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Assessment of Managerial Finance Topics: Comparative analysis of financial statement between two Textile Company’s
Instructor : Y. A. M. Rafiqul Haq Course Title: Managerial Finance Department of Business Administration
Mahfuza Akter(+8801556341735) ID : 10206038 Chand Sultana(+8801556341735) ID : 12106018 Dilshad Jahan(+8801726809130) ID : 12106009 Nahida Refayat(+8801711505714) ID : 11106012 Azma Jahan Noor(+8801914879531) ID : 11106001
U niversity of A sia P acific
Department of Business Administration
Date: June 08, 2012 To Mr. Y. A. M. Rafiqul Haq Department of Business Administration, Course of Managerial Finance The University of Asia Pacific.
From: Mahfuza Akter Mili ; Chand Sultana ; Dilshad Jahan ;Nahida Refayat & Azma Jahan Noor.(Students of MBA) Subject : Prayer for accepting our Assigment .
As you said in the class, we have formed a group consisting of five (05) members and we have prepared our assignment as your given topic .The group names of members are stated below:
Group members: Mahfuza Akter(+8801556341735) ID : 10206038 Chand Sultana(+8801556341735) ID : 12106018 Dilshad Jahan(+8801726809130) ID : 12106009 Nahida Refayat(+8801711505714) ID : 11106012 Azma Jahan Noor(+8801914879531) ID : 11106001
Therefore, we will by highly obliged if you accept our this Assignment.
First of all we would like to thanks to all mighty ALLAH that HE courage us to complete this Assignment. We would like to thank all of other helping hands who were with us to make this assignment possible. We also would like to thanks our honorable course instructor Y. A. M. Rafiqul Haq Of Managerial Finance , Department of Business Administration in the University of Asia Pacific to giving me the opportunity to prepared this assignment.
Table of Contents
Abstract Object Limitation Source Of Data Methodology Scope Introduction Saiham Textile Mills Ltd Ashraf Textile Mills Ltd Findings & Analysis Balance Sheet Comparison Income Statement Comparison Financial Statement Analysis By Ratio Liquidity Ratio Current Ratio Quick Ratio Debt-To-Equity Total Asset Turnover Ratio Account Receivable Turnover Inventory Turnover Ratio Profitability Ratio Gross Profit (Gp) Ratio Conclusion Recommendation Bibliography Annexer 01 02 02 02 02 02 03 03 03 04 04 04 05 05 05 05 06 06 06 06 07 07 08 08 09 10
The purpose of this assignment is to evaluate, analyze and compare the financial statements between two Company’s & I have chosen these two companies on the basis of their financial performance, they are also listed on all major stock exchanges of the country. After researching, surveying, observing, collection of data, I have arrived at the written analysis follows hereafter. As the requirement of the report, I have conducted a detailed study of the analysis the financial statements and ratios. On the basis of above information, I have arrived on specific recommendations from strategic management’s viewpoint. I have supported suggestions through strategic theories, matrices and exhibits, present in the report. The report includes the whole financial status of both the companies through which a reader can get the financial strengths & weakness of both the organizations. The fundamentals of the research is to build the reader’s capability to evaluate the financial data & information into projective manner as to compare the financial stability & growth with each other in consequence either for enhancement & for decrement.
This assignment is carried out as the analysis of of financial statement between two Textile Company’s To Analysis for Profit and Loss A/c, Balance Sheet and Cash flow statement; the financial ratios is also analyzed. The analysis is based on a year-to-year comparison of a firm's ratios, The comparison of Balance Sheet accounts either using ratios or not, to get useful information and draw useful conclusions A comparison of relationship among account balances To simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business.
We When we prepared this report all necessary data is not available. For this we assume some of the data to complete the report. On the other hand when we go to collect the financial statement we were unable to found our needed statement books. Finally, one limitation was on shortage of knowledge that was reduced to make this report a better one. And Time was major constraint.
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.
As a rule, we had to follow a particular method for collecting data to complete the report accurately. At first we make Income Statement, Balance Sheet & Cash Flow on a excel sheet. Than we analysis the Income Statement & the Balance Sheet using the common sizing & indexing method. Finally we used the eleven financial ratios for our ratio analysis.
We worked on Ashraf textile mills ltd. & Saiham textile mills ltd for our report and achieve knowledge about the financial statement of textile company and also gather knowledge how could we analysis any company’s efficiency, profitability and stability by ratio analysis.
