University of Dhaka

Report on Performance Analysis of Ceramic Industry in Bangladesh

Prepared by:
Md. Mahbubur Rahman (11325023)
Fariha Bahar Chowdhury (11325031)
Priyanka Paul (11325035)
Md. Monirul Islam (11325054)

Prepared for:
Dr. Yousuf Kamal
(Designation)
Accounting and Information Systems
Course:
Date: November 13, 2014

Table of Contents

Particulars

Page no

EXECUTIVE SUMMARY

INTRODUCTION

OBJECTIVE OF THE STUDY

METHODOLOGY OF THE STUDY

LIMITATION OF THE STUDY

FINANCIAL RATIOS

4-6

TESTING THE FINANCIAL SOUNDNESS OF SELECTED

CERAMICS COMPANIES WITH THE INDUSTRY AVERAGE:
Monno Ceramics Industries Limited

7-12

RAK Ceramics (Bangladesh) Limited

13-17

Shinepukur Ceramics Limited

18-22

Fu-wang Ceramics Industry Limited

23-28

CONCLUSION

29

References

29

1|Page

EXECUTIVE SUMMARY
This paper applies performance evaluation of ceramic industry of Bangladesh and to test its
financial soundness. The main aim is achieved through ratio analysis of four selected ceramic
(Fu Wang, Monno, Shinepukur and RAK) companies in Bangladesh. Measurement of financial
performance by ratio analysis helps identify organizational strengths and weaknesses by
detecting financial anomalies and focusing attention on issues of organizational importance. The
financial performance of this industry is measured in terms of profitability, solvency, efficiency
and liquidity analysis and to test the financial soundness. The study covers four public sector
ceramic companies listed on Dhaka Stock Exchange. The study has been undertaken for the
period of two years from 2011-12 to 2012-2013 and the necessary data has been obtained from
the audited annual report of the selected companies. The liquidity position was very weak in all
the cases of the selected companies and thereby reflecting the difficulties in paying short-term
obligation on due date. Financial stability of the selected companies has shown an upward trend.
This study will help investors to identify the nature of financial performance of the ceramic
industry of Bangladesh and will also help to take investment decision.

2|Page

INTRODUCTION
CERAMIC industry of Bangladesh is a booming sector and the growth potential of both
domestic and foreign market indicates it may become one of the big foreign currency earners for
the country. Now its time to measure and analyze the performance of this industry. But such
kind of analysis has not been done on this ceramic sector before. So, in this gap of analysis we
have tried to evaluate and interpret the performance of the selected four ceramic companies for
the period of 2011-12 to 2012-2013.

Performance evaluation of a company is usually related to how well a company can use it assets,
share holder equity and liability, revenue and expenses. Financial ratio analysis is one of the best
tools of performance evaluation of any company. In order to determine the financial position of
the ceramic companys and to make a judgment of how well the ceramic companys efficiency,
its operation and management and how well the company has been able to utilize its assets and
earn profit. We used ratio analysis for easy measurement of liquidity position, asset management
condition, profitability and market value and debt coverage situation of the ceramic companys
for performance evaluation. It analyzes the use of a companys assets and control of its expenses.
It determines the greater the coverage of liquid assets to short-term liabilities and it also compute
ability to pay ceramic companies short-term and tong-term payments obligation from the cash
generate. It determines share market condition of ceramic companies.

Financial distress is a condition when a company cannot meet, or has difficulty to pay off, its
financial obligation to its creditors. The chance of financial distress increases when a firm has
high fixed costs, liquid assets, or revenues that are sensitive to economic downturns. Sometimes
financial distress can lead to bankruptcy.

OBJECTIVE OF THE STUDY

The study is designed to achieve the following objectives:
i.
ii.

3|Page

To assess the financial performance of the selected ceramic companies

To assess the probability of bankruptcy of the selected ceramic
companies

iii.

To compare individual performance with the industry performance

METHODOLOGY OF THE STUDY

We used quantitative approach for our report because majority of data was collected from the
quantitative approach. Data has been taken from a sample of four ceramic companies in Dhaka
Stock Exchange. We used the model to analysis the financial performance and financial
soundness of the selected ceramic companies. First step of the model we did a selection of
financial report. The annual financial reports present the financial data of a companys position,
operating performance and fund flow for an accounting period. The study covers a two year
period from 2011-12 to 2012-13. In the second step of model data has been collected from the
identified balance sheet, income statement, cash flow statement and statement of shareholders
equity. Finally we identified suitable ratio for performance evaluation and to analyze the
financial soundness of the ceramic industry. Basically all the collected data have been analyzed.

LIMITATION OF THE STUDY

There are some limitations of this paper. Data was taken from the annual reports of the year
2011-12 to 2012-2013, considering the fact that data sets are too small. Predictions based on this
data may not be entirely true. Moreover, some data were taken directly from the internet which
may not be exactly true.

