termpaper fin301 (final)

8/11/2019 Termpaper Fin301 (Final)

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TERMPAPER ON THE FINANCIAL STATEMENT ANALYSIS AND

COMPARATIVE INTERPRETATION BETWEEN

SHINEPUKUR CERAMICS LTD &RAK

CERAMICS LTD

Submitted to

MAHTAB FARUQUI

Senior Lecturer, BRAC Business School

Submitted by

Russel Raphael Corraya (11104086)Nazifa Hoque (11104087)

Ishfaq Halim (11104091)

Farah Al Karim (11104037)

Zarin Tasnim Jessi (10204024)

Suman Sarkar (09304007)

FIN 301, Sec: 002, Group: 07

Last date of submission: 16thJuly, 2013


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LETTER OF TRANSMITTAL

July 16, 2013

Mahtab Faruqui

Course Instructor, FIN 301

BRAC Business School

66 Mohakhali, Dhaka 1212.

Subject: Submission of a term paper on the financial statement analysis and comparison between

Shinepukur Ceramics Ltd &RAK Ceramics Ltd.

Dear Madam,

With due respect, we would like to submit our term paper on the financial statement analysis and

comparison between Shinepukur Ceramics Limited &RAK Ceramics Limited. During this

analysis we have enriched and gained a lot of experiences regarding how finance managers make

strategic decisions & how financial management can be applied in real life.

However, we believe that the knowledge and experience we have gathered in this course will be

helpful in our future professional life. We will be grateful to you if you would kindly accept our

report.

Your support in this regard will be highly appreciated.

Sincerely Yours,

Russel [11104086] ____________________

Nazifa [11104087] ____________________

Farah [11104066] ____________________

Ishfaq [11104061] ____________________

Sumon [11104088] ____________________

Jessi [10204024] ____________________


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ACKNOWLEDGEMENT

First of all, we would like to recall The Almighty, whose kindness has helped us to end up with

an extensive effort. Again, we would like to show our gratitude and gratefulness towards all the

individuals who have a great contribution to complete the term paper. However, we must record

our immense indebtedness to our respected course instructor Ms. Mahtab Faruqui, for sparing

her valuable time to give us proper direction for completing this report. We also would like to

give thanks to our group members who are very co-operative throughout the report.

EXECUTIVE SUMMARY

This term paper is mainly based on some basic ratio analysis of the last three years financial

statements between two leading ceramics companies of Bangladesh, Shinepukur ceramics ltd &

RAK Ceramics Ltd. The ratios are mainly liquidity ratios, under which there are current ratio and

acid-test ratio, then comes leverage ratios, under which there are debt-to-equity ratio & debt-to-

total-asset ratio. After that comes coverage ratio, mainly interest coverage ratio, and then there

are activity ratios where receivable turnover ratio, receivable turnover in days ratio, inventoryturnover ratio, inventory turnover in days ratio & total asset turnover ratios are given. Lastly,

there are profitability ratios; mainly net profit margin, return on investment and return on equity

ratios are done. After each ratio we analyzed and compared the reasons of the ups and downs in

those ratios within same industry, then again we compared those ratios between these two

industries. Last of all we tried to recommend how those situations can get any better and

concluded.


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TABLE OF CONTENTS

Parts Topics Page Numbers

Part-1 Introduction 05

1.1 Origin Of The Report 05

1.2 Objectives & Scope Of The Study 05

1.3 Methodology 05

1.4 Limitations 05

Part-2 The Ceramic industry Of BD & Company Profiles 06

2.1 BD Ceramic sector 06

2.2 Shinepukur Ceramics Ltd 06

2.3 RAK Ceramics Ltd 07

Part-3 Financial Statement Analysis 07

3.1 Ratio & Analysis Of Shinepukur Ceramics 07

3.2 Ratio & Analysis Of RAK Ceramics 12

Part-4 Comparative interpretation between Shinepukur and RAK

Ceramics Ltd

17

Part-5 Recommendations &Conclusion 20

5.1 Recommendation for Shinepukur 20

5.2 Recommendation for RAK 21

5.3 Conclusion 21

Part-6 Appendix 21

6.1 Graphical representatives of Shinepukur 21

6.2 Graphical representatives of RAK 25

6.3 References 30


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01: INTRODUCTION

1.1: Origin of the Report

We are doing FIN 301 Course in the current semester and this course consists of the

fundamentals of financial management. We strongly believe that we have gained a lot of

practical knowledge by doing this course. During the analysis of this report, we have gained a lot

of practical knowledge and experiences, which will be very helpful for our future professional

life. As this course is mainly related to financial management, this course provides us a lot of

knowledge about the basic principles and concepts of finance and their applications in some

manufacturing companies.

