shinepukur ceramics ltd
TRANSCRIPT
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TERM PAPER
ON
Financial Accounting
Submitted To:
Mr. Shajedul Alam Senior Lecturer
School of Business University of Liberal Arts Bangladesh
Course Code: MBA-301
Section: 02
Submitted By:
Name Id. No.
Md. Shakhawatul Islam 143 051 070
Tarik Salman 143 051 029
Shafat Rahman 143 051 047
Md. Khoshnur Alam 143 051 020
Md. Anisul Haque Tareque 142 051 086
Date of Submission:
December 15, 2014
iii
Letter of Transmittal
December 15, 2014
To
Mr. Shajedul Alam
Senior Lecturer
School of Business
University of Liberal Arts Bangladesh
Subject: Letter of Transmittal for Term Paper.
Dear Sir,
With great pleasure we submit our report on “Ratio Analysis: Shinepukur Ceramic Ltd.”,
that you have assigned to us as an important requirement of the course MBA 301. We
have found the study to be quite interesting, beneficial and insightful. We have tried our
level best to prepare an effective and creditable report.
We hope you will find this report worth all the labor we have put in it. Though we have
put our best efforts yet it is very likely that the report may have some mistakes and
omissions that are unintentional. So, we hope that the report will worthy of your
consideration.
Yours Sincerely, Shakhawatul Islam/143 051 070
Tarik Salman/143 051 029
Shafat Rahman/143 051 047
Md. Khoshnur Alam/143 051 020
Md. Anisul Haque Tareque/142 051 086
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Acknowledgement
All praise to Allah!
We would like to convey our thanks to a number of persons who helped me in
completing this dissertation. The endeavor and strain undertaken by those cannot be
left without recognition.
First of all, we are immensely grateful to our respective Course Teacher, Mr. Shajedul
Alam, Senior Lecturer in School of Business, University of Liberal Arts Bangladesh
University for his guidance, valuable & thoughtful comments, and suggestion. We are
very grateful to him for giving us inspiration and encouragement throughout our study.
His indefatigable patience & attention to detail enable us to complete this dissertation &
get it into its present form. However, all its limitations are considered.
Secondly, I would like to convey my thanks to people providing us with valuable
information that was very much needed for the completion of this report.
Finally, our sincere gratitude goes to our friends & classmates who helped us whenever
we needed.
Despite our sincere efforts, there may appear some shortfalls in the report. We apologize
for any such unintentional errors.
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Executive Summary Shinepukur Ceramics Ltd is one of the top leading ceramic product manufacturers
in Bangladesh which is a member of BEXIMCO Group, the Largest Private Sector
Business Conglomerate in Bangladesh. Started at 1997 SCL had shown tremendous
achievement in the ceramic industry not only in local market but also in international
arena. There for in this term paper we will discuss analysis and recommend about some
of the major ratios analysis for our course financial accounting. Considering the public
financial report of their fiscal year 2011, 2012, and 2013 we will determine how well SCL
is operating their business and what benefit they will bring for their present and
prospect shareholders. In addition with this achievement throughout the past few years
Shinepukur has continuously reinforced their good performance by providing
stockholders with regular cash or stock dividend. They have also been successful in
maintaining a moderate balance of liquidity and profitability.