FINANCIAL RATIOS
Financial analysis offers a system of appraisal and evaluation of a firms performance and
operations; it is the analysis of the financial statement of an enterprise. The analysis of financial
statement can be best done by various yardsticks of which, the important is known as ratio or
percentage analysis. Ratio is a numerical or an arithmetical relation between two figures. It is
expressed when one figure is divided by another. Accounting ratios show inter-relationship
which exist among various accounting data. Accounting ratio can be expressed in various ways
such as, a pure ratio, a rate or a percentage.

Ratio analysis is certainly a very admirable device because it is simple and it has a predictive
value. Managements and other users thus, rely substantially on the financial ratios based on
4|Page

accounting data for making assessments and predictions of past performance, present position
and probable future potentials. One important way for diagnosing the financial health is to
measure the profitability, liquidity, activity and solvency and the level of the bankruptcy of
enterprise.

Operating Cycle
Expressed as an indicator (days) of management performance efficiency, the operating cycle is a
"twin" of the cash conversion cycle. While the parts are the same - receivables, inventory and
payables - in the operating cycle, they are analyzed from the perspective of how well the
company is managing these critical operational capital assets, as opposed to their impact on cash.

Liquidity Ratios
Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt
obligations. Liquidity is a pre-requisite for the very survival of an enterprise. They show the
number of times the short term debt obligations are covered by the cash and liquid assets. If the
value is greater than 1, it means the short term obligations are fully covered. Generally, the
higher the liquidity ratios are, the higher the margin of safety that the company posses to meet its
current liabilities. Most common examples of liquidity ratios include current ratio, acid test ratio
(also known as quick ratio), cash ratio, cash flow from operation ratio and working capital ratio.

Profitability Ratios
Profitability ratios measure a companys ability to generate earnings relative to sales, assets and
equity. These ratios assess the ability of a company to generate earnings, profits and cash flows
relative to relative to some metric, often the amount of money invested. They highlight how
effectively the profitability of a company is being managed. Different profitability ratios provide
different useful insights into the financial health and performance of a company. For example,
gross profit and net profit ratios tell how well the company is managing its expenses. Return on
capital employed (ROCE) tells how well the company is using capital employed to generate
returns. Return on investment tells whether the company is generating enough profits for its
shareholders or not.
5|Page

Activity Ratios

Asset management (Activity) ratios compare the assets of a company to its sales revenue.
Analysis of asset management ratios tells how efficiently and effectively a company is using its
assets in the generation of revenues. They indicate the ability of a company to translate its assets
into the sales. Asset management ratios are computed for different assets. Common examples of
asset turnover ratios include fixed asset turnover, inventory turnover, accounts payable turnover
ratio, accounts receivable turnover ratio, and cash conversion cycle. The higher the asset
turnover ratios, the more sales the company is generating from its assets. Low asset turnover
ratios mean that the company is not managing its assets wisely. They may also indicate that the
assets are obsolete. Companies with low asset turnover ratios are likely to be operating below
their full capacity.

Financial Leverage (Debt) Ratios

Financial leverage ratios (debt ratios) indicate the ability of a company to repay principal amount
of its debts, pay interest on its borrowings, and to meet its other financial obligations. They also
give insights into the mix of equity and debt a company is using. They give indications about the
financial health of a company. Companies need to carefully manage their financial leverage
ratios to keep their financial risk at acceptable level. Careful management of financial leverage
ratios is also important when seeking loans from banks and financial institutions. Favourable
ratios can help the company to negotiate a favourable interest rate. The long-term solvency of a
company can be measured by the use of solvency ratios named debt to total assets, the times
interest earned and fixed charge coverage ratio.

Return Ratios
A ratio used by many investors to compare the expected returns of an investment to the amount
of risk undertaken to capture these returns. This ratio is calculated mathematically by dividing
the amount he or she stands to lose if the price moves in the unexpected direction (i.e. the risk)

6|Page

by the amount of profit the trader expects to have made when the position is closed (i.e. the
reward).
TESTING THE FINANCIAL SOUNDNESS OF SELECTED CERAMICS COMPANIES

Monno Ceramics Industries Limited

Monno Ceramic Industries started its journey in Bangladesh on 1981 as a public limited
company under the Companies Act 1913. Monno soon earned an enviable reputation for both
quality and value. The subsequent introduction of bone china to its range of quality dinnerware
has only served to strengthen that reputation. As the original exporter of porcelain dinnerware
Made in Bangladesh Monno is proud to contribute to the growth of the Bangladesh economy.
In a developing country the kudos accorded to exports and the valuable foreign exchange derived
is significant. Today in Bangladesh Monno is a household name and regarded as one of the
countrys premier companies. The company went for public issues of share in1985 and its shares
are listed in Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. since 1983 and
1985 respectively. Till to date the company has 1,350,000 shares and 8,071 shareholders. Monno
Ceramic Industries Ltd. was the largest ceramic company in Bangladesh and held the
top position in ceramic industry.

It began its journey by producing porcelain dinnerware and eventually expanded onto the
manufacture of Bone China. The product quality has been immaculate from the very beginning
which has been directly reflected by the continuous market demand from local and international
consumers.
Monno Ceramics state of the art technology and creative designs gives it a competitive edge
and establishes itas a strongcompetitor in the porcelain manufacturing world. In order to create to
p of the rangemerchandise, Monno Ceramic possesses the most advanced machinery for porcelai
nproduction in the country. State of the art technology like isocratic press and Dip Glaze are
there to increase efficiency and product quality. After meeting the need of local market
successfully, Monno Ceramic is exporting to global market like- USA, Canada, Australia,
France, UK, Sweden, New Zealand, Germany, Italy and many other countries. This is also a
success indicator of the company.