1.2: Objectives &Scope of the Study

Our objectives are to learn about the practical use of financial management in order to gain more

practical knowledge on how and why there are changes in the financial statements and how we

can interpret them; and also to compare between two companies to determine which one is in a

better condition.We are cosidering the information of the last 3 years annual report of these two

companies for the analysises. Only these particular issues have been studied in this report.

1.3: MethodologyInformation used to prepare this report has been collected only from the secondary source as we

did not get any appointment with the finance manager of the companies.

Secondary Source: Annual Reports of Shinepukur Ceramics Ltd &RAK Ceramics Ltd, from

2010-2012

1.4: Limitations

It has been quite hard for us to meet together and discuss about the companies and find out their

current position by comparing between them without any practical knowledge of doing this kind

of analysis before.


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02: THE CERAMIC INDUSTRY OF BD & COMPANY PROFILES

2.1:BD Ceramic industry:

The ceramic industry is surprisingly not quite a new one in Bangladesh. It dates back to 1962.

People Ceramic Industries Ltd (PCI) pioneered the manufacture of porcelain tableware in

Bangladesh. According to Bangladesh Ceramic Ware Manufacturers Association (BCWMA),

there are approximately 40 ceramic manufacturers operating in this industry producing

tableware, sanitary ware and tiles. A medium scale ceramic plant needs around Taka 10

crore (Taka 100 million) in initial investment and the BCWMA sources say the present

investment in the countrys ceramic industry is roughly about Taka2,000 crore (Taka 20

billion) and this sector employs some one lakh (0.1 million) workers. Shinepukur, Monno,

Bengal Fine, Standard, Peoples and National Ceramic are considered as major players in

ceramic tableware market. RAK, Fu Wang, China-Bangla, FARR, Modhumoti, ATI,

Sunflower, Great Wall, Dhaka-Sanghai and Mir are considered as major manufacturers of tiles

and sanitary wares and their share of market. The total capacity of ceramic tableware

manufacturing companies is nearly 24,000 tons a year as of 2008, of which an average of

48 percent is exported and the remaining 52 percent is used in the domestic market. Monno

and Shinepukur have the highest production capacity of nearly 60,000 pieces a day , followed

by Standard ceramics with 40,000 pieces a day. According to a market study, the existing tilesfactories produced 374 million square feet of tiles in 2008 and the output is estimated to grow at

the rate of 17 percent in 2009 and 2010. Of the total production of 322 million square feet of tiles

in 2007, RAK ceramics alone made 74 million square feet followed by ChinaBangla, Fu-wang

an Mir, each produced slightly over 30 million square feet of tiles.

2.2: Shinepukur Ceramics Ltd.

Shinepukur Ceramics Limited (SCL) is a member of BEXIMCO Group which is the LargestPrivate Sector Business Conglomerate in Bangladesh with about over 45,000 people worldwide

in the permanent payroll, have over 300000 shareholders, handling a diversified range of

merchandise to and from Bangladesh. Shinepukur Ceramics has been registered in Bangladesh in

1997 and the Plants were commissioned in 1998. Commercial production of Porcelain Tableware

started in April 1999 and Bone China in November 1999. SCL is located in the BEXIMCO


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Industrial Park, near Dhaka Export Processing Zone (DEPZ), 40 Km from Capital Dhaka City,

where captive power generation, water supply, effluent waste water treatment and all other

infrastructural facilities are available. Total Investment in the Company is in excess of US$ 35

Million. The Company has already made additional Investment of US$ 10 Million to expand its

Bone China Unit.

2.3: RAK Ceramics Ltd.

RAK Ceramics (Bangladesh) Limited, a UAE-Bangladesh joint venture company, was

incorporated in Bangladesh on 26 November, 1998 as a private company limited by shares under

the Companies Act 1994. The name of the Company was there after changed to its name from

RAK Ceramics (Bangladesh) Private Limited to RAK Ceramics (Bangladesh) Limited as per

resolution passed in extraordinary general meeting on 10 June 2008, certificate issued by the

Registrar of Joint Stock Companies dated 11 February, 2009. It is engaged in manufacturing and

marketing of ceramics tiles, bathroom sets and all types of sanitary ware. It has started its

commercial production on 12 November, 2000. The commercial production of new sanitary ware

plant was started on 10 January, 2004. Further expansion of the existing facilities of ceramics

tiles plant took place in year 2004, and for tiles and sanitary plant were in year 2007.

