Group number : 01

Nam ID
e
Abir Hasan Apurbo 1820493
Affan Ahmed 1821868
Sanchita Mondal 1620268
Anika Antara Tammi 1820360
Md. Asfaq Uddin 1721529

Report Topic : Working Capital Requirements of Ceramic industries of Bangladesh

Course : BUS485

Submission Date : 23/08/2021

Submitted to : Mohammad Fahad Noor

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Letter of transmittal:

To:
Mohammad Fahad Noor,
Faculty, Bus485
Independent University, Bangladesh
Bashundhara R/A, Dhaka
Date: 23 August, 2021,
Subject: Submission of survey report
Dear sir ,
Please allow us to express our gratitude towards you for providing us with the opportunity of
presenting our report on Working Capital Requirements of Ceramic industries of Bangladesh,.
This report reflects thoroughly on our focus on the topic regarding this matter. All the relevant
information regarding the report we have done have been included and it is expected that our
report will help you get a clear view about our work . We tried our level best for preparing this
report meaningfully and correctly, as much as possible and it will be our sheer pleasure to
explain any query or clarification in order for you to learn in depth of our survey.

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Acknowledgement:

We have taken efforts in this assignment. However, the completion of this

assignment would not have been possible without the kind support and help of our
respected faculty who deserves our deepest appreciation. We would like to express
our utmost gratitude to MR. Mohammad Fahad Noor for giving us the opportunity
to do this report and we would like to thank you for your contribution in stimulating
numerous suggestions and encouragement, which helped us to coordinate this
assignment and most importantly for being the most supportive mentor one could
ask for. Our thanks and appreciations also go to those who have helped us with the
abilities in developing the assignment. Furthermore, without the time, effort and
cooperation of our team members, it would not have been possible for us to
successfully complete this report.
Thank you.

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 Table of content
Introduction……………………………………………………………………………………………  5

Literature Review ………………………………………………………………………………………6

Research Variables …………………………………………………………………………………… 6

Dependent Variable……………………………………………………………………………………. 6

Independent variable ……………………………………………………………………………………8

Profitability ………………………………………………………………………………………………8

Relationship between profitability and working capital requirement……………………………… 8

Growth opportunities…………………………………………………………………………………… 9

Relationship between Growth opportunity and working capital requirement…………………….. 10

Financial leverage ……………………………………………………………………………………….10

Relationship between Financial leverage and working capital requirement………………………. 11

Assets tangibility……………………………………………………………………………………….. 12

Relationship between Assets tangibility and working capital requirement………………………… 12

operating cash flow ………………………………………………………………………………………13

Relationship between operation cashflow and working capital requirement……………………….14

Methodology …………………………………………………………………………………….……….15

Present scenario of the ceramic enterprise of Bangladesh……………………………………15

Competitive Rivalry in the enterprise…………………………………………………………16
Exporting Countries…………………………………………………………………………….17
Challenges………………………………………………………………………………………. 17
Opportunities …………………………………………………………………………………… 17
Data ……………………………………………………………………………………………….18
Sample ……………………………………………………………………………………………18
Profitability………………………………………………………………………………………. 19
Operating cashflow……………………………………………………………………………… 20
Assets Tangibility……………………………………………………………………………….. 22
Growth opportunity…………………………………………………………………………….. 23
Financial leverage ……………………………………………………………………………….24
Problems faced by the ceramic industry in Bangladesh……………………………………… 25
Conclusion……………………………………………………………………………………….. 26
Reference………………………………………………………………………………………… 27
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 Research Paper

on  

Working Capital Requirements of Ceramic industries of Bangladesh

Abstract

Purpose – The main aim of this paper is to analyze the effects of various factors like  profitability, growth opportunity,
financial leverage, assets tangibility, operating cash flows of company working capital requirements (WCR) of Ceramic
industries of Bangladesh.

Design/methodology/approach –The paper employs panel data regression model with fixed  and random effect
estimations. The data utilized in this study includes financial data of 5  ceramic company operating in Bangladesh for the
period 2016 to 2020.

Findings –The overall results of the study indicate that operating cash flow, financialleverage, profitability, sales growth
and asset tangibility are the key drivers of WCR forBangladeshi ceramic industry. Profitability of firm and sales growth
are found to be positively  related to WCR. Contrarily, asset tangibility, operating cash flow and financial leverage
are  found to be negatively related to WCR.

Limitations – This paper investigates firm specific factors while ignoring the external

like GDP growth, business indicators and industry type. Further research can be done to assess the effect of these external
factors on working capital requirements.

Originality/value: This research contributes to the working capital literature by providing  empirical evidence on
determining factors of working capital requirements in ceramic industries.

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1. Introduction  
Management of financial affairs is one of the most important ‘value adding’ activity for an  organization and thus it is an
inseparable part of top management’s decision-making process  (Chandra, 2003). Corporate finance decisions can broadly
be categorized into first, long-term  decisions related to capital budgeting, capital structure and dividend policy Second,
short  term decisions related to working capital management (WCM) (Chiou et al., 2006). Over the  last forty years major
theoretical developments in corporate finance literature has been  reported which helped managers to improve their
financial decision making. However, these  developments are not uniform across all areas of corporate finance. Major
theoretical  advances have been reported with respect to the management of longer-run financial  )decisions of the firm
(Pass & Pike, 1984). While research related to shorter-run or working  capital decision making appears to be relatively
neglected (Pass & Pike, 1987). In spite of the  fact that mismanagement of working capital components are considered to
be the primary  reason for business failure (Smith, 1973). It is thus important that enterprises manage their  working
capital more carefully. WCM is also critical for long-term survival of the business and helps .business to maintain
liquidity status and to pay off the current obligations as and  when due (Panda, 2012). However literature on WCM is
limited in scope (Chiou et al.,  2006). Majority of research on WCM is directed towards understanding the relationship
of  firm’s profitability, with its WCM (Jose et al., 1996; Shin & Soenen, 1998; Deloof, 2003;  Padachi, 2006; Garcia-
Teruel & Martinez-Solano, 2007; Raheman & Nasr, 2007). On the  contrary studies about what factors determine the
working capital requirement (WCR) arelatively limited. Researchers like Chiou et al. (2006); Narender et al. (2008);
Nazir & Afza  (2009); Banso-Caballero et al. (2010), Manoori & Muhammad (2012); Lotfinia et al. (2012);  Valipour et
al. (2012); Akinlo (2012); Abbadi & Abbadi (2013) have focused on different  determinants of WCR. But all these studies
except Banso-Caballero et al. (2010) focused on  large firms. In case of Indian context Kaur & Kaur (2014) focused on
identifying  determinates of WCR in case of large Indian automobile companies i.e. Maruti Suzuki India  Ltd., Force
Motors Ltd., Hindustan Motors Ltd. and Mahindra & Mahindra Ltd.  