7|Page

Comparison of Monno Ceramics with the Industry

Market Share
From the analysis given in the following table we can see a clear picture of Monnos market
share:
Item

Monno

Industry

Market

Monno

Industry

Market

2012

2012

Share

2013

2013

Share

%
Sales

778,623,849

7,972,905,199

9.77

753,989,906

7,884,934,076

9.56

*Assuming total sales of the industry is coming from four companies only

Monno ceramics holds around 9.77% of market share only and this percentage reduces in the
very next period. The percentage of total asset of the industry is given below:
Item

Monno

Industry

Market

Monno

Industry

Market

2012

2012

Share

2013

2013

Share

%
Total

3,040,180,913

19,858,644,018

15.31

%
3,043,563,145

19,326,015,141

15.75

Assets

Monno ceramics holds 15.31% market share in terms of assets and with the passage of time their
percentage of market share slightly increased.

8|Page

Liquidity
Liquidity ratio is an important tool to measure the relationship of a firms current assets and
current liabilities. Liquidity ratios tell us whether the firm will be able to repay its debt as they
come due over the next year or so.
Items

Monno

Industry

Compared

Monno

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

Current Ratio

1.11

1.49

Less liquid

1.08

1.52

Less liquid

Quick Ratio

0.70

0.89

Less liquid

0.66

0.88

Less liquid

Net Working

0.09

0.22

Good

0.08

0.26

Good

Capital to Sales
ratio
Figure: Monnos Liquidity Ratios
Current ratio as well as quick ratio generally represents what portion of current liabilities is
secured through current assets. According to the notion, bigger these ratios mean greater safety
of firm from bankruptcy. So from analysis it is found that they do not care about that in any of
the study years. Current ratio and Quick ratio are decreasing year to year. So its liquidity position
is relatively bad. And Monnos Net Working Capital to Sales ratio represents positive figure.

Efficiency ratio/turnover ratio

Efficiency ratio measures how effectively the firm is managing its assets.

9|Page

Items

Monno

Industry

Compared

Monno

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

2.20

2.05

More efficient

2.05

1.76

More efficient

0.22

5.63

Less efficient

0.22

4.65

Less efficient

0.26

0.40

Less efficient

0.25

0.38

Less efficient

Inventory
turnover
Accounts
receivables
turnover
Total Asset
turnover

In 2012 Monnos inventory turnover of 2.20 times is higher than the industry average of 2.05
times. In 2013 Monnos inventory turnover of 2.05 times is also higher than the industry average
of 1.76 times. This suggests that Monno is holding lesser inventories. The higher this ratio is, the
more efficiently a company managing their inventory. Since inventory was low then these money
could be used for adding value to shareholder by accepting other project. Monnos total asset
turnover ratio is slightly less than the industry average, indicating that the company is not
generating sufficient volume of business given its total investment. Moreover, Monno cannot
collect its receivables efficiently.

Shareholders Ratios and Return Ratios

The market ratios show that on average the company enjoyed positive growth.
Item

EPS

10 | P a g e

Monno

Industry

Compared

Monno

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

0.71

1.43

Bad

0.35

0.95

Bad

Figure: Monnos Shareholders Ratio

Items

Monno

Industry

Compared

Monno

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

Basic earning 0.029

0.078

Less profitable

0.026

0.061

Less profitable

power ratio
ROA

0.006

0.048

Less profitable

0.004

0.031

Less profitable

ROE

0.007

0.065

Less profitable

0.004

0.043

Less profitable

Figure: Monnos Profitability Ratios

In both year 2012 and 2013, Monnos ROA is much lower than the industry average. These low
returns results from the companys low basic earning power plus higher interest costs. Both of
which cause its net income to be relatively low. Stockholders invest to get a high return on their
money; ROE tells how well they are doing in an accounting sense. ROE in both years is less than
the industry average. ROE is the true bottom-line measure of performance.

11 | P a g e

Debt Management Ratios

Debt Management Ratios indicates how the company is financed and also indicates the riskiness
of the firm.
Items

Monno

Industry

Compared

Monno

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

0.242

0.112

More debt

0.242

0.112

More debt

0.319

0.236

More debt

0.307

0.234

More debt

Equity multiplier

1.32

1.38

Bad

1.32

1.39

Bad

Times Interest

1.29

1.60

Bad

1.84

1.17

Good

Total Debt to
Asset ratio
Total Debt to
equity

coverage ratio
Figure: Monnos Debt Management Ratio
Total Debt to Asset ratio measures the percentage of funds provided by creditors. Creditors prefer

low debt ratios because the lower the debt ratio, the greater the cushion against creditors losses
in the event of liquidation. Stockholders, on the other hand, may want more leverage because it
magnifies expected earnings. Monnos debt ratios are higher than the industry average in both
the year 2012 and 2013. The more the equity the more the company is liquid. But Monnos Total
Debt to equity ratio is much higher than the industry average. Times Interest coverage ratio
measures the extent to which operating income can decline before the firm is unable to meet its
annual interest costs. Failure to meet this obligation can bring legal action by the firms creditors,
possibly resulting in bankruptcy. Monnos Times Interest coverage ratio in both years is lower
than the industry average. It is a very negative sign for Monno Ceramics Industries Limited.

