CHAPTER: - I

Introduction

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1.1 Introduction:
Agro-industry is an industry that uses or processes agricultural products as raw materials in
its production process (Hsu, 1997).The agro-industry provides the crucial farm-industry
linkage which helps accelerate agricultural development by creating backward linkages
(supply of credit, inputs and other production enhancement services) and forward linkages
(processing and marketing), adding value to the farmer's produce, generating employment
opportunities, and increasing the farmer's net income.
Agriculture is the single largest producing sector of the economy since it comprises about
18.6% of the country's GDP and employs around 45% of the total labor force. The
performance of this sector has an overwhelming impact on major macroeconomic objectives
like employment generation, poverty alleviation, human recourses development, food
security & export diversification.

Bangladesh economy depends heavily on agriculture. GDP from Agriculture in Bangladesh

increased to 10739.10 BDT Million in 2019 from 10468.80 BDT Million in 2018. GDP From
Agriculture in Bangladesh averaged 9012.60 BDT Million from 2006 until 2019, reaching an
all time high of 10739.10 BDT Million in 2019 and a record low of 7017.10 BDT Million in
2006. Constant researches are being done in order to obtain advanced technologies so that
new crops can be created and irrigation, harvesting and such steps of cultivation can be done
more efficiently so that we, as a country, can attain food security. Agro based sector is
continuing to grow with the use of advanced technology and modern machineries. In
Bangladesh agricultural sector refers to crop cultivation (mainly rice, jute, wheat, sugar,
cotton, vegetable, tea, tobacco etc.), animal farming (poultry, dairy etc.), forestry, fisheries
and other related services etc.

A rising middle class (estimated at over 30 million) has fueled demand for high quality
agriculture products. According to the Bangladesh Bureau of Statistics (BBS), for FY 2014-
15 (provisional estimate), crops, livestock, fisheries, and forest products account for about 16
percent of Bangladesh’s total GDP and employs approximately 47 percent of the total
population. Most agricultural production in Bangladesh is characterized by traditional
subsistence farming. Bangladesh produces a variety of agricultural products such as rice,
wheat, corn, legumes, fruits, vegetables, chicken meat, fish, and seafood. Rice is considered
the main staple in the Bangladeshi diet. Less arable land and limited natural resources
increase the importance of developing new agricultural technologies, such as salt tolerant or
submergence tolerant seed varieties, to help increase productivity for future demand

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needs. Strikes, floods, cyclones, and drought also can affect agricultural productivity levels
and incomes.
1.2 Origin of the Report:
Students has a reason to complete the program and the important reason is to face the real
corporate working environment in the practical life and let the student learn about the
practical experience in real working sector by using the four years theoretical knowledge. It is
an important part for all the graduate students from North East University Bangladesh
(NEUB). I completed my internship program on the Alim Industries Limited and I prepared
my internship report based on this company. It is very important part for me to complete my
BBA graduation and the supervisor of the program is Ishrat Sharmin who is the Lecturer of
North East University Bangladesh (NEUB). It is the result or feedback of three months
hardworking under Alim Industries Limited.
1.3 Objective of the Report:
1.3.1 General Objective:
To evaluate the financial performance of Alim Industries Limited based on financial
management procedures Agricultural Product sells to the farmers and the corporation and
how it impacts on the agriculture sector by using the product.
1.3.2 Specific objective:

 To analyze the financial statements of Alim Industries Limited.

 To calculate the different types of financial ratios of the company.
 To know the financial condition of the company.
 To know the company’s financial development for last five years.
 To understand the financial performance of Alim Industries Limited on different areas
such as liquidity, profitability and solvency.
 To assess the company’s effectiveness and weakness in these segments.
 To make recommendations to improve in these areas where it is needed.
1.4 Methodology of the study:
To make the report more meaningful and presentable, I have use web site and documents.
Information for this Report is mainly collected from various secondary data sources.
1.4.1 Secondary Sources:
Information related to the company, is collected from internal and external sources the
annual report and official website, Company’s own publications- Different articles and
various Business publications in the internet.
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1.5 Limitation of the Study:
I was working in the Alim Industries Limited for three months as an intern and it seems very
short time. But it was a great opportunity for me to working under them and the environment
of the Alim Industries Limited office was very friendly. Every one of my department always
treat me well. Although we know that there has some norm, rules and restriction in every
firm. That’s why I had to face some limitation to collect the information for preparing the
report.
 Large scale investigation was not possible due to time constraints.
 The study was conducted only within few employees of Alim Industries Ltd (Head
Office).
 Relevant data and documents collection were difficult due to the organizational
confidentiality. 4
 Relevant papers and documents were not sufficient.
 Lack of my prior knowledge about this agro machinery business and product of Alim
Industries.
1.6 Literature review on financial performance of Agro Machinery
Business:
Bangladesh is ranked in the eighth place in terms of world population statistics and the most
densely populated country that has a weak economy. In the economic activities most of the
labor forces i.e. around 60% are engaged in agricultural activities. As like as other developing
nations, Bangladesh has an agriculture controlled economy of low per capita earnings and
huge population (Azmat, 2009). Bangladeshi economy largely depends on agriculture and
agricultural growth heavily relies on rural progress (BBS, 1999; UO, 2005).
1.6.1 Agricultural Machineries business in Bangladesh
Agriculture Machineries Industry or business is not new in Bangladesh. This Business was
started in 1962 with Deep tube well and Power Tiller by Pakistan Agriculture Development
Corporation. After the independence of Bangladesh, This sector goes under the Ministry of
Agriculture, Bangladesh and Bangladesh Agriculture Research Institute (BARI) and
Department of Agriculture Extension (DAE) wings are the main supervisors or monitor of
this sector. For the irrigation of the land water pump concept was introduced in 1974. Uses of
power tiller diesel engine become popular during the beginning of 1982 with the investment
of self interested people. The Chittagong Builders is one of them. After that by the
withdrawal of import duty on agro machineries in 1984, privatization of this sector gets more