This study primarily aims at identify various  determinants of WCR in Ceramic industry in Bangladesh. We have focused
only on   manufacturing Ceramin industries because in these firms the WCM decisions are relatively more  important than
in service firms (Padachi et al., 2012). A manufacturing firm has to hold  larger inventories and accounts receivable; thus,
working capital issues are more critical in  manufacturing firms. On the contrary, the service industry holds much fewer
inventories and  accounts receivable.  

More specifically, the objective is to assess the effect of different factors like financial  leverage and profitability, growth,
operating cash flows, asset tangibility and age  of the firm on WCR of manufacturing ceramic industries of Bangladesh.
This study will bridge the vast gap of  WCM literature by providing evidence on WCR determinants in case of
Bangladesh  

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2. Literature Reviwe :

2.1 Data :

This study aims at identifying the determinants of WCR of ceramic sector that has emerged as one of the most  vibrant
and dynamic sector of the Bangladeshi economy over the last two decades.

 The time span of data was 2016 till 2020. Precisely, those firms meeting the following  criteria were selected in the
sample  

1. The sample firm must belong only to the ceramics sector.  

2. The firm must be available during 2016 to 2020.  

3. Complete information about the entire variables under study must be available for a time  frame of 5 years (2016 to
2020).  

 Sample selection started with the universe of all 5 ceramic firms available  

in Dhaka Stock exchange. Thus, a sample of 5 ceramic industries is obtained for  this study.

2.2. Research Variables  :

To analyse the determinants of WCR, one dependent variable and five independent  variables are included in this study
based on the previous literature These variables are described below:  

2.3 Dependent Variable :

Dependent variables receive this name because, in an experiment, their values are studied under the supposition or
hypothesis that they depend, by some law or rule (e.g., by a mathematical function), on the values of other variables.
Shulman and Cox (1985) pioneered the approach of using working capital requirement (WCR) and net liquid balance
(NLB) as an alternative measure of the financial position of The Moderating Effect of Working Capital Management on
the Relationship between Working Capital Determinants and Firm Performance 40 a firm. It was also used by Hawawini,
Viallet, and Vora (1986) who suggested that it is an accounting measure that reveals the amount of capital invested by a
firm in its operating cycle. According to Faden (2013), if the working capital requirement is positive, the excess must be
financed by either free cash flow or debt; and when it is negative, a firm's operating cycle becomes the permanent source
of firm financing. The positive working capital requirement policy is related to the conservative approach to the working
capital requirement, and the negative working capital requirement policy is related to the aggressive approach to WCR. It
is an effective measure of firm liquidity by highlighting the timing of the firm operating cash inflows and outflows (Rehn,
2012). Meanwhile, NLB consists of the difference between a firm’s cash plus marketable security and short-term debts or
borrowings, and it is related to firm financial decisions with no direct correlation to firm operations (Faden, 2013). NLB
looks at these assets as a primary source of liquidity (Kleiman, 1992) and can predict the financial crisis of a firm (Chiou
et al., 2006).

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2.4 Independent variable:

In the review of the literature on determinants of WCR, various factors were identified that  significantly affect the WCR.
For this study, five firm-specific factors, profitability, Growth opportunity, financial leverage, , Assets tangibility,
operating cash flow are selected as independent variable . 

2.4.1 : Profitability :  

Corporate performance has been identified as a potential determinant of working capital financing policies.
The tax trade-off models show that profitable firms will employ more debt since they are more likely to have
a high tax burden and low bankruptcy risk (Ooi, 1999). However, Myers (1984) prescribes a negative
relationship between debt and profitability on the basis that successful companies do not need to depend so
much on external funding. They, instead, rely on their internal reserves accumulated from past profits.
Titman & Wessels (1988) and Barton et al. (1989), agree that firms with high profit rates, all things being
equal, would maintain relatively lower debt ratio since they are able to generate such funds from internal
sources. Empirical evidence from previous studies (Chittenden et al., 1996; Coleman and Cole, 1999; Al-
Sakran, 2001) appears to be consistent with the pecking order theory.  In addition to that more profitable
firms also have a greater capacity to generate internal resources which equip them  to provide more credit to
customers which subsequently increase the investment in working  capital. SMEs usually have constraint in
acquiring external financing thus it is expected that  SMEs with higher capacity to generate internal sources
in terms of profit invest more in  working capital. Due to this reason, a positive relationship between ROA
and WCR is  expected. Thus, the following hypothesis is formulated:  

2.4.2 : Relationship between profitability and working capital requirement:

Working capital is an important issue during financial decision making since its being a part of investment in asset that
requires appropriate financing investment. However, working capital is always being ignored in financial decision making
since it involves investment and financing in short term period. Further, also act as a restrain in financial performance,
since it does not contribute to return on equity (Sanger, 2001). Though, it should be critical for to a firm to sustain their
short term investment since it will ensure the ability of firm in longer period. The crucial part in managing working capital
is required maintaining its liquidity in day-to-day operation to ensure its smooth running and meets its obligation (Eljelly,
2004). However, this is not a simple task since managers must make sure that business operation is running in efficient
and profitable manner. There are the possibilities of mismatch of current asset and current liability during this process. If
this happens and firm’s manager cannot manage it properly then it will affect firm’s growth and profitability. This will
further escort to financial distress and finally firms can go bankrupt. Dilemma in working capital management is to
achieve desired tradeoff between liquidity and profitability (Raheman & Nasr, 2007). Liquidity management plays an
important role in a firm’s profitability and risk as well as its value (Smith, 1980). Referring to theory of risk and return,
investment with more risk will result to more return. Thus, firms with high liquidity of working capital may have low risk
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then low profitability. Conversely, firm that has low liquidity of working capital, facing high risk results to high
profitability. The issue here is in managing liquidity, firm must take into consideration all the items in both accounts and
try to balance the risk and return. However, Van Horne and Wachowicz (2004) point out that excessive level of current
assets may have a negative effect of a firm’s profitability, whereas a low level of current assets may lead to lowers of
liquidity and stock-outs, resulting in difficulties in maintaining smooth operations. Working capital management affects
profitability of the firm, its risk, thus its value (Smith 1980). In other words, efficient management of working capital is an
important component of the general strategy aiming at increasing the market value (Howorth and Westhead, 2003;
Deloof, 2003; Afza & Nazir, 2007). Since the flexibility of this group of assets is very high in terms of adapting to
changing conditions and due to these characteristics they can often be applied to realize the main objective of financial
management through policy changes. The fundamental subject of working capital is to provide optimal balance between
each element forming working capital. Most of the efforts of finance directors in a firm are the efforts they make to carry
the balance between current assets not at optimal level and responsibilities to an optimal level (Lamberson, 1995). The
most important of all, it is the determination of investment volume and to which asset it will be invested (Appuhami,
2008:11). One reason for this is the decisive influence of current assets on others, one another reason is the obligation of
fulfillment of current responsibilities. Working capital necessity influences liquidity level and profitability of a firm. As a
result, it affects investment and financing decisions, too. Despite the compounds of working capital that a company must
have, basically depends on the company type and the sector in which it operates. Company size, growth rate and cash flow
are the other important factors. If the determination factors are not explained fully and adequacy of working capital is
undetermined, companies would be routed to bankruptcy (Appuhami, 2008:11, Ramachandran, Kanakiraman, 2009:64).
Amount of current assets to be calculated at a level where total cost is of a minimum degree means an optimum working
capital level. The optimum working capital level is the case in which balance between risk and efficiency is provided. A
quest for such balance requires a constant monitoring of the elements forming working capital.