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Table of Contents
1. Company Profile .......................................................................................................... 1
1.1 Nature of Business ................................................................................................. 1
1.2 Company Mission .................................................................................................. 1
1.3 Company Vision ..................................................................................................... 1
1.4 Company Goals ...................................................................................................... 1
1.5 Values of the Company .......................................................................................... 2
1.6 Quality Policy: ........................................................................................................ 2
1.7 Comparative Information ...................................................................................... 2
1.8 Management .......................................................................................................... 2
1.8.1 Corporate Directors ........................................................................................ 2
1.9 Operations.............................................................................................................. 3
2. History of Shinepukur Ceramics ................................................................................. 3
2.1 Present Manufacturers .......................................................................................... 5
2.2 Bangladesh Experience .......................................................................................... 5
2.3 Global Foot Print ................................................................................................... 5
3. Products ....................................................................................................................... 5
3.1 Bone China ............................................................................................................. 6
3.2 Porcelain ................................................................................................................ 6
3.2.1 Plain Porcelain ................................................................................................ 6
3.2.2 Ivory China ...................................................................................................... 6
3.2.3 High Alumina Porcelain ................................................................................. 7
3.2.4 Satin China ...................................................................................................... 7
4. Product Distribution .................................................................................................... 7
4.1 Local Market .......................................................................................................... 7
4.2 International Market ............................................................................................. 7
5. Statement of Comprehensive Income ......................................................................... 8
6. Statement of Changes in Equity ................................................................................ 10
7. Statement of Financial Position ................................................................................ 12
8. Statement of Cash Flows ............................................................................................ 14
9. Ratio Analysis ............................................................................................................ 16
9.1 Items and Amounts ............................................................................................. 16
9.2 Profitability Ratios ............................................................................................... 16
9.2.1 Mark Up Ratio ................................................................................................ 17
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9.2.2 Gross Margin Ratio ....................................................................................... 18
9.2.3 Profit Margin Ratio ....................................................................................... 19
9.2.4 Return on Capital Employed Ratio ............................................................... 20
9.2.5 Return on Capital Invested / Equity Ratio ................................................... 21
9.3 Liquidity Ratio ..................................................................................................... 22
9.3.1 Current Ratio ................................................................................................ 22
9.3.2 Acid Test / Quick Ratio ................................................................................. 23
9.4 Efficiency Ratio .................................................................................................... 24
9.4.1 Stock Turnover Ratio .................................................................................... 24
10. Findings ................................................................................................................... 25
11. Recommendation .................................................................................................... 26
Conclusion ......................................................................................................................... 27
References ......................................................................................................................... 28
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1. Company Profile Shinepukur Ceramics Limited (SCL) was incorporated in Bangladesh on 26th January
1997 under the Companies Act, 1994 as a private Company and commenced its
manufacturing operation in 1999. The Company was converted to a Public Limited
Company on 7th May 2008; The Shares of the Company have been listed in the Dhaka
Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) on 18th November 2008
under the DSE and CSE Direct Listing Regulations 2006.
The registered office of the company is located at House No.17, Road No, Dhanmondi
R/A, Dhaka. The industrial units are located at Beximco Industrial Park, Sarabo,
Kashimpur, and Gazipur. It is engaged in manufacturing and marketing of high
quality Porcelain and high value added Bone China Table wares, which it sells in the
local as well as international markets. SCL has no subsidiary or associate-Company.
Bangladesh Export Import Company (Beximco) Ltd owns its 100% shares, thereby
becoming its holding Company.
1.1 Nature of Business
The company operates in a single industry segment. It is engaged in manufacturing
and marketing of high quality Porcelain and high values added Bone China
Tableware, which it sells in the local as well as international markets.
1.2 Company Mission
Each of our activities must benefit and add value to the common wealth of our society.
We firmly believe that, in the final analysis we are accountable to each of the
constituents with whom we interact; namely: our employees, our customers, our
business associates, our fellow citizens and our shareholders.
1.3 Company Vision
To be regarded as world class ceramics company through product.
1.4 Company Goals
o To sustain a significant sales growth above industry average.
o To develop employee skills through training.
o To establish as one of the most preferred Ceramics Company in Bangladesh.
o To focus on customer satisfaction.
o To assure quality products from our manufacturing facilities.
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1.5 Values of the Company
In order to achieve our aspired vision we shall subscribe to the following values.
o Transparent and fair in all our dealing.
o Take initiative to exceed standard.
o Share social responsibility.
o Works as a team.
o Live up to our commitment.
1.6 Quality Policy:
Shinepukur Ceramics Limited firmly believes in Total Quality as a continuous process
of improvement in all spheres of business. It plans to achieve this by:
o Seeking customers need and expectations and striving to satisfy and to
exceed them.
o Simultaneous improvement of productivity and cost reduction.
o Involving employees at all levels and providing knowledge and training.
o Maintaining a high standard of safety, health and environment.
1.7 Comparative Information
Comparative information has been disclosed for all numerical information in the
financial statements and also the narrative and descriptive information where it is
relevant for understanding of the current year‟s financial statements. Comparative
figures have been re-arranged wherever considered necessary to ensure better
comparability with the current year without causing any impact on the profit and
value of assets and liabilities as reported in the financial statements.
1.8 Management
The company continues to be managed and run under the direct supervision /
guidance of Mr. Salman F. Rahman, deputy Chairmen of Beximco group.