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speed. Tractor was first introduced in Bangladesh in 1985 by The Metal Pvt Limited. But it
started to get popularity from 1999.At present Total Tractor using population in our country
is 20000. Agricultural Engineers of Bangladesh Agriculture Research Institution is working
on the development of new technologies and its uses in Bangladesh for the betterment of our
farmer and our agriculture sector. Up to now this institution successfully introduced many
modern agro machineries to the farmers like: High Speed Rotary Tiller, Crop cutting
Machine, Hand and Power operated corn Harvesting machine, Potato withdrawal Machine,
Mango Picking and grading machine etc. This institution along with farmers also provides
training to different companies on manufacturing, operating and maintenance of these
machines.
1.6.2 Financial Performance Evaluation:
The financial performance evaluation is to carry out an evaluation and analysis of the
financial status of a company so as to reflect its financial situation and developing trend on
the basis of the financial indexes reflected in its financial statements. It provides important
financial information for the company to improve its financial performance and decision-
making process (Zhang, 2007).
1.6.3 Firm Financial Performance:
Domestic and foreign scholars already have a unified view on the definition of the firm
financial performance. In general, Shi Qi (2009) defined the firm financial performance as
the firm operating results within a comprehensive reflection by the situation of profitability,
asset quality, financial risk and business growth conditions etc. Zhang (2010) defined the
firm performance as the results or outcomes of firm during a certain operating period; and
defined financial performance as the performance measured by using financial ratios. Firm
financial performance evaluation refers to the suitable and scientific evaluation for firm
operating effectiveness and operators’ performance by using financial ratios. Its definition is
related to the selection of financial ratios, ratios system establishment and the use of what
kind of evaluation method etc.
1.6.4 Relation between traders and Farmers:
Market based reforms identified many small traders have came into view since last few years
who are linked with agricultural inputs trading. In many cases they lack knowledge, technical
know-how, skills, and efficiency to take benefit of free market economy. Most commonly
they do not highlight on good brand name, constructive image, and reliable association with
farmers which work sometimes but do not work in long run. Their main focus is only earning
profit while they ignore responsible behavior. For power tiller mechanic, dealer etc. traders
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play important role in farmer’s buying decision. If these traders do not communicate to their
consumer’s effectively high quality power tiller may remain unknown towards farmers.
For developing agricultural sector, more and more credit sales system should be introduced
all over the country for agricultural machineries like power tiller, pump, harvester etc. in this
way crop production can be efficient and farmers can be benefited (M. A. QUAYUM, 2012).
1.6.5 Supply chain of agricultural machinery Sub-Sector:
A common supply chain of Agriculture Machinery sub-sector in Bangladesh is delineated in
Figure 4, which involves importers, raw material traders, foundry or foundry cum AM
manufacturers, spare parts manufacturers, wholesalers and retailers. The channels are
identified based on the core business unit, i.e., the producers. In forward linkage, the channels
are up to the consumers i.e., the farmers. On the other hand, in backward linkage the channels
go down to the importers. The core business unit is fragmented and small. In general, the
more integrated (foundry and machine shop under the same shed/factory) the units, the more
capital-intensive they are. The integrated units also have fewer intermediaries. It was
recognized that the integrated units mostly have their own outlets for both wholesaling and
retailing.
1.6.6 Business Development Service (BDS) provisions and potential service providers:
Major constraints of agricultural machinery sub-sector along with business
development services (BDS) provisions and potential providers
BDS Constraints Business Development Services Service Providers
 Lack of skill related to iron,  Provisions for skill development on  Public sector
alloy and brass casting, heat iron, brass and alloy casting, and heat training institutes:
treatment; fabrication and treatment of metals to workshop and BITAK, BUET,
machining; R & M of AM; foundry technicians BMTF,
and marketing and financial  Provisions for skill development on Development
Skill management training at the machine fabrication and machine partners
development producers as well as service operation to workshop technicians  Public and private
providers level  Provisions for knowledge and training institutes;
information on basic operation, repair Manufacturing
and maintenance to farmers, custom- workshops; DFPM
hire service providers and mechanics of BAU
 Private training
 Provisions for skill development on institutes;
marketing and financial management Manufacturing
to management personnel workshops; DFPM
of BAU
 Public and private
 Provisions for strengthening training institutes
 Lack of ability to collectively capAlimty of Foundry Owners’  Business
safeguard the interest of the Association of Bangladesh (FOAB), associations,
sub-sector Bangladesh Shilpa Malik Samity Development
(BSMS) and Bangladesh Agricultural partners, NGOs
Machinery Manufacturers Association
(BAMMA)

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  Lack of information related
to market size and cluster,
and production technology at
producers’ level
 Lack of Bangla operation
Information and maintenance manual of
services AM for mechanics, custom-
hire service providers and
farmers
 Lack of modern capital
machinery
 Lack of testing and
standardization fAlimlities in
Product Bogra and Jessore
development  Lack of innovation and
continuation of AM
 Lack of supply of quality raw
Input supply materials
 Lack of uninterrupted supply
of electricity
Business  Lack of working capital and
development finance for capital machinery
Policy  Lack of appropriate policies
advocacy and regulations on
mechanization, importation
of capital machinery and
multiple VAT on imported
raw materials
 Provisions for access to market  AM business
information about market size, associations, GO
clusters of market and potential for (Ministry of
export market to producers and sellers information and
 Provisions for easy access to Bangla foreign affairs),
operation and maintenance manual to Development
mechanics, custom-hire service partners
providers and farmers  Private firms, NGOs
 Provisions for access to information  BUET, BAU, BRRI,
on modern technology and capital BARI, GO, NGO,
machinery Development
 Provisions for establishing common partners
fAlimlity centers for testing and  GO, Private sector,
standardization in Bogra and Jessore Development
 Provisions for establishing ‘Central partners
Institute of Agricultural Engineering  Government,
(CIAE)’ for continuation of Development
innovation through R&D partners
 Provisions for uninterrupted supply  Business
of quality raw materials to associations, GO
manufacturers
 Provisions for preferential treatment  PDB, PBS, Ministry
for supply of electricity to AM of Energy
manufacturers  Public and private
 Provisions for easy access to soft and sector banks, GO
flexible long and mid-term credit policy support
fAlimlities
 Provisions for appropriate policies  Business
and regulations on mechanization, associations
preferential treatment on capital
machinery importation and multiple
VAT on imported raw materials

1.7 Market of commercial vehicle in Bangladesh:

In current scenario the size of the commercial vehicle is around bd 3500 crore. But in other
case it was about bdt 1500 crore a long ago. It’s been 40,000 units of vehicles such as bus,
truck, auto-rickshaw, cargo van, human-hauler, pickup and tanker were sold last year. It is
higher than 2,000 units 10 years ago. This growing demand will continue to grow more in the
next 10 years. Bangladesh Road Transport Authority (BRTA) showed it registered 7,808 unit
of trucks in the seven months to July last year. The number was 7,275 units in 2018 and
6,330 units in 2017.
The automotive industry in Bangladesh is largely dominated by imports of reconditioned and
new vehicles, mostly from Japan, China, and India and a few from Europe and the US. The
automobile manufacturing and assembling industries have not grown in Bangladesh in the
last three decades because of a lack of raw materials and the backward linkage.

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But, it is expected that the local entrepreneurs will soon go for automobile manufacturing in
the country.
1.7.1 Farmer categories:
Data were collected (Table 1 & 2). The questionnaire survey with the farmer was based on
the present condition of agricultural practice and level of mechanization. The interview with
the manufacturers, entrepreneur and other respondents was based on thequantity of
machinery produced, distributed and marketing agents for establishing mechanization.
Table -1 Different farmer categories
Type of farmers Number of farmers
Landless (less than 0.2 ha) 17
Small (0.2-1.0 ha) 23
Medium (1.0-3.0 ha) 21
Large (3.0 ha and above) 19
Total 80

Table 2Information of different actors for mechanization

Respondent/Actor Nabiganj Sylhet Sadar Golapganj Total per
category
Manufacturer 17 1 1
Wholesaler and Retailer 1 2 1 4
Raw materials trader 2 2 1 5
Service providers 4 3 3 10
Farmers 37 23 20 80
Total 100

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 CHAPTER: - II

Company Overview of Alim Industries Limited

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2.1. Company Profile:
Alim Industries Ltd. was established in 1990 at the BISCIC Industrial Estate, Gutatikar,
Sylhet. Late M. A. Alim Chowdhury was the mastermind behind establishment of the
industry. In fact the industry is the definitive manifestation of his long-cherished ingenious
vision of the founder.