2.4.3 : Growth opportunities :

Firm performance have been reflected by market growth or sales, satisfied customers, establishment of base for future
growth as well as financial outcomes without a specific order (Dvir et al., 1993). Return on assets (ROA) is taken as a
measure of profitability. Ritab et al. (2004) in their research concluded that ROA taken into account of assets, being
highly important for revenue generation. ROA have been used as an indicator of performance (Yammessri and Loth,
2004). Growth of firm is not for the sake of growth but sometimes inherent to their existence. It is quite critical aspect of
the organization lifecycle. Those must continuously grow to sustain their competitive position especially where other
competitive firms have faster growing pace (Kazmi, 2002; Johnson et al., 2008). Whereas few researches have different
opinion that growth may not be target for all organizations, but an ability of organization is critical, as they suggest that
organization without growth or low growth are generally tends to fail (Headd and Kirchhoff, 2007). It is not necessary that
newly established organizations show growing trend but those mature and well established organizations also show high
growth (Coad, 2009; Honjo and Haranda, 2006). Size is an important predictor of the performance. Larger firms show
better profitability while smaller firms do not have an ability to compete larger firms in this regards. Chi (2004) clarified
the relationship and concluded that organizational size is having significant impact on performance as well as rights of the
shareholders. Larger firms have better chances to obtain credits from financial institutions. They may obtain loan at
cheaper rates, as they have better credit worth and low chances of bankruptcy. The same aspect has been confirmed by
Gedajlovic and Shapiro (1998). They confirmed that relationship between size and profitability of the organization is
positive in nature. On the other hand another study conducted by Yi and Tzu (2005) concluded different results. Their
study depicted that size of the firm does not have any impact on the performance. Studies related to organizational
economics tried to clarify the relationship of firm size and growth (Dosi et al., 1995; Jovanovic, 1982) furthermore an
impact of diversification on performance of the organizations (Palepu, 1985; Choi and Russell, 2005) as diversification in
the market is generally considered one of the possible corporate strategy to grow and reduce market related risk. More

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diversified firms depict better performance as they ensure risk reduction compared to those less diversified. Pandya and
Rao (1998) highlighted the presence of volatility in the performance of specialized or less diversified firms in comparison
to more diversified firms which tends to show better performance on average.

2.4.4: Relationship between Growth opportunity and working capital requirement:

The company's main objective is to maximize the firm value. Firm value used to measure successfulness of the company,
due to the increasing of the firm value means that the increasing prosperity of the owner of the company (Brigham ,
2010:7 ). Firm value can be determined by three factors: internal factor, external factor, and a technical factor. In this
reseacrh is mainly focused on the internal factor. Internal Factor analysis is often referred to as the company’s critical
factor, since it’s nature can be controllabl by the manager. Financing decision, dividend policy, profitability and liquidity
are example of the critical internal factors. On other hand, firm value is indicated not a stand-alone value. The research by
Myers (1977) views the value of a firm as the total of the value of assets in place and the growth prospect of options to
make future discretionary investments. The research by Jensen (1986) the growth opportunities has arises by
underinvestment and overinvestment problem in the company. Growth is expected to provide positive aspects for the
company thereby increasing the demanded opportunity to invest of the company. For investors the company's growth is a
favorable prospects, because the investment expected to provide a high return in the future. Growth opportunity also
called as investment opportunities. Investment opportunities are options to invest in positive net present value project.
According to Brigham and Houston (2001), the increase in debt is defined by outsiders about the company's ability to pay
future obligations or the presence of low business risk, it will be responded positively by the market. Financing decision
perspective related with firm value was divided into two theory. Those theory are represented by the pecking order theory
and trade-off Theory. Pecking Order theory establishes a sequence of financing decisions where the manager will first
choose to use retained earnings, debt and the issuance of shares as a last option (Mamduh, 2004). According Brigham
(1999), the company prefers to use debt as compared to the issuing of new shares due to costs resulting from the debt is
less than the costs incurred when issuing new shares. Trade-off theory states that the optimal capital structure can be
achieved if there is a benefit for the use of leverage or debt. Based Tradeoff Theory, debt levels are effected by the rate of
growth of the company. In accordance with the Tradeoff Theory, companies that have high growth rates tend to finance
their investments by debt, because of the relatively high share price.  The literature on WCM advocates a significantly
positive relationship between sales  growth and WCR (Chiou et al., 2006; Nazir & Afza, 2009; Wasiuzzaman &
Arumugam,  2013). To accelerate sales growth, firms need to grant goods on credit which increase the  investment of
firms in receivable and subsequently increase the WCR. Kieschnich )(2006) also advocated a positive association between
the sales growth and WCR because in  anticipation of future sales a firm needs to build up inventories.

2.4.5 : Financial leverage :

Financial leverage is a traditional viewpoint of financial activities. About the firm who borrows cash to operate. It’s the
company’s ability to increase EBT or earnings before taxes by utilizing its fixed financial charges. It also have effect on
the earnings per share of a particular company. Leverage refers to the debt component in a firm’s capital structure
(Pandey, 2009).

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A company does not utilizeearnings before interest, fixed cost bearing securities, and tax will change and as a resultcause
change in earnings per share. If a firm has no fixed financial charges especially preference dividend and interest it’s an
indication of financial leverage (Pandey, 2019). Financial leverage gives a firm the ability to magnify its earnings before
interest rate and tax thus increasing earnings per share (Saleem, Rahman & Sultana, 2014).

In agreement with the findings of the existing literature, this study also used debt ratio as a proxy for financial leverage
(Akinlo, 2012; Banos-Caballero et al., 2012; Nazir&Afza, 2009; Chiou et al., 2006; Banso-Caballero et al., 2010). Debt
ratio is calculated by allocating total debt by total assets. Most of the studies on determinants of WCR found a negative
association between financial leverage and WCR. (Chiou et al,2006).

Organizations may add-on the shareholders equity by employing debt.The manner in which the firm’s capital structure is
formed impacts firm’s governance and consequently the flexibility a company has in passing critical decisions. Financial
leverage is the portion of the firm’s capital financed with debt (Ward & Price, 2006). It follows that highly indebted firms
have higher leverage in their capital structure.Capital structure according to Firer, Ross, Westerfield& Jordan (2004)
implies the relative amount of debt and utilized by a company to finance its operational activities.

