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Assignment

0N

Ratio Analysis

Monno Ceramic Industries Ltd.
Course Name: Business Finance Course Code: FIN 201 Section: 03

Submitted To Quazi Sagota Samina, Senior Lecturer, Department of Business Administration, East West University.

Submitted By Muhammad Nazmul Amin ID# 2009-2-10-296

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96 times Monno Ceramic can pay 0.95 times Monno Ceramic can pay 0. Page 2 of 12 . But still its profitability was high as is current ratio was low.LIQUIDITY RATIO  Current Ratio Current Ratio= For 2011 Current Ratio = = 0.96 times current liabilities with their current assets that means it has current asset 0. For 2010 Current Ratio = = 0. Even then its current ratio was below than the rule of thumb so it was a negative side.95 times current liabilities with their current assets that means it has current asset 0.95 times than current liabilities.96 times than current liabilities.There wass a slight positive change in the company’s liquidity condition. Interpretation The current ratio of Monno Ceramics was slight higher in 2010 than 2011.

In spite of the increasing turn in quick ratio Monno Ceramic might face troubles to pay off short term obligations without relying on the sale of inventories in the event of liquidation. Interpretation Company’s quick asset is increased in 2011 than 2010 so that company’s liquidity also increased but its quite below than the rule of thumb (2 times).41 times.36 times.41 times With current quick asset Monno Ceramic can meet its current liabilities 0. Page 3 of 12 . Quick Ratio Quick ratio = For 2011 Quick ratio = = 0.36 times With current quick asset Monno Ceramic can meet its current liabilities 0. For 2010 Quick ratio = = 0.

89 times in a year.96 times Monno Ceramic can produce 1. Interpretation Inventory Turnover Ratio reduced in 2011 which was not a good sign. of course. excess stocks were. For 2010 Inventory Turnover Ratio= = 1.96 times in a year.89 times Monno Ceramic can produce 1.EFFICIENCY/ASSET UTILIZATION RATIO  Inventory Turnover Ratio Inventory Turnover Ratio= For 2011 Inventory Turnover Ratio= = 1. This suggests that Monno Ceramic was holding excessive stocks of inventory. unproductive and represented an investment with a low or zero rate of return. Page 4 of 12 .

99 = 42 days. Day Sales Outstanding Ratio Day Sales Outstanding Ratio= For 2011 Day Sales Outstanding Ratio= = 34. For 2010 Day Sales Outstanding Ratio= = 41.23 = 34 days. In case of sales on credit Monno Ceramic needs 34 days to collect the accounts receivables.  Fixed Asset Turnover Ratio Fixed Asset Turnover Ratio= For 2011 Fixed Asset Turnover Ratio= = tk 2. Interpretation Since Day Sales Outstanding ratio of Monno Ceramic was reduced in 2011 than 2010 so it can be said that company’s credit policy in 2011 was better than that of 2010. In case of sales on credit Monno Ceramic needs 42 days to collect the accounts receivables.06 By using tk 1 of fixed asset the company can generate sales of tk 2.06 For 2010 Page 5 of 12 .

82 By using tk 1 of total asset the company can generate sales of tk 0.88 Interpretation Again decrease in Total Asset Turnover Ratio in 2011. or a combination of these steps should be taken. To become more efficient.88 By using tk 1 of total asset the company can generate sales of tk 0.09 By using tk 1 of fixed asset the company can generate sales of tk 2. Page 6 of 12 . indicating that the company is not generating a sufficient volume of business given its investment in total asset.82 For 2010 Total Asset Turnover Ratio= = tk 0.Fixed Asset Turnover Ratio= = tk 2.09 Interpretation Company’s decreasing Fixed Asset Turnover ratio was indicating a bad signal though it is a company of around 15 years old it might concentrate on its fixed asset. sales should be increased.  Total Asset Turnover Ratio Total Asset Turnover Ratio= For 2011 Total Asset Turnover Ratio= = tk 0. some assets should be disposed of .

41% The company earns .41% profits by utilizing all the assets. Page 7 of 12 . For 2010 Return on Assets (ROA) = = .68% Monno Cermic earns 9.PROFITABILITY RATIO  Return On Assets (ROA) Return on Assets (ROA) = For 2011 Return on Assets (ROA) = = 2.98% The company earns 2.68% profit for their shareholders.98% profits by utilizing all the assets. Interpretation This low return results from the company’s above average use of de  Return On Equity (ROE) Return on Equity (ROE) = For 2011 Return on Equity (ROE) = = 9.

6%. of that . it is indicating that company sales are too low. For 2010 Net Profit Margin = = .6% Whatever the amount of sales.47% company earns as profit or more specifically on sales the rate of profit is .36% profit for their shareholders. poor asset management and its above average debt.For 2010 Return on Equity (ROE) = = 1.47% Interpretation Though slight upward change of Net Profit Margin. Interpretation As Monno Ceramic was more dependent on equity than asset so this increasing change in ROE in 2011 was expected. its costs are too high. Page 8 of 12 .36% Monno Cermic earns 1. But in the long run Monno Ceramic might suffer a lot due to its poor liquidity position.  Net Profit Margin Net Profit Margin = For 2011 Net Profit Margin = = 3.6% company earns as profit or more specifically on sales the rate of profit is 3. of that 3. But still in 2011 it was better than the 2010 sales.47% Whatever the amount of sales.

the company can meet its interest expense 1. the company can meet its interest expense 1.05 times Monno Ceramic has operating profit 1. This means.05 times with its existing operating profit. For 2010 Time Interest Earned = = 1.LEVERAGE RATIO  Time Interest Earned Time Interest Earned = For 2011 Time Interest Earned = = 1.53 times with its existing operating profit.05 times than its interest expense. Page 9 of 12 . This means.53 times Monno Ceramic has operating profit 1.53 times than its interest expense.

46% of total fund is financed from debt sources and rest 30. This kind of poor TIE ratio results in a conclusion that. Interpretation Page 10 of 12 .46% 69. For 2010 Debt Ratio = = 69.81% is financed from equity sources.19% 69.  Debt Ratio Debt Ratio = For 2011 Debt Ratio = = 69.54% is financed from equity sources.19% of total fund is financed from debt sources and rest 30.Interpretation Company’s TIE ratio is not satisfactory though it slight increased in 2011 than 2010. Monno Ceramic would face difficulties if it attempted to borrow additional funds.

indicating that its creditors supplied about three fourth of the company’s total financing.82 times .27% less than 2010). Creditors might be reluctant to lend the firm more money .Monno Ceramics Debt Ratio in 2011 was 69. From this prospect it can be said that Monno Ceramic was regarded as being somewhat riskier in 2011 as having poor growth Page 11 of 12 = 48.54 times = 188. but they are lower for riskier firms. and management would be subjecting the firm to a greater chance of bankruptcy. MARKET RATIO  Price Earning Ratio (P/E Ratio) Price Earning Ratio (P/E Ratio) = For 2011 Price Earning Ratio (P/E Ratio) = For 2010 Price Earning Ratio (P/E Ratio) = Interpretation P/E ratios are higher for firms with high growth prospects.19% (.

44 Interpretation Increases of Book Value ratio in 2011 shows investors are willing to pay more for Monno Ceramic’s book value. Market/ Book Value Ratio Book Value Ratio = Book Value Per Share = For 2011 Book Value Per Share = Book Value Ratio = For 2010 Book Value Per Share = Book Value Ratio = = 2. Page 12 of 12 .56 = 4.57 = 208.70 = 192.