Since the inauguration of his career, applied technology became the centre point of Alim
Chowdhury's dream and aspiration. Industrial backwardness of the Sylhet region disheartened
him constantly. In particular, the question of transforming from conventional to modern
mechanized system of cultivation for changing the destiny of our poverty-stricken rural
peasants spellbound his imagination from the very beginning of his career.
Before stepping into a permanent line of entrepreneurial involvement, he participated on
experimental basis, in some flourishing ventures for sometime but those proved too
insignificant to accommodate his big inventive ideas. He went on exploring viability of wider
range of ventures seriously until a draft plan could be contemplated by him which
subsequently came into being as the New Engineering Works Ltd. in 1978.
An aggressive preparation and homework was completed before taking real practical steps.
Considering the unique local concentration of tea industry in Sylhet district i.e., the newly
found industry specialized in tea processing machineries.
Simultaneous with manufacturing activities, the newly found Alim Industries Ltd. also
highlighted Agro-machineries Development and Research as a major organizational objective
for flaming market challenges with a constantly updated quality of services.
Initially, the Alim Industries Ltd. started with M. A. Alim Chwdhury as the Chairman, Gulam
Rabbani Chowdhury as the Managing Director, Alimus Sadat Choudhury the Executive
Director and Mr. Alimul Ahsan Chowdhury as a Director.
In 2004 after the bereavement of our beloved founder Chairman M. A. Alim Chowdhury, the
positions of Chairman and Executive Directors were re-organized. Since then on, the founder
Executive Director Alimus Sadat Chowdhury has been discharging the responsibilities of
Chairman and Mr. Alimul Ahsan Chowdhury took over as Executive Director.
After increase of our business growth recently in 2011 Alim Industries Ltd. re organized the
executive committee with Mr. Alimul Ahsan Chowdhury as the Managing Director, Alimus
Sadat Chowdhury as the vice Chairman and Gulam Rabbani Chowdhury as the Chairman.

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2.2 Company History:
Alim Industries Limited was established in 1396 Bengali Year (1990 AD) in the South
Surma, BSCIC Industrial Estate. To provide complete machinery Based Agricultural solution
to our farmers, to improve research, develop and manufacture better agro machineries, Alim
Industries Limited has always strived to achieve the very best. We have performed and
demonstrated with our machineries throughout the whole country, round the year. To get the
farmers acquainted with out all sort of field machineries, we arrange field demonstrations,
fair, road show, free servicing and campaign. Through these activities we show and train the
farmers how to get the best result using our machines and methods, how to minimize the
cultivation cost, how to keep the land fertile, use surface water, reduce the use of artificial
chemicals, pesticides and fertilizer. By transforming the traditional farming methods into
farm mechanization system we have been developing, improving, manufacturing our
different machineries such as power tiller, paddy- wheat power thrasher, maize power
thrasher, power reaper, Winnower, Drum Seeder, Power Tiller Operated Seeder, Dryer
Machine. Alim Industries Limited has been manufacturing its own developed and designed
products, at the same time we have been manufacturing machines designed by different
government research organizations such as BARI, BRRI, IRRI. All the products
manufactured by Alim Industries Limited is patent designed trademark and copy right
protected.
2.3 About of Alim Industries Limited
Alim Industries Ltd an ISO 9001:2008 certified company is a leading agro machinery
manufacturer, researcher, developer, exporter, importer & marketer in Bangladesh located in
BSCIC I/E, Gutatikor, Sylhet consisting of six units of production plant including the main
factory. AIL has registration of Patent, Design, Copy right and Trademark on its all products.
It was registered by the joint stock company on 24-07-1990as a Pvt. Ltd. Company that is
well reputed both in nationally and internationally.
It is a matter of great pride that we achieved the highly prestigious President Award &SCB
Agro-Award for our unparallel contribution to Agriculture sector of national development
for production of top efficacy agro-machinery and unrelenting technical research in the
sector.
Alim Industries is expanding facilities to make farm machinery to meet the rising demand
from growers in the face of gradual decline in farm workers, said the company.

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The move comes after the National Board of Revenue (NBR) offered duty concession on
import of certain parts for the first time in fiscal 2016-17 to encourage local manufacturing of
power tiller, power thresher, power reaper and power seeder.
The revenue authority said it would charge only 1 percent duty on import of certain
machinery parts.
The locally-manufactured agri-machinery would be 15-20 percent cheaper than the imported
ones if the government maintains the concessionary rates, said Alimul Ahsan Chowdhury,
managing director of Alim Industries.
The company, which is based in the northeastern district of Sylhet, is now awaiting the green
light from the agriculture ministry, the permission of which is needed to enjoy the duty
benefit.
“The Company to start making power reaper and power tiller from December”
Alim's efforts come at a time when farmers are preparing nearly 90 percent of the farm land
by power tillers and tractors and threshing more than 90 percent of their grains by machines.

In addition, a large portion of land is also irrigated by machines -- a transition that has created
a huge market for farm machinery and spare parts, and it is growing in the face of rising farm
wages amid falling supply of farm labourers, according to stakeholders. Imported farm
machinery meets most of the demand in the absence of adequate domestic manufacturing.

For example, 40,000 new power tillers enter the market every year and 95 percent of the
quantity is imported, according to industry insiders.
There is no authentic data regarding market size of agricultural machinery in Bangladesh,
Chowdhury said, adding that Alim Industries, the oldest agri-equipment maker in
Bangladesh, has been logging in 15-20 percent annual growth.
He urged the Bangladesh Bank for including agricultural machinery in the list of agro-based
industries so that the sector can get low-cost loans and keep their production costs low.
He also called for tax breaks to encourage investment by existing and new investors in the
sector.
Sheikh Md Nazim Uddin, director of farm mechanization project under the agriculture
ministry, said they visited the plant of Alim Industries and found that the company is
developing infrastructure and bringing capital machinery.
“We have submitted our recommendation to the ministry.” The government is also planning
to frame a policy on farm mechanization in order to ensure development of the sector,
according to Nazim Uddin.

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The existing agricultural policy has given emphasis on mechanization. “But a separate policy
is needed if we want to go for manufacturing and ensure quality of the machinery,” he said,
adding that a draft has already been submitted to the agriculture ministry.

2.4 Mission & Vision of Alim Industries Ltd

Alim Industries Limited has been manufacturing all the agro machineries to meet all the need
from seeding, weeding, applying fertilizer-pesticides, irrigation, harvesting, thrashing,
winnowing, drying and preserving. As a part of the ongoing activity Alim Industries Limited
has been conducting.
 Alim Industries Limited has been exporting to different countries, after meeting
country’s internal requirement.
 Beside creating expert labor force , Alim Industries Limited is being developed as an
Export alternative industry
 Using machineries produced by Alim Industries Limited, farmers can be benefitted
both individually and commercially.
 Saving huge labor cost, investment and time farmers are being self dependent.
 By using high quality locally manufactured machineries we can reduce the
dependency on imported items.
2.5 Company Location
 Alim Industries Limited, BSCIC, Industrial Estate, Gutatikor Kodomtoli, Sylhet-
3100
 info@alimindustriesltd.com
 09611969696 (Hotline) +880821 840662/840664 (office)
 +880821840698

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2.6. Product Profile:
Alim Industries Motors Sell Ploughing Machines, Seeding Plantation Machineries, Irrigation
Machineries, and Fertilizer and Insecticides Applying Machineries, Harvesting Machineries,
Threshers, Post Harvesting Machinery, etc.

pump, light pick-ups and mini trucks, tractors, diesel engine, harvester, rice transplanted, rice
cutter, spray machine

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2.7 Distribution Network:
The Company maintains strategically located sales centers in nineteen different locations
across the country. It has developed an advanced distribution system through its more than
300 skilled and trained manpower and a large fleet over eighty vehicles. The distribution
system is capable of handling continuing volume of diverse range of products from the
various businesses.
The company’s distribution centers are highly streamlined, computerized and automated. We
are capable of maintaining a cold chain for some specialized range of products such as
vaccines and insulin. The combination of this advanced function and multidimensional
capabilities made it possible to handle hundreds of products efficiently.