12 | P a g e

RAK Ceramics (Bangladesh) Limited

RAK Ceramics (Bangladesh) Limited (the Company), formerly RAK Ceramics (Bangladesh)
Pvt. Limited, a UAE-Bangladesh joint venture company, was incorporated in Bangladesh on 26
November 1998 as a private company limited by shares under the Companies Act 1994. The
Company was later converted from a private limited into a public limited on 10 June 2008 after
observance of required formalities as per laws. The name of the Company was thereafter
changed to RAK Ceramics (Bangladesh) Ltd. as per certificate issued by the Registrar of Joint
Stock Companies dated 11 February 2009. The address of the Companys registered office is
RAK Tower, Plot # 1/A, Jasimuddin Avenue, Sector # 3, Uttara, Dhaka 1230. The company got
listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) on 13 June
2010.

RAK Ceramics (Bangladesh) Limited has authorized capital of Tk. 600 million and paid up
capital was 306 million. The Company is engaged in manufacturing and marketing of ceramics
tiles, bathroom sets and all types of sanitary ware. It has started its commercial production on 12
November 2000. The commercial production of its new sanitary ware plant, expansion unit of
ceramics facilities, tiles and sanitary plant was started on 10 January 2004, 1 July 2004 and 1
September 2007 respectively. RAK Ceramics (Bangladesh) Limited is currently staffed with
1,112 full time employees. It strongly believes that employees are the strength of the Company.

Comparison of RAK Ceramics with the Industry:

Market Share: From the analysis given in the following table we can see a clear picture of
RAKs market share:
Item

RAK

Industry

Market

RAK

Industry

Market

2012

2012

Share

2013

2013

Share

%
Sales
13 | P a g e

4,507,821,528

7,972,905,199

56.53

%
4,687,262,509

7,884,934,076

59.45

*Assuming total sales of the industry is coming from four companies only
RAK ceramics holds around 59% of market share and this percentage fluctuates over the period.
The percentage of total asset of the industry is given below:
Item

RAK

Industry

Market

RAK

Industry

Market

2012

2012

Share

2013

2013

Share

%
Total

8,386,402,972

19,585,644,081

42.81

%
9,266,255,808

20,595,035,141

44.99

Assets

RAK ceramics holds more market share in terms of assets and with the passage of time their
percentage of market share increased.

Liquidity:
Liquidity ratio is an important tool to measure the relationship of a firms current assets and
current liabilities. Liquidity ratios tell us whether the firm will be able to repay its debt as they
come due over the next year or so.
Items

RAK

Industry

Compared

RAK

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

Current Ratio

2.19

1.49

More liquid

2.20

1.52

More liquid

Quick Ratio

1.45

0.89

More liquid

1.50

0.88

More liquid

Net Working

0.57

0.22

More liquid

0.67

0.26

More liquid

Capital to Sales
ratio
Figure: RAKs Liquidity Ratios

14 | P a g e

Current ratio as well as quick ratio generally represents what portion of current liabilities is
secured through current assets. According to the notion, bigger these ratios mean greater safety
of firm from bankruptcy. So from analyzing it is found that they are care about that in any of the
study years. Current ratio and Quick ratio are rising year to year. So its liquidity position is
relatively good. And RAKs reservoir ratio represents positive figure.

Efficiency ratio/turnover ratio:

Efficiency ratio measures how effectively the firm is managing its assets.
Items

Inventory

RAK

Industry

Compared

RAK

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

1.76

2.05

Less efficient

1.59

1.76

Less efficient

6.01

5.63

More efficient

6.50

4.65

More efficient

0.53

0.40

More efficient

0.50

0.38

More efficient

turnover
Accounts
receivables
turnover
Total Asset
turnover

In 2012 RAKs inventory turnover of 1.76 times is lower than the industry average of 2.05 times.
In 2013 RAKs inventory turnover of 1.59 times is also lower than the industry average of 1.76
times. This suggests that RAK is holding more inventories. Excess inventory of course,
unproductive, and it represents an investment with a low zero rate of return. The higher this ratio
is, the more efficiently a company managing their inventory. If inventory was low then these
money can be used for adding value to shareholder by accepting other project. RAKs total asset
turnover ratio is more than the industry average, indicating that the company is generating a
sufficient volume of business given its total investment.