03: FINANCIAL STATEMENT ANALYSIS

3.1: Ratio & Analysis of Shinepukur Ceramics:

Current Ratio:

Year

Current asset

(taka)

Current liabilities

(taka) Ratio2010 1636600076 1465043771 1.117099

2011 1617231951 1648906953 0.980790

2012 1796412804 1772067117 1.013738

Analysis: In above years, it is visible that current ratio has a decreasing trend and the reason

behind is that current asset decreased at 2011 as the advances, deposits and prepayments


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decreased by 40.24% and the liabilities increased because of the increasing of the short term

loans by 20.07% and accruals and other payables by 75.36% and as a whole the total liability has

increased by 12.56% than the previous year. In 2012 the current asset increased because of the

increasing of accounts and other receivables by 45.16%.and the current liability also increased

because of the increasing short term loan, long term loan and accounts payable and again the

current ratio is back in an increasing trend comparing to 2011.

Acid Test:

Year Current AssetCurrentliabilities(taka) Inventories Ratio

2010 1636600076 1465043771 8451950560.540192

2011 1617231951 1648906953 891674750 0.440023

2012 1796412804 1772067117 845059407 0.536860

Analysis: Here, we can see that the acid test ratio has decreased from year 2010 to 2011.This

thing is happing because of the increasing of the liabilities proportion to the current asset. So, in

2011 though the operational activity has increasing cash flow, the quick ratio decreased

compared to 2010. Then in 2012, the receivables increased but the inventories decreased and as a

result the more liquid portion of the current asset increased and the quick ratio again goes higher

compared to 2011.

Debt to Equity Ratio:

YearTotal Debt(taka) Shareholders equity (taka) Ratio

2010 2,393,768,143 2,731,958,854 0.88

2011 2,654,289,453 4,499,760,423 0.59

2012 2,575,551,106 4,544,462,049 0.57

Analysis: Comparing the ratio of 2010 with 2011 it decreased from 0.88 to 0.59 because of the

increase of shareholders equity 64.71% (where retained earningscontains 5.79%). And also

increase in the total debt 10.88%. Again in 2012 it also had a decreasing trend while changing a

little where shareholders equity increased 0.99% but total debt decreased 3.058%.


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Debt to Total Assets:

YearTotal Debt(taka) Total Assets (taka) Ratio

2010 2,393,768,143 5,125,726,997 0.47

2011 2,654,289,453 7,154,049,876 0.37

2012 2,575,551,106 7,120,013,155 0.36

Analysis:From 2010 to 2011 the ratio decreased from 0.47 to 0.37 % where total debt increased

10.88% (including creditors, accruals and other payable increased 75.36% and short term loans

increased 20.07%) and total assets increased 39.57% (where accounts and other receivablesincreased 23.13%) again in 2012 from 2011 it was a decreasing trend where both total debt and

total assets decreased. But it was a slight change comparing to previous years. Here total debt

decreased 3.06% and total assets decreased 0.48%. For this reason the ratio was a little changed.

Interest Coverage:

Year EBIT(taka) Interest Expense (taka) Ratio

2010 570103662 249775873 2.28 times

2011 532318752 306604938 1.74 times

2012 568165442 364625228 1.56 times

Analysis: From 2010 to 2012, we can see that interest or borrowing cost increased as Shinepukur

increased their operational overdraft than the previous year. In accordance with that, their ability

to cover interest has decreased. The more consistent a companys earnings, the lower the interest

coverage ratio can be.

Receivables Turnover:


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Year Net Credit Sales(taka)Average Receivables(Net) (taka) Ratio

2010 1926745719 477473540 4.035293

2011 1901444562 587933889 3.234112

2012 1942350752 853413145 2.275979

Analysis:From 2010 to 2012, we can see that there was increase both in net sales and receivables

thats why the ratio has decreased. The reason behind that as the turnover ratio is decreasing, the

problem indicate a downturn in the economy. Shinepukur is having cash flow problems tend to

remit payments later than those with an adequate cash flow. The danger for the company is that

customers did not remit on time; it had trouble paying vendors on time. For that reason their cash

collections are also low. It represents that they rejected delay payments of debtors.

