June 08, 2012 Assessment of Managerial Finance Topics: Comparative analysis of financial statement between two Textile Company’s Submitted to: Instructor : Y. A. M. Rafiqul Haq Course Title: Managerial Finance Department of Business Administration Submitted by: Mahfuza Akter(+8801556341735) ID : 10206038 Chand Sultana(+8801556341735) ID : 12106018 Dilshad Jahan(+8801726809130) ID : 12106009 Nahida Refayat(+8801711505714) ID : 11106012 Azma Jahan Noor(+8801914879531) ID : 11106001U niversity of A sia P acific Department of Business Administration
Date: June 08, 2012ToMr. Y. A. M. Rafiqul HaqDepartment of Business Administration,Course of Managerial FinanceThe University of Asia Pacific.From: Mahfuza Akter Mili ; Chand Sultana ; Dilshad Jahan ;Nahida Refayat & AzmaJahan Noor.(Students of MBA)Subject : Prayer for accepting our Assigment .As you said in the class, we have formed a group consisting of five (05) members and wehave prepared our assignment as your given topic .The group names of members arestated below:Group members:Mahfuza Akter(+8801556341735)ID : 10206038Chand Sultana(+8801556341735)ID : 12106018Dilshad Jahan(+8801726809130)ID : 12106009Nahida Refayat(+8801711505714)ID : 11106012Azma Jahan Noor(+8801914879531)ID : 11106001Therefore, we will by highly obliged if you accept our this Assignment.
AcknowledgmentFirst of all we would like to thanks to all mighty ALLAH that HE courage us to completethis Assignment. We would like to thank all of other helping hands who were with us tomake this assignment possible.We also would like to thanks our honorable course instructor Y. A. M. Rafiqul HaqOf Managerial Finance , Department of Business Administration in the University ofAsia Pacific to giving me the opportunity to prepared this assignment.
Table of ContentsAbstract 01Object 02Limitation 02Source Of Data 02Methodology 02Scope 02Introduction 03Saiham Textile Mills Ltd 03Ashraf Textile Mills Ltd 03Findings & Analysis 04Balance Sheet Comparison 04Income Statement Comparison 04Financial Statement Analysis By Ratio 05Liquidity Ratio 05Current Ratio 05Quick Ratio 05Debt-To-Equity 06Total Asset Turnover Ratio 06Account Receivable Turnover 06Inventory Turnover Ratio 06Profitability Ratio 07Gross Profit (Gp) Ratio 07Conclusion 08Recommendation 08Bibliography 09Annexer 10
ABSTRACTThe purpose of this assignment is to evaluate, analyze and compare the financialstatements between two Company’s & I have chosen these two companies on the basisof their financial performance, they are also listed on all major stock exchanges of thecountry.After researching, surveying, observing, collection of data, I have arrived at the writtenanalysis follows hereafter. As the requirement of the report, I have conducted a detailedstudy of the analysis the financial statements and ratios.On the basis of above information, I have arrived on specific recommendations fromstrategic management’s viewpoint. I have supported suggestions through strategictheories, matrices and exhibits, present in the report.The report includes the whole financial status of both the companies through which areader can get the financial strengths & weakness of both the organizations.The fundamentals of the research is to build the reader’s capability to evaluate thefinancial data & information into projective manner as to compare the financial stability& growth with each other in consequence either for enhancement & for decrement.
ObjectThis assignment is carried out as the analysis of of financial statement between twoTextile Company’sTo Analysis for Profit and Loss A/c, Balance Sheet and Cash flow statement; thefinancial ratios is also analyzed.The analysis is based on a year-to-year comparison of a firms ratios,The comparison of Balance Sheet accounts either using ratios or not, to get usefulinformation and draw useful conclusionsA comparison of relationship among account balancesTo simplifies the comprehension of financial statements. Ratios tell the whole story ofchanges in the financial condition of the business.Limitation:We When we prepared this report all necessary data is not available. For this we assumesome of the data to complete the report. On the other hand when we go to collect thefinancial statement we were unable to found our needed statement books. Finally, onelimitation was on shortage of knowledge that was reduced to make this report a betterone. And Time was major constraint.Source of Data:For our report we collect data for finding & analysis. At first we collected the annualreport & take financial statements of two companies’. We also collected some data fromthe internet.Methodology:As a rule, we had to follow a particular method for collecting data to complete the reportaccurately. At first we make Income Statement, Balance Sheet & Cash Flow on a excelsheet. Than we analysis the Income Statement & the Balance Sheet using the commonsizing & indexing method. Finally we used the eleven financial ratios for our ratioanalysis.Scope:We worked on Ashraf textile mills ltd. & Saiham textile mills ltd for our report andachieve knowledge about the financial statement of textile company and also gatherknowledge how could we analysis any company’s efficiency, profitability and stability byratio analysis.