1.8.1 Corporate Directors
Board of Directors:
Chairmen: A.S.F. Rahman
Vice Chairmen: Salman F. Rahman
Director: O.K. Chowdhury & Iqbal Ahmed
Independent Director: Masud Ekramullah Khan
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Executive Director & Company Secretary: Mohammad Asad Ullah, FCS
Management Committee:
Chief Executive Officer: Mohammed Humayun Kabir, FCA
Executive Director: Md. Luthfor Rahman
Executive Director: Md. Faruque Ali
General Manager: Md. Rafiqul Islam, FCA
General Manager: S.R.Ansari ( Porecelain Plant)
General Manager: Farque Ali (Bone China)
1.9 Operations
The company started its commercial operation of porcelain and Bone China units in
the year 1999 and has been continuing as one of the fastest growing Company in the
Industry. Despite the complex economic issues worldwide along with increased
competition from new entrants posing new challenges for every concern in this
industry, this company is fully geared to meet these challenges and continues to
perform well by focusing on product quality, product innovation, and customer‟s
satisfaction and by improving the customer base.
At 2003 for installing the new machinery, the gross turnover stands at Tk. 1126.02
million with a growth of 11.94% as compared to previous year‟s turnover of
Tk.1005.90 million. Considering the rapid increase of demand of the products in
foreign and domestic market, the management of the company took steps to expand
its porcelain unit to double the existing production capacity and keep its share in the
international and domestic markets.
2. History of Shinepukur Ceramics Shinepukur Ceramics is a member of the Largest Private Sector Conglomerate,
BEXIMCO, in Bangladesh with about 30,000 people in the permanent payroll,
handling a diversified range of merchandise to and from Bangladesh. The Group‟s in-
house manufacturing interests encompass Seafood, Jute Yarn, Pharmaceuticals,
Textiles, Knit, Denim, Garments, Real Estate and Engineering. BEXIMCO is also
involved in Media, Computers and the IT Arena‟s.
As part of a meticulously planned expansion program of the Group, BEXIMCO has
setup this state-of-the-art Ceramic Tableware Plant, SHINEPUKUR CERAMICS LTD.
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(SCL) on the outskirts of Dhaka in 1999. SCL is a 100% export oriented unit, equipped
with the latest and modern Machinery‟s and Kiln‟s from TAKASAGO MINO, and SKK
Japan and comprises of two independent units producing high quality Porcelain and
Bone China Tableware. The Porcelain unit has a capacity of 60,000 pieces, whilst the
capacity of the Bone China unit being 10,000 pieces a day. The Bone China unit has in
fact been setup on the basis of the latest technology from NIKKO Japan, coupled with
extensive training facilities to our Production team, both locally and internationally.
In addition, SCL is equipped with the top-of-the-testing and Quality Control
Laboratory facilities, Decal Plant, Carton-Packaging Plant, Modeling Unit, and has at
its disposal its captive gas-based Power Generation capability, and the best effluent
discharge mechanisms in place. The Company is also an ISO 9001/2000 certified
Company.
Since commencement of the commercial production at the end of 1999, Shinepukur
has successfully developed a substantial export market for the top-of-the-line Bone
China and Porcelain Tableware and the customer portfolio now includes world-
renowned Tableware companies in the UK, USA, Spain, Italy, Australia, New Zealand,
Norway, Sweden, Russia, UAE, Denmark, Germany, France, Mexico, Turkey, and
India.
Decal Plant and Design Studio: Decal production started in August 2001. Total
Printing Capacity is about 120,000 Sheets per Month, starting from single color upto
8 Colors with Gold/Platinum, both On glaze (840 degrees Celsius) and In glaze (1220
degrees Celsius), and completely Lead and Cadmium Free. The Company has set up
Designing Studio in the Plant in 2005 and in Italy with Rody Time s.r.l. in 2006.
Packaging Plant: Production in the Packaging Plant started in June 2003. Assorted
about 300,000 Pieces White and/or Brown Cartons per month are presently being
produced in this facility. In addition, the Company also supplies 4-6 Color Printed
Cartons.
Exports from Shinepukur Ceramics comprise about 60% of the National Tableware
Export turnover of Bangladesh. As recognition of this contribution, SCL has been
awarded National Export Trophy (Gold) in December 2003 for the Financial Year
2000-2001and 2002-2003.
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2.1 Present Manufacturers
Till today, Bone China remained a product of ultimate luxury and a technology
guarded by a very few world-renowned manufacturers. The leading manufacturers are
Wedgewood, Spode, Royal Doulton and Royal Worcester of UK; Lenox of USA;
Villeroy & Boch of Germany; Richard Ginori of Italy; Noritake, Naromi and Nikko of
Japan and Hankook of Korea. Some of these companies have also set up factories in
Indonesia and Thailand.