Receivables Turnover in Days:

Year Days in year Receivable Turnover Ratio

2010 365 4.035293 90 Days

2011 365 3.2334112 113 Days

2012 365 2.275979 160 Days

Analysis: It shows that they are very dawdling in terms of collecting receivables from their

customers. By time they are becoming more deliberate as by years 90 days become 113 days and

then 160 days. It means customers r not punctual to remit on time. Too high an average

collection period is usually taken as bad for the companys liquidity.

Inventory Turnover:

YearCost of Goods Sold(taka)

Average Inventory (taka)Ratio

2010 1,267,648,737 845,195,056 1.4998

2011 1,248,024,942 891,674,750 1.3996

2012 1,268,312,998 845,059,407 1.5008

Analysis:The higher inventory turnover, the more proficient the inventory management of the

more firm is liquid. According to 2010-2012 data of Shinepukur in 2011 its ratio was low

(1.4998) and gradually it turn up to 1.5008 in 2012. It because of their other expense decrease as

a result their inventory turnover rate boost constantly from 2010-2012.

Inventory Turnover in Days:


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Year Days in year Inventory Turnover Ratio

2010 365 1.4998 243.366 DAYS

2011 365 1.3996 260.788 DAYS

2012 365 1.5008 243.204 DAYS

Analysis: As IT was highest so ITD is lowest in 2012 than the year 2010 and 2011. In 2011 IT

was lowest so ITD is highest in the year 2011 than the year 2010 and 2012. So, in 2011 ITD

remains between 2010 and 2012.

Total Assets Turnover:

Year Net sales(taka) Total average assets(taka) Ratio

2010 1,926,745,719 5,125,726,997 0.376%

2011 1,901,444,562 7,154,049,876 0.266%

2012 1,942,350,752 7,120,013,155 0.273%

Analysis: In 2010 the total asset turnover ratio was highest than 2011 and 2012. Net sales in

2011 was lowest and total assets were lowest in 2010 than 2010 though as the ratio was highest

in 2010 it might indicate the relative efficiency with which SHINEPUKUR CERAMICS LTD

utilizes its total assets to generate sales.

Net Profit Margin:

Year Net profit after taxes(taka) Net sales (taka) Ratio

2010 253247000 1,926,745,719 13.14%

2011 168768000 1,901,444,562 8.88%

2012 90285000 1,942,350,752 4.65%

Analysis: From 2010 to 2012, as the cost of producing goods has increased there is a gradual

decrease in the net profit after taxes and also their earning per share decreased from 1.32 to 0.71

and as a result the net profit margin has a decreasing trend from 2010 to 12.

Return on Investment:

Year Net profit after taxes(taka) Total assets Ratio


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2010 253247371 5125726997 4.94%

2011 168768102 7154049876 2.35%

2012 90285057 7120013155 1.26%

Analysis: In 2009 ROI is 3.71% when in 2010 ROI is 4.94%. Compare to the previous year 2009it also show greater ROI. That is a good sign for the company perspective. In 2010 ROI is 4.94%

when in 2011 ROI is 2.35%. Compare to the previous year 2010 it also show lesser ROI. That is

not a good sign for the company perspective. In 2011 ROI is 2.35% when in 2012 ROI is 1.26%.

Compare to the previous year 2011 it also show lesser ROI. That is not a good sign for the

company perspective.

Return on Equity:

YearNet profit after taxes(taka)

Shareholders Equity (taka) Ratio

2010 253247371 2731958854 9.26%

2011 168768102 4499760423 3.75%

2012 90285057 4544462049 1.98%

Analysis: In 2009 ROE is 6.95% when in 2010 ROE is 9.26%. Compare to the previous year

2009 it also show greater ROE. That is a good sign for the company perspective. In 2010 ROEis 9.26% when in 2011 ROI is 3.75%. Compare to the previous year 2010 it also show lesser

ROE due to decrease in net profit. That is not a good sign for the company perspective. In 2011

ROE is 3.75% when in 2012 ROE is 1.98%. Compare to the previous year 2011 it also show

lesser ROE. That is not a good sign for the company perspective.

