Chapter One:Introduction & Methodology                             1
1.1 Introduction and Overview of Renata LimitedThe purpose of this report is to analyze financial statements. This involve...
Renata Ltd. - Mission“To provide maximum value to our customers, shareholders, colleagues, and communitieswhere we live an...
1.5 Nature of AnalysisFor our analysis, we mainly focused relied on “Ratio Analysis”, which helped us to identify anyspeci...
Chapter Two:Analysis and Interpretation   Of Different Ratios                              5
2. Ratio AnalysisTo evaluate a firm’s financial condition and performance, the financial analyst usually performsanalyses ...
2.1 Liquidity Ratio:Ratios that show the relationship of a firm’s cash and other current assets to its current liabilities...
2.1.2 Quick Ratio:Inventories typically are the least liquid of a firm’s current assets – they are the assets on whichloss...
higher degree of output. That may contribute for higher profit. Although the benchmark analysissuggests that the firm is c...
Inventory Turnover Ratio                        1.9                       1.85                        1.8                 ...
Accounts Receivable Ratio                         11.4                         11.2                          11           ...
Average Collection Period Ratio                         35                         34                                     ...
Total Asset Turnover Ratio                        1.15                         1.1                                        ...
2.3.1 Debt or Leverage Ratio:Total debt includes both current liabilities and long term debts. Creditors prefer low debt r...
2.3.2 Time Interest Earned (TIE) Ratio:The TIE ratio measures the extent to which earnings before interest and taxes (EBIT...
very higher rate of EPS but they are not taking debt, which is good news for the company. It iscreating trust on sharehold...
2.4.2 Net profit margin Ratio:Net profit margin ratio is the ratio measures net income per dollar of sales and is calculat...
Return on Total Assets (ROA) = Net Profit / Total Assets                    Table: ROA ratios for Renata for the years 200...
Return on common shares Ratio = Net income available to common shares / Averageshareholders Equity.      Table: Return on ...
EPS also shows that because of their profitability in nature they also provide higher EPS. It is avery good company for in...
Price/Earnings ratio is higher for firms with high growth potentials and low for riskier firms.The investors consider the ...
2.5.3Earning per share:Earnings per Share (EPS) are the portion of a companys profit allocated to each outstandingshare of...
Dividend Yield                         5000                         4800                                                  ...
CHAPTER – 03Findings and Conclusion                          24
3.1 Overall Findings on Renata Limited       Analyzing the liquidity ratios we can see that Renata Limited is holding less...
3.2 Conclusion:From the overall analysis we see that the market value of Renata Limited is much higher thanthe book value....
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Omey renata

  1. 1. Chapter One:Introduction & Methodology 1
  2. 2. 1.1 Introduction and Overview of Renata LimitedThe purpose of this report is to analyze financial statements. This involves a thoroughunderstanding of all the ins and outs of financial statements. Analysis of financial statementsbasically involves finding different significant ratios such as liquidity ratios, asset Utilizationratios, Solvency ratios, profitability ratios, and market value ratios. To take financial decisionsanalyzing financial statements is very important for a financial manager. Moreover, it is alsoimportant to make reasoning for what makes book value differ from market value of shares. In this report we have studied the financial statements of Renata Limited from 2009 to2010. Based on these 2 years financial statements we have made analysis and interpreted ourfindings.Renata Ltd. - An OverviewRenata Limited is one of the top ten pharmaceutical manufacturers in Bangladesh. Renata isengaged in the manufacture and marketing of human pharmaceutical and animal health products.The company also manufactures animal therapeutics and nutrition products. Renata currentlyemploys about 2300 people in its head office in Mirpur, Dhaka and its two production facilitiesin Mirpur, Dhaka and Rajendrapur, Dhaka. The company began its operations as Pfizer(Bangladesh) Limited in 1972. For the next two decades it continued as a subsidiary of PfizerCorporation. However, by the late 1990s the focus of Pfizer had shifted from formulations toresearch. In accordance with this transformation, Pfizer divested its interests in many countries,including Bangladesh. At present, Renata manufactures about 300 generic pharmaceuticalproducts