2.8 Strategic Business Units:

 Alim Industries (Agro-machinery Research, Development & Manufacturer)

 Royal Homes Ltd. (Real Estate Concerned)
 Richmond Hotel and Suites
 Richmond Hotel and Apartments
 Brothers Machinery. (All kind of Machinery parts Importer: Specially Water Pump)
 Alim Agro International (All kind of Agro Machinery Importer, Exporter and Supplier

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2.9 Organizational Structure:

Organizational hierarchy chart

Chairman/CEO

Marketing Chief Financial HR Manager

Manager officer

Business Account Administration

unit head manager

Product Cash R&D

manager Manger

Sales Tax Sales &

manager Manager Marketing

Zonal Accounts
Manager

Operational
Department

2.10 Company Policy:

2.10.1 Quality policy:

Alim Industries and meeting exceeding customer expectations

Alim Industries follows International Standards on Quality Management System to ensure

consistent quality of products and services to achieve customer satisfaction. Alim Motors also
meets all national regulatory requirements relating to its current businesses and ensures that
current Good Manufacturing Practices (CGMP) as recommended by World Health
Organization is followed for its pharmaceutical operations. The management of Alim Motors

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commits itself to quality as the prime consideration in all its business decisions. All
employees of Alim Motors must follow documented procedures to ensure compliance with
quality standards. The pool of human resources of the company will be developed to their full
potential and harnessed through regular training and their participation in seeking continuous
improvement of work methods.
2.10.2 Environment policy
Alim Industries is committed to maintain the harmonious balance of our eco-system and
therefore constantly seeks ways to manufacture and produce products in an eco-friendly
manner so that the balance of nature remains undisturbed and the environment remains
sustainable. In pursuit of this goal, Alim Industries will:
 Comply fully with all local and national environmental regulations.
 Conserve natural resources like water and energy for sustainable development, and
adopt environmentally safe processes.
 Ensure appropriate treatment of all effluents prior to discharge, to prevent pollution or
degradation of environment.
 Ensure appropriate communication and cooperate with internal and external interested
parties on environmental issues.
 Create awareness on environmental issues among our employees and suppliers.
 Adopt modern waste management technology
2.11 Finance and Planning:
Alim Industries Finance and Planning function is the nerve centre of the conglomerate. Being
the nature of the structure, ALIM Finance and Planning plays the centralized role in all kinds
of financial and accounting services. Meaning it handles financial and accounting matters of
not only Alim Industries Limited but also of all of its subsidiaries supporting the mission and
vision of the Group. The major areas of its activities include
 Corporate Finance
 Treasury
 Insurance and risk management
 Costing
 Credit Management
 Accounts payable management
 General accounting

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 CHAPTER: - III
Financial Performance Analysis & Findings

Page 18 of 45
3.1 Introduction:
Financial ratios are useful indicators of a firm's performance and financial situation. Most of
the ratios can be calculated from information provided in the financial statements.

3.2 Using of the Financial Ratio:

The financial statement is the major part of company and it is regularly needed for the
company to measure the company’s operating efficiency. The information contain in the four
financial statements. The financial statement is based on the use of the ratio or relative value
that’s why relative is the main word here. To analysis and monitoring the firm performance
can be possible by calculating and understanding of the financial ratios. The income
statement and the balance sheet are the fundamental input to ratio analysis.

3.3 Types of Ratio Comparisons:

Ratio analysis is not merely the calculation of a given ratio. More important is the
interpretation of the ratio value. A meaningful basis for comparison is needed to answer such
questions as ―Is it too high or too low and ―Is it good or bad?‖ Two types of ratio
comparisons can be made:
3.3.1 Cross-sectional Analysis
3.3.2 Time-series Analysis:
3.3.3 Combined Analysis:
3.3.1 Cross-Sectional Analysis:
Cross-sectional analysis involves the comparison of different firms’ financial ratios at the
same point in time. Analysts are often interested in how well a firm has performed in relation
to other firms in its industry. Frequently, a firm will compare its ratio values to those of a key
competitor or group of competitors that it wishes to emulate. This type of cross-sectional
analysis, called benchmarking, has become very popular.

3.3.2 Time-Series Analysis:

Time-series analysis evaluates performance over time. Comparison of current to past
performance, using ratios, enables analysts to assess the firm’s progress. Developing trends
can be seen by applying more than one year comparison. Each and every significant year to
year difference may be emblematic of a big problem for a company in the cross functional
analysis.

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3.3.3 Combined Analysis:
The Cross functional and time series analysis is the most informative approach in the ratio
analysis. A combined view makes it possible to assess the trend in the behavior of the ratio in
relation to the trend for the industry.

3.4 Cautions about Using Ratio Analysis:

Before discussing specific ratios, we should consider the following cautions about their use:
 Ratios with large deviations from the norm only indicate symptoms of a problem.
Additional analysis is typically needed to isolate the causes of the problem. The
fundamental point is this: Ratio analysis merely directs attention to potential areas of
concern; it does not provide conclusive evidence of the existing complication.
 A firm can’t judge the overall performance of a company by using the single ratio
because of insufficient information. The important ratios are needed for the better
judgment. But for the specific reasons s firm can use three or two or one ratio to know
about the firm financial condition.
 The financial audited statement’s data get more priority for the financial ratio
analysis. We may not find the exact financial situation of a company without using
the financial statements which have been audited.
 The financial performance can be measured by the financial ratio. The ratio’s result
need to compare and need to calculate by using the financial statement. Otherwise
they may create fault in their task and decisions. Because of the seasonal impact may
create problem. For a demo like account receivable turnover value of a company at
the end of the June will not match with the end of the December value and it may
create barrier to take any decision if they don’t compare the seasonal changes during a
year.
 Inventory and depreciation accounts can create misinterpret in the ratio analysis.
That’s why the financial data should be developed in the same way like the financial
data are being compared.
There have five basic ratios which are being used to analysis a company financial
condition by using a company financial statement. That are-
 Liquidity,
 Activity,
 Debt,
 Profitability, and

Page 20 of 45
  Market ratios.

To measure a company’s return we can use the profitability ratio but the market ratio is not
only measure the return of a company but also measure the risk of a company. The ratios
which main task is calculating the risk are known as liquidity ratio, debt ratio and activity
ratio.
The balance sheet and the income statement are playing an important part to analysis the
financial ratio. That’s why I collected those things from the Alim Industries Limited to
analysis the financial condition.
3.5 Types of Ratio:
For calculating different types of ratios for the project work, the following formulae were
used:
3.5.1 Ratios:
Current Asset
1. Current Ratio =
Current Liabilities
It’s a measures a company’s ability to meet short term obligations with short term assets, a
useful indicator of cash flow in the near future. A social enterprise needs to ensure that it can
pay its salaries, bills and expenses on time. Failure to pay loans on time may limit your future
access to credit and therefore your ability to leverage operations and growth. The one
problem with the current ratio is that it does not take into account the timing of cash flows.
2. Working Capital = (CA_CL) Current Asset – Current Liabilities
A company’s efficiency and its short- term financial health can be measured by the working
capital.
3. Quick Ratio (Alimd-Test Ratio) = Quick Assets
Current Liabilities
If a firm has enough short term asset to meet with immediate demand and liabilities of a firm
(Without selling any inventories), is known as a more stringent or demanding liquidity. It is
also known as ―Alim Test‖, because it is one of the most liquid assets for any company that
can be quickly converted into cash. If a firm quick ratio result is 1:1 that means the firm or
the company can pay its bill without selling its own inventory.