3.2: Ratio & Analysis of RAK Ceramics

Current Ratio:

Year Current assets Current liabilities Ratio

2010 3961808405 1915544278 2.068241

2011 4720917880 2196879220 2.148920

2012 4913984328 2456242485 2.000610


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Analysis: In 2011, the current asset increased by 4.83% than 2010 and it happens because of the

increase in receivables and the liabilities also increase because of the borrowings and payables.

Still the current ratio has an increasing trend that means it has more liquidity than 2010 in 2011.

In 2012, though the current asset has a substantial increase, the ratio shows a downward trend

because of the increase of the current liability which occurs as the provision for the employee

benefits and borrowings increased.

Quick Ratio:

Year Current assets less inventories Current liabilities Ratio

2010 2474084068 1915544278 1.29

2011 3062855311 2196879220 1.39

2012 3136095610 2456242485 1.27

Analysis: In 2011, RAK has higher current assets without inventories because of the increase of

the trade debtors and so their quick has changed from 1.29 to 1.39. But in 2012, their current

liability has a substantial increase because of the borrowings the quick ratio goes down to 1.27.


YearTotal Debt(taka) Shareholders equity (taka) Ratio

2010 1,933,404,376 5,107,689,978 0.38

2011 2,229,811,134 5,322,635,087 0.42

2012 2,595,972,148 5,551,136,969 0.47

Analysis:From 2010 to 2011 the ratio increased from 0.38 to 0.42% where total debt increased

15.33% (including trade and other payable increased 5.99%) and shareholders equity increased

4.21% (where retained earnings increased 16%). Again in 2012 ratio was in increasing trend but

not that much comparing to previous years where shareholders equity increased 4.29% and totaldebt increased 16.42%.

Debt to Total Assets:


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YearTotal Debt(taka) Total Assets (taka) Ratio

2010 1,933,404,376 7,041,094,453 0.27

2011 2,229,811,134 7,726,313,055 0.29

2012 2,595,972,148 8,255,933,779 0.31

Analysis:From 2010 to 2011 the ratio increased where total assets increased 9.73% (including

trade and other receivables increased 73.27%) and total debt increased 15.33% (including trade

and other payable increased 5.99%). Again in 2012 the ratio also increased where total debt

increased 16.42% and total assets increased 6.85% (including inventories increased 7.23% and

total current assets increased 4.09%)

Interest Coverage:

Year EBIT (taka) Interest Expense (taka) Ratio

2010 753200802 90715307 8.30 times

2011 925597718 21147092 43.77 times

2012 910508985 23820468 38.22 times

Analysis: From 2010 to 2012, we can see that interest coverage has a consistent growth as the

earnings before interest and tax increased tremendously comparing to the year 2010. This

happens because of the borrowing of the short term loans rather than the long term loans.

Receivables Turnover:

Year Net Credit Sales (taka) Average Receivables(Net) (taka) Ratio

2010 4009021454 388310742 10.32426

2011 4580008209 672817194 6.8072102012 4908171279 621510397 7.897166

Analysis: In 2010 to 2012, we can see that there was increase in net sales but the receivables

were also gets higher and thats why the receivables turnover decreased. It gives the investors a

clear insight about their collection of receivables which is less than the industry median.


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Year Days in year Receivable Turnover Ratio

2010 365 10.32426 35 Days2011 365 6.807210 54 Days

2012 365 7.897166 46 Days

Analysis: Itshows that they are very much prompt in collecting their cash outgoing from their

customers. In 2010 it was 35 days which is a very low average collection period and that is also

bad as it symbolize extremely restricted credit policy; that they sell their product only to the

prompt customers. So in 2011 we can see a increase in RTD that is 54 days.

Inventory Turnover

Year Cost of Goods Sold(taka) Average Inventory (taka) Ratio

2010 2,505,064,934 1,487,724,337 1.6838

2011 2,693,527,991 1,658,062,569 1.6245

2012 2,979,160,088 1,777,888,718 1.6757

Analysis: According to R.A.K ceramics data both cost of goods sold and inventory has a

constant growth in them thats why inventory turnover rate got sequential vertical slope. In 2011

cost of goods sold had a little increase than inventory remaining, that impact the ratio and IT had

a little fall and then in 2012 it increased again.

Inventory Turnover in Days

Year Days in year Inventory Turnover Ratio

2010 365 1.6838 216.772 DAYS

2011 365 1.6245 224.685 DAYS

2012 365 1.6757 217.819 DAYS


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Analysis:As IT was highest so ITD is lowest in 2010 than the year 2011 and 2012. In 2011 IT

was lowest so ITD is highest in the year 2011 than the year 2010 and 2012. So, in 2012 IDT

remains between 2011 and 2010.