including hormones, contraceptives, anti-cancer drugs, oral preparations,cephalosporins, parenteral preparations as well as other conventional drugs. In addition, theyalso offer about 95 animal therapeutics and nutrition products. Renata is a publicly tradedcompany on the Dhaka Stock Exchange. In 2009, the company’s annual turnover was about US$56 million, with an annual growth of about 35%.The company also operates four othermanufacturing units – the original Pfizer facility for general products, a UNICEF-approved SFF,a Cephalosporin facility, and a Penicillin facility. As of the third quarter of 2010, Renata exportsits products to the UK, Afghanistan, Cambodia, Hong Kong, the Philippines, Jordan, Sri Lanka,Vietnam, Myanmar, Kenya, Belize, Nepal, Malaysia, and Guyana, with registration ongoing in23 other countries. 2
  3. 3. Renata Ltd. - Mission“To provide maximum value to our customers, shareholders, colleagues, and communitieswhere we live and work.”Renata Ltd. – Vision“To establish Renata permanently among the best of innovative branded generic companies.”Approach to Quality of Renata Ltd.“The endurance of a company’s reputation depends upon the quality of work it does rather thanthe quantity. Hence, the appreciation of quality must be instinctive, and our commitmentinstinctive, and our commitment.”1.2 Objective of the Report o Forming an overall understating about the financial condition of the company over last two years. o Analyzing the ratios of the selected company based on financial statements. o To make forecast on the basis of the trend in different ratios. o To learn the methods of evaluating and rationalizing the financial aspects of the company.1.3 MethodologyI have initiated our research through the gathering information about Renata Ltd. I havecollected secondary data from the balance sheet and income statement of annual reports of 2009to 2010. I have collected the company’s annual reports from its website.As it is mentioned earlier, I have considered the last 2 year’s “Annual Reports” of RenataLimited. The annual reports of 2009 and 2010 of Renata Ltd. were taken into consideration foranalysis.1.4 Nature and Sources of DataFor the report we have only considered the secondary sources of data. Our secondary sourcesmainly include the last 2 years “Annual Reports” of Renata Ltd. which had been collected fromthe company’s website. 3
  4. 4. 1.5 Nature of AnalysisFor our analysis, we mainly focused relied on “Ratio Analysis”, which helped us to identify anyspecific trends or fluctuations occurred during the periods taken into consideration for analysis.1.6 Limitations of the Study o As this was an individual project, it was very difficult to accomplish the report in a very limited time. o The paper focuses on analysis of only one single firm. o In the financial statements some information was not present. o Moreover many companies practice unethical accounting practices to get rid of tax that may be different from the actual scenario. Also many times, these companies manipulate financial statements to make their performance much more lucrative to the shareholders. Such practice if had taken place might have diluted the findings which are based on the information available in the “Annual Reports”. 4
  5. 5. Chapter Two:Analysis and Interpretation Of Different Ratios 5
  6. 6. 2. Ratio AnalysisTo evaluate a firm’s financial condition and performance, the financial analyst usually performsanalyses on various aspects to find out the financial health of the firm; among which ratioanalysis is one of the most important and commonly used methods. Ratio analysis is a toolfrequently used during the analysis to relate two pieces of financial data by dividing one qualityby the other. In this study various ratio analyses will be done to understand the financialcondition of the company get a clear picture. The analysis of financial ratios involves two typesof comparison: o First, the analyst compares a present ratio with past and expected future ratios for the same company. The current ratio (the ratio of current assets to current liabilities) for the present year could be compared with the current ratio for the previous year-end. When financial ratios are arranged over a period of years, the analyst can study the composition of change and determine whether there has been an improvement or deterioration in the firm’s financial condition and performance over time. o The second method of comparison involves comparing the ratios of one with those of similar rivalry firms or with industry averages at the same point in time. Such a comparison gives insight into the relative financial condition and performance of the firm. It also helps us identify any significant deviation from any applicable industry average (or standard).Here we will discuss and calculate different types of ratios of Renata Pharmaceuticals Ltd. 6