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3.5.2 Activity Ratios:
1. Inventory Turnover Ratio = Cost of Goods Sold
Inventory
It is the calculation the number of times inventory is turning over into sales during the year or
how many days it takes to sell inventory. This is a good indication of production and
purchasing efficiency. A high ratio indicates inventory is selling quickly and that little unused
inventory is being stored (or could also mean inventory shortage). If the ratio is low, it
suggests overstocking, obsolete inventory or selling issues.

2. Total Asset Turnover Ratio = Sales or Revenue

Total Assets

Total Asset Turnover Ratio is the company's total revenue, the invoice, cash payments and
other revenues. Total Asset Turnover Ratio represents the value of goods and services
provided to customers during a specified time period - usually one year. How efficiently a
business generates sales on each currency of assets. An increasing ratio indicates a company
is using its assets more productively.

𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒
3. Days Sales Outstanding (DSO) = × 𝑛𝑜 𝑜𝑓 𝐷𝑎𝑦𝑠
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠
It is a measurement of the average number of days that a company takes to collect revenue
after a sale has been made. A low DSO number means that it takes a company fewer days to
collect its accounts receivable. A high DSO number shows that a company is selling its
product to customers on credit and taking longer to collect money.
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
4. Average Payment Period = × 𝑛𝑜 𝑜𝑓 𝐷𝑎𝑦𝑠
𝑁𝑒𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑜𝑟 𝐶𝑂𝐺𝑆

The average time period in which a business or company typically takes in paying off its
purchases that have been made by credit. This will not have an effect on the company's
working capital. A shorter payment period indicates prompt payments to creditors.

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3.5.3 Leverage Ratios:

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡𝑠
1. Debt Ratio = × 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

It is a financial ratio that measures the extent of a company’s or consumer’s leverage. The
debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can
be interpreted as the proportion of a company’s assets that are financed by debt. The higher
this ratio, the more leveraged the company and the greater its financial risk.
3.5.4 Profitability Ratios:
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
1. Net Profit Ratio = 𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
A ratio of profitability calculated as net income divided by revenues, or net profits divided by
sales. It measures how much out of every currency of sales a company actually keeps in
earnings. Profit margin is very useful when comparing companies in similar industries. A
higher profit margin indicates a more profitable company that has better control over its costs
compared to its competitors. This ratio measures your ability to cover all operating costs
including indirect costs
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝐴𝑣𝑎𝑖𝑙𝑎𝑏𝑙𝑒 𝑓𝑜𝑟 𝐶𝑜𝑚𝑚𝑜𝑛 𝑆𝑡𝑜𝑘𝑒 𝐻𝑜𝑙𝑑𝑒𝑟𝑠
2. Return on Equity = 𝑆𝑡𝑜𝑘𝑒 𝐻𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates
with the money shareholders have invested. This is one of the most important ratios to
investors. How does this return compare to less risky investments like bonds.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
3. Return on Assets (ROA) = 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

The ability of a company to turn or convert the asset into profit can be measured by the return
on asset ratio (ROA). It is a very crucial part of measurement for a company or industry.
Your competitors will have found a way to operate more efficiently when the ROA ratio is
low compare to the other competitor’s industries. The company total asset is the sum total
liabilities and the shareholder equity and it is used for financing the company. The company’s
asset can be funded by debt or equity. The tax interest expense is adding back in the formula
of ROA

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3.6 Financial Ratio Analysis of Alim Industries Limited:
Financial ratio is the most important thing for a company to measure the performance of a
firm. It can be divided into five basic categories and those are liquidity, activity, debt,
profitability and market ratio. By using the liquidity, debt and activity ratio help to measure
the primary risk. Profitability ratio is using to measure the return but market ratio is using to
measure the both risk and return.
For the financial analysis need some necessary inputs for preparing the financial ratio which
help to measure the company’s performance. Here, we will use the 2015to 2018 income
statements and balance sheets for Alim Industries Ltd to present financial performance
analysis.
Last Four Years Financial Data Analysis of Alim Industries Ltd
Particulars 2015 2016 2017 2018
Turnover 226,003,705 207,611,472 197,611,472 186,003,705
Gross profit 90,401,482 72,664,015 71,140,130 70,681,408
Profit before tax 25,021,621 24,414,652 19,286,206 18,657,152
Profit after tax 16,264,054 15,869,524 12,536,034 12,127,149
Shareholder’s Equity 38,350,721 25,776,917 28,932,862 26,012,834
Total Assets 191,753,603 171,846,114 206,663,298 216,773,613
Total Current Assets 187,679,516 166,016,946 192,519,976 198,822,768
Total current Liabilities 122,722,306 127,080,201 149,293,566 156,423,839
Total Liabilities 153,402,882 146,069,197 177,730,436 190,760,779

3.6.1 Liquidity Ratios:

A firm ability to satisfy its short term obligations can be measured by the liquidity ratio and the
strength to meet the immediate obligations. The solvency of the firm’s overall financial position
can be referred by the liquidity ratio. It will refer the capability of pay its bill. Because of a
company insufficient liquidity may be forced to make a tough decision to meet their obligation. It
will work as indicator and help to lead for solving the cash flow problem. There has a two basic
measure of the liquidity and those are:
I) Current Ratio:
It is one of the most commonly used financial ratios. It helps to measure the ability of a firm
to meet its short term obligations. It refers the company’s liquidity asset to compare with the
short term liabilities. So it helps to show the capability of a firm to meet its short term

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obligation by using their asset like cash etc. If CR is high that means a company has more
liquidity to meet its obligations. The current ratio 2:1 is the ideal current ratio. And the
formula of the current ratio is:

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Current Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Alim Industries Ltd. Current Ratio 2015-2018

Particulars 2015 2016 2017 2018
Current Assets 187,679,516 166,016,946 192,519,976 198,822,768
Current Liabilities 122,722,306 127,080,201 149,293,566 156,423,839
Current Ratio 1.53 1.31 1.29 1.27

1.8
1.6
1.4
1.2
1
0.8 1.53
0.6 1.31 1.29 1.27
0.4
0.2
0
2015 2016 2017 2018

Current Ratio

Figure I: Current Ratio

Interpretation:
In 2018 Alim Industries Limited current ratio was 1:27. It was good and current ratio
increased from 1:27 to 1:29 in the 2017. So it is clearly indicated that the current asset and
liabilities both were increased. The current ratio increased slightly 1:31 in 2016 that mean the
current liabilities is increased than the current asset and the current asset was remaining
unchanged. The ratio was increased commonly 1:53 in 2015. But in 2015 the current
liabilities was going down because of the reduction of short term debt and the accounts
payable. After the analysis of current ratio we can say that the Alim Industries Limited didn’t
face any problems to meet or fulfill their obligations.

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II) Quick (Alimd-Test) Ratio: The quick (Alimd-test) ratio is similar to the current ratio except
that it excludes inventory, which is generally the least liquid current asset. A reliable test of
liquidity is the quick ratio test that excludes inventory from current asset. It considered the
ability to use its quick assets to pay its current liabilities. This approach can be acceptable
since inventory of many companies cannot be quickly converted into cash. The ideal quick
ratio is 1:1. There have two primary factors which is the reason behind for the low liquidity of
inventory. Those are:
 There have several types of inventory which can’t be sold easily because the items are
partially known as special items, completed items or similar like those types of item.
 Sometime inventory sold on credit rather than cash and these types things become an
account receivable. We know that account receivable is a thing which needs time to
convert in cash and that’s why it’s not included in the quick ratio..

