CHAPTER-1INTRODUCTION & METHODOLOGYRAK Ceramics (Bangladesh) Limited, was incorporated in 1998 as a UAE-Bangladesh joint venture private company. It started its commercial production on 12 November 2000. It is engaged in manufacturing and marketing of ceramics tiles, bathroom sets, gres porcellanato and all types of sanitary ware. RAKs products include varieties of ceramic wall and floor tiles, decors, listellos, pencils, cappings, border and corners. The company has over 1000 models active in the ceramic and porcelain tile business and has over 40 models of sanitary ware of various bathroom utility and luxury products. The plant standard capacity is 22,000 square meter tiles per day & 8.03 mn sqm per annum and 3,400 pieces of sanitary ware per day & 1.10 mn pcs per annum. Revenue for RAK Ceramics comes mainly from Ceramic and Gress Porcelain tiles (63%), and Sanitary Wares (35.3%). Dcor/Border also contributes 1.7% of RAKs revenue. Currently the company has two subsidiaries namely RAK Pharmaceuticals Pvt. Ltd (holding 55% share), and RAK Power Pvt. Ltd (holding 57% share). RAK ceramics also has three associates where it holds 47% share in RAK Paints Pvt. Ltd., 35% in RAK Security Services (Pvt.) Ltd. and 20% share in RAK-Mosfly (Bangladesh) Pvt. Ltd. RAK Ceramics (Bangladesh) Limited is an ISO 9001:2008 certified organization. According to its latest annual report it is the market leader in the ceramic tiles and sanitary ware products holding 25% & 67% market share respectively. About 99.6% production is consumed in local market and rest 0.4% is exported. About 90% of raw materials are imported. The company was listed in DSE and CSE in 2010 under Book building method. At present, 77.82% of total shares of RAKCERAMIC are held by the sponsors/directors 10.45% by institutional investors and rest 11.73% by general public.

1.1 Book Value Vs Market Value:The book value of share indicates the dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid. In other words, the book value of share is the value of the shareholders equity according to the financial statement. Market Value is the value of a share according to the stock market. The market value of share is decided through the interaction of demand and supply of that particular companys stock. Implications of EachBook value simply implies the value of the company on its books, often referred to as accounting value. It's the accounting value once a companys auditors have accounted for assets and liabilities. Stock market investors who buy and sell the stock determine whether book value is an accurate assessment of a companys value. Market value has a more meaningful implication in the sense that it is the price you have to pay to own a part of the business regardless of what book value is stated.1. Book Value Greater Than Market Value:The financial market values the company for less than its stated value or net worth.When this is the case, it's usually because the market has lost confidence in the ability of the company'sassets to generatefuture profits andcash flows. In otherwords, the market doesn't believe that the company is worth the value on its books.Value investorsoften like to seek out companies in this category in hopes that the marketperception turns out tobe incorrect. After all, the market is giving you the opportunity to buy a business for less than its stated net worth.2. Market Value Greater Than Book Value:The market assigns a higher value to the company due to the earnings power of the company's assets. Nearly all consistently profitable companies will have market values greater than book values.3. Book Value Equals Market Value:The market sees no compelling reason to believe the company's assets are better or worse than what is stated on the balance sheet.

Book Value and Market Value of share for RAK Ceramics (Bangladesh) LimitedIf we look at the shares book value and market value of RAK Ceramics, we find out that the market value of the share is greater than the book value. We may say this is good news for them but in reality this is not. It clearly defines that the market value is shrinking over the years, which is definitely bad news for RAK. In 2010, it was 172 but in 2013 it was 53.3, which is very low. On the other hand book value is stable over the years that was moving around 21 to 22. Though the book value is lower than market value, still we will say this a bad news, as the company is not generating the value once it was creating for the investors. So diminishing value creation has made RAK in such a position that is not welcomed by the investors. The graph shows a comparative presentation of the book value and market value of the share of RAK Ceramics (Bangladesh) Limited

In the graph it is clearly seen that the market value is higher than the book value but the market value has decreased drastically over the years. This is indeed a bad news for the company. The investors are not having trust on the company and demanding the share to invest. So, on the basis of the above data a hypothesis can be made as following-Hypothesis: the company is not in a good position as its market value of share is shrinking over the years. 1.2 Objectives of the study:The objectives of this assignment are- To analyze the financial status of the company with the help of the latest available annual report. In our case we are conducting the analysis on the basis of annual report published in December 2013. To study the book value and market value of share To analyze the balance sheet and income statement of 2013 To analyze the cash flow statement of 2013 To analyze different ratios1.3 Methodology: Data source: source of data for this report is the annual reports of the company, which is a secondary source. Statistical Techniques: for our analysis we will use the different kind of graphs (line chart, bar chart) Period under consideration: our point of discussion will be based on 2013 that is the latest available year for annual report. Nature of Analysis: we will conduct both time series and cross section analysis. Standard of Comparison: here we are going to conduct a cross section analysis with another local firm of cement industry named Fuwang Ceramics

