revenue Average Total Asset

2015

=

2014

6329964274

=

10753365565

=0.59

5508640000 9476977741

=0.58

*indicates the ability of a company to use its asset. So the ratio rate of the 2 years is not so high.

Current Ratio

=

Current Asset Current Liabilities

2015

2014

6741661301

=

=

4218330929

=1.599:1

7123130156 3538079861

=2.013:1

*Ideal ratio is 2:1. So the current ratio of 2014 is greater than the year of 2015. Quick Ratio

=

Cash Short-Term Marketable Investments Receivables Current Liabilities

2015

2014

1101566520

=

=

4218330929

=0.261

1473926142 3538079861

=0.417

*Ideal ratio is 1:1. So the quick ratio rate of two years is not so well. Cash Ratio

=

Cash Short-Term Marketable Investments Current Liabilities

Page No- 11

2015

=

2014

201898000

=

4218330929

=0.048

40661640 3538079861

=0.011

* Ideal ratio is 1:1. So the quick ratio rate of two years is not so well. Debt-to-Assets Ratio

=

Total Debt Total Assets

2015

=

2014

420624802

=

10753365565

=0.039

420624802 9476977741

=0.044

*indicates how many assets of a company are financed by debt. So, the ratio rate of 2014 is good. Debt-to-Capital Ratio

=

Total Debt Total Debt+Total Shareholdrs' Equity

2015

=

2014

420624802

=

3789130912

=0.111

420624802 3789130912

=0.111

*Ideal Ratio: Higher the ratio, higher the risk of default. So the ratio of 2015 & 2014 is same and well for the company. Debt-to-Equity Ratio

=

Total Debt Total Shareholdrs' Equity

Page No- 12

2015

=

2014

420624802

=

3368506110

=0.124

420624802 3368506110

=0.124

*indicates the extent to which a company relies on external debt. The ratio rate of 2 years is same. Financial Leverage Ratio

=

Total Asset Total Equity

2015

2014

10753365565

=

=

6038597111

=1.780

9476977741 5919429484

=1.600

*measure of financial leverage(capital structure) The ratio rate of 2 years is almost average. Gross Profit Margin

=

Gross Profit Revenue

2015

2014

2162410962

=

=

6329964274

=0.341

1975308452 5508640000

=0.358

*A profitability ratio. The ratio rate of 2 years is not so high. So it reflects fewer efficiency in converting raw materials to income. Operating Profit Margin

=

Operating Income Revenue

Page No- 13

2015

2014

1070931754

=

=

6329964274

=0.169

997857436 5508640000

=0.181

*Measures profitability without concern for taxes and interest. The ratio rate of two years is average. Net Profit Margin

=

Net Income Revenue

2015

2014

4541554406

=

=

6329964274

=0.717

3964568745 5508640000

=0.719

* Measures the percentage of each sales. The ratio rate of two years is average. Operating ROA =

Operating Income Average Total Asset

2015

=

1070931754

10753365565

=0.084

2014

=

997857436 9476977741

=0.111

*indicate the levels of operating profits relative to the firm’s total asset. The ration rate of two years is almost same. ROA =

Net Income Average Total Asset

Page No- 14

2015

=

2014

4541554406

10753365565

=0.422

=

3964568745 9476977741

=0.418

*Indicates ability of a company to earn profit from its asset. The ratio rate of ROA is good. ROE =

Net Income Average Total Equity

2015

4541554406

=

6038598640

=0.752

2014

=

3964568745 5919429484

=0.669

*indicates the return to the owner on the amount invested in the business. The ROA rate of two years is good for the company. P/E

=

Price Per Share Earnings Per Share

2015

639.91

=

48.65

=13.153

2014

=

684.43 43.33

=15.796

*The P/E rate of two years of the company is good. P/CF =

Price Per Share Cash Flow Per Share

Page No- 15

2015

639.91

=

45.98

=13.917

P/S

=

2014

=

684.43 39.69

=17.244

Price Per Share Sales Per Share

2015

=

639.91

688.56

=0.929

P/S

=

2014

=

684.43 727.76

=0.940

Price Per Share Book Value Per Share

2015

=

639.91

124.06

=5.158

2014

=

694.43 130.66

=5.314

Page No- 16

Ratio Analysis- Berger Paints Bangladesh Limited Inventory Turnover Ratio

=

Cost of Goods Sold Average Inventory

2015

2014

14837714000

=

=

1513733000

=9.802

13165473000 1660913000

=7.92

* The inventory turnover ratio rate of 2015 is greater than 2014.

Receivable Turnover

=

Revenue Average Receivables

2015

12267996000

=

939573000

=13.056

2014

=

10881046000 832711000

=7.92

* Receivable turnover ratio of two years is almost average and well. The receivable turnover ratio of 2015 has been improved before the year of 2014.

Page No- 17

Payables Turnover

Purchases

=

Average Trade Payables

2015

2014

5811465000

=

=

1779661000

=3.265

5942325000 1461545000

=4.065

* The payables turnover ratio was well times in 2014. Working Capital Turnover

=

Revenue Average Working Capital

2015

2014

12267996000

=

=

390590000

=31.40

10881046000 171604000

=63.40

* Indicates the number of times the working capital is turned over. The rate of the ration of 2014 is well. Fixed Asset Turnover

=

Revenue Average Net Fixed Asset

2015

2014

12267996000

=

=

1843340000

=6.655

10881046000 1578664000

=6.892

* the ratio establishes between fixed asset and sales. The ideal rate for the ratio is 5. So fixed asset turnover ratio rate ability is well. Total Asset Turnover

=

Revenue Average Total Asset

Page No- 18

2015

2014

12267996000

=

=

6683525000

=1.83

10881046000 5632593000

=1.93

* indicates the ability of a company to use its asset. So the ratio rate of the 2 years is not so high.