Leverage is measured using various ratios. Within the capital structure of the firm, the ratios indicate the ability of the
firm to satisfy the interests of its various stakeholders and to quantify debt the firm has. In addition to this, a firm with a
higher debt ratio has to incur a higher cost for external financing due to a higher risk premium (Banos-Caballero et al.,
2010). Thus, these firms pay more attention to effective WCM so that investment in working can be minimized to avoid
further high cost external financing (Nazir&Afza, 2009). This negative relationship is also confirmed byRaheman& Nasr
(2007) and Akinlo (2012) for different countries.

 Kithandi, Charles Katua(2019)Financial Leverage and Financial Performance of the Energy and Petroleum Sector
Companies Listed in the Nairobi Securities Exchange. Issue- 01. Pp- 16,17.
 Nazir, M. S., &Afza, T. 2009. Working Capital Requirements and the Determining Factors in Pakistan. The Icfai
Journal of Applied finance, 15(4): 28-37.

2.4.6: Relationship between Financial leverage and working capital requirement:

Many quantitative and qualitative factors need to be taken into account when establishing a company’s capital structure.
First, from the standpoint of sales, a company that exhibits high and relatively stable sales activity is in a better position to
utilize financial leverage, as compared to a company that has lower and more volatile sales.Second, in terms of business
risk, a company with less operating leverage tends to be able to take on more financial leverage than a company with a
high degree of operating leverage. Third, in terms of growth, faster-growing companies are likely to rely more heavily on
the use of financial leverage because these types of companies tend to need more capital at their disposal than their slow
growth counterparts Fourth, from the standpoint of taxes, a company that is in a higher tax bracket tends to utilize more
debt to take advantage of the interest tax shield benefits. Fifth, a less profitable company tends to use more financial
leverage, because a less profitable company is typically not in a strong enough position to finance its business operations
from internally generated funds.  The capital structure decision can also be addressed by looking at a host of internal and
external factors. First, from the standpoint of management, companies that are run by aggressive leaders tend to use more
financial leverage. In this respect, their purpose for using financial leverage is not only to increase the performance of the

11
company but also to help ensure their control of the company. Second, when times are good, capital can be raised by
issuing either stocks or bonds. However, when times are bad, suppliers of capital typically prefer a secured position,
which, in turn, puts more emphasis on the use of debt capital. With this in mind, management tends to structure the capital
makeup of the company in a manner that will provide flexibility in raising future capital in an ever-changing market
environment. In essence, corporate management utilizes financial leverage primarily to increase the company’s earnings
per share and to increase its return-on-equity. However, with these advantages come increased earnings variability and the
potential for an increase in the cost of financial distress, perhaps even bankruptcy. With this in mind, the management of a
company should take into account the business risk of the company, the company’s tax position, the financial flexibility of
the company’s capital structure, and the company’s degree of managerial aggressiveness when determining the optimal
capital structure. Corporate management tends to measure financial leverage by using short-term liquidity ratios and long-
term capitalization, or solvency ratios. As the name implies, these ratios are used to measure the ability of the company to
meet its short-term obligations. Two of the most utilized short-term liquidity ratios are the current ratio and acid-test ratio.
Both of these ratios compare the company’s current assets to its current liabilities. However, while the current ratio
provides an aggregated risk metric, the acid-test ratio provides a better assessment of the composition of the company’s
current assets for purposes of meeting its current liability obligations since it excludes inventory from current
assets. Capitalization ratios are also used to measure financial leverage. While many capitalization ratios are used in the
industry, two of the most popular metrics are the long-term-debt-to-capitalization ratio and the total-debt-to-capitalization
ratio. The use of these ratios is also very important for measuring financial leverage. However, it's easy to distort these
ratios if management leases the company’s assets without capitalizing on the assets' value on the company’s balance
sheet. Moreover, in a market environment where short-term lending rates are low, management may elect to use short-
term debt to fund both its short- and long-term capital needs. Therefore, short-term capitalization metrics also need to be
used to conduct a thorough risk analysis. Coverage ratios are also used to measure financial leverage. The interest
coverage ratio, also known as the times-interest-earned ratio, is perhaps the most well-known risk metric. The interest
coverage ratio is very important because it indicates a company’s ability to have enough pre-tax operating income to
cover the cost of its financial burden. The funds-from-operations-to-total-debt ratio and the free-operating-cash-flow-to-
total-debt ratio are also important risk metrics that are used by corporate management.

2.4.7 : Assets tangibility :

Tangibility measures the ratio between fixed assets over total assets a firm have on its balance sheet. Charalambakis and
Psychoyios (2012) claims it exist a positive relationship between such a ratio and the level of debt because tangible assets
could be used as collateral for the debt holders. Furthermore, having a high proportion of collateralized tangible assets
could lower the conflict between managers and shareholders, because managers will not have the same excess of free cash
to use on wasteful investments (Almeida & Campello, 2007). Tangible assets also tend to reduce the financial distress
costs because of the liquidation possibility in case of default. Considering these factors lenders are expected to feel more
confident and reluctant supplying loan to a company with high level of tangible assets than an identical company with less
tangible assets on its balance sheet. On the other hand, Morellec (2001) claims there could be a negative relationship
between tangible assets and leverage because it exists a risk for firms with high access to liquid tangible assets. In more
detail, this risk is that the managers exploit debt and 1 The dummies are 1) Basic Materials 2) Industrials 3) Consumer
Goods 4) Health Care 5) Consumer Services 6) Telecommunications 7) Utilities 8) Financials 9) Technology 10) Oil &
Gas 13 shareholders by selling uncollateralized tangible assets underprized for short term funding (Morellec, 2001).

2.4.8 : Relationship between Assets tangibility and working capital requirement:

Tangible assets are one of the key drivers for explaining the capital structure within firms (Charalambakis & Psychoyios,
2012). The impact of a firm’s composition of assets and how they explain its capital structure is an ongoing debate.
Tangible assets are generally more liquid than intangible assets. Therefore, tangible assets have a higher second market
12
value, and in case of bankruptcy these could be quickly and easily sold. Furthermore, ownership of tangible assets should
give companies with such assets an increased debt capacity. As Siblikov (2009) argues the question if tangible assets are
negatively or positively associated with debt is not clear. The current divergence between existing studies and theories
concerning the relationship triggered this thesis concerning if tangible assets is a significant variable in order to explain
companies debt levels. The composition of tangible assets is of importance to explain the level of debt within firms
(Giambona, Golec, & Schwienbacher, 2014). Tangible assets are divided into smaller and more specific assets groups,
which are presented in the notes of the annual reports. Consequently, this division reveals in some extent the
redeployability and liquidity of the assets. Tangible assets that could be used within different industries should suggest
higher debt capacity for the firm. The impact of the composition of the tangible assets on the debt level will be analysed in
this thesis. Modigliani and Millers proposition from 1958 laid the foundation for modern corporate finance (Hillier, 2013).
Since then, several theories have developed from their thesis, two of these are the trade-off- and pecking order theory. The
trade-off- and pecking order theory are contradicting each other concerning if tangible assets have a positive or negative
effect on debt level. The first mentioned theory predicts a positive relationship, while the second predicts a negative. The
source of inspiration for this paper is “What do we know about capital structure? Revisiting the impact of debt ratios on
some firm-specific factors” written by Charalambakis and Psychoyios (2012). Their paper concludes that tangible assets
have a positive effect on the debt ratio. In this thesis inspiration is taken from their regression model to explain the debt
ratio, in which tangible assets is one of the explaining variables.