2.2 Bangladesh Experience
Shinepukur Ceramics is the first industry which has successfully absorbed the Bone
China technology from Nikko of Japan in the year 2000 and, in a short span of two
years, has emerged as a major supplier to global brands of Bone China tableware.
Monno Ceramic, which is well known for its porcelain, has also recently started
producing very small quantity of Bone China. We may hope that more entrepreneurs
will now be interested to setup Bone China factories in the country.
2.3 Global Foot Print
Exporting Countries: As inauguration of the commercial production at the end of
1999, Shinepukur has successfully developed a substantial export market for the top
of the line Bone China and Porcelain Tableware and the customer portfolio now
includes world-renowned Tableware companies in the Australia, Argentina, Canada,
Denmark, Egypt, France, Germany, India, Ireland, Italy, Japan, Mexico, Norway, New
Zealand, Poland, Pakistan, Portugal, Russian Federation, Romania, Spain, Sweden,
Saudi Arabia, Singapore, Taiwan, Turkey, USA, UK, UAE etc.
3. Products Shinepukur presently manufactures Shinepukur produces World Class Bone China.
Complementing its superb range of Bone China, Shinepukur also offers Porcelain,
Ivory China and High Alumina tableware for all different market segments. The
following are the products:
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3.1 Bone China
Shinepukur Ceramics was the first company in
Bangladesh to introduce Bone China technology and
products. Both home and abroad, the brand
„Shinepukur‟ has become a synonym of premium quality
ceramics. Shinepukur‟s Bone China Plant is one of the
few of its kind in the World with technology from
NIKKO Company, Japan‟s master Bone China producer. SCL produces World class
Bone China, using the top quality raw materials and ingredients, sourced by highly
reputed manufacturers from all corners of the Globe. These are augmented by a
highly calibrated test protocol for Metal release, Thermal shock tolerance, Detergents,
Acid and Chipping resistance, Dishwasher efficiency.
3.2 Porcelain
Shinepukur Ceramics also offers Plain Porcelain, Ivory
China, High Alumina Porcelain and Satin China
tableware for all different market segments. Shinepukur
Porcelain has the finest features and bright white body,
made from highest quality raw materials. It is
comparable in quality to the best Porcelain,
manufactured by the world-renowned companies.
3.2.1 Plain Porcelain
Shinepukur Porcelain has the finest features and bright
white body, made from highest quality of Raw
Materials. It contains 18% Alumina in the Body. It is
comparable in quality to the best Porcelain,
manufactured by the world-renowned companies.
Water Absorption is 0%, hardness of Glaze 4 Mohs and
Crushing Strength 1000 Kg/cm2.
3.2.2 Ivory China
It contains 23% Alumina in the Body which similar
weight to Porcelain Body and color is creamy with
translucency similar to Porcelain. Water Absorption is
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0%, Hardness of Glaze 5 Mohs. Crushing Strength 1100 Kg/cm2 which about 10%
stronger than Porcelain.
3.2.3 High Alumina Porcelain
This Product has no translucency and made
especially for Hospitality and Food Service
Industry. Contains 28% Alumina in the Body and
can be offered in any shape suitable for commercial
use. Water Absorption is 0%, Hardness of Glaze 5
Mohs. Crushing Strength 1600 Kg/cm2 about 60%
stronger than Porcelain.
3.2.4 Satin China
A Shinepukur own research product which is most
white appearance than conventional Porcelain,
increased % of Alumina and Premium Clay. Contains
30% Alumina in the Body to make this Product 70%
stronger than Porcelain.
4. Product Distribution SCL distributes its products in the following manner:-
4.1 Local Market
Through Own Showroom and Franchise Showroom.
Through Local Distributors/Wholesalers,
Through Local Retailers/Chain Stores. and
Direct Sales and Delivery to Institutions/Organizations/Corporate Houses.
4.2 International Market
Through Own Showroom (Wholesale) in the USA.
Through Yellow Showroom (Retail) in Pakistan (Yellow Brand)
Through Reputed Importers in Europe, North America and Middle-East (Customer
Brand).
Through Reputed Retailers in Europe and North America (Customer Brand).
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5. Statement of Comprehensive Income For the year ended 31 December 2013
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6. Statement of Changes in Equity For the year ended 31 December 2013
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7. Statement of Financial Position As at 31 December 2013
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8. Statement of Cash Flows For the year ended 31 December 2013
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9. Ratio Analysis Ratio Analysis is a form of Financial Statement Analysis that is used to obtain a quick
indication of a firm's financial performance in several key areas. The ratios are
categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset
Management Ratios, Profitability Ratios, and Market Value Ratios.