  7. 7. 2.1 Liquidity Ratio:Ratios that show the relationship of a firm’s cash and other current assets to its current liabilitiesare known as liquidity ratios. Different types of liquidity ratios are discussed below.2.1.1 Current Ratio:The ratio that relates current assets to current liabilities is the current ratio. The current ratioindicates the ability of a company to pay its current liabilities from current assets and shows thestrength of the company’s working capital position. . Current ratio of 2:1 is considered to be ahealthy condition for most business organization. The ratio is calculated as follows: Current Ratio = Current Assets / Current Liabilities Table: Current Ratios of Renata of the years 2009 to 2010 Company 2009 2010 Renata 1.16 1.11 Current Ratio 1.16 1.14 2009 1.12 2010 1.1 1.08 2009 2010According to Benchmark analysis the current ratio of 2:1 is considered to be ideal for acompany. So according to the benchmark analysis Renata Limited’s performance is poor to meetthe current obligation. These decreasing current ratio indicate that either Renata Ltd. using moretheir current asset for larger production or they took more short term debt. 7
  8. 8. 2.1.2 Quick Ratio:Inventories typically are the least liquid of a firm’s current assets – they are the assets on whichlosses are most likely to occur in the event of liquidation. Therefore, it is important to measurethe firm’s ability to pay off short term obligations without having to rely on the sale ofinventories. This is why quick ratio is used. Quick ratio of 1:1 is considered to be a healthycondition for most businesses. Quick ratio= (Current Assets- Inventories)/ Current Liabilities Table: Quick Ratios of Renata of the years 2009 to 2010 Company 2009 2010 Renata .40 .41 Quick Ratio 0.41 0.405 2009 0.4 2010 0.395 2009 2010From the above chart we can see that, Renata went for huge production at 2010 because of theincreasing demand of their products. So their cash balance gone down and their Inventory alsoincreased than compare to past few years. At the same time to make these huge production theyhad buy Supplies with Credit from supplier much more than previous years. So all these factorsforced to make their Quick Ratio weaker but future they will actually get their benefit.Overall comment:Overall, both renata’s current ratio was decreasing and quick ratio was slightly increasing fromyear 2009 to 2010. This indicates less cash holdings of the company. Also there may beincreased current liability and inventory. These will ultimately result in further investment and 8
  9. 9. higher degree of output. That may contribute for higher profit. Although the benchmark analysissuggests that the firm is conveniently placed but time series analysis says that liquidityperformance is not so good. Though Renata looks for the better opportunity and they use theircurrent asset more for higher production but they should maintain sufficient current asset tomeet the current obligation. This happen because either Renata’s sales department’sperformance is poor or their products quality was not good.2.2 Asset Utilization Ratio:The Asset utilization ratios the way in which a company uses its assets to generate revenue andprofit. A set of ratios that measure how effectively a firm manages its assets compared to itssales. These ratios are designed to find out whether the total amount of each type of asset asreported on the balance sheet appear reasonable, too high, or too low considering current andprojected sales levels. Asset Management Ratio is done based on inventory turnover ratio, dayssales outstanding and fixed asset and total asset turnover ratio.2.2.1 Inventory Turnover Ratio:Inventory Turnover Ratio tells how often a businesss inventory turns over during the course ofthe year. Inventories are the least liquid form of asset and a high inventory turnover ratio isgenerally positive. The ratio is calculated as follows: Inventory Turnover ratio= Sales /Average Inventories Table: Inventory Turnover Ratios for Renata of the years 2009 to 2010 Company 2009 2010 Renata 1.69 1.86 9
  10. 10. Inventory Turnover Ratio 1.9 1.85 1.8 2009 1.75 1.7 2010 1.65 1.6 2009 2010From the above chart we can see that, Renata’s inventory turnover ratio is slightly increasedfrom 2009 to 2010. Indicates deterioration in asset utilization and more capital tied up in liquidcapital, thus increasing cost of short term financing and company is getting new buyers everyyear and as a result they have to produce more and keep it to the inventory till buyer take theirproduct.2.2.2 Accounts Receivable Turnover: This ratio gives us the number of times accounts receivables are collected in the year.It is calculated as follows: Accounts Receivable Turnover = Net credit sales /Average Accounts Receivable Table: Accounts Receivable Turnover Ratios for Renata of the years 2009 to 2010 Company 2009 2010 Renata 11.34 10.64 10