2.4.9 : operating cash flow :

Firm’s ability to generate cash flow is a fundamental question in forecasting firms’ performance in financial accounting
research (Orput and Zang 2009; Richardson, 2006). It is because cash flow is valueenhancing for firm which agency
problem had been subject to a maximum control. Keown et al. (2005) add that cash flow must exceed the cash payment to
ensure survival of business in the long run. Consequently, users of financial information question why the surplus of cash
flow should be subject to the level of over-investment and its ability to provide better estimate of capital gain rates (Jensen
1986; Rishardson 2006; Keown et al, 2005). Although evidence exist to support the association between cash flow and
stock prices, financial analysts and researchers have added that the relevance and reliability of cash flow is mainly
because cash flow techniques consistently outperform earnings techniques over alternatives forecast horizons (Penman
and Sougiannis,1998). Bartov et al., (2001) use a comparative approach to investigate which independent variable
(earnings or cash flows) exhibits more dominance on share prices. They provide greater information ability for equity
within the US, the UK, Canada, Germany, and Japan during the period from 1988 to 1996. And conclude that earnings
have greater explanatory power than cash flows for securities returns in the three AngloSaxon countries (the US, UK and
Canada). Choi et al. (2000) investigate whether earnings´ lack of timeliness or noise contributes to the low association
between earnings and returns of knowledge-based and traditional industries during the period from 1980 to 1994. They
focus on noise resulting from investor uncertainty about future cash flow related to intangibles. They conclude that timing
differences exist between earnings and stock price changes, which are produced by investor activity, based on an
estimation of firm value derived from expected future benefits. They illustrate the possibility of higher uncertainty
regarding future economic benefits leading to greater information asymmetry between investors and managers and
inducing more noise on the estimated firm value in knowledge-based industries in comparison to the traditional industries.
Similarly, Arthur et al., (2008) was the first to use the actual components of the cash flow from operations to predict
where future earning provide lower prediction errors than models incorporating simply net cash flow from operating
activities. Their findings demonstrate that disaggregation cash flow into lowest-level subcomponents concede a significant
increase in explanatory over a model which uses just aggregate cash flow from operation. Also, they suggest that, the
prediction error is significantly lower for the disaggregate model in each year and the reporting core cash flow from
operation as one item provides essentially the same level of explanation as does reporting it as two separate receipts and

13
payment items. The results is consistence with (Krishnam and Largay, 2000; Arthur and Chuang, 2006; Cheng and Hollie,
2007).

2.4.10 Relationship between operation cashflow and working capital requirement:

Performance assessment according to Turcas (2011) is one of the most important financial problems in companies as a
result of firms using different financial resources and methods to carry out profitable projects so as to achieve maximum
return for their stockholders and the ability of a company to determine internal and external resources of an organization,
supply capital and prepare financial plan is important for its growth and development. Therefore, the economic well being
of any business in production or in servicing depends on careful monitoring and management of the flow of cash within
and outside that organization. Corporate financial performance measures the results of a firm’s policies and operations in
monetary terms. These results are reflected in the firm’s return on investment, return on assets, return on equity and value
added among others and the performance objectives are that an enterprise must generate sufficient cash through operating,
investing, and financing. A business firm should be able to devise various ways for selecting components of its cash flow
which would be used in the company’s operation to raise its productivity or achieve performance. Cash is a vital
component of any business and required effective management because even profitable businesses can go bankrupt when
they failed to manage their cash effectively, particularly if they operate in rapid-growth or seasonal industries (BDBC,
2014) and without which a business may not survive. A firm being profitable does not mean the firm is also solvent due to
the fact that profit is not cash. According to Turcas Operating Cash Flow And Corporate Financial Performance Of Listed
Conglomerate Companies.. DOI: 10.9790/0837-2302110111 www.iosrjournals.org 2 | Page (2011) the solvency,
flexibility and the financial performance of the firm are set on the firm’s ability to generate positive cash flows from the
operating, investing and financing activities. Hence, inadequate cash flow planning with regards to operating activities
will have a negative impact on the financial performance by lowing cash inflow and increasing cash outflow. In the
context of financial accounting, operating cash flow is the cash generated from the day to day activities of a business, that
is, the flow of cash made available from the core operations of a business entity. Net cash flow from operating activities
represent the net increase or decrease in cash and cash equivalent resulting from operations shown in the income
statement in arriving at operating profit. In view of the fact that it adjusts for receivable, depreciation and liabilities,
operating cash flow may be seen as a more accurate measure of how much a company has generated, in comparison with
the conventional profitability measures like net income and that a business entity is characterized by many fixed assets
within its books of account, such as machinery and equipment which are more likely to reduce net income as a result of
depreciation (Fabozzi & Markowitz, 2006). Nevertheless, the business entity’s operating cash flow would therefore
provide a more accurate picture of the company's current cash holdings than the artificially low net income since
depreciation is not a cash expense. Conglomerates are companies mainly established to accomplish synergies,
diversification and earnings growth. These are measured through the financial performance indicators. For these
companies to achieve long term success they must have paid close attention to the cash flow of their transactions relating
to operations activities. A business must have adequate cash on hand to pay for operations to make investments.
Therefore, any ongoing cash flow concern could have a negative impact on the overall performance of the business.

14
Methodology :

Research:

Present situation of the ceramic industry:

Present scenario of the ceramic enterprise of Bangladesh :