Ratio Analysis as a tool possesses several important features. Ratios can be used to
compare a firm's financial performance with industry averages. In addition, ratios can
be used in a form of trend analysis to identify areas where performance has improved
or deteriorated over time.
9.1 Items and Amounts
Items 2011 2012 2013
Gross Profit 653,104,250 674,037,754 477,671,044
Cost of Goods Sold 1,248,024,942 1,268,312,998 1,226,896,190
Net Sales 1,901,129,192 1,942,350,752 1,704,567,234
Net Profit 168,768,102 90,285,057 11,801,568
Sales 1,901,129,192 1,942,350,752 1,704,567,234
Capital Employed 3,594,603,758 3,572,722,968 3,437,927,613
Owner's Capital 4,499,760,423 4,544,462,049 4,487,866,589
Current Assets 1,617,231,951 1,796,412,804 1,710,385,576
Current Liabilities 1,648,906,953 1,772,067,117 1,756,989,717
Stock Or Inventory 891,674,750 845,059,407 912,642,408
Average Stock 330,676,340 326,749,984 337,857,421
9.2 Profitability Ratios
Profitability ratios compare income statement accounts and categories to show a
company's ability to generate profits from its operations. These ratios basically show
how well companies can achieve profits from their operations. Investors and creditors
can use profitability ratios to judge a company's return on investment based on its
relative level of resources and assets. In other words, profitability ratios can be used to
judge whether companies are making enough operational profit from their assets.
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Mark Up in2011
Mark Up in2012
Mark Up in2013
Mark Up Ratio 52.33% 53.14% 38.93%
Ma
rk
up
Ra
tio
P
er
ce
nta
ge
Mark Up Ratio
9.2.1 Mark Up Ratio
The difference between an investment's lowest current offering price among dealers
and the higher price a dealer charges a customer. Markups occur when dealers act as
principals (buying and selling securities from their own accounts, at their own risk),
as opposed to brokers (receiving a fee for facilitating a transaction).
Mark up in 2011 = (Gross Profit * 100)/ Cost of Goods Sold = (653,104,250 * 100)/ 1,248,024,942 = 52.33%
Mark up in 2012 = (Gross Profit * 100)/ Cost of Goods Sold
= (674,037,754 * 100)/ 1,268,312,998 = 53.14%
Mark up in 2013 = (Gross Profit * 100)/ Cost of Goods Sold = (477,671,044 * 100)/1,226,896,190 = 38.93%
9.2.1.1 Interpretation Here in these graph we can see that in 2012 the markup ratio is increase to 53.14%
which was previously 52.33% as because of the gross profit was increased. But in 2013
their business was fall down that‟s why their gross profit decreases and the markup
ratio is now only 38.93%.
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9.2.2 Gross Margin Ratio
Gross margin ratio is a profitability ratio that compares the gross margin of a business
to the net sales. This ratio measures how profitable a company sells its inventory or
merchandise. In other words, the gross profit ratio is essentially the percentage
markup on merchandise from its cost. This is the pure profit from the sale of
inventory that can go to paying operating expenses.
Gross Margin Ratio in 2011 = (Gross Profit * 100)/Net Sales
= (653,104,250 * 100) / 1,901,129,192 = 34.35%
Gross Margin Ratio in 2012 = (Gross Profit * 100)/Net Sales
= (674,037,754 *100) /1,942,350,752 = 34.70%
Gross Margin Ratio in 2013 = (Gross Profit * 100)/Net Sales
= (477,671,044 *100) / 1,704,567,234 = 28.02%
9.2.2.1 Interpretation As shown, in 2012 there net sales increased, that‟s why the gross margin ratio was
increased to 34.70% which was previously 34.35%. Although the sales of 2012 was
more than in 2011 but the gross profit did not increased as much as they sells. But in
2013 the sales goes down, so there net sales was decreased as well as the gross profit.
So in 2013 the gross margin ratio reaches only 28.02%.
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Margin orGross ProfitPercentage
2011
Margin orGross ProfitPercentage
2012
Margin orGross ProfitPercentage
2013
Gross Margin Ratio 34.35% 34.70% 28.02%
Ma
rg
in o
r G
ro
ss
P
ro
fit
Pe
rc
en
tag
e
Gross Margin Ratio
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9.2.3 Profit Margin Ratio
The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a
profitability ratio that measures the amount of net income earned with each dollar of
sales generated by comparing the net income and net sales of a company. In other
words, the profit margin ratio shows what percentage of sales are left over after all
expenses are paid by the business.