Introduction:In our country textile companies are doing very well business. So many competitors arein this sector. Lots of new companies entered this market. From all of them we choosetwo cement company for our report. We collect their financial statement & analyze them& we identify their comparative advantageSaiham Textile Mills LtdSaiham Textile Mills Limited is one of the known names in the textile industry, whichhas been operating for more than 20 years. Over the years Saiham has been a familiarname to the people of middle and lower middle income as it has been providing qualityproducts at a very reasonable price. The products of the company have been pretty muchgood in quality and targeted to substitute the imported fabrics for the end users. It can besaid that the company has achieved some degrees of success as it has proved to be astrong local company, which has created its own position in the local market.Ashraf Textile Mills LtdAshraf textile mills ltd is one of the another company which is run and managed byrelatives, the standard and efficiency of the management does not compromise on itsquality.
Findings & Analysis:According to our report subject our main objective is identifying the difference betweentwo companies financial statement. Also we want to find out which company is morestable & which is not stable. From the financial statement we can find out ourrequirements. In below we give our finding & analysis in basis of company’s financialstatement.Analyze of Income Statement, Balance Sheet between two companies’:In below we are going to discuss about the two companies balance sheet, IncomeStatement flow comparison in a briefly:Balance Sheet Comparison:Assets:From the balance sheet of the both companies we can identify that Saihan textile had6,400,688 Tk. total assets in 2008 but on the other hand Ashraf textile had only 5,910,353Tk. total asset in 2008. Next year both company’s total assets were increase. Ashraftextile reached in 6,223,788 Tk. whereas in 2009-2008 Saiham textile’s total asset12,454,493 Tk. For the total asset volume we can say that Saiham textile has morepowerful rather than Ashraf textile.Liability:The total liability we saw that Ashraf textile had 3,971,219 Tk liabilities in 2008 &Saiham textile had 2,665,482 Tk. only in 2009.Shiham textile liabilities was alsoincreased and reached 3,170,512 Tk the other hand Ashraf textile’s liabilities wasdecrease and reached 3,774,164 Tk. But clearly we can comments that Saiham textile hadleast liability than the Saiham textile. How ever Saiham textile had the more Net assetthan the Ashraf textile.Share Holder’s Equitywe can easily understand that Saiham textile had the more equity and it was 9,283,981 tkfor 2009-2008 & Ashraf textile had 2,449,624. So we can say that Saiham textile had themore investment in the market.Income Statement Comparison:From our income statement we can identify that Saiham textile has a profit 646,323 Tk.in 2008 & 454,564 Tk in 2009 . From this we can say that the profit is decreasing by nextyears. On the other hand Ashraf textile is in a profit of 314,149 tk in 2008 & 510,493 tkin 2009 & -14,064,257. Both conmany’s continue their business in profit where Ashraftextile doing their business with profitability.
Financial Statement Analysis By Ratio:A comparison of relationship among account balances. The term accounting ratio is usedto describe significant relationship between figures shown on a balance sheet, profit andloss account or in any other part of accounting organization.Profitability-its ability to earn income and sustain growth in both short-term and long-term. A companys degree of profitability is usually based on the income statement,which reports on the companys results of operations;Solvency-Its ability to pay its obligation to creditors and other third parties in the long-term; Liquidity-Its ability to maintain positive cash flow, while satisfying immediateobligations; Stability-The firms ability to remain in business in the long run, withouthaving to sustain significant losses in the conduct of its business. Assessing a companysstability requires the use of both the income statement and the balance sheet, as well asother financial and non-financial indicatorsFor the performance measurement of Ashraf textile & Saiham textile mills Ltd. In belowwe are going to analysis about the two companies financial statement using ratio analysis.Here are belongs:Liquidity Ratio:The test liquidity ratio defines that how quickly a firm or an organization transform itsassets, cash securities; inventory & others into the form of cash its also enable thedecision maker to make corrective & proactive decisions which impact as increment inprofitability of the organization or firm.Current Ratio:Current assets divided by current liabilities. It shows a firm’s ability to cover its currentliabilities with its current assets.Ashraf textile current ratio is 1.54 times in 2008 and 0.97 times in 2007. Here we see thatcurrent ratio has been decreased and go down in less than 1. On the other hand Saihamtextile current ratio was 1.35 in 2008-07 & next year 2.16 but it also be below theIndustry average. In the last year for both company we suggested that the currentliabilities couldn’t be covered if existing current asset are liquated at their book values.Quick Ratio:Current assets less inventories divided by current liabilities. It shows a firms ability tomeet current liabilities with its most liquid assets.Ashraf textile Quick r ratio is 1.08 times in 2008 and 0.97 times in 2007 which . Here wesee that Quick ratio has been also decreased. On the other hand Saiham textile Quickratio was 1.23 in 2008-07 & next year 2.06 then we can easily identify that Saiham textilehas good position than the Ashraf textile