Total Asset Turnover:

Year Net sales (taka) Total Average Assets(taka) Ratio

2010 4,009,021,454 7,041,094,354 0.569%

2011 4,580,008,209 7,741580000 0.592%

2012 4,908,171,279 8,255930000 0.595%

Analysis:In 2012 the total asset turnover ratio was highest than 2010 and 2011. Net sales andtotal assets were lowest in 2010 than 2011 and 2012. The ratio was highest in 2012 it might

indicate that the relative efficiency with which RAK CERAMICS LTD utilizes its total assets to

generate sales.

Net Profit Margin:

Year Net profit after taxes(taka) Net sales (taka) Ratio

2010 60652000 4,009,021,454 1.51%2011 75695000 4,580,008,209 1.65%

2012 60812000 4,908,171,279 1.24%

Analysis: Here, net profit after tax increased in 2011 as their production cost were lower and

they also have a substantial sales, which affected the net profit margin and I goes higher. In

2012, the price of the raw materials gets higher and production cost increased and the Net profit

margin goes lower though the sales increased.


Year Net profit after taxes (taka) Total assets Ratio

2010 723966144 6811848278 10.62%

2011 964027757 7632118242 12.63%

2012 830529175 8352295460 9.94%


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Analysis: In 2010 ROI is 10.62% when in 2009 ROI is 5.52% .compare to the previous year

2009 it show greater ROI that is a good sign for business In 2011 ROI is 12.63% when in 2010

ROI is 10.62%.Compare to the previous year 2010 it also show greater ROI. That is a good sign for the

company perspective.In 2011 ROI is 12.63% when in 2012 ROI is 9.94% due to decrease insales.Compare to the previous year 2011 it also show lesser ROI. That is not a good sign for the

company perspective.

Return on Equity:

Year

Net profit after taxes(taka)

Shareholders Equity (taka) Ratio2010 723966144 5044739061 14.35%

2011 964027757 5663656568 17.02%

2012 830529175 6114564468 13.58%

Analysis: In 2009 ROE is 11.30% when in 2010 ROE is 14.35%.Compare to the previous year

2009 it also show greater ROI. That is a good sign for the company perspective. That is a good sign for

the company perspective.In 2010 ROE is 14.35% when in 2011 ROE is 17.02%.Compare to the

previous year 2010 it also show greater ROI. That is a good sign for the company perspective. In 2011

ROE is 17.02% when in 2012 ROI is 13.58%.Compare to the previous year 2011 it also show lesserROE. That is not a good sign for the company perspective.

04: COMPARATIVE INTERPRETATION BETWEEN BERGER AND RAK CERAMICS

LTD

[All the graphical representations are shown in the appendix]

Current Ratio:

After analyzing, we can see that both Shinepukur and RAKs current ratio is higher than 1(industry mean) in the above three years which tells us that the companies are capable of meeting

their short-term obligations. However, RAK has more ability to meet its current liability than

Shinepukur has. This ratio represents the margin of safety available to the creditors which is

satisfactory for both of the companies. As the companies ratio is above 1, they are efficiently

using their current assets or short-term financing facilities. Again we can see that both of


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companies ratios have an increasing trend. So both the companies are in good financial health &

it is definitely a good sign. However, RAK has more liquidity than Shinepukur.

Quick Ratio:

Quick ratio is used as a complementary ratio to the current ratio. In this graphical representationit is visible that RAK has more capacity to pay off current obligations immediately than

Shinepukur. In addition, Shinepukur has a low liquidity ratio represents that the firm's liquidity

position is not good.

We also noticed that over the year from 2010 to 2012, RAKss current ratio improved that

means the company was capable of paying its obligations and it is also same for its quick ratio.

On the other hand, though Shinepukur has higher median average in current ratio but it is under

the median range in quick ratio which creates doubt whether company was capable or not of

paying its obligations. From the current ratio we thought that their financial strength was good

but in quick ratio we saw a different picture which refers Shinepukurs financial strength was not

good. From this view point we can say that RAK is in good financial position than Shinepukur.