Profit Margin Ratio in 2011 = (Net profit * 100) /Net sales
= (168,768,102 * 100)/1,901,129,192 = 8.88%
Profit Margin Ratio in 2012 = (Net profit * 100) /Net sales
= (90,285,057 * 100)/1,942,350,752 = 4.65%
Profit Margin Ratio in 2013 = (Net profit * 100) /Net sales
= (11,801,568 * 100)/1,704,567,234 = 0.69%
9.2.3.1 Interpretation In this profit margin ratio graph we clearly saw that the profit margin was fall down in
2012, and goes to 4.65% profit only. That was 8.88% in 2011. But in 2013 their net
profit was too low then the previous years. That‟s why the profit margin ratio goes to
the bottom and near to 0(zero) it‟s only 0.69%. Because operating expense was
dramatically high in 2013.
0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%
Net ProfitPercentage
2011
Net ProfitPercentage
2012
Net ProfitPercentage
2013
Profit Margin Ratio 8.88% 4.65% 0.69%
Ne
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Pe
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Profit Margin Ratio
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9.2.4 Return on Capital Employed Ratio
Return on capital employed or ROCE is a profitability ratio that measures how
efficiently a company can generate profits from its capital employed by comparing net
operating profit to capital employed. ROCE is a long-term profitability ratio because it
shows how effectively assets are performing while taking into consideration long-term
financing. This is why ROCE is a more useful ratio than return on equity to evaluate
the longevity of a company.
Return on Capital Employed in 2011 = (Net profit * 100)/Capital Employed (Average Capital) = (168,768,102*100)/ {(35,157,639 + 7,154,049,876)/2} = (168,768,102*100)/3,594,603,758 = 4.69%
Return on Capital Employed in 2012
= (Net profit * 100)/Capital Employed (Average Capital) = (90,285,057 *100)/ {(25,432,780 + 7,120,013,155)/2} = (90,285,057 *100)/3,572,722,968 = 2.53%
Return on Capital Employed in 2013 = (Net profit * 100)/Capital Employed (Average Capital) = (11,801,568 * 100)/ {(1,600,987 + 6,874,254,239)/2} = (11,801,568 * 100)/3,437,927,613 = 0.34%
9.2.4.1 Interpretation In 2012 the return on capital employed goes to 2.53%, which was 4.69% in 2011. But
because of the company‟s business fall down in 2013, the net profit was very low.
That‟s why the return on capital employed ratio was only 0.34%.
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
Return onCapital
Employed2011
Return onCapital
Employed2012
Return onCapital
Employed2013
Return on Capital Employed 4.69% 2.53% 0.34%
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Return on Capital Employed Ratio
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9.2.5 Return on Capital Invested / Equity Ratio
Return on Capital Invested is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words,
the return on equity ratio shows how much profit each dollar of common
stockholders' equity generates. So a return on 1 means that every dollar of common
stockholders' equity generates 1 dollar of net income. This is an important
measurement for potential investors because they want to see how efficiently a
company will use their money to generate net income.
Return on Capital Invested 2011 = (Net Profit * 100)/Owner's Capital = (168,768,102*100)/4,499,760,423 = 3.75%
Return on Capital Invested 2012 = (Net Profit * 100)/Owner's Capital
= (90,285,057 * 100)/4,544,462,049 = 1.99%
Return on Capital Invested 2013 = (Net Profit *100)/Owner's Capital
= (11,801,568 * 100)/4,487,866,589 = 0.26%
9.2.5.1 Interpretation The return on capital invested ratio or the equity ratio in 2012 was 1.99%. In 2011 that
was 3.75%. But in 2013 the net profit was too lower than the previous year‟s. The
return on capital invested was only 0.26%.
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
Return onCapital
Invested 2011
Return onCapital
Invested 2012
Return onCapital
Invested 2013
Series 1 3.75% 1.99% 0.26%
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Inv
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Pe
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Equity Ratio
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9.3 Liquidity Ratio
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt
obligations. This is done by comparing a company's most liquid assets (or, those that
can be easily converted to cash), its short-term liabilities. The ratios that we'll look at
are the current, quick and cash ratios and we will also go over the cash conversion
cycle, which goes into how the company turns its inventory into cash.
9.3.1 Current Ratio
The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay
off its short-term liabilities with its current assets. The current ratio is an important
measure of liquidity because short-term liabilities are due within the next year.