15 | P a g e

Market Ratios and Return Ratios:

The market ratios show that on average the company enjoyed positive growth.
Item

EPS

RAK

Industry

Compared

RAK

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

2.98

1.43

2.83

Positive

0.95

Positive

Figure: RAKs Market Ratios

Items

RAK

Industry

Compared

RAK

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

Basic earning 0.124

0.078

More profitable

0.112

0.061

More profitable

power ratio
ROA

0.099

0.048

More profitable

0.093

0.031

More profitable

ROE

0.135

0.065

More profitable

0.132

0.043

More profitable

Figure: RAKs Profitability Ratios

In both year 2012 and 2013, RAKs ROA is much higher than the industry average. This high
returns results from the companys high basic earning power plus low interest costs. Both of
which cause its net income to be relatively high. Stockholders invest to get a return on their
money, ROE tells how well they are doing in an accounting sense. ROE in both years is more
than the industry average. ROE is the true bottom-line measure of performance.

Debt Management Ratios:

16 | P a g e

Debt Management Ratios indicates how the company is financed and also indicates the riskiness
of the firm.
ROA

RAK

Industry

Compared

RAk

Industry

Compared

2012

Average

To

2013

Average

To

2012

Industry

2013

Industry

0.036

0.112

Less debt

0.034

0.112

Less debt

0.371

0.236

More debt

0.411

0.234

More debt

Equity multiplier

1.37

1.38

Less debt

1.41

1.39

More debt

Times Interest

2.20

1.60

Good

1.84

1.66

Good

Total Debt to
Asset ratio
Total Debt to
equity

coverage ratio
Figure: RAKs Debt Management Ratio
Total Debt to Asset ratio measures the percentage of funds provided by creditors. Creditors prefer

low debt ratios because the lower the debt ratio, the greater the cushion against creditors losses
in the event of liquidation. Stockholders, on the other hand, may want more leverage because it
magnifies expected earnings. RAKs debt ratio less than the industry average in both the year
2012 and 2013. The more the equity the more the company is liquid. But RAKs Total Debt to
equity ratio is much higher than the industry average. Times Interest coverage ratio measures the

extent to which operating income can decline before the firm is unable to meet its annual interest
costs. Failure to meet this obligation can bring legal action by the firms creditors, possibly
resulting in bankruptcy. RAKs Times Interest coverage ratio in both years is higher than the
industry average. It is very positive sign for RAK ceramics (Bangladesh) Limited.

17 | P a g e

Shinepukur Ceramics Limited

Private Sector Business Conglomerate in Bangladesh with about over 48,000 people worldwide
in the permanent payroll, have over 300,000 shareholders, handling a diversified range of
merchandise to and from Bangladesh. Shinepukur Ceramics was registered in Bangladesh in
1997 and the Plants were commissioned in 1998. Commercial Production of Porcelain
Tableware started in April 1999 and Bone China in November 1999. The manufacturing facility
is located in the BEXIMCO Industrial Park, near Dhaka Export Processing Zone (DEPZ), 40 km
from Capital Dhaka City, where captive power generation, water supply, effluent waste water
treatment and with all other infrastructural facilities in place. Very soon after its launching in
1999, with a state-of-the-art & robust production technique engaging the industry-best around
3,000 skilled people behind, Shinepukur Ceramics could easily win the heart of worlds topranked buyers community and established its leadership in both export and domestic market.
Today, Shinepukur exports to more than 40 countries including USA, Canada, UK, Germany,
France, Italy, Romania, Norway, Sweden, Denmark, Poland, Spain, Turkey, Japan, Australia,
Brazil, India, UAE, Chile, Egypt, Russia etc. And this outstanding relentless performance
enabled Shinepukur to achieve National Export Trophy from the Government of Bangladesh in
all four (4) times awarded. Having certified with ISO 9001:2008 from Det Norske Veritas
(DNV) of Netherlands for Quality & Process Management, later Shinepukur also became the
only Ceramic Tableware Company in Bangladesh to receive Superbrands and Dun &
Bradstreet (D&B) Corporate award. Having an intriguing commitment inside to do something
good for the Nation, Shinepukur has performed significant roles to Bangladeshi Economy in the
years passed. In the days to come, Shinepukur wishes to excel in every dimension to strengthen
positive image of Bangladesh by exporting its world-class products which are produced in strict
compliance and greatest care.

Comparison of Shinepukur Ceramics with the Industry:

18 | P a g e

Market Share: From the analysis given in the following table we can see a clear picture of
Shiepukurs market share:
Item

Shinepukur

Industry

Mkt.

Shinepukur

2012

2012

Share 2013

Industry

Mkt.

2013

Share

Sales 1942350752 7972905199 24.36 1704567234 7884934076 21.62

*Assuming total sales of the industry is coming from Four companies only
Shinepukur ceramics holds around 21.62% of market share and this percentage fluctuates over
the period. The percentage of total asset of the industry is given below:
Item Shinepukur
2012

Industry

Mkt.

Shinepukur

2012

Share 2013

Industry

Mkt.

2013

Share

%
TA

7120013155 19858644018 35.85 6874254239 20604015141 33.36

Shinepukur ceramics holds quite a low market share in terms of assets and with the passage of
time their percentage of market share decreased.
Liquidity: Liquidity ratio is an important tool to measure the relationship of a firms current
assets and current liabilities. Liquidity ratios tell us whether the firm will be able to repay its debt
as they come due over the next year or so.
Item

Shinepukur Industry

Compared

Shinepukur

Industry

Compared

2012

Avg.