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 & we identify their comparative advantage
Saiham Textile Mills Ltd
Saiham Textile Mills Limited is one of the known names in the textile industry, which has been operating for more than 20 years. Over the years Saiham has been a familiar name to the people of middle and lower middle income as it has been providing quality products at a very reasonable price. The products of the company have been pretty much good in quality and targeted to substitute the imported fabrics for the end users. It can be said that the company has achieved some degrees of success as it has proved to be a strong local company, which has created its own position in the local market.
Ashraf Textile Mills Ltd
Ashraf textile mills ltd is one of the another company which is run and managed by relatives, the standard and efficiency of the management does not compromise on its quality.
Findings & Analysis:
According to our report subject our main objective is identifying the difference between two companies financial statement. Also we want to find out which company is more stable & which is not stable. From the financial statement we can find out our requirements. In below we give our finding & analysis in basis of company’s financial statement. Analyze of Income Statement, Balance Sheet between two companies’: In below we are going to discuss about the two companies balance sheet, Income Statement flow comparison in a briefly:
Balance Sheet Comparison:
From the balance sheet of the both companies we can identify that Saihan textile had 6,400,688 Tk. total assets in 2008 but on the other hand Ashraf textile had only 5,910,353 Tk. total asset in 2008. Next year both company’s total assets were increase. Ashraf textile reached in 6,223,788 Tk. whereas in 2009-2008 Saiham textile’s total asset 12,454,493 Tk. For the total asset volume we can say that Saiham textile has more powerful rather than Ashraf textile.
The total liability we saw that Ashraf textile had 3,971,219 Tk liabilities in 2008 & Saiham textile had 2,665,482 Tk. only in 2009.Shiham textile liabilities was also increased and reached 3,170,512 Tk the other hand Ashraf textile’s liabilities was decrease and reached 3,774,164 Tk. But clearly we can comments that Saiham textile had least liability than the Saiham textile. How ever Saiham textile had the more Net asset than the Ashraf textile.
Share Holder’s Equity
we can easily understand that Saiham textile had the more equity and it was 9,283,981 tk for 2009-2008 & Ashraf textile had 2,449,624. So we can say that Saiham textile had the more investment in the market.
Income Statement Comparison:
From our income statement we can identify that Saiham textile has a profit 646,323 Tk. in 2008 & 454,564 Tk in 2009 . From this we can say that the profit is decreasing by next years. On the other hand Ashraf textile is in a profit of 314,149 tk in 2008 & 510,493 tk in 2009 & -14,064,257. Both conmany’s continue their business in profit where Ashraf textile doing their business with profitability.
Financial Statement Analysis By Ratio:
A comparison of relationship among account balances. The term accounting ratio is used to describe significant relationship between figures shown on a balance sheet, profit and loss account or in any other part of accounting organization. Profitability-its ability to earn income and sustain growth in both short-term and longterm. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations; Solvency-Its ability to pay its obligation to creditors and other third parties in the longterm; Liquidity-Its ability to maintain positive cash flow, while satisfying immediate obligations; Stability-The firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators For the performance measurement of Ashraf textile & Saiham textile mills Ltd. In below we are going to analysis about the two companies financial statement using ratio analysis. Here are belongs:
The test liquidity ratio defines that how quickly a firm or an organization transform its assets, cash securities; inventory & others into the form of cash its also enable the decision maker to make corrective & proactive decisions which impact as increment in profitability of the organization or firm.
Current assets divided by current liabilities. It shows a firm’s ability to cover its current liabilities with its current assets. Ashraf textile current ratio is 1.54 times in 2008 and 0.97 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 was 1.35 in 2008-07 & next year 2.16 but it also be below the Industry average. In the last year for both company we suggested that the current liabilities couldn’t be covered if existing current asset are liquated at their book values.
Current assets less inventories divided by current liabilities. It shows a firms ability to meet current liabilities with its most liquid assets. Ashraf textile Quick r ratio is 1.08 times in 2008 and 0.97 times in 2007 which . Here we see that Quick ratio has been also decreased. On the other hand Saiham textile Quick ratio was 1.23 in 2008-07 & next year 2.06 then we can easily identify that Saiham textile has good position than the Ashraf textile
Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. It is also known as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company. If we consider the year 2009 of Ashraf textile, the ratio is 2.54 that creditors are providing for each 1Tk. In the case of Saiham textile in 2009-2008 the ratio is 1.34 that Creditors are providing. So we can say that Ashraf textile is in a better position than the Saiham textile.