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Quick (Alimd test) ratio=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Alim Industries Quick Ratio 2015-2018

Particulars 2015 2016 2017 2018
Current Assets 187,679,516 166,016,946 192,519,976 198,822,768
Inventory 31,905,518 28,222,881 32,728,396 33,799,871
Current Liability 122,722,306 127,080,201 149,293,566 156,423,839
Quick Ratios 1.27 1.08 1.07 1.05

1.5

1 1.8
1.27
1.07 1.05
0.5

0
2015 2016 2017 2018

Quick Ratios

Figure II: Quick Ratio

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Interpretation:
Here, we can see that the quick ratios result of Alim Industries Limited’s company was 1.05 in
2018 and it increases slightly in next two years that is 1.07 & 1.08. The current assets, current
liabilities and also the inventory increased respectively in 2017 and 2016.It shows massive
improvement i.e. 1.27 in the year 2015. In the meantime company hold huge amount of cash in
hand or may face problem in inventory management or in the account receivable.
3.6.2 Activity Ratios:
Activity ratios measure the speed with which various accounts are converted into sales or
cash—inflows or outflows. With regard to current accounts, measures of liquidity are
generally inadequate because differences in the composition of a firm’s current assets and
current liabilities can significantly affect its ―true‖ liquidity. It is therefore important to look
beyond measures of overall liquidity and to assess the activity (liquidity) of specific current
accounts. A number of ratios are available for measuring the activity of the most important
current accounts, which include inventory, accounts receivable, and accounts payable. The
efficiency with which total assets are used can also be assessed
I) Inventory Turnover:
Inventory turnover commonly measures the activity, or liquidity, of a firm’s inventory. The
ratio is measure accompany is strong enough to sell their inventory or not. The IT ratio value
is going up and indicated that the company has in strong position to sell inventory or the
effectiveness in purchasing inventory. But when it reverses, the selling and the effectiveness
in purchasing inventory both will show the negative sign because higher is the better here.
The result 4:1 is the standard result of the inventory turnover ratio .The standard inventory.
We can calculate the IT ratio by using the formula and that is-.

Inventory-Turnover Ratio= 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑 𝑆𝑜𝑙𝑑

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Alim Industries Ltd Inventory Turnover Ratio 2015-2018

Particulars 2015 2016 2017 2018
Cost of Goods Sold 135,602,223 134,947,457 126,471,342 115,322,297
Inventory 31,905,518 28,222,881 32,728,396 33,799,871
Inventory Turnover Ratio 4.25 4.78 3.86 3.41

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 100%

80%

60% 4.25 4.78 3.86 3.41

40%

20%

0%
2015 2016 2017 2018

Inventory Turnover Ratio

Figure I: Inventory Turnover Ratio

Interpretation: Here from the above mentioned table, it can be seen that in 2018 and 2017
turnover ratio was below standard i.e. 3.41 and 3.86. Because the company may bought extra
inventory or couldn’t sale their products. But the positive side is they improved their inventory
turnover ratio in every year and in 2016 it was 4.78 which are known as standard one. But in
2015 it decreased by 11% i.e. 4.25. It means the company spent more to buy too much inventory
and that’s why they had more inventory than the selling procedure.
II) Average Collection Period:
The average collection period, or average age of accounts receivable, is useful in evaluating
credit and collection policies. Average collection period is the ratio that measures how many
times a company or a firm needs to convert account receivable in cash during a period and it
also measure the time of collecting the account receivable in one period. Average collection
period ratio will be high when the amount of uncollected cash increased and when it reduced
the ratio result will go down. A company’s collection period should be 30 days. The average
collection period ratio is arrived at by dividing the average daily sales into the accounts
receivable balance:

𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒
Average Collection Period = 𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠
× No of Days

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 Alim Industries Average Collection Period 2015-2018

Particulars 2015 2016 2017 2018

Accounts Receivables 41,289,493 36,523,728 42,354,395 43,741,009
No. of Days 360 360 360 360
Total Sales 226,003,705 207,611,472 197,611,472 186,003,705
Average Collection Period 65.77 63.33 77.16 84.66
(Days)

90
80
70
60
50 84.66
77.16
40 65.77 63.77
30
20
10
0
2015 2016 2017 2018

Average Collection Period

Figure II: Average Collection Period

Interpretation: Here it can be seen that Alim Industries average collection period couldn’t meet
the standard point till now but they are improving every year by well management of credit sales
and collection as in every year its collection period is reduced. It can be seen in 2015 the period
was 84.66 days, in 2016 it reduced by 9.7 % i.e. 77.16 days, in 2017 it was 63.33 days. But in
2018 it increased slightly by 3.85% i.e. 65.77 days.

III) Average Payment Period:

The average payment period ratio refers how many times a company or a firm needs to pay
its suppliers. The payment period should be between 45 to 65days, it’s the ideal one. Anyhow
when a company missed the ideal payment period or pay one period payment in another
period that mean a company take much more time to pay its supplier which is very harmful
for a company. It may badly affect in company’s financial position. We can find the ratio

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result just like the ACP (Average Collection Period Ratio). .A Company can find the APP
ratio by divided accounts payable with the annual purchase and then multiply it with no of
day and the formula is given below-

𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑎𝑦𝑎𝑏𝑙𝑒
× No of Days
Average Payment Period = 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒

Alim Industries Average Payment Period 2015-2018

Particulars 2015 2016 2017 2018

Accounts Payable 25,771,684 26,686,842 31,351,649 32,849,006
No. of Days 360 360 360 360
Annual Purchase 135,602,223 134,947,457 126,471,342 115,322,297
Average Payment Period 68.42 71.19 89.24 102.54
(Days)

120

100

80

60 102.54
89.24
40 68.42 71.19

20

0
2015 2016 2017 2018

Average Payment Period

Figure III: Average Payment Period

Interpretation: The ratio of Alim Industries was 102.54 days in 2015, 89.24 days in 2016, 71.19
days in 2017 and 68.42 days in 2018 which shows continuous improvement in paying their
suppliers. The ratio indicated that the Alim Industries Company pays to their supplier in time
which the positive sign for the company. And it will be helpful for the company because it will
increase their negations power with the vendors and May able to get discount in the future.

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IV) Total Asset Turnover Ratios: The total asset turnover indicates the efficiency with
which the firm uses its assets to generate sales. So a higher ratio is always more favorable.
Higher turnover ratios mean the company is using its assets more efficiently. Lower ratios
mean that the company isn't using its assets efficiently and most likely have management or
production problems. For instance, a ratio of 1 means, the net sales of a company equals the
average total assets for the year. In other words, the company is generating 1 dollar of sales
for every dollar invested in assets.
Total asset turnover is calculated as follows:
Total Asset Turnover Ratios= 𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝑅𝑒𝑣𝑖𝑛𝑢𝑒
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Alim Industries Ltd Total Asset Turnover Ratio 2015-2018

Particulars 2015 2016 2017 2018

Sales 226,003,705 207,611,472 197,611,472 186,003,705
Total Assets 191,753,603 171,846,114 206,663,298 216,773,613
Total Asset Turnover Ratio 1.18 1.21 0.96 0.86

1.4

1.2

0.8
1.18 1.21
0.6 0.96
0.86
0.4

0.2

0
2015 2016 2017 2018

Total Asset Turnover Ratios

Figure IV: Total Asset Turnover Ratios

Interpretation: Here in 2015 the ratio was .86 which means Alim Industries generates 86 paisa
by investing TK.1 assets. In 2016 and 2017 it increased to .96 and 1.21 which indicate positive