To

2013

Avg.

To

2012

Industry

2013

Industry

Current Ratio

1.01

1.49

Less liquid

0.97

1.52

Less liquid

Quick Ratio

0.54

0.89

Less liquid

0.45

0.89

Less liquid

NWC To Asset

0.013

0.23

Less liquid

-0.03

0.26

Less liquid

Figure: Shinepukurs Liquidity Ratios

19 | P a g e

Current ratio as well as quick ratio generally represents what portion of current liabilities is
secured through current assets. According to the notion, bigger these ratios mean greater safety
of firm from bankruptcy. But from analyzing it is found that they didnt care about that in any of
the study years. May be they were trying to reduce their capital cost through investing current
liabilities in asset expansion thats what doing the whole industry. Cash liquidity ratio is
expressing that they maintained more cash for facing uncertain situation than industry, though
this ratio is declining year to year. And FCLs reservoir ratio represents negative figures due to
current liabilities were greater than their current asset in all the three years. That means no
portion of total asset was using as net working capital. This trend is good when others asset is
using to bring FCLs bread and butter. But it should also keep in mind when they will be aware
of this may be then no time will be left other than bankruptcy.
Efficiency ratio/turnover ratio:
Efficiency ratio measures how effectively the firm is managing its assets.
Items

Shinepukur Industry
2012

Inventory turnover

1.50

Compared

Average

To

2012

Industry

2.06

Less

shinepukur Industry
2013

1.34

Average

To

2013

Industry

1.77

efficient
Accounts

2.27

5.63

receivables turnover
Total Asset
turnover

Less

0.40

Less
efficient

Less
efficient

2.53

4.65

efficient
0.27

Compared

Less
efficient

0.25

0.38

Less
efficient

In 2012 Shinepukurs inventory turnover of 1.50 times is lower than the industry average of 2.06
times. In 2013 Shinepukurs inventory turnover of 1.34 times is also lower than the industry
average of 1.77 times. This suggests that Shinepukur is holding more inventories. Excess
inventory of course, unproductive, and it represents an investment with a low zero rate of return.
The higher this ratio is, the more efficiently a company managing their inventory. If inventory
was low then these money can be used for adding value to shareholder by accepting other
20 | P a g e

project. Shinepukurs total asset turnover ratio is less than the industry average. After all this, it
seems that FCLs management is somewhat relax and agency cost is getting higher day by day.
Market Ratios and Profitability Ratios: The market ratios show that on average the company
enjoyed positive growth.
Market Ratios and Return Ratios:
The market ratios show that on average the company enjoyed positive growth.
Item Shinepukur Industry Compared Shinepukur Industry Compared
2012

EPS

Average

To

2012

Industry

1.43

0.61

2013

Positive

-0.08

Average

To

2013

Industry

0.95

Negative

Figure: Shinepukurs Market Ratios

Items

Shinepukur Industry
2012

Basic

earning 0.079

Average

To

2012

Industry

0.078

power ratio
ROA

Compared

More

shinepukur Industry
2013

0.053

Average

To

2013

Industry

0.061

profitable
0.006

0.048

Less

Compared

More
profitable

-0.008

0.031

unprofitable

-0.012

0.043

unprofitable

profitable
ROE

0.009

0.065

More
profitable

Figure:Shinepukurs Profitability Ratios

In both year 2012 and 2013, Shinepukurs ROA is much lower than the industry average. This
high returns results from the companys high basic earning power plus low interest costs. Both of
which cause its net income to be relatively high. Stockholders invest to get a return on their

21 | P a g e

money, ROE tells how well they are doing in an accounting sense. ROE in both years is more
than the industry average. ROE is the true bottom-line measure of performance.

Debt Management Ratios:

Debt Management Ratios indicates how the company is financed and also indicates the riskiness
of the firm.

item

shinepukur Industry Compared shinepukur Industry Compared

2012

Average To

2013

Average To

2012

Industry

2013

Industry

0.13

0.112

More debt 0.13

0.112

More debt

Total Debt to equity

0.20

0.236

Less debt

0.234

Less debt

Equity multiplier

1.56

1.38

More debt 1.53

1.39

More debt

Times Interest

2.17

1.60

Good

1.66

Good

Total Debt to Asset

ratio

0.21

2.24

coverage ratio

Total Debt to Asset ratio measures the percentage of funds provided by creditors. Creditors prefer

low debt ratios because the lower the debt ratio, the greater the cushion against creditors losses
in the event of liquidation. Stockholders, on the other hand, may want more leverage because it
magnifies expected earnings. Shinepukurs Total Debt to equity ratio is less than the industry average.
But Shinepukurs debt ratio more than the industry average in both the year 2012 and 2013.
Times Interest coverage ratio measures the extent to which operating income can decline before
the firm is unable to meet its annual interest costs. Failure to meet this obligation can bring legal
action by the firms creditors, possibly resulting in bankruptcy. Shinepukurs Times Interest
coverage ratio in both years is higher than the industry average. It is very positive sign for
Shinepukur Ceramics Bangladesh Limited.

