ratio analysis square prsentation

7/27/2019 Ratio Analysis Square Prsentation

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GROUP MEMBERS:

FAHAD AMEEN 10-16742-2

American International University of Bangladesh

Faculty : Abedin,Md. Joynal

Course: Financial Management- Section C


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OUR COMPANY

Year of Establishment :Unit 1 : 1994 ; Unit 2 : 1998 ; Unit 3 : 2000

Manufacturing Business :100% Cotton Ring Spun Yarn for Hosiery

Target Market :Export Oriented Readymade Garments Industry

Investment :Unit 1 : US$ 20.00 mln ; Unit 2 : US$ 13.50 mln ; Unit 3 : US$ 12 mln

Capacity :Unit 1 : 36,288 spindles with daily production capacity of 20,000 kgs.Unit 2 : 23,184 spindles with daily production capacity of 12,000 kgs

768 rotors with daily production capacity of 8,000kgs

Unit 3 : 3,192 open end heads with daily production capacity of 20,000kgs


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OUR OBJECTIVE

1) To Do Ratio Analysis Of The Financial YearOf 2010 and 2011 Of Square Textile LTD.

2) Give Interpretations On How the CompanyIs Doing According To The Result Of TheRatio Analysis

3) To Interpret Which Financial Year WasBetter For Square Textile LTD.


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WHAT IS RATIO ANALYSIS

A tool used by individuals to conduct a quantitative

analysis of information in a company's financial

statements. Ratios are calculated from current year

numbers and are then compared to previous years, othercompanies, the industry, or even the economy to judge

the performance of the company. Ratio analysis is

predominately used by proponents of fundamental

analysis.


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CLASSIFICATION OF RATIOS

Liquidity Ratios

Leverage Ratios

Turnover Ratios

Profitability Ratios

Market Value Ratios


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LIQUIDITY RATIOS

are used to measure the short-term solvency of a company. They showthe ability of the company to quickly convert its assets into cash to payits short-term debts. The higher the ratios, the more liquid the companyand the less likely the company experience financial distress in short-term basis.

Includes:

1) Current Ratio

2) Quick Ratio

3) Cash Ratio


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LEVERAGE RATIOS are used to measure the extent of the company's financing with debt relative to

equity and its ability to cover interest and other fixed charges. They address thecompany's long-term ability to meet its financial leverage. The higher the ratios, themore indebtedness the company owes, which signal the possibility the company, willbe unable to earn enough to satisfy its debt obligations

Includes:

1) Total Debt Ratio

2) Debt/Equity Ratio

3) Equity Multiplier

4) Interest Coverage Ratio

5) Cash Coverage Ratio


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TURNOVER RATIOS The percentage of a mutual fund or other investment vehicle's holdings

that have been "turned over" or replaced with other holdings in a givenyear. The type of mutual fund, its investment objective and/or theportfolio manager's investing style will play an important role indetermining its turnover rati

Includes:

1) Receivables Turnover Ratio

2) Inventory Turnover

3) Capital Turnover


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PROFITABILITY RATIOS

measure the overall earnings performance of a companyand its efficiency in utilizing assets, liabilities and equity

Includes:

1) Profit Margin

2) Return ON Asset

3) Return ON Equity


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MARKET VALUE RATIOS are used for value comparison. These Ratios are not

contained in financial statements and they can only becalculated from publicly traded companies.

Includes:

1) Price-Earnings Ratio

2) Market to book ratio


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CURRENT RATIO OFSQUARE TEXTILE LTD

1.3

1.4

1.51.6

2010 2011

1.431.57

Ratio

Ratio

The Company is doing well, as it has more assets then its liability

The company has done better in 2011 then 2010

Current Ratio: A liquidity ratio that measures a company'sability to pay short-term obligations.


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QUICK RATIO OF SQUARE TEXTILE LTD

0.83

1.55

0 0.5 1 1.5 2

2010

2011

Ratio

Ratio

Overall the company is doing good

The Company is doing better in 2011 then 2010

Quick Ratio:An indicator of a company's short-term liquidity. The quick

ratio measures a company's ability to meet its short-term obligations with itsmost liquid assets. The higher the quick ratio, the better the position ofthe company.


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CASH RATIO OF SQUARE TEXTILE LTD

0

0.1

0.2

20102011

0.0310.119

Ratio

Ratio

The Company has to work on having more liquid asset

The companys liquid asset increased in 2011

Cash Ratio: The ratio of a company's total cash and cashequivalents to its current liabilities. The cash ratio is most commonlyused as a measure of company liquidity. It can therefore determineif, and how quickly, the company can repay its short-term debt. Astrong cash ratio is useful to creditors when deciding how muchdebt, if any, they would be willing to extend to the asking party.