Current assets like cash, cash equivalents, and marketable securities can easily be
converted into cash in the short term. This means that companies with larger
amounts of current assets will more easily be able to pay off current liabilities when
they become due without having to sell off long-term, revenue generating assets. The
standard value of current ratio is 2:1.
Current Ratio in 2011 = Current Assets : Current Liabilities
= 1,617,231,951 : 1,648,906,953
= 0.98 : 1
Current Ratio in 2012 = Current Assets : Current Liabilities
= 1,796,412,804 : 1,772,067,117
= 1.01 : 1
Current Ratio in 2013 = Current Assets : Current Liabilities
= 1 710,385,576 : 1,756,989,717
= 0.97 : 1
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9.3.1.1 Interpretation From this ratio table we can see that in 2011 the current ratio of the company was
0.98 and in 2012 the ratio increased to 1.01, these occurred because both the Current
Assets & Current Liability increased in 2012. In 2013 the Current Ratio again
decreased because the Current Liability increased more than the previous year and
also the Current Assets increased but not like the Current Liability. The current ratio
was 0.97 in 2013.
9.3.2 Acid Test / Quick Ratio
The acid test ratio or quick ratio is a liquidity ratio that measures the ability of a
company to pay its current liabilities when they come due with only quick assets.
Quick assets are current assets that can be converted to cash within 90 days or in the
short-term. Cash, cash equivalents, short-term investments or marketable securities,
and current accounts receivable are considered quick assets. The standard rate of acid
test ratio is 1.1 : 1.
Acid Test Ratio in 2011 = Current Assets - Stock or Inventory : Current Liabilities
= (1,617,231,951-891,674,750) : 1,648,906,953
= 725,557,201 : 1,648,906,953
= 0.44 : 1
Acid Test Ratio in 2012 = Current Assets - Stock or Inventory : Current Liabilities
= (1,796,412,804-845,059,407) : 1,772,067,117
= 951,353,397 : 1,772,067,117
= 0.54 : 1
Acid Test Ratio in 2013 = Current Assets - Stock or Inventory : Current Liabilities
= (1,710,385,576-912,642,408) : 1,756,989,717
= 797,743,168 : 1,756,989,717
= 0.45 : 1
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9.3.2.1 Interpretation The standard value of acid test ratio is 1:1. But company acid test ratio was 0.54:1 in
2012. This was 0.44:1 in 2011. In 2012 the current asset was higher as well as their
current liabilities. In 2013 SCL‟s stock or inventory increased but their current asset
decreased. That‟s why their quick ratio in 2013 was 0.45:1.
9.4 Efficiency Ratio
The efficiency ratio is a ratio that typically applies to banks, in simple terms is defined
as expenses as a percentage of revenue (expenses / revenue), with a few variations. A
lower percentage is better since that means expenses are low and earnings are high. It
relates to operating leverage, which measures the ratio between fixed costs and
variable costs. No matter what kind of business a company is in, it must invest in
assets to perform its operations. Efficiency ratios measure how effectively the
company utilizes these assets, as well as how well it manages its liabilities
9.4.1 Stock Turnover Ratio
Inventory turnover illustrates how well a company manages its inventory levels. If
inventory turnover is too low, it suggests that a company may be overstocking or
overbuilding its inventory or that it may be having issues selling products to
customers. All else equal, higher inventory turnovers are better. Inventory turnover
illustrates how well a company manages its inventory levels. If inventory turnover is
too low, it suggests that a company may be overstocking or overbuilding its inventory
or that it may be having issues selling products to customers. All else equal, higher
inventory turnovers are better.
Stock Turnover in 2011 = Cost of Goods Sold / Average Stock = 1,248,024,942 / (324,497,027+336,855,654)/2 = 1,248,024,942 /330,676,340 = 3.77 times
Stock Turnover in 2012 = Cost of Goods Sold / Average Stock
= 1,268,312,998 / (336,855,654+316,644,315)/2 = 1,268,312,998 /326,749,984 = 3.88 times
Stock Turnover in 2013 = Cost of Goods Sold / Average Stock
= 1,226,896,190 / (316,644,315+359,070,527)/2 = 1,226,896,190/337,857,421 = 3.63 times
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9.4.1.1 Interpretation Efficiency ratio calculates the turnover of receivables, the payment of liabilities. In
2012 it was 3.88 times. Previous year it was 3.77 times. As because the cost of goods
sold was increased and average stock was decreased. But in 2013 the cost of goods
sold and average stocks both are decreased. That‟s why the stock turnover ratio in
2013 was 3.63.