  11. 11. Accounts Receivable Ratio 11.4 11.2 11 2009 10.8 10.6 2010 10.4 10.2 2009 2010From the above chart we can see that, Rnata’s accounts receivable ratio dicreased from year2009 to 2010. This ratio quantifies the firms effectiveness in extending credit as well ascollecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently afirm uses its assets.2.2.3 Average collection period Ratio / Days Sales Uncollected:Average collection period ratio or DSO is used to evaluate the firm’s ability to collect its creditsales in timely manner. The DSO represents the average length of time the firm must wait aftermaking sales before receiving cash, which is the average collection period. The DSO ratio iscalculated by dividing accounts receivable by average sales per day which indicates the averagelength of time it takes the firm to collect its credit sales. It is calculated as: Average collection period Ratio =365/Accounts Receivable Turnover Table: Average collection period Ratio for Renata of the years 2009 to 2010 Company 2009 2010 Renata 32.19 34.30 11
  12. 12. Average Collection Period Ratio 35 34 2009 33 2010 32 31 2009 2010From the above chart we can see that, Rnata’s DSO ratio increased from year 2009 to year 2010.Renata’s DSO is good in the previous year and they are doing very good in consistently. If theycan keep producing qualitative product that has good demand in the market, and in future theywill have higher profit.2.2.4 Total Asset Turnover Ratio:The Total Asset Turnover ratio measures the amount of sales generated for every dollars worthof total assets. The total asset turnover ratio is calculated by dividing sale by total assets. Thetotal asset turnover ratio tells us whether the company or how well the company is utilization itstotal assets to generate sales. The total asset turnover ratio is calculated by dividing sale by totalassets. The total assets turnover ratio measures the turnover of all the firm’s assets. It iscalculated as follows: Total Assets Turnover Ratio = Total sales/ Total assets Table: Total Asset Turnover Ratios for Renata of the years 2009 to 2010 Company 2009 2010 Renata 1.01 1.11 12
  13. 13. Total Asset Turnover Ratio 1.15 1.1 2009 1.05 2010 1 0.95 2009 2010From the above chart we can see that, Renata’s total asset turnover ratio same as year 2009 andyear 2010. This indicates no improvement in total asset utilization.We compute the average totalassets by averaging the asset totals at the beginning and at the end of the year.Overall Comment:Overall, Renata’s Asset Utilization Ratios indicate that, analyzing the asset management ratioswe found out that increasing trend in inventory piling, but it will ultimately result in higheramount of production in future. Then again, Renata invested heavily in fixed asset. It also tells ahigher future output. Another fact is Renata maintains flexible credit terms. These are mainlydue to the tendency of maintaining good relationship in corporate channels. So that it willcontribute to the future growth of the company2.3 Solvency Ratios:This ratio measures how effectively a firm is managing its debts. This ratio helps the analyst to:o Check balance sheet ratios to determine the extent to which borrowed funds have been used to finance assets.o Review income statement ratios to determine how well operating profits can cover fixed charges such as interest.Debt Management ratios include analysis of two types of ratio: Debt ratio and Times interestearned ratio. 13
  14. 14. 2.3.1 Debt or Leverage Ratio:Total debt includes both current liabilities and long term debts. Creditors prefer low debt ratios,because the lower the ratio, the greater the cushion against creditor’s losses in the event ofliquidation. This ratio reflects how effectively a firm is managing its debts. It helps the analyst todetermine the extent to which borrowed funds have been used to finance assets and review howwell operating profits can cover fixed charges such as interest. The owners on the other hand canbenefit from leverage because it magnifies earnings, and thus the return to stockholder. Itmeasures the percentage of the firm’s assets financed by creditors. It is computed as follows: Debt ratio= Total long term Liabilities / total assets Table: Debt Ratios for Renata of the years 2009 to 2010 Company 2009 2010 Renata .06 .05 Total Debt Ratio 0.06 0.04 2009 0.02 2010 0 2009 2010From the above chart we can see that, Renata’s total debt ratio is slightly decreased from year2009 to 2010. A low leverage ratio may make the company more solvent, normally debt ratio islower better, because high debt increases the risk as interest is compulsory obligation. Their debtratio is low because they are taking fewer amount of loan from the bank. 14