The less the debt equity ratio the grater the shareholders are interested to equity financing. So, if

we compare between Shinepukur and RAK Ceramics Company we found that investors will be

more happy to invest in RAK ceramics as they have only 0.47 debt in 2012 comparing to

Shinepukur, who has 0.57. So, RAK is the better company.

Debt to total Assets:

This ratio measures how much of the total assets are from the debt financed. In 2012, Shinepukurhas a debt to asset ratio of 0.36 whereas, RAK has only 0.31. So, comparing the both ratios we

can easily say that RAK is the better one.

Interest Coverage:

This ratio measures the interest coverage ability a company has over its debt. The higher the

interest coverage ratio the better the company position and the more attractiveness for financial

loan. In comparison between Shinepukur and RAK, RAK is the preferable one because it has

more ability to meet its financial obligation than Shinepukur.

Receivables Turnover:The higher the turnover, the shorter the time between the typical sale and cash collection. Here in

2012, only 2.9 times Shinepukur has turned their receivables into cash and in contrast, RAK has

receivable turnover ratio of 7.9 times. So, RAK has the higher turnover ratio and so it is the

better one.


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This figure tells us the average number of days for which receivables are outstanding before

being collected. The less the days the more the investors are attracted. For shinepukur the ratio is

160 days and for RAK, the ratio is 46 days. Comparing all the data analysis above we can say

that R.A.K ceramics management are more vigorous to collect their cash outgoing. As they hasa ideal average collection period or RTD.

Inventory Turnover:

It can be say that Shinepukur are stronger with inventory turnover ratio, as they are maintaining

an upward slope in terms of inventory turnover. With the time that is going ahead they are going

higher with inventory turnover ratio which is strength to a company. On the other hand we can

see that R.A.K ceramics inventory turnover rate is going down which is absolutely harmful to a

company.

Inventory Turnover in Days

Inventory turnover ratio represents how many days worth of inventory is on hand to work

with. So, in the case of RAK Ceramics Ltd Company has shorter days on hand comparing to

Shinepukur Ltd Company. Generally this ratio clearly represents how well the company is

managing its inventory. However, a higher number is better. However, a number too high might

suggest that the company is selling merchandise faster than it can be replenished. If a company

runs out of a particular item it risks losing sales to a competitor who has the item in stock. So, we

can say that RAK Ceramics Ltd Company is selling its item faster than Shinepukur Ltd

Company.

Total Assets Turnover:

The Total Assets Turnover ratios measure how efficiently a company puts their longer-term

assets to use. In other words, how much sales can the company generates given a certain amount

of assets in place. The resulting ratio measures a firm's efficiency at using its assets in generating

sales or revenue - the higher the number the better. It also indicates pricing strategy: companies

with low profit margins tend to have high asset turnover, while those with high profit margins

have low asset turnover.

Here in comparison Shinepukur Ceramics Company Ltd has lower assets turnover. On the other

hand, RAK Ceramics Ltd has higher assets turnover, which indicates that Shinepukur Ceramics

Ltd Company has managed their longer-term assets more efficiently and also they have a suitable

pricing strategy that is why they have become able to maintain their long-term assets efficiently.


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20

Net Profit Margin:

In the graphical representation, we can determine that both the companies are generating huge

profit. But if we compare the companies with the industry mean which is 4.1, we found that

shinepukur is up to the mark as its net profit margin in 2012 is 4.65 but not RAK. So, Shinepukur

is the better one.


Compare between RAK and SHINPUKUR in ROI :Return on investment of RAK is greater

then shinpukur because RAK sale is 4507821528 (included export 18389470) in 2012 when

shinpukur sale is 298289470 (excluded export 1,687,152,110).on the other hand RAK total

asset is larger than the total asset of Shinpukur.

Return on Equity:

Compare between RAK ceramics and shinpukur ceramics in ROE :return on Equity of RAK

ceramics Co. is greater then shinpukur ceramics due to constant fall of Net Income through 2011

to 2012.on the other hand ,equity is larger than RAK ceramics in every perspective.RAK

ceramics has 600000000 authorized shares (issued 278,388,935 ordinary shares of Take 10/-

each) when shinpukur has 500000000 authorized shares (127,796,570 shares of Tk. 10/- each

fully paid-each ).

05: RECOMMENDATIONS & CONCLUSION

5.1: Recommendation for Shinepukur:

Shinepukur can give attention given to inventories and debt management. Also Rationality and

planning in materials purchases can avoid unnecessary inventory build up or shortage of

materials. Lastly, they can provide provision for the training of officers and employees in

modern management techniques.