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trends and ensure efficient investments of asset to generate more sales. But in 2018 the ratio
slightly decreased to 1.18.
3.6.3 Debt Ratio:
The debt amount which is using for the financial purpose of a company and the debt is being
used for generate a company’s profit. Financial analyst always thinks about the long term
debt because it provides a financial help to a firm for the long term period. So the creditor
claim must be given before distributing the earning profit to the shareholders or owners. The
new shareholder and the future shareholders also concern and give attention to know the
ability of the firm to repay its debt. Not only the shareholders but also the lenders are
concerned about the firm’s debt percentage. That’s why management should be concerned
about the indebtedness of the firm.
The financial leverage will be high of a firm when a firm uses more to increase its total asset
of the firm. The financial leverage is the appreciation of risk and return and it is known as a
preferred stock and debt which is using for the fixed cost financing. The risk and return will
be high when a firm uses more fixed cost debt.
There are two general types of debt measures, one is measures of the degree of indebtedness
and another one is measures of the ability to service debts. The degree of indebtedness
measures the amount of debt relative to other significant balance sheet amounts. A popular
measure of the degree of indebtedness is the debt ratio. The second type of debt measure, the
ability to service debts, reflects a firm’s ability to make the payments required on a scheduled
basis over the life of a debt. The firm’s ability to pay certain fixed charges is measured using
coverage ratios. Typically, higher coverage ratios are preferred, but too high a ratio (above
industry norms) may result in unnecessarily low risk and return. In general, the lower the firm’s
coverage ratios, the less certain it is to be able to pay fixed obligations. If a firm is unable to pay
these obligations, its creditors may seek immediate repayment, which in most instances would
force a firm into bankruptcy. Two popular coverage ratios are the times interest earned ratio
and the fixed payment coverage ratio.
(i) Debt Ratio: The proportion of the total debt financed by the creditors for increasing the asset
and it is measured by the debt ratio. The more people money is used to generate the profit that
means the debt ratio is high for the firm. And we can calculate the ratio amount by using the
debt ratio formula and it is given below:

𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt Ratio= × 100
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

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 Alim Industries Ltd. Debt Ratio 2015-2018

Particulars 2015 2016 2017 2018

Total Liabilities 153,402,882 146,069,197 177,730,436 190,760,779
Total Assets 191,753,603 171,846,114 206,663,298 216,773,613
Debt Ratio 80.00% 85.00% 86.00% 88.00%

88%

86%

84%
88%
82% 86%
85%
80%
80%
78%

76%
2015 2016 2017 2018

Debt Ratio

Figure I: Debt Ratio

Interpretation:
Alim Industries Company has both short term and long term debt like other company. The
company has both types of asset that are tangible asset and intangible asset. The tangible asset are
inventories, property and plants and the intangible asset are software, patent and trade mark etc.
the debt ratio of the Alim Industries fluctuated day by day Over the last four years. The Alim
Industries Company takes higher financial risk in 2015. Because the debt ratio is 88% and it is
highest percentage during 2016 to 2017.But the debt ratio was going down respectively from
2016 to 2018 and it’s the good sign which indicated that the improvement of the asset value and
reduction of the debt value.

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II. Times Interest Earned Ratio:
The times interest earned ratio, sometimes called the interest coverage ratio, measures the
firm’s ability to make contractual interest payments. The higher its value, the better able the
firm is to fulfill its interest obligations. The times interest earned ratio is calculated as
follows:
Time Interest Earned Ratio = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 & 𝑇𝑎𝑥𝑒𝑠 (𝐸𝐵𝐼𝑇)
× 100
𝐼𝑛𝑡𝑒𝑒𝑠𝑡

Alim Industries Ltd Time Interest Earned Ratio 2015-2018

Particulars 2015 2016 2017 2018

EBIT 45,048,695 34,004,713 27,229,382 28,125,246
Interest 20,027,074 9,590,061 7,943,176 9,468,094
Time Interest Earned Ratio 2.25 3.55 3.43 2.97

4
3.5
3
2.5
2 3.55 3.43
2.97
1.5 2.25
1
0.5
0
2015 2016 2017 2018

Time Interest Earned Ratio

Figure II: Time Interest Earned Ratio

Interpretation: Here in 2015Alim Industries has a ratio of 2.97. This means that Alim
Industries income is 2.97 times greater than its annual interest expense. In other words, Alim
Industries can afford to pay additional interest expenses. In this respect, Alim Industries is
less risky and the bank shouldn't have a problem accepting his loan. In 2016 and 2017 that
ratios increased to 3.43 and 3.55 but in 2018 that ratio decreased massively to 2.25 times
because the company’s income may decrease because of some unexpected reasons.

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3.6.4 Profitability Ratios
There are many measures of profitability. As a group, these measures enable the analyst to
evaluate the firm’s profits with respect to a given level of sales, a certain level of assets, or
the owners’ investment. Without profits, a firm could not attract outside capital. Owners,
creditors, and management pay close attention to boosting profits because of the great
importance placed on earnings in the market place.
I) Gross Profit Margin: The gross profit margin measures the percentage of each sales
dollar remaining after the firm has paid for its goods. Higher the gross profit margin, the
better (that is, the lower the relative cost of merchandise sold). The gross profit margin is
calculated as follows:
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡𝑠
Gross Profit Margin=
𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝑅𝑒𝑣𝑖𝑛𝑢𝑒

Alim Industries Ltd Gross Profit Margin 2015-2018

Particulars 2015 2016 2017 2018

Gross Profits 90,401,482 72,664,015 71,140,130 70,681,408
Sales 226,003,705 207,611,472 197,611,472 186,003,705
Gross Profit Margin 40.00% 35.00% 36.00% 38.00%

40%
39%
38%
37%
40%
36%
38%
35%
36%
34% 35%
33%
32%
2015 2016 2017 2018

Gross Profit Margin

Figure I: Gross Profit Margin

Interpretation: In 2015 Alim Industries achieved a 38% percent GP. This means that for
every TK.1 of sales Alim Industries generates 38 Paisa in profits before other business
expenses are paid. Next two years in 2016 and 2017 that percentages decreased because of

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covering some extra cost compare to previous year. It was 36% in 2016 and 35% in 2017
respectively. In 2018 company reduced their cost of goods sold (COGS) thus their GP
increased to 40%.

(ii) Operating Profit Margin: It measures the amount after deducting the variable cost from
the dollar of sales. The percentage of each dollar sales is measured by the operating profit
margin ratio. And then interest, taxes, dividend of the shareholders included all other costs
and expenses are deducted from it. After all of the things deducted, you will get pure profit
from sales. It is pure profit because only the profit earned on operation and deducted all the
expenses included the shareholder’s dividend. To calculate the operating profit margin we
need to go through the formula and that is given below:

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡𝑠
Operating Profit Margin Ratio = 𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝑅𝑒𝑣𝑖𝑛𝑢𝑒

Alim Industries Ltd Operating Profit Margin Ratio 2015-2018

Particulars 2015 2016 2017 2018

Operating Profits 45,048,695 34,004,713 27,229,382 28,125,246
Sales 226,003,705 207,611,472 197,611,472 186,003,705
Operating Profit Margin 19.93% 16.38% 13.78% 15.12%

20%

15%

20%
10% 16%
14% 15%

5%

0%
2015 2016 2017 2018

Operating Profit Margin Ratio

Figure II: Operating Profit Margin Ratio

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Interpretation: It can be seen from above table that from 2015 to 2018 Operating profit
margin has fluctuated due to cost variation in different years. In 2013 it was 15% and in 2016
it was decreased by 1% i.e. 14%. In 2017 it was highest compare to other three years i.e.
16%. And in 2018 it was decreased to 14%. This 14% means that for every TK.1 of income,
only 14 Paisa remains after the operating expenses have been paid. This also means that only
14 paisa is left over to cover the non-operating expenses.