Total Asset turnover Ratio:
The final asset management ratio, the total asset turnover ratio, measures the turnover of all assets, it is calculate by total sales by total assets. In 2008 Ashraf textile total asset turnover ratio was 0.39 & 0.46 in 2009 on the other hand Saiham textile was 0.54 & 0.28. Ashraf textile ratio is more than Saiham textile. But the both company is below the industry average and also go down in less then 1 so, indicating that the both companies are not generating a sufficient volume of business given its total assets investment, sales should be increased and some assets should be disposed of, or a combination of these step should need be taken.
Account Receivable Turnover: We can measure how the ratio use to the assets
liquidity of the receivables is receivables turnover it measures the number of times on average, the company collects receivables during the period. We compute receivables turnover by dividing net credit sales (net sales less cash sales) the average net receivables. Unless seasonal factors are significant, average net receivables can be computed from the beginning and ending balances on the net receivables. The receivable turnover ratio provides insight into the equality of the firm’s receivables and how to successful the firm is in is collections. Ashraf textile turnover ratio was 26.53 & 51.27 in the year of 2008 & 2009 and Saiham textile became 177.08 & 131.69 in the following year .we can easily identify a dramatically different between these companies Eventually we can say that Ashraf textile was received turnover position is than the Saiham textile.
Inventory Turnover Ratio: 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 Cost of good sold. Ashraf textile’s inventory turnover was 61.46 in the yea 2008 and becomes 79.34 in the year 2009 on the other hand Saiham textile was 70.21 and decrease in the year and become 63.86. Here we see that both companies are stand mostly in a seminal stage in case of inventory activity and also stand a good position.
Profitability ratios (also referred to as profit margin ratios) compare components of income with sales. They give us an idea of what makes up a company's income and are usually expressed as a portion of each dollar of sales. The profit margin ratios we discuss here differ only by the numerator. It's in the numerator that we reflect and thus evaluate performance for different aspects of the business: The gross profit margin is the ratio of gross income or profit to sales. This ratio indicates how much of every taka of sales is left after costs of goods sold.
GROSS PROFIT (GP) RATIO:
Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. The basic components of the calculation of gross profit ratio are gross profit and net sales. Gross profit would be the difference between net sales and cost of goods sold. Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. As the gross profit is found by deducting cost of goods sold from net sales, higher the gross profit better it is. There is no standard GP ratio for evaluation. Ashraf textile gross profit in the year 2008 was 32.26% and becomes 38.01% in the year 2009 where the gross increased and Saiham textile in the year 2008 was 31.52% and the next year decrease and reached 18.56% which is a measure of the efficiency of the firm’s operations, as well as an indication of how products are priced and we saw that Ashraf textile has relatively more effective at producing and selling products above cost.
We examine the analysis of Ashraf textile & Saiham textile mills ltd. We see that the liquidity position is nit good both of the company. The industry average is better than the both companies because almost every ratio of the industry is high with comparison to the company in case of liquidity, leverage, asset management, profitability and market value measure is better of textile industry, industry performance is better and improving every year, in conclusion company and industry is doing well and in future growth is take place which increase the revenues and dividends and it better for the country.
Saiham Textile Mills Ltd & Ashraf Textile Mills Ltd Which are profitable companies, but both of the companies need to increase their liquidity and asset management position. On the other hand they should pay their liabilities as soon as they can, and increase its owner’s equity than its liabilities. Cost and expenses should be reduced so the company can generate more profit. Company should sale their shares on the high market rates and pay more dividend to their investors.
(i) Annual report -Ashraf textile mills ltd. For the year of 2008, 2009 -Saiham textile mills ltd. For the year of 20082007 & 2009-2008
(ii) Fundamental Of Financial Management (10th edition) (iii) Fundamental Of Corporate Finance (8th edition)
-Brigham Houston -Ross, Westerfield, Jordan
1. Saiham Textile Mills Limited
Balance Sheet As At June 30, 2009
2. Saiham Textile Mills Limited
Profit And Loss Statement Fore The Year Ended June 30, 2009
3. Ashraf Textile Mills Limited
Balance Sheet As At June 30, 2009
4 Ashraf Textile Mills Limited
Profit And Loss Statement Fore The Year Ended June 30, 2009
5.Working Of Ratio Analysis 6.Presetion By Graph Or Chart
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