10. Findings After analysis the current condition, we find out some findings. Those are ;
The firm suffers due to irregular power and gas supply. According to the
industry sources, to harness power during the shortfall period they used diesel-
run generators, but due to high oil prices it was very expensive.
Ceramic manufacturers pay high tariff on gas compared to other sectors.
The industry faces high import duty on certain ceramic raw materials from 7.5
percent to 15 percent. Besides, this sector pays high Value Added Tax (VAT) of
15 percent on produced goods.
The firm also faces difficulty in getting health certificate from Bangladesh
Standard Testing Institution (BSTI), which is required by many international
buyers, especially in European market. The existing complex pre-shipment
procedure delays the process of export and involves additional expenditure to
increase production cost.
3.53.55
3.63.65
3.73.753.8
3.853.9
StockTurnover
in 2011
StockTurnover
in 2012
StockTurnover
in 2013
Stock Turnover Ratio 3.77 3.88 3.63
Sto
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Tu
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R
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Stock Turnover Ratio
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They are 100% Export Company. So they tried to produce that product what is
taken from ordered.
Return on Equity, Profit Margin, Return on Assets all were negative but when
they set the packaging plant then all ratios start to increase.
This company lacks high level manufacturing and industrial engineering
techniques, required machinery and equipment and international standard
laboratory for testing and quality control.
They are more conscious about their Quality like to purchase the raw material,
all time they like one supplier so that they raw material cannot be changed.
Another thing at the time of loading the raw material they checked so that
firstly quality cannot be changed.
11. Recommendation SCL is one of the top class ceramics company in Bangladesh. After analysis and
findings there are some following suggestions that can be made for future progress in
service.
Shinepukur Ceramics should inform its consumers and customers about the
new improvement of its products.
The company can encourage its customers (retailers) by providing different
types of trade offers, complementary samples, and gift offerings.
Shinepukur Ceramics should confirm the availability of its products for more
convenience of the end users.
Shinepukur Ceramics should cover as much outlet it can ensuring the
availability of the brands.
Shinepukur Ceramics should make aware all about its brand to the consumers
as well as customers for creating image of brand assistance.
The can increase its advertising efforts. Billboard may be the best way in
advertising of its products.
Shinepukur Ceramics can arrange cultural programs like–verities shows, folk
concerts etc. under its brand to improve brand image in the mind of people.
Shinepukur Ceramics should increase the annual budget for merchandising
expenses.
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To increase company image, brand image and for social responsibility,
Shinepukur Ceramics can do some social works like–tree plantation, blood
donation, vaccination programs etc.
Shinepukur Ceramics may be sincere about their local market then their profit
will increase.
Preparedness for meeting the challenge of globalization under WTO
environment.
They must introduce a new product line: ceramics product for bathroom items,
bathtub, basin, commode, pans, tiles and extra toilet accessories.
Due to globalization customers are now becoming connecting to another
including manufacturers but hear SCL is far behind (feedback).
We have noticed that SCL is not involved in any kind of visible promotion for
their brand and products.
Conclusion This paper shows us a real picture of Shinepukur Ceramic Ltd and polices practices.
As a most newly and private Ltd ceramics company, it is as good as the other
company. . Now this is the market leader as a ceramics company. Another thing is
that they think only Monno Ceramics is their main and only one competitor. SCL has
been working from its very beginning to ensure the best use of its creativity, well
disciplined, well managed and perfect growth. Exports from Shinepukur Ceramics
comprise about 60% of the National Tableware Export turnover of Bangladesh. As
recognition of this contribution, SCL was awarded four times National Export Trophy
(Gold). SCL is playing a vital role in Socio-Economic development of Bangladesh.
The desirable qualities of the tableware – beauty of design, excellence in making and
affordable price – are rooted with the Beximco‟s mission and commitment. The
tableware is made to the most exact standards to please the most apprehensive
customers. The quality control supervisors at every stage of production ensure that all
items meet the most critical standards in the world. Giving dignity and distinction to
the users, Shinepukur tableware becomes centerpiece in any stylish home. It blends
together the outstanding technology and timeless craftsmanship to catapult
Bangladesh into the new millennium.
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References - Shinepukur Ceramics Ltd, Annual Report for FY 2013.
- http://www.shinepukur.com/inner.php
- http://www.beximco.com/investor-relation.php
- http://www.dsebd.org/latest_share_price_scroll_g_a.php
- http://www.myaccountingcourse.com/financial-ratios/
- http://www.prenhall.com/divisions/bp/app/cfl/RA/
- http://www.investopedia.com/terms