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21

5.2: Recommendation for RAK:

The problem of RAK can be solved to certain extent. They should increase dividend per share

that will serve as a promotional tool. Contribution analysis for each of the product lines to

optimize profit in light of demand factors. Effects to bring selling prices in line with costs having

regard to competition and other market factors. They have to be more careful about utilization of

working capital. Last but not the least, In the face of todays global competition with open

market operation, RAK must develop and retain the high achievers and motivated work force

and equip them with the latest skills and technologies.

5.3: Conclusion:

Financial analysis is helpful in assessing the financial position and profitability of a concern.

This is done through comparison by ratios for the same concern over a period of years and for

one concern against another. This helps to evaluate the trend and condition of organization. As it

helps to give idea about the financial condition, thus it helps in future financial projection and

decision making process of any business house. So, every business student should learn about the

tool of analyzing different companies from different viewpoints.

06: APPENDIX

6.1: Graphical Representatives of Shinepukur

0.9

0.95

1

1.05

1.1

1.15

2010 2011 2012

Current Ratio

Current Ratio


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22

0

0.2

0.4

0.6

0.8

2010 2011 2012

Acid Test

Acid Test

0

0.2

0.4

0.6

0.8

1

2010 2011 2012

Debt to Equity

Debt to Equity

0

0.1

0.2

0.3

0.4

0.5

2010 2011 2012

Debt to Asset

Debt to asset


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23

0

0.5

1

1.5

2

2.5

2010 2011 2012

Interest Coverage

Interest Coverage

0

1

2

34

5

2010 2011 2012

Receivable turnover

Receivable

turnover

0

1

2

3

4

56

2010 2011 2012

Inventory turnover

Inventory turnover

18

20

22

24

26

2010 2010 2011

Receivable turnover in days

Receivable

turnover in days


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24

0

50

100

150

2010 2011 2012

Inventory turnover in days

Inventory

turnover in days

1.85

1.9

1.95

2

2.05

2.1

2.15

2.2

2.25

2010 2011 2012

Total asset turnover

Total asset

turnover

0.00%

2.00%

4.00%

6.00%8.00%

10.00%

12.00%

14.00%

2010 2011 2012

Net profit margin

Net profit margin


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25

6.2: Graphical Representatives of RAK:

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2010 2011 2012

Return on Investment

Return on

Investment

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

2010 2011 2012

Return on equity

Return on equity

1.9

1.95

2

2.05

2.1

2.15

2.2

2010 2011 2012

Current Ratio

Current Ratio


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26

1.2

1.25

1.3

1.35

1.4

2010 2011 2012

Acid Test

Acid Test

0

0.1

0.2

0.3

0.4

0.5

2010 2011 2012

Debt to Equity

Debt to Equity

0.25

0.26

0.27

0.28

0.29

0.3

0.31

0.32

2010 2011 2012

Debt to Asset

Debt to asset


27/30

27

0

10

20

30

40

50

2010 2011 2012

Interest Coverage

Interest Coverage

0

10

20

30

40

50

60

2010 2011 2012

Receivable turnover in days

Receivable turnover

in days

0

2

4

6

8

10

12

2010 2011 2012

Receivable Turnover

Receivable turnover


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28

1.58

1.6

1.62

1.64

1.66

1.68

1.7

2010 2011 2012

Inventory turnover

Inventory turnover

212

214

216

218

220

222

224

226

2010 2011 2012

Inventory turnover in days

Inventory turnover

in days

0.55

0.56

0.57

0.58

0.59

0.6

2010 2011 2012

Total Asset turnover

Total Asset

turnover


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29

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

2010 2011 2012

Net profit margin

Net profit margin

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

2010 2011 2012



0.00%

2.00%

4.00%

6.00%

8.00%10.00%

12.00%

14.00%

16.00%

18.00%

2010 2011 2012

Return on equity

Return on equity


30/30

6.3: References

1] Annual Report Of Shinepukur Ceramics Ltd, Year 2010-2012

2] Annual Report Of RAK Ceramics Ltd, Year 2010-2012

3] Asian Business Review, Volume 1, Issue 1, September2012

4] James C. Van Horne, and John M. Wachowicz, Jr. Fundamentals of Financial

Management, 13th Edition, Prentice Hall India.

termpaper fin301 (final)

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