III. Net Profit Margin: the net profit margin just thinks about the revenue of a company
earn. It shows how much of each dollar collect as a revenue after deducting all the expenses
like interest, tax and preferred stock dividend. When the net profit margin is increasing, it
will be a good sign for a company because the higher is the better. The calculation formula of
the net profit margin is given below:

𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐴𝑣𝑎𝑖𝑙𝑏𝑙𝑒 𝑓𝑜𝑟 𝑆𝑡𝑟𝑜𝑐𝑘 𝐻𝑜𝑙𝑑𝑒𝑟′𝑠

Net Profit Margin ratio =
𝑆𝑎𝑙𝑒𝑠 𝑜𝑟 𝑅𝑒𝑣𝑖𝑛𝑢𝑒

Alim Industries Ltd Net Profit Margin ratio 2015-2018

Particulars 2015 2016 2017 2018

Earnings available for 16,264,054 15,869,524 12,536,034 12,127,149
common stock holders
Sales 226,003,705 207,611,472 197,611,472 186,003,705
Net Profit Margin 7.20% 7.64% 6.34% 6.52%

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 8%
7%
6%
5%
4% 7% 8%
6% 7%
3%
2%
1%
0%
2015 2016 2017 2018

Net Profit Margin ratio

Figure III: Net Profit Margin Ratio

Interpretation: In above table it is shown that after deducting all kind of expenses Alim
Industries has Net profit margin ratio of 6.52% in 2015, 6.34% in 2016, 7.64% in 2017, and
7.20% in 2018 respectively. It is fluctuated in every year as the cost was fluctuated in every
year. Though as a growing organization the overall net profit margin of Alim Industriesis
acceptable.
3.7 SWOT Analysis:
SWOT analysis is very important for every company. SWOT analysis helps the company to
justify about their strength, weakness, opportunity & threats.

S= Strength W=Weakness

SWOT Analysis

O= Opportunity T= Threats.

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Strengths:
 Company Image
 Strong Financial capabilities as a new company
 Identified customer need
 Professional sales team
 Modern technology
Weaknesses:
 New entry in Importing
 Lack of experience in lease financing
 Quick decision making problem
 Manpower setup problem
 Well distribution network problem
Opportunities:
 Rapid mechanization of agriculture sector
 Increase construction works in rural areas
 ROI is substantial
 Extension of variability of product
 Ensure Market coverage against competitor’s product.
 Add value to Attract Consumer.
 Advertising and targeting the Target customer
 Govt. support for agribusiness
 Increase farmers awareness
 Rapid mechanization of agriculture sector
 Technology used in agribusiness
Threats:
 Global economic recession
 Dependent on foreign supply
 Higher purchase model

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5.8 Finding:
There has a lot of ratio but few of them are most important for the company and those are
current ratio, quick ratio, ROA, ROE, inventory turnover and the debt equity ratio. This is the
key ratio of the company. That does not mean other ratios are less important because it also
measure the performance of a company. All the positive and negative finding can be
observed based on the financial performance analysis. Overall finding that we observed from
above ratio analysis of Alim Industries Limited are stated below:
 Current ratio couldn’t meet the standard (2:1) but its improving every year. And lower
current ratio doesn’t mean negative all the time. It may prove positive sign. It depends
on organization structure.
 Quick Ratio meets the standards (1:1). So Company is able to cover current liabilities
by current assets.
 Inventory Turnover ratio meets the standards in 2018 & 2017. Though it was below
standards in 2016 & 2015. But we can see its improving.
 Average Collection Period ratio doesn’t meet the standards. This is not desirable. But
every year it’s improving slightly.
 Average Payment Period ratio is almost close to the standards. Though it was bad in
the beginning. But in 2016 it was close enough to the standards.
 Total Assets Turnover ratio is good as it is generating more sales than invested
amount of assets.
 Debt Ratio is not good.
 Time Interest Earned Ratio is acceptable but it should be improved.
 Gross Profit Margin shows increasing trend in last year. It is good.
 Operating Profit Margin shows fluctuated value. But it can be accepted as every year
it was positive.
 Net Profit Margin shows increasing trends, which is desirable. Though last year it was
slightly decreased
 Return on Total Assets shows increasing trends, which is desirable. But in the last
year it was slightly decreased.
 Return on Common Equity shows fluctuated values but it was positive.
 The company should not flexible about the installment payment of agricultural
product.
 Don’t invest in advertise on the people of the importance of agricultural product.

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 CHAPTER: - IV
Recommendations & Conclusion

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4.1 Recommendations
During my internship I have analyzed the some problems in the organization. To the best of
my knowledge I recommend the Following Recommendations for Improvements.
 There is a lack of some mismanagement In Alim Industries Limited that if an
employee has some problems with his supervisors can communicate with the high
management of the organization and some steps must be taken for solution of that
problem.
 The Alim Industries Limited should maintain some training programs for its
employees, so. I suggest that the company should provide such type of opportunities
to its employees for best result.
 Consumer demands are changing day by day and it is very important to follow the
marketing strategies.
 The payment process of Alim Industries Limited is very lengthy in purchasing of
tractors for farmers and as well as other products.
 Equipment and furniture should be according to the new organizational styles.
 Proper attention should be given to new and upgraded customers.
 Sales and marketing should pay full attention on quality of products and services to its
customers.
 Communication between management and the customers should be very effective.
 Sales and marketing’s incentives should be increased to the employees and salaries
package also should increase for best outputs from employees.
 Working load in every department should be equally distributed for working in
friendly environment and for coordination between all departments.
 There is a lot of paper work in marketing department. It should be reduces for better
emphasis on their work.
 Decision making and decision taking is a very important task in every organization
and the Alim Industries Limited should involve the high management in decision
making so that the employees can describe their requirements according to
responsibilities assign to them in front of board of directors.

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4.2 Conclusion
The company Alim Industries Ltd. was established in 1990 at the BISCIC Industrial Estate,
Gotatikar, Sylhet. A spires to provide farmers with complete agricultural solutions by
emphasizing sufficiency through modernization of agriculture production, with particular
attention on increased production, processing and value addition. The company is focused on
modernizing & bringing efficiency to Plant Nutrition, Mechanization & Tissue Culture
through continuous research & development. Since its establishment Alim Industries rapidly
growing up. The company is operating in a smooth way in terms of financial activities. They
have sustained their business by good management of the assets. Financial analysis is
necessary to know about a business and the performance of its share. All analysis reveals the
financial strength of Alim Industry. Greenland Technologies Limited has immense
opportunity to expand its business in future and contribute more in the economy of
Bangladesh.
The three months internship program helped me to enhance my knowledge beyond the text
books. I have gained practical knowledge regarding the corporate environment which I
hope would support me in the future.

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 Reference
Books:
 Principles of Managerial Finance by Gitman

 Financial Ratio Analysis: A Handy Guidebook by Charles K. Vandyck

 Financial Management by M Y Khan & P K Jain

Publications:
 Annual Report of Alim Industries Limited (2015 to 2018)

 Various others financial Report

Internet:
http:// www.alimindustriesltd.com

www.investopedia.com

www.myaccountingcourse.com

www.slideshare.com

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 Abbreviations

Abbreviations Elaborations
AIL Alim Industries Limited
TDS Tax deducted at source
TO Turnover.
VAT Value added tax
GM General manager.
PAT Profit after tax.
PBT Profit before tax
PBIT Profit before interest and tax
SE Shareholder’s equity.
ROA Return on asset.
CA Current ratio
ROE Return on equity.
IT Inventory turnover ratio
BBA Bachelor of business administration
NEUB North East University Bangladesh
BD Bangladesh

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