Current Ratio

=

Current Asset Current Liabilities

2015

2014

3951586000

3541219000

=

=

=1.852:1

=1.912:1

2132948000

1851418000

* Ideal ratio is 2:1. So the current ratio of 2014 is greater than the year of 2015. Quick Ratio

=

Cash Short-Term Marketable Investments Receivables Current Liabilities

2015

=

2014

330156000

=

2132948000

=0.155:1

293875000 1851418000

=0.159:1

* Ideal ratio is 1:1. So the quick ratio rate of two years is not so well. Cash Ratio

=

Cash Short-Term Marketable Investments Current Liabilities

Page No- 19

2015

=

2014

800000000

=

2132948000

=0.375:1

400000000 1851418000

=0.216:1

* Ideal ratio is 1:1. So the quick ratio rate of two years is not so well. Debt-to-Assets Ratio

=

Total Debt Total Assets

2015

2014

1747146000

=

=

2132948000

=0.819

1426465000 1851418000

=0.770

* indicates how many assets of a company are financed by debt. So, the ratio rate of 2015 is good. Debt-to-Capital Ratio

=

Total Debt Total Debt+Total Shareholdrs' Equity

2015

2014

1747146000

=

=

1979035000

=0.882

1426465000 1658354000

=0.860

* Ideal Ratio: Higher the ratio, higher the risk of default. So the ratio of 2015 & 2014 is same and well for the company. Debt-to-Equity Ratio

=

Total Debt Total Shareholdrs' Equity

Page No- 20

2015

2014

1747146000

=

=

1859035000

=0.939

1426465000 1758354000

=0.8112

* indicates the extent to which a company relies on external debt. The ratio rate of 2 years is same. Financial Leverage Ratio

=

Total Asset Total Equity

2015

=

2014

6339060000

=

4038513000

=1.570

5346874000 3354605000

=1.594

* measure of financial leverage(capital structure) The ratio rate of 2 years is almost average. Gross Profit Margin

=

Gross Profit Revenue

2015

=

2014

5255332000

=

12267996000

=0.428

4295302000 10881046000

=0.395

* A profitability ratio. The ratio rate of 2 years is not so high. So it reflects fewer efficiency in converting raw materials to income. Operating Profit Margin

=

Operating Income Revenue

Page No- 21

2015

=

2014

1996401000

=

12267996000

=0.162

1520953000 10881046000

=0.140

* Measures profitability without concern for taxes and interest. The ratio rate of two years is average. Net Profit Margin

=

Net Income Revenue

2015

=

2014

1425955000

=

12267996000

=0.116

1097609000 10881046000

=0.100

* Measures the percentage of each sales. The ratio rate of two years is average. Operating ROA =

Operating Income Average Total Asset

2015

=

1996401000

6339060000

=0.314

2014

=

4295302000 5346874000

=0.284

* indicate the levels of operating profits relative to the firm’s total asset. The ration rate of two years is almost same.

Page No- 22

ROA =

Net Income Average Total Asset

2015

2014

1425955000

1097609000

=

=

=0.224

=0.205

6339060000

5346874000

* Indicates ability of a company to earn profit from its asset. The ratio rate of ROA is good. ROE =

Net Income Average Total Equity

2015

=

1425955000

4038513000

=0.353

2014

=

1097609000 3354605000

=0.327

* indicates the return to the owner on the amount invested in the business. The ROA rate of two years is good for the company. P/E

=

Price Per Share Earnings Per Share

2015

1903.60

=

61.49

=30.958

2014

=

1425 47.33

=30.107

* The P/E rate of two years of the company is good. P/CF =

Price Per Share Cash Flow Per Share

Page No- 23

2015

1903.60

=

91.98

=20.670

P/S

=

2014

=

1425 49.69

=28.678

Price Per Share Sales Per Share

2015

=

1903.60

1934.558

=0.983

P/S

=

2014

=

1425 1472.33

=0.968

Price Per Share Book Value Per Share

2015

1903.60

=

174.16

=10.930

2014

=

1425 144.66

=9.850

Page No- 24

Recommendation The next step is to find out how to turn them into batter Financial Position. In our opinion we are recommending these:-

RAK Ceramics: (1) Inventory turnover & receivable turnover ability should be improved further. (2) Fixed asset turnover should be developed. (3) Should try to increase current asset & cash. (4) Should try to increase revenue as much as possible further.

Berger Paints: (1) Total asset turnover & receivable turnover ability should be improved further. (2) Fixed asset turnover should be developed. (3) Should try to increase current asset, cash & cash investments receivables. (4) Should try to increase revenue & operating income as much as possible further.

Page No- 25

Conclusion We have already solved the report on the financial analysis regarding analysis and total description in the two company. As we are in ongoing process to be a business graduate we will have to face some difficulties regarding this report in our professional life. So we must have to know the knowledge of management in business to regard running a business and also many aspects of business. This report will help us to meet up the problems that we may face in future.

Page No- 26

References (1) http://rakcerambd.com/ (2) http://rakcerambd.com/investor-annual-reports.php (3) http://www.bergerbd.com/ (4)http://www.bergerbd.com/corporate_info/reports/Annual _and_Quarterly_Reports (5) https://www.wikipedia.org/ (6)http://www.investopedia.com/university/peratio/peratio1 .asp

Page No- 27