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TOTAL DEBT RATIO OF SQUARE TEXTILE LTD

0.40.60.8

20102011

0.610.53

Ratio

Ratio

The Company has more debt then compared to its asset, the company isnot doing good in terms of debt management

The debt has gone down in 2011 then 2010

Total Debt Ratio:A ratio that indicates what proportion of debt a company has

relative to its assets. The measure gives an idea to the leverage of the companyalong with the potential risks the company faces in terms of its debt-load.


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DEBT-TO-EQUITY RATIO OF SQUARE TEXTILE LTD

1.24

1.01

0 0.5 1 1.5

2010

2011

Ratio

Ratio

The company is being financed mostly by debt

The company is using less debt in 2011 for financing then 2010

Debt/Equity Ratio: A measure of a company's financial leverage

calculated by dividing its total liabilities by stockholders' equity. Itindicates what proportion of equity and debt the company is usingto finance its assets.


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EQUITY MULTIPLIER RATIO OF SQUARE TEXTILE LTD

0 1 2 3

2010

2011

2.5

1.91

Ratio

Ratio

Since square textile has a higher equity multiplier, it can be said torely more heavily on debt in order to finance its assets.

Equity multiplier ratio became down in 2011 then 2010

Equity Multiplier: Like all debt management ratios, the equity

multiplier is a way of examining how a company uses debt to financeits assets. Also known as the financial leverage ratio or leverageratio.


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INTEREST COVERAGE RATIO OF SQUARE TEXTILELTD

0

200

400

20102011

262.9196.07

Ratio

Ratio

The company has good capability of paying its debts

Its capabilities decreased in 2011

Interest Coverage Ratio:A ratio used to determine how easily a company can

pay interest on outstanding debt. The interest coverage ratio is calculated bydividing a company's earnings before interest and taxes (EBIT) of one period bythe company's interest expenses of the same period:


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RECEIVABLE TURNOVER RATIO OF SQUARETEXTILE LTD

0

1

2

3

2010 2011

2.182.81

Ratio

Ratio

The receivable turnover ratio in 2011 is better then 2010

Receivables Turnover Ratio: An accounting measure used to quantify a

firm's effectiveness in extending credit as well as collecting debts. Thereceivables turnover ratio is an activity ratio, measuring how efficiently afirm uses its assets.


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CAPITAL TURNOVER RATIO OF SQUARE TEXTILELTD

0

0.2

0.4

0.6

0.8

1

1.2

2010 2011

0.751.06

Ratio

Ratio

The capital turnover ratio in 2011 is more then 2010

Capital Turnover: A measurement comparing the depletion of working

capital to the generation of sales over a given period. This provides someuseful information as to how effectively a company is using its workingcapital to generate sales.


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NET PROFIT MARGIN OF SQUARE TEXTILE LTD

0

0.05

0.1

0.15

2010 2011

0.11

0.08

Ratio

Ratio

The net profit margin of the company was better in 2010 then 2011

Net Profit Margin: A ratio of profitability calculated as

net income divided by revenues, or net profits divided by sales. Itmeasures how much out of every dollar of sales a company actuallykeeps in earnings.


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RETURN ON ASSET OF SQUARE TEXTILE LTD

0.08

0.093

0.07 0.08 0.09 0.1

2010

2011

Ratio

Ratio

Linear (Ratio)

The company is quite profitable relative to its total assets

The return on asset ratio is higher in 2011 then 2010

Return ON Asset:An indicator of how profitable a company isrelative to its total assets. ROA gives an idea as to howefficient management is at using its assets to generate earnings.


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RETURN ON EQUITY OF SQUARE TEXTILE LTD

0.165 0.17 0.175 0.18

2010

2011

0.18

0.17

Ratio

Ratio

The company is making average amount of profit with the moneyshareholders have invested.

The return on equity was higher in 2010 then 2010


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PRICE EARNINGS RATIO OF SQUARE TEXTILELTD

13.5611.58

Ratio

20102011

current share price of Square textile is higher in 2011 compared toits per-share earnings.


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MARKET TO BOOK RATIO OF SQUARE TEXTILELTD

6.56.09

Sales

20102011

The market to book ratio of Square textile is higher in 2011 then 2010


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SUMMARY OF 2010

1.43

0.83

0.031

0.61

1.24

2.5

2.180.75

0.11

0.08

0.18

6.5

2010

Current ratio

Quick ratio

Cash ratio

Total debt ratio

Debt equity

ratioEquity MultiplierratioReceivableturnover ratioCapital turnover

Net profitMarginReturn of asset

Return onequity

Market to book

1.57

1.55

0.1190.53

1.01

1.91

2.81

1.06

0.08

0.093

0.17

6.09

2011

CurrentRatio

Quick Ratio

Cash Ratio

Total DebtRatioDebt-to-equityEquityMultiplierReceivableTurnoverCapital

TurnoverNet ProfitMarginReturn ONAssetReturn onEquity

Market to

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