The worldwide ceramic enterprise is really well worth of US$20 billion. Bangladesh is
flawlessly placed to expand rapidly in this region with its high first-class, price ratio andcreative human useful
resource base. Traditionally, ceramic enterprise is a exertions-in depth region and organizations in evolved
international locations enjoy problems in remaining competitive because of growing exertions price and latest
worldwide monetary disaster.
Bangladesh, being a fueloline rich, lowexertions price economy and having superior ‘bone china’technology, is
flawlessly placed to be a strategic accomplice in manufacturing and supply of ceramic items (Board of
Investment, Bangladesh).The ceramic enterprise is fairly now no longer pretty a brand new one in Bangladesh.
It
dates back to 1962. People Ceramic Industries Ltd (PCI) pioneered the manufacture of porcelain tableware in B
angladesh (Khandaker and Alamgir 2006). According toBangladesh Ceramic Ware Manufacturers Association
(BCWMA), there are approximately forty ceramic producers working on this enterprise producing tableware,
sanitary ware and tiles. A medium scale ceramic plant wishes around Taka 10 crore (Taka a hundred million) in
preliminary funding and the BCWMA reassets saythe gift funding withinside the country’s ceramic enterprise is
more or less approximately Taka2,000 crore (Taka 20 billion) and this region employs a few one lakh (0.1
million)workers. Shinepukur, Monno, Bengal Fine, Standard, Peoples and National Ceramic are taken into
consideration as essential gamers in ceramic tableware marketplace. RAK, Fu Wang, China-Bangla, FARR,
Modhumoti, ATI, Sunflower, Great Wall, Dhaka-Sanghaiand Mir are taken into consideration as essential
producers of tiles and sanitary wares and their share of marketplace is depicted in Figure 4.1 (in appendix). The
overall capability of ceramic tableware production organizations is almost 24,000 tons a yr as of2008, of which
a mean of forty eight percentage is exported and the ultimate fifty two percentage issued withinside the home
marketplace. Monno and Shinepukur have the best production capacity of almost 60,000 portions a day,
observed via way of means of Standard ceramics with forty,000 portions a day. According to a marketplace
study, the current tiles factories produced 374million rectangular toes of tiles in 2008 and the output is predicted
to develop on the price of17 percentage in 2009 and 2010. Of the whole manufacturing of 322 million
rectangular toes of tiles in 2007, RAK ceramics by myself made seventy four million rectangular toes observed
via way of means of China-Bangla, Fu-wang an Mir, every produced barely over 30 million rectangular toes of
tiles(M. Islam 2010, Khan 2009, Rahman 2009c, 2009e).Over the years, the ceramic enterprise in Bangladesh
has flourished immensely and has won popularity all through the world. Local ceramic ware manufacturing
enterprise is anticipating a constant boom with a US $a hundred million return from exports via way of means
of 2015 as the worldwide marketplace favors greater cargo from Bangladesh. The Export Promotion Bureau
(EPB) and Bangladesh Bank records proven in Figure 4.2 (in appendix) , placed the whole fee of export profits
15
from ceramic ware at $38.33 million withinside the FY 2007-08, up via way of means of 28% from the
preceding yr and in thelast economic yr, the profits stood at $31.70 million. After a steady boom inlast 15 years,
this region is now in an awesome function to gain the goal of $100million export profits (Daily Ittefaq, 2009;
Hossain, 2009; Export Promotion Bureau and Bangladesh Bank).Quality of merchandise has helped Bangladesh
to carve a gap withinside the global market; the producers on this region are taking dangers at the same time as
diversifying their designs into world-elegance standards. Furthermore, the herbal fuel oline this is utilized in the
kilns of the Bangladesh's ceramic enterprise does now no longer include any sulphur and that iswhy the
country's ceramic merchandise appearance brighter and shiny. The near competitors of Bangladesh are China
and India, however they often produce conventional items. Moreover, because of latest worldwide monetary
disaster and growing exertions price, the developed countries are putting greater orders to low-price
international locations like Bangladesh. The trend of boom price of this region due to the fact 1991 display that
the export marketplace will grow further. To address the multiplied export call for, all essential exporters,
together with Monno Ceramic, Shinepukur Ceramic, and Bengal great ceramic, were increasing their plant
(Khan 2009).Though export marketplace of Bangladeshi ceramic enterprise is growing, thedomestic
marketplace percentage of nearby ceramic wares is shrinking because of sizeable import of low priced overseas
items, particularly from China. As distant places call for goes up, country’s essential producers at the moment
are pumping eighty percentage of the manufacturing into the global marketplace. Moreover, the nearby
organizations export an awful lot of the merchandise to the global marketplace, hence creating a call for-
deliver gap in Bangladesh. Due to this, imports of ceramic merchandise in Bangladesh are increasing very rapid
parallel to the boom in export. In the yr 2008-09, for instance, the country imported completed ceramic
merchandise, glass and glass ware merchandise really well worth of approximately US$seventy five million and
exported ceramic merchandise really well worth of US$31.70million (Kakati 2008, Rahim 2005, Export
Promotion Bureau and Bangladesh Bank).Of extraordinary ceramic merchandise, ceramic tablewares are
exported to approximately 50countries which include the united states and Canada, tiles to India, Nepal and
Bhutan and sanitary ware to the Middle East, in particular to the UAE. The enterprise sells
ceramic merchandise really well worth of Taka 1,000 crore (Taka 10 billion) annually in the domesticmarket
and can pay taxes near Taka three hundred crore (Taka three billion) and Taka a hundred crore(Taka 1 billion)
to the software services, which include fuel competitive oline (Khan 2009, Islam 2010).

Competitive Rivalry in the enterprise:

The ceramic enterprise of Bangladesh faces stiff opposition from foreign sources like Sri Lanka, China and
Thailand however the home market is yet weakly aggressive. Ceramic producers like Monno Ceramic,
Shienpukur Ceramic, Standard Ceramic, FARR Ceramic and Bengal Fine ceramic are still eading, in particular
withinside the export marketplace, and were lately
expandingtheir plant to further improve their percentage of export marketplace. All other ceramicmanufacturers
also are growing their manufacturing capability following sturdy growth in call for for ceramic wares. Due to
the worldwide recessionary effect and growing labor cost, the evolved international locations are putting greater
orders to low-price international locations for quality ceramic wares; hence, the export call for for Bangladeshi
ceramic ware is growing rapidly. Addressing this robust boom, the numbers of competition, more or less of
identical length and aggressive capability, are growing on this enterprise day via way of means of day
(Khandaker and Alamgir 2006, Khan).The competing nearby producers also are energetic in making sparkling
actions to improve their marketplace status and enterprise performance. For instance,
XCeramics produces ceramic tiles for each interior and exterior usage. According to themanagement of this
corporation, they're the primary to fabricate tiles made of ceramics meant for outside use that could be synthetic
in the country. Besides, X ceramics is likewise growing its manufacturing capability to fabricate
20percentgreater output than their nearest competition to advantage 25% of the marketplace percentage. This
company is likewise arising with effective techniques like teaming up with over seasentity to percentage its
technological knowledge and to show its issue into the “first ever European Standard multinational joint
assignment ceramics production facility.” The most powerful aggressive pressures come now no longer from
outsiders, however additionally from current industry participants. Great Wall Ceramic Industries Ltd., has
16
introduced to produce a high-cease product, great-reduce tiles with adorned borders to satisfy nearby call for
since demand for expensive tiles is high. FARR Ceramics Ltd., which went into
commercial manufacturing in February 2007, already bagged 10% marketplace percentage in Bangladeshiceram
ics exports and is a few of the few now displaying resilience towards global recession. Moreover, the control of
FARR Ceramic claims, it's far the first Bangladeshi corporation to go into the export marketplace of Argentina
after shoring up its foothold in Europe (Rahman 2009c, 2009f, Bhuiyan 2009, Star Business
Report2009).However, increment withinside the quantity of latest plants, capability
development, product development and marketplace expansion via way of means of ceramic ware producers of
Bangladesh are nonetheless low as compared to the sturdy boom in call for each in exportand nearby
marketplace. As there nonetheless go out enough boom possibilities on this enterprise, therivalry a few of the
current organizations are nonetheless weak, hence making this region greater appealing for the capacity entrants

Exporting Countries:
According to the statistics of Export Promotion Bureau (EPB), the enterprise earned greater than $fifty
two.seventy four million thru export in 2017-18 economic years (FY), which was $35.fifty seven million in
2016-17 FY, and $35.32 million in 2015-sixteen FY. Of extraordinary ceramic merchandise, tableware is
exported to greater than 50 international locations which include the US, Canada, European Union international
locations and Australia; tiles to India, Nepal and Bhutan; and sanitary ware to the Middle East, in particular to
the UAE.