  15. 15. 2.3.2 Time Interest Earned (TIE) Ratio:The TIE ratio measures the extent to which earnings before interest and taxes (EBIT), alsocalled operating income, can decline before the firm is unable to meet its annual interest cost.Failure to meet this obligation can bring legal action by the firm’s creditor, possibly resulting inbankruptcy. The TIE ratio is computed by dividing earnings before interest and taxes (EBIT) byinterest charges. It measures the ability of the firm to meet its annual interest payments. The TIEratio is defined as follows: Times Interest Earned = (Income before interest and taxes) / Interest expense Table: TIE Ratios for Renata of the years 2009 to 2010 Company 2009 2010 Renata 9.74 11.17 Time Interest Earned Ratio 11.5 11 10.5 2009 10 2010 9.5 9 2009 2010From the above chart we can see that, Renata’s the TIE ratio increased from year 2009 to year2010. Renata is not taking any long term debt; as a result they are not facing any difficulties orbenefits regarding this ratio. Generally the ratio is considered as safe from the lenders point ofview. Renata Ltd. has pretty high ratios than benchmark, so the shareholders will be satisfiedwith the company.Overall Comment:Renata’s debt management ratios indicate that Renata is in a better position. In fact, Renatamight have great facilities borrowing additional funds. Compare with the EPS, Renata is giving 15
  16. 16. very higher rate of EPS but they are not taking debt, which is good news for the company. It iscreating trust on shareholders mind regarding the company. Though they are not taking any longterm loan, as a result they don’t have any chance for the bankruptcy in near future.2.4 Profitability Ratios:A group of ratios that are showing the effect of liquidity, asset management, and debtmanagement on operating results are the basic of profitability ratio. Profitability is the net resultof a number of policies and decisions. Profitability ratios are of three types- Net profit margin onsales, Return on Asset (ROA) and Return on Equity (ROE).2.4.1 Gross Profit Margin Ratio:The gross profit margin is the percentage of each Taka in sales remaining with the companyonce the costs of goods are paid off. It is calculated by dividing gross profit by sales. It isdefined as follows: Gross Profit Margin Ratio = Gross profit / Net sales Table: Gross Profit Margin Ratio for Renata of the years 2009 to 2010 Company 2009 2010 Renata 53.33% 52.75% Gross Profit Margin Ratio 53.40% 53.20% 53.00% 2009 52.80% 2010 52.60% 52.40% 2009 2010In 2010 the ratio goes down. The reduction looks serious and will cause concern for the ownersand lenders even if it may be explained to some extent by industry wide downturn. 16
  17. 17. 2.4.2 Net profit margin Ratio:Net profit margin ratio is the ratio measures net income per dollar of sales and is calculated asnet income divided by revenues, or net profits divided by sales. It measures how much out ofevery dollar of sales a company actually keeps in earnings. A higher profit margin indicates amore profitable company that has better control over its costs compared to its competitors. Thetotal asset turnover ratio is calculated by dividing sale by total assets. The total assets turnoverratio measures the turnover of all the firm’s assets. It is calculated as follows: Net profit margin Ratio = Net profit / Net sales Table: Net profit margin Ratios for Renata for the years 2009 to 2010 Company 2009 2010 Renata 15.47% 16.73% Net Profit Margin Ratio 17.00% 16.50% 16.00% 2009 15.50% 2010 15.00% 14.50% 2009 2010Renata Ltd’s profit margin in the year 2009 to 2010 was slightly increased, it indicates that itssales were higher, its costs were lower. And a higher profit margin also indicates that Renata ismore profitable company that has better control over its costs compared to its competitors.2.4.3 Return on Total Asset (ROA):Return on Asset (ROA) is an indicator of a company which deals with profit relative to its totalassets. It gives an idea as to how efficient management is at using its assets to generate earnings.It is calculated by dividing a companys annual earnings by its total assets, ROA is displayed asa percentage. It provides an idea of the overall return on investment earned by the firm. TheROA after interest and taxes are computed as follows: 17