Debt-To-Equity:Debt-to-Equity ratio indicates the relationship between the external equities or outsidersfunds and the internal equities or shareholders funds. It is also known as external internalequity ratio. It is determined to ascertain soundness of the long term financial policies ofthe company.If we consider the year 2009 of Ashraf textile, the ratio is 2.54 that creditors areproviding for each 1Tk. In the case of Saiham textile in 2009-2008 the ratio is 1.34 thatCreditors are providing. So we can say that Ashraf textile is in a better position than theSaiham textile.Total Asset turnover Ratio:The final asset management ratio, the total asset turnover ratio, measures the turnover ofall assets, it is calculate by total sales by total assets.In 2008 Ashraf textile total asset turnover ratio was 0.39 & 0.46 in 2009 on the otherhand Saiham textile was 0.54 & 0.28. Ashraf textile ratio is more than Saiham textile.But the both company is below the industry average and also go down in less then 1 so,indicating that the both companies are not generating a sufficient volume of businessgiven its total assets investment, sales should be increased and some assets should bedisposed of, or a combination of these step should need be taken.Account Receivable Turnover: We can measure how the ratio use to the assetsliquidity of the receivables is receivables turnover it measures the number of times onaverage, the company collects receivables during the period. We compute receivablesturnover by dividing net credit sales (net sales less cash sales) the average netreceivables. Unless seasonal factors are significant, average net receivables can becomputed from the beginning and ending balances on the net receivables. Thereceivable turnover ratio provides insight into the equality of the firm’s receivables andhow to successful the firm is in is collections.Ashraf textile turnover ratio was 26.53 & 51.27 in the year of 2008 & 2009 and Saihamtextile became 177.08 & 131.69 in the following year .we can easily identify adramatically different between these companies Eventually we can say that Ashraf textilewas received turnover position is than the Saiham textile.Inventory Turnover Ratio: To help determine how effectively the firm is managinginventory and also to gain an indication of the liquidity of inventory. This ratio iscalculated by dividing inventory into Cost of good sold.Ashraf textile’s inventory turnover was 61.46 in the yea 2008 and becomes 79.34 in theyear 2009 on the other hand Saiham textile was 70.21 and decrease in the year andbecome 63.86. Here we see that both companies are stand mostly in a seminal stage incase of inventory activity and also stand a good position.
Profitability Ratio:Profitability ratios (also referred to as profit margin ratios) compare components ofincome with sales. They give us an idea of what makes up a companys income and areusually expressed as a portion of each dollar of sales. The profit margin ratios we discusshere differ only by the numerator. Its in the numerator that we reflect and thus evaluateperformance for different aspects of the business: The gross profit margin is the ratio ofgross income or profit to sales. This ratio indicates how much of every taka of sales is leftafter costs of goods sold.GROSS PROFIT (GP) RATIO:Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as apercentage. It expresses the relationship between gross profit and sales. The basiccomponents of the calculation of gross profit ratio are gross profit and net sales. Grossprofit would be the difference between net sales and cost of goods sold.Gross profit ratio may be indicated to what extent the selling prices of goods per unit maybe reduced without incurring losses on operations. It reflects efficiency with which a firmproduces its products. As the gross profit is found by deducting cost of goods sold fromnet sales, higher the gross profit better it is. There is no standard GP ratio for evaluation.Ashraf textile gross profit in the year 2008 was 32.26% and becomes 38.01% in the year2009 where the gross increased and Saiham textile in the year 2008 was 31.52% and thenext year decrease and reached 18.56% which is a measure of the efficiency of the firm’soperations, as well as an indication of how products are priced and we saw that Ashraftextile has relatively more effective at producing and selling products above cost.
Conclusion:We examine the analysis of Ashraf textile & Saiham textile mills ltd. We see that theliquidity position is nit good both of the company.The industry average is better than the both companies because almost every ratio of theindustry is high with comparison to the company in case of liquidity, leverage, assetmanagement, profitability and market value measure is better of textile industry, industryperformance is better and improving every year, in conclusion company and industry isdoing well and in future growth is take place which increase the revenues and dividendsand it better for the country.RecommendationSaiham Textile Mills Ltd & Ashraf Textile Mills Ltd Which are profitable companies, butboth of the companies need to increase their liquidity and asset management position. Onthe other hand they should pay their liabilities as soon as they can, and increase itsowner’s equity than its liabilities. Cost and expenses should be reduced so the companycan generate more profit. Company should sale their shares on the high market rates andpay more dividend to their investors.
Bibliography:(i) Annual report -Ashraf textile mills ltd. For the year of 2008, 2009 -Saiham textile mills ltd. For the year of 2008- 2007 & 2009-2008(ii) Fundamental Of Financial Management(10th edition) -Brigham Houston(iii) Fundamental Of Corporate Finance(8th edition) -Ross, Westerfield, Jordan
Annexer1. Saiham Textile Mills LimitedBalance Sheet As At June 30, 20092. Saiham Textile Mills LimitedProfit And Loss StatementFore The Year Ended June 30, 20093. Ashraf Textile Mills LimitedBalance Sheet As At June 30, 20094 Ashraf Textile Mills LimitedProfit And Loss StatementFore The Year Ended June 30, 20095.Working Of Ratio Analysis6.Presetion By Graph Or ChartIn The Power Point Slides