Challenges :
One of the principle demanding situations to the boom of the ceramics enterprise is insufficient deliver of herbal
fuel oline. Natural fuel oline isn't always simplest the important thing electricity supply for the enterprise
however additionally essential for keeping first-class of the goods because the nearby herbal fueloline does now
no longer include any sulphur which makes regionally produced ceramic merchandise appearance brighter three
| P a g e and shiny. There is scarcity of uncooked substances for ceramic items in Bangladesh and producers are
closely depending on imported uncooked substances. Moreover, the ceramic organizations must endure a large
quantity of price because of obligations and boost earnings tax on import of those uncooked substances. The
ceramic producers urge the authorities for zero-responsibility advantages on import of uncooked substances and
25 percentage incentive on exports just like the clothes enterprise. They additionally sense the pressing want for
growing the port and verbal exchange centers to fast track import of uncooked substances and shipping of
completed merchandise. The ceramics enterprise leaders additionally spotlight the significance of constructing a
robust backward linkage. Many gear and machineries which can be presently being imported may be synthetic
withinside the country. It will boom performance in addition to lessen manufacturing costs.
Opportunities :
The ceramic enterprise is gambling a crucial function withinside the export marketplace after readymade clothes
hence a right incentives and help from the government are urgently required. Ceramic has amazing capacity
withinside the clinical region just like the rising discipline of nanotechnology is particularly primarily based
totally on ceramic substances. We also are the use of ceramics in LED (light-emitting diode) lights. Now, we're
operating on anti-bacterial tiles for lavatories and inexperienced constructing architecture. Advanced ceramics
is classed into monolithic ceramics, ceramic matrix composites, ceramic coatings and others. On the premise of
cease-users, the enterprise is labeled into electric and electronics, machinery, clinical and pharmaceuticals,
biomaterials, army and defense, automobile and others. According to a latest marketplace assessment performed
via way of means of Market Page | 3Research Future, the superior ceramic marketplace will see an exponential
boom over the following 5 years. Increasing call for for superior ceramics withinside the vehicle and electronics
enterprise, particularly in international locations together with India, China and Japan, is propelling the
marketplace boom, and our ceramic enterprise ought to nicely make a contribution to that.

17
Data :

The Data that are collected are secondary data that are mainly gathered from yahoo finance, Dhaka Stock
exchange and Dhaka tribune.

Sampling :

We have collected data of the independent variables of the five companies:

 Monno Ceramics
 RAK Ceramics
 Standard Ceramics
 Fu Wang ceramics
 Shinepukur Ceramics
The independent variables that are:

 Assets tangibility
 Growth opportunities
 Operating Cashflow
 Profitability
 Financial leverage

18
Profitability :

Monno Ceramics :

Profit margin :

Year Profitability
2016 14%
2017 15.65%
2018 21.83%
2019 11.42%
2020 22.55%

RAK Ceramics:

Profit Margin :

year Profitability
2016 13.24%
2017 14.82%
2018 21.79%
2019 9.02%
2020 12.22%

Standard ceramics :

Profit Margin :

Year Profitability
2016 7.86%
2017 9.02%
2018 10.58%
2019 7.45%
2020 9.83%

Fu Wang ceramics :

Profit margin:

Year Profitability
19
 2016 10.32%
2017 15.78%
2018 13.25%
2019 9.81%
2020 8.23%

Shinepukur Ceramics:

Profit Margin :

Year Profitability
2016 5.83%
2017 6.25%
2018 4.65%
2019 3.83%
2020 5.78%

Data Analysis :

According to the table most of the company’s profit margin increased from 2016 to 2018. But in 2019 due to
Covid-19 and the lockdown that was given by the Bangladesh government all of the companies profit margin
was decreased. But all of them recovered in 2020. According to the tables Only Monno ceramics have a really
good increase in the profit margin and in 2019 though they had a fall in their margin but they recovered it in
2020. RAK Ceramics, Standard Ceramics, Fu wang Ceramics also made profits but not as much as Monno
ceramics. Their growth was good. But in case of Shinepukur Ceramics the changes were not increasing . It’s
profit margin increased until 2017 and then from 2018 it was decreasing that means the sales of this company
was decreasing. Comparing in these 5 companies Monno Ceramics has a better profitability.

Operating Cashflow :

Monno Ceramics :

Year Amount
2020 7,850.3
2019 109,504.8
2018 200,927.7
2017 187,107.7
2016 62,602.7

RAK ceramics :

year Amount

20
 2020 1,248
2019 1,587
2018 549
2017 1,804
2016 1,076

Standard Ceramics :

Year amount
2020 2528868
2019 8035420
2018 5551544
2017 7127096
2016 5782758

Fu Wang Ceramics :

Year Amount
2020 20275.4
2019 51390.2
2018 36630.3
2017 (86701.1)
2016 92441.3

Shinepukur Ceramics :

Year AMOUNT
2020 135,899.1
2019 60,182.0
2018 40,573.1
2017 110,611.5
2016 288,868.8

Data Analysis :

According to the table Monno Ceramic’s operating cashflow is quite good it increased from 2016 and kept
increasing till 2018. In 2019 it started to fall and drastically fell in 2020 due to Covid 19 situation. For RAK
Ceramics the cash flow increased in 2016 and 2017 then fell in 2018 and again started to increase in 2019 and
kept increasing in this situation. Fu Wang faced loss in 2017 but the company also recovered from it and again
started to make profit in 2018, but again in 2020 the cash flow decreased. Shinepukur’s cashflow didn’t
increase from 2016 till 2019 but it’s operating cashflow increased drastically in 2020. According to the analysis
21
RAK ceramic’s operating cashflow is better than the other companies because it managed to keep its operating
cashflows increasing during this covid 19 situation whereas other companies cashflow decreased

Assets tangibility :

Monno Ceramics:

Year Tangibility
2016 2138 million
2017 2152 million
2018 2278 million
2019 2257 million
2020 2266 million

RAK Ceramics:

Year Tangibility
2016 2658 million
2017 2968 million
2018 3698 million
2019 3912 million
2020 4125 million

Standard Ceramics:

Year Tangibility
2016 2145 million
2017 2689 million
2018 2799 million
2019 3125 million
2020 3378 million

Fu Wang Ceramics:

Year Tangibility
2016 2291 million
2017 2578 million
2018 2766 million
2019 2999 million
2020 3214 million

22
Shinepukur Ceramics:

Year Tangibility
2016 2098 million
2017 2236 million
2018 2598 million
2019 2612 million
2020 2958 million

Data Analysis :

Tangible assets mainly means assets that have monetary value. Tangible assets are calculated by subtracting the
total liabilities of a firm from the total assets. According to the table 5 companies have increasing tassets
tangibility. Among them RAK Ceramics tangibility is better than other’s.