  18. 18. Return on Total Assets (ROA) = Net Profit / Total Assets Table: ROA ratios for Renata for the years 2009 to 2010 Company 2009 2010 Renata 15.67% 16.65% Return on Total Asset Ratio 17.00% 16.50% 2009 16.00% 2010 15.50% 15.00% 2009 2010Return on Assets is a stable indicator of how profitable a company is before leverage. It is also ameasure of the productivity of an enterprise’s total resources, and is used to assess managerialperformance as it measures a manager’s ability and efficiency in creating wealth. The tableshows that the ROA for Renata Pharmaceuticals Ltd. is increasing rapidly from 2009 to 2010 Onthe other hand net income also increases but equivalently tax also decreases a lot so the netincome ultimately increases. From 2010 Renata did very well and ROA position is much higherin the year 2009.2.4.4 Return on common shares:This is the ratio of net income to shareholders’ equity. It measures the rate of return onstockholder’s investment. The ROE is perhaps the most important ratio of all. It is thepercentage of return on funds invested in the business by its owners. In short, this ratio tells theowner whether or not all the effort put into the business has been worthwhile. If the ROE is lessthan the rate of return on an alternative, risk-free investment such as a bank savings account, theowner may be wiser to sell the company, put the money in such a savings instrument, and avoidthe daily struggles of small business management. The return on equity (ROE) or the rate ofreturn on stockholder’s return is measured as follows: 18
  19. 19. Return on common shares Ratio = Net income available to common shares / Averageshareholders Equity. Table: Return on common shares Ratio for Renata for the years 2009 to 2010 (%) Company 2009 2010 Renata 27.34% 28.65% Return on Equity Ratio 29.00% 28.50% 28.00% 2009 27.50% 2010 27.00% 26.50% 2009 2010The amount of net income returned as a percentage of shareholders equity. Return on equitymeasures a corporations profitability by revealing how much profit a company generates withthe money shareholders have invested.Renata proved much profitable in 2009 than 2010. The sharp increase in Net Income toShareholder and Common Equity was the reason. By relating these earnings to the shareholderequity, an investor can quickly see how much cash comes from existing assets. In 2009 Renatapaying higher EPS so the common equity or the shareholders investment rate goes up then theNet income. That indirectly shows that investors trust is high for these company and the RenataLimited can get credit more investors any time.As we know that investors usually look for companies with returns on equity that are high andgrowing, and for Renata they fulfill both of the features for ROE, so Renata Limited willinfluence a large number of investors.Overall Comments:All the profitabilty ratio shows a positive trends for the renata it is becasuse of the goodinventory management system, higher net income, good asset management and the total equityof the Renata Limited. That basically tells that it is a very profitable company. The figure of the 19
  20. 20. EPS also shows that because of their profitability in nature they also provide higher EPS. It is avery good company for investment and the shareholders also have the trust for the company.2.5 Market Value Measures:The market value ratios represent a group of ratios that relates the firm’s stock price to itsearnings and book value per share. These ratios give management an indication of whatinvestors think of the company’s past performance and future prospect. If the firm’s liquidity,asset management, debt management, and profitability ratios are all good then market valueratios will be high which will lead to an increase in the stock price of the company.Market value ratio is of two types- Price/Earnings Ratio and Market/Book value Ratio.2.5.1 Price/Earning (P/E) Ratio:This is the ratio of the price per share to earnings per share. It shows the dollar amount investorswill pay for $1 of current earnings. It is computed by market price per share and earnings pershare (EPS). P/E ratio = Market price per share/ Earnings per sharePrice/Earnings ratio is higher for firms with high growth potentials and low for riskier firms.The investors consider the firm with high leverage more risky than firm with low leverage.However if the ratio of the firms is increasing it means that it is gaining trust of the investors. Table: Price/Earnings Ratios of Renata for the years 2009 to 2010 Company 2009 2010 Renata 35.94 27.47 P/E Ratio 40 30 2009 20 2010 10 0 2009 2010 20
  21. 21. Price/Earnings ratio is higher for firms with high growth potentials and low for riskier firms.The investors consider the firm with high leverage more risky than firm with low leverage. Fromthe above chart we can see that, Renata’s P/E ratio decreased from year 2010. For Renata, thisindicates that, the earning has become a lot less attractive in 2010 and a stock with a low PEratio is a cheap stock.2.5.2 Market/Book value per share:The ratio of a stock’s market price to its book value gives another suggestion of how investorsregard the company. Companies with relatively high rates of return on equity generally sell athigher multiples of book value than those with low returns. The formula for Market/Book Valueis given below:Market / Book value per share ratio = Total common shareholders equity / common sharesoutstanding. Table: Market Value per share Ratio for Renata for the years 2009 to 2010 Company 2009 2010 Renata 1221.19 1643.99 Market/Book Value Per Share Ratio 2000 1500 2009 1000 2010 500 0 2009 2010From the above chart we can see that, Renata’s M/B value ratio increased in year 2009 to year2010. For this large increase of Market value per share ratio indicates that it succeeded to gainmore investor’s trust and the investors are very much confident about the prospect. 21