1.4 Limitations:While conducting the report, some limitations were yet present here:1. Due to time constraints we couldnt be focused in depth. 2. We couldnt study the whole industry of ceramic and make a comparative analysis based on that.

CHAPTER -2ANALYSIS & INTERPRETATIONThe analysis and interpretation would be done by the means of time series study and cross section study.Time Series Analysis2.1 Income Statement Analysis We have analyzed income statement and Balance sheet by doing a common size statement. We have also calculated the growth rate for major income statement and Balance sheet items. For actual figure of growth rate and common size statement, please refer to the Table-2, Table -3 and Table-4 in the Appendix portion of the report. Based on the Income statements and Balance sheet in terms of growth rate and common size statements, some of the major findings that we identified are as below- Sales growth was largely derived from improved realizations consequent to a price increase during the year and a healthy off take of value-added products. Export earnings also increased to Taka 26.14 mn in 2013 from Taka 18.39 mn in 2012, as a result of catering to the demand of the export market.

Other income also includes toll manufacturing from subsidiary, which amounted to Taka 7.33 mn in 2013. Cost of goods sold has increased by Taka 111 mn (3.9% up) in 2013 than 2012 in tandem with sales. Raw Materials cost increased by Taka 221.82 mn in 2013, due to production of bigger size tiles and increase in production volume in-group companies. Operational efficiency and innovative waste management optimized input consumption volume. Administrative expenses decreased by Taka 9.5 (-3.6%) mn mainly due to rigorous cost reduction policy.

Marketing expenses increased by Taka 87 (21.7%) mn mainly due to increase in advertisement expenses by 7.71 mn, discount expense by Taka 63 mn. Interest expenses decreased to Taka 3.92 mn in 2013 from Taka 16.63 mn in 2012 due to decrease in bank borrowings.

Common size Income Statements (RAK ceramics)Particulars2010201120122013

Sales + 1.0% + 10.3% + 5.9% + 4.0%

COGS (8.8%) + 6.0% + 10.9% + 3.9%

Marketing expense (9.3%) (2.6%) + 9.8% + 21.7%

Administrative expense + 226.2% + 1.7% + 25.1% (3.6%)

EBIT + 51.1% + 9.7% (8.7%) (0.1%)

Financial expense (75.4%) + 8.1% (58.5%) (23.5%)

Net Income + 112.7% + 33.2% (13.8%) + 4.6%

2.2 Balance Sheet Analysis There has been an addition of Taka 100.14 mn in 2013 to the gross block of the fixed assets in the following areas: Land proximal to the present existing manufacturing facilities to expand tile and sanitary ware capacities by Taka 21.73 mn, Factory admin and stores building Taka 17.83 mn, additionsto plant & machinery and furniture and fixtures by Taka 51.53 mn and Taka 3.22 mn respectively. In 2013 there has also been installation of new communication equipments of Taka 2.73mn for added data connectivity between factories. RAK increased its investment from 40% in 2012 to 47% in 2013 by contributing Taka 36.75 mn in RAK Paints, an associate company. Inventory has gone up by 246 mn in 2013 compare to 2012. The reason behind the piled inventory is nothing but sluggish growth in real estate and housing sector in 2013 and onwards. They are the big driver. Though the Company has a policy of maintaining 6-7 months inventory of key inputs to ensure uninterrupted operations. Cash and bank balances include cash in hand Taka 2.7 mn, balances in bank accounts Taka 270.37 mn and Fixed Deposits Taka 1150.76 mn. The liquid balances of cash and bank are in commensurate with the smooth functioning of the business.

2.3 Cash Flow Statement Analysis

The statement of cash flows is designed to show how the firms operations have affected its cash position by examining the investment and financing decisions of the firm. Often the information contained in the statement of cash flows answer questions like: Is the firm generative the cash needed to purchase additional fixed assets for growth? Does it have excess cash flows that can be used to repay debt or to invest in new products? Information contained in the Cash Flow Statement is useful both for financial managers and investors. The graph followed shows the net cash in hand of RAK ceramics for the year 2013

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