22 | P a g e

Fu-wang Ceramics Industry Limited

Company Profile
Fu-Wang Ceramic Industry Limited, the pioneer ceramic manufacturer in Bangladesh was
established in May 1995 as a joint venture company. Subsequently, in 1998, it was listed in the
Dhaka and Chittagong capital markets. Since then, it has been operating as a public limited
company with an authorised capital of Tk. 1 billion and a paid-up capital of Tk. 769 million.
The company is engaged in production of various types of wall and floor tiles. Within a short
period, the business expanded its market share by its unique quality, competitive price, exclusive
designs, and wide variety of sizes and models. Its effective and creative marketing campaign
enabled the company to establish its brand value in the tiles market in Bangladesh.
Fu-Wang Ceramic Industry Limited is capable of meeting the increasing demand of customers
countrywide. By using high quality raw materials, Italian/Chinese machinery and highly
experienced foreign and local engineers, the company has created good reputation in the
Bangladesh ceramic market. The business is engaged in selling luxurious glazed floor and wall
tiles, that are produced by utilising the latest printing and laser cut technology.

Corporate Information

Date of incorporation: 31 May 1995

Listed in Dhaka Stock Exchange Ltd: May 1998
Listed in Chittagong Stock Exchange Ltd: May 1998
Commercial Production: October 1996
ISO Certification: ISO-9002 Certified on 4 November 1998
23 | P a g e

Business Lines: Manufacturing and Marketing of Ceramic Floor and Wall Tiles
Authorised Capital: Tk. 1 billion
Paid-up Capital: Tk. 769 million
Face Value: Tk. 10
Market Lot: 500
Total Share No. of securities: 76,920,353
Number of employees: 470

The principle place of business is the registered office at 118 Gulshan Avenue,Gulshan 2, Dhaka
1212, Bangladesh. The Chairman of Fu-wang Ceramics is Mr. Alexander Lee and Managing
Director is Mr. Khaled N. Kabir and Independent Directors are Mr. Mustafa Mohiuddin, Mr.
Masudur Rahman and Mrs. Nilufar Anzum.

Comparison of Fu-wang Ceramics with the Industry:

Market Share: From the analysis given in the following table we can see a clear picture of Fuwangs market share:
Item

Fu Wang

Industry

Mkt.

Fu Wang

Industry

Mkt.

2012

2012

Share

2013

2013

Share

%
Sales

744109070

7972905199

9.33

%
739114427

7884934076

9.37

*Assuming total sales of the industry is coming from Four companies only

Fu-wang ceramics holds below 10% of market share and this percentage fluctuates over the
period. The percentage of total asset of the industry that is held by DESCO is given below:
Item

Fu Wang

Industry

Mkt.

Fu Wang

Industry

Mkt.

2012

2012

Share

2013

2013

Share

%
TA

1312046978

24 | P a g e

19858644018

6.61

%
1419941949

20604015141

6.89

Fu-wang ceramics holds quite a low market share in terms of assets and with the passage of time
their percentage of market share slightly increased.
Liquidity: Liquidity ratio is an important tool to measure the relationship of a firms current
assets and current liabilities. Liquidity ratios tell us whether the firm will be able to repay its debt
as they come due over the next year or so.
Item

Current

Fu Wang

Industry

Compared

Fu Wang

Industry

Compared

2012

Avg.

To

2013

Avg.

To

2012

Industry

2013

Industry

1.49

More

1.52

More

1.66

Ratio
Quick

liquid
0.89

0.90

Ratio
NWC

1.83

liquid

Good

0.93

0.89

More

liquid
0.22

0.23

To Sales

liquid

Good

0.33

0.27

More

liquid

liquid

Figure: Fu Wangs Liquidity Ratios

Current ratio as well as quick ratio generally represents what portion of current liabilities is
secured through current assets. Cash liquidity ratio is expressing that they maintained more cash
for facing uncertain situation than industry, though this ratio is decreasing year to year.
According to the notion, bigger these ratios mean greater safety of firm from bankruptcy. And
actually they are in far away from bankruptcy. They should not be afraid of bankruptcy.

Efficiency ratio/turnover ratio: Efficiency ratio measures how effectively the firm is managing
its assets.
Item

25 | P a g e

Fu Wang

Industry

Compared

Fu Wang

Industry

Compared

2012

Avg.

To

2013

Avg.

To

2012

Industry

2013

Industry

Inventory turnover

2.77

2.06

More

2.09

1.77

More

efficient
Accounts

receivables 14.01

5.63

turnover

More

efficient
9.37

4.66

More

efficient

Total Asset Turnover

0.57

0.41

More

efficient
0.52

0.38

More

efficient

Number of days of 131.97

186.85

More

efficient
174.60

213.30

More

efficient

inventory
Number of days of 26.05

82.05

38.95

80.83

More

efficient

receivables
Operating cycle

More

efficient

158.01

268.90

More

efficient
213.55

294.13

More

efficient

efficient

Fu-Wangs inventory management is stronger than industry average, thats what is reflecting its
inventory turnover ratio and period. Inventory turnover and accounts receivables turnover are
increasing year to year comparing to the industry average. These refer the company is increased its
efficiency on inventory management and also that the business is expanding year to year. The time

period for replenishment is very less than industry average in each year. Operating cycle is also
more efficient and is very less than industry average. These indicate they held their supplier better
than any other firms in industry by expanding their business day by day (year to year). Indeed, it
is better to have small these ratios which reflect firm is sincere enough about their creditor. In the
case asset, total asset turnover ratio is saying Fu-Wangs has increased its sales respect to the
industry average.