  22. 22. 2.5.3Earning per share:Earnings per Share (EPS) are the portion of a companys profit allocated to each outstandingshare of common stock. It serves as an indicator of a companys profitability. It is generallyconsidered to be the single most important variable in determining a shares price. It is calculatedas follows:Earnings per share = Net income available to common shares / outstanding commonshares Table: Earning per share Ratio for Renata for the years 2009 to 2010 Company 2009 2010 Renata 333.90 471.06 Earning Per Share Ratio 500 400 300 2009 200 2010 100 0 2009 2010EPS of Renata Ltd. has been increasing. If they can continue it they have a bright future. Thisshould attract new investors to invest on their company through share market.2.5.4Dividend Yield:Dividend Yield Ratio is calculated as follows: Dividend Yield = Dividend per share / Market price per share Table: Dividend Yield Ratio for Renata for the years 2009 to 2010 Company 2009 2010 Renata 4819.54 4468.77 22
  23. 23. Dividend Yield 5000 4800 2009 4600 2010 4400 4200 2009 2010Renata Ltd. was pay less dividend in 2010. This may be an indication that less earn to pay to theshareholders. Investor may interpret that, the company did not have enough money to paydividend.Overall Comments:One of the most important ratios to evaluate the performances of the firm is the price-earningsratio, through the period, Renata’s risk got reduced in the market. Also, it succeeded to gainmore investor’s trust which will help Renata to look for further sources of investments. 23
  24. 24. CHAPTER – 03Findings and Conclusion 24
  25. 25. 3.1 Overall Findings on Renata Limited Analyzing the liquidity ratios we can see that Renata Limited is holding less cash inhand. Both the current ratio and the quick ratio are lower than the benchmark. Though itindicates increase in liability and higher inventory holding but it will ultimately contribute tofuture investment and higher output. Analyzing the asset management ratios we found out that increasing trend in inventorypiling, but it will ultimately result in higher amount of production in future. Then again, Renatainvested heavily in fixed asset. It also tells a higher future output. Another fact is Renatamaintains flexible credit terms. These are mainly due to the tendency of maintaining goodrelationship in corporate channels. So that it will contribute to the future growth of the company. Analyzing the debt management ratios we can summarize that the company has decreaseits debt capital but it was also successful in utilizing the advantage of debt financing as dividendand EPS shows increasing trends largely. Then again, this increased debt will help to makefurther investment. Analyzing the profitability ratios we can summarize that profit margin sale increase,which means a handsome amount of net income in every year in comparison to sales. From theROA we can tell that their investing heavily on fixed asset and company also getting higheroutput over the years. After that, ROE shows increasing trend that means the company isgenerating higher profit with the money shareholders have invested. Analyzing the market ratios, we can summarize that for P/E and M/B value ratioRenata’s risk got reduced in the market. That indicates Renata have gained more trust among theinvestors. This will help Renata to look for further sources of investment. 25
  26. 26. 3.2 Conclusion:From the overall analysis we see that the market value of Renata Limited is much higher thanthe book value. It is a very good sign for a company. But it is better for Renata Limited becauseof the trends, for last five years the data shows the market value is three to five times higher thanthe book value. They also provide a good portion of their net income as dividend to theshareholders. Moreover, we all know that a company’s overall condition can measure by themarket price of the share. Finally, the main thing is that they are a lot of giant competitor in themarket. So for make a stable and increasing growth of their market price of share RenataLimited can look more on their liquidity position because they hold less cash which might bevery risky for Renata Limited and the field of inventory management issue they can be moreefficient. Despite of that few facts they are doing very good in the market as the market value ishigher than the book value which shows their business activity and trends is gaining more andmore investors trust. 26

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