Growth Opportunity :

Company Name Percentage :

Monno Ceramics 372.50%
RAK Ceramics 258.85%
Standard Ceramics 197.28%
Fu Wang Ceramics 201.84%
Shinepukur Ceramics 187.33%

Data Analysis :

Growth opportunity is the addition of all the growth rates that are in a survey then divided by the year like in
this report we have taken the growth rate of 5 years so the data inputed are the addition of these 5 years of
growth rate then divided by number of years that means 5 . According to the table Monno Ceramics have the
highest percentage of growth opportunity and shinepukur ceramics have the lowest percentage of growth
opportunity.

23
Financial leverage :

Monno Ceramics:

year percentage
2016 28%
2017 31%
2018 33%
2019 39%
2020 42%

RAK Ceramics

Year Percentage
2016 25%
2017 26%
2018 29%
2019 35%
2020 38%

Standard Ceamics

Year Percentage
2016 15%
2017 19%
2018 23%
2019 26%
2020 32%

Fu Wang Ceramics :

Year Percentage
2016 13%
2017 16%
2018 21%
2019 26%
2020 28%

Shinepukur Ceramics :

24
 Year Percentage
2016 21%
2017 28%
2018 31%
2019 35%
2020 38%

Data Analysis :

The financial leverage equation is a very important and sensitive thing as borrowing fund helps a company to
grow and increase profit, but there is also rick involve, which can lean to company potential loss. The formula
to find financial leverage is total debts divided by Shareholder’s equity. According to the all 5 companies have a
increasing percentage of financial leverage.

Problems faced by the ceramic industry in Bangladesh :

The enterprise suffers because of abnormal energy and fuel oline supply. The ceramic tableware manufacturing
unit desires to preserve spherical the clock 380-degreetemperature. When energy voltage or fuel oline stress is
low such temperature reduces; while the temperature falls, it takes as a minimum 12 hours to deliver it lower
back to preceding degree, inflicting a large loss. A low warmth in any plant causes fault to shadeation and nice.
According to the enterprise sources, to harness energy throughout the shortfall duration they used diesel-run
generators, however due to high oil costs it become very expensive. For walking such excessive fee generators,
the manufacturing fee of ceramic items rises as properly (Khan 2009).
 Ceramic producers pay excessive tariff on fueloline in comparison to different sectors. Presently, common
fuel oline tariff is Taka 2/cubic metre for fertilizer factories,Taka five.13/cubic metre for ceramics factories and
Taka 3.five/cubic metre forgas-primarily based totally energy plants (Khan 2005).
 The enterprise faces excessive import obligation on sure ceramic uncooked substances from7.five
percentage to fifteen percentage. Besides, this zone will pay excessive Value Added Tax(VAT) of 15
percentage on produced items (Kakati 2008). Journal of Business and Technology (Dhaka) 114
 This zone additionally faces issue in getting fitness certificates from Bangladesh Standard Testing Institution
(BSTI), that is required with the aid of using many international buyers, in particular in European marketplace.
According to industry sources, the prevailing complicated pre-cargo procedure (PSI) delays the system of
export and includes extra expenditure to growth manufacturing fee (New Age 2009)
.  No authorities aid via decrease hobby charge. Industry human beings urgethe authorities to restore one digit
hobby charge on mortgage and prolonged it to the ceramic zone.
 In Bangladesh there's scarcity of uncooked substances for ceramic items and the manufacturers are 100
pendent on import of uncooked substances from overseas. Besides, near competition like China and India have
their own raw substances. Hence, the authorities ought to take steps to discover deposits of superior nice clay
for ceramic withinside the coalmine vicinity of north Bengal(Khan 2009)
.  This enterprise lacks excessive degree production and commercial engineering techniques, required
equipment and gadget and global standard laboratory for checking out and nice control. Besides, this zone is in
want of research and improvement attempt to economies on electricity fee as properly as appropriate and ok
education applications to increase pull of professional labor.
 China offers 22.five percentage incentives to its ceramic exporters, Bangladesh gives nothing. According to
enterprise sources, the authorities ought to sell this zone with numerous incentives because the price addition of
25
this sector is set sixty five percentage. The enterprise calls for economic aid from government to present this
zone a further push to seize a part of a potential global marketplace together with assembly neighborhood
demand (Rahman 2009f, Daily Ittefaq 2009).
 The neighborhood ceramic tableware producers have come to be the sufferer of the2008 economic crisis.
The mixture export income got here down toUS$31.70 million from US$38.33 million throughout the economic
12 months 2008-09.According to Export Promotion Bureau (EPB), Bangladesh exported ceramic tableware
really well worth of Taka 24.5crore (Taka 245 million) in September 2008, which got here right all the way
down to Taka 21crore (Taka 210 million) in October and Taka 16.6 crore (Taka 166 million)in November 2008
(Rahman 2009a, Export Promotion Bureau, BangladeshBank).

Conclusion :

Bangladesh's ceramics industry has experienced 200 percent growth in production in the last five years.
This growth momentum is expected to sustain for a considerable period of time thanks to the robust
development of the real estate sector and rising living standard of the people in the country. The
industry is also positioned to expand rapidly in the global market with its high-quality products, low
labour costs and creative entrepreneurs. Traditional manufacturers of ceramics such as Italy and Spain
have been experiencing difficulties in remaining competitive due to rising labour cost and the ongoing
global financial crisis. Therefore more orders are being placed to low-cost countries like Bangladesh.
In terms of quality Bangladeshi ceramics can easily compete with the products of its close competitors
China and India. Now, if the industry gets proper incentives and support from the government, it has all
the potential to be one of the top ceramics-exporting countries in the world. Much like the garments
industry this would be another manufacturing success for Bangladesh.  

26
Reference :

 The Daily Star. 2021. An overview of Bangladesh's ceramics industry. [online] Available at:
<https://www.thedailystar.net/supplements/overview-bangladeshs-ceramics-industry-1498489>
[Accessed 23 August 2021].
 Dhaka Tribune. 2021. Local ceramic industry grows to fetch foreign currencies. [online] Available at:
<https://www.dhakatribune.com/business/economy/2019/07/08/local-ceramic-industry-grows-to-fetch-
foreign-currencies> [Accessed 23 August 2021].
 Ccifb.com.bd. 2021. [online] Available at: <http://www.ccifb.com.bd/wp-
content/uploads/2019/12/CCIFB_Ceramics-Industry-of-Bangladesh.pdf> [Accessed 23 August 2021].
 Wsj.com. 2021. MONNOCERA.BD | Monno Ceramic Industries Ltd. Annual Income Statement - WSJ.
[online] Available at: <https://www.wsj.com/market-
data/quotes/BD/XDHA/MONNOCERA/financials/annual/income-statement> [Accessed 23 August
2021].

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