Market Ratios: The market ratios show that on average the company enjoyed positive growth.
Item

EPS

Fu Wang

Industry

Compared

Fu Wang

Industry

Compared

2012

Avg.

To

2013

Avg.

To

2012

Industry

2013

Industry

1.43

Neutral/Good

0.96

Negative

1.42

26 | P a g e

0.72

Figure: Fu-Wangs Market Ratios

The earning per share dictating declining no dividend should be declared unless get back the
previous position. But Fu-Wangs done the opposite dividend was greater than the industry while
earning per share declining. It is just somewhat deception with its shareholder.

Profitability Ratios:
Item

Gross Profit

Fu Wang

Industry

Compared

Fu Wang

Industry

Compared

2012

Avg.

To

2013

Avg.

To

2012

Industry

2013

Industry

0.30

Slightly Less

0.27

Slightly Less

0.28

Margin
Operating Margin

0.25

profitable
0.14

0.20

Less

Profitable
0.10

0.16

profitable
Net Profit Margin

0.15

0.10

More

Less
profitable

0.07

0.07

Neutral/Good

0.05

0.06

Slightly Less

profitable
Operating return on asset

0.08

0.08

Neutral/Goo
d

ROA

0.08

0.05

More

profitable
0.04

0.03

profitable

ROE

0.10

0.07

More

More
profitable

0.05

0.04

profitable

More
profitable

Figure: Fu-Wangs Profitability Ratios

Though Fu-Wangs Gross Profit Margin is slightly less profitable comparing to the industry average,
but Fu-Wangs Net Profit Margin is more profitable comparing to the industry average. So the
company is in a good position.
Fu-Wangs Return on asset (ROA) and Return on equity (ROE) comparing to the industry
average refer it is more efficient on utilization of asset, financial expense and sales as well. So
the company is in a better position.
27 | P a g e

Debt Management Ratios: Debt Management Ratios indicates how the company is financed and
also indicates the riskiness of the firm.
Item

Fu Wang

Industry

Compared

Fu Wang

Industry

Compared

2012

Avg.

To

2013

Avg.

To

2012

Industry

2013

Industry

Total Debt to Assat ratio

0.04

0.11

Less Debt

0.04

0.11

Less Debt

Total Debt to equity

0.05

0.24

Less Debt

0.05

0.24

Less Debt

Equity multiplier

1.29

1.39

Less Debt

1.32

1.40

Less Debt

Time Interest coverage 0.75

1.61

Bad

1.41

1.67

Not Good

ratio
Figure: Fu-Wangs Debt Management Ratios

Total Debt to Asset ratio and Total Debt to equity measure the percentage of funds provided by
creditors. Creditors prefer low debt ratios because the lower the debt ratio, the greater the
cushion against creditors losses in the event of liquidation. Stockholders, on the other hand, may
want more leverage because it magnifies expected earnings. Fu-Wangs Total Debt to Asset ratio
and Total Debt to equity less than the industry average in both the year 2012 and 2013. The more
the equity the more the company is liquid.
Times Interest coverage ratio measures the extent to which operating income can decline before
the firm is unable to meet its annual interest costs. Failure to meet this obligation can bring legal
action by the firms creditors, possibly resulting in bankruptcy. Fu-Wangs Times Interest
coverage ratio in 2012 is very lower than the industry average. But in 2013, it is close to the
industry average. It is positive sign for Fu-Wang Ceramic Industry (Bangladesh) Limited.

28 | P a g e

CONCLUSION
The prospect and the future of Bangladeshi Ceramic tiles companies lies not only in this region
but it spreads across the country. I would like to produce some of the evidences aligning with
this and with this I would like to conclude our projectWe used financial ratio analysis to analyze the financial performance and financial soundness of
the selected ceramic companies. Ratio analysis is certainly a very admirable device because it is
simple and it has a predictive value.
Not all four companies hold much of market share but some of them trying to hold more market
shares. And also some of them hold more liquidity condition and more efficient in companys
Asset efficiency or Turnover ratio, especially in RAK & Fu-Wang Ceramic company. In terms of
Profitability ratios, they are trying hard to make more profit, in fact RAK Ceramic made notable
profit. However they all are sunk in more debt except Fu-wang Ceramics Industry Limited.

References
1. Company websites
2. Annual reports (2012-2013)
3. Magazines, web-articles and cataloguese
4. Dr. Yousuf Kamal (2014), Financial Statement & Ratio Analysis, lecture, DU.
5. About.com.,

(2014),

Financial

Ratios,

http://beginnersinvest.about.com/od/financialratio/

29 | P a g e

Investing

for

Beginners,