Keeping pace with globalization, Bangladesh is experiencing rapid infrastructural development. In this situation iron & steel industry has a bright growth prospect & Ratanpur Steel Re-Rolling Mills Ltd. is pioneer in this industry. The slogan of the RSRM is “Steel for the nation”.
In this competitive market RSRM using most advanced and latest technology suitable for the production of Termo–Mechanically Treated (TMT) reinforcement bar renowned worldwide for its special features of having strength with high elongation percent and toughness which is not possible in other ordinary reinforcement bars of conventional processes.
Ratanpur Steel Re-Rolling Mills Ltd. was incorporated in Bangladesh as private limited company on 22 April, 1986 as company limited by shares under the Companies Act, 1913 and converted into public limited company on 26 June 2012 under the Companies Act, 1994. The Company is engaged in the manufacturing process of producing various grades of M.S. Deformed Bar (300W/40 Grade, 400W/60 Grade and 500W/TMT) from M.S.Billet and sales/export of the products and other business related thereto. The Company has set up its Re-Rolling Mills factory at 176, Baizid Bostami I/A, Baizid Bostami road, Nasirabad, Chittagong, and commenced commercial production from 1986. The Company is listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) as a publicly quoted company. Trading of the shares of the company started in two stock exchanges from 22 September 2014.
2. INDUSTRIAL TOUR REPORT 1
Bismillahir Rahmanir Rahim
Industrial Tour Report
Topic: Analysis on Financial Performance of RSRM
Submitted To:
Mrs. Nasrin Jahan Nasu
Lecturer
Department of Accounting and Information Systems
University of Chittagong
Submitted By:
Abu Hasan Al-Nahiyan
ID No: 09301120
Session: 2008 -09
Department of Accounting and Information Systems
University of Chittagong
3. INDUSTRIAL TOUR REPORT 2
Date of Submission: -31/12/2014
SUPERVISOR’S CERTIFICATE
This is to certify that Abu Hasan Al-Nahiyan bearing ID No 09301120 has
completed his Industrial Tour Report successfully under my supervision. It is
to be noted that in this reporthe tried to find outthe “Financial performance
of “Ratanpur Steel Re-Rolling Mills Ltd.” During the preparation of the
report he regularly contacted with me and took my suggestions regularly as
well as followed my direction as directed. I wish his great success and
prosperity in life.
I therefore recommend accepting the industrial tour report with best wishes.
Signature
Mrs.Nasrin Jahan Nasu
Lecturer
Department of Accounting & InformationSystems
University Of Chittagong
4. INDUSTRIAL TOUR REPORT 3
LETTER OF SUBMISSION
Date: 31st December, 2014.
Mrs.Nasrin Jahan Nasu
Lecturer
Departmentof Accounting& Information Systems
University of Chittagong
Subject:SubmissionofIndustrial Tour Report.
Dear Madam,
With an enormous pleasure, I would like to submit my industrial tour report
on Ratanpur Steel Re-Rolling Mills Limited to fulfill the requirement of the
BBA Program. In preparing this report, the relevant information related to
this paper is collected and integrated accordingly. It is highly pleasure for me
to get you as a supervisor of my theoretical with pragmatic experience work,
which is an integral part of my BBA Program.In every segment of this report, I
have made an honest endeavor to present it as good combination of my
knowledge, intelligence and the information gathered from the research
paper.
In preparing this report, perhaps some mistakes are there. You, I hope, will
consider these mistakes clemently. I also expect your cooperation whenever I
require.
Thanking You,
Yoursfaithfully,
………………………….
(Abu Hasan Al-Nahiyan)
5. INDUSTRIAL TOUR REPORT 4
ID No: 09301120, Session: 2008-09
Department of Accounting & Information System
University of Chittagong
PREFACE
Now in the world competition is increasing smoothly. New types of business
are emerging day by day. Every single enterprise has to complete several
national and multinational organizations. To face this competition business
enterprise needs highly educated employees who have knowledge about all
the aspects influencing the activities of business.
Field work is considered as a bridge between academic knowledge and
practical field. Practical knowledge is imperative for the Business students
especially BBA students. The business world is going more critical in this new
millennium & the practical situations are changing day by day. For that, by
doing this sort of assignment task students can have first-hand idea about
organization and can get practical exposure by doing industrial tour in
different organizations. In developed countries, the business schools give
more preference to practical knowledge than theoretical knowledge. That is
why; the program on any practical aspect is conducted for the BBA students of
Faculty of Business Administration, Chittagong University. Here students are
assigned with practical topics to prepare study report conducted on the
organization. In this respect, I have been assigned to prepare industrial tour
report on RATANPUR STEEL RE-ROLLING MILLS LIMITED. The core object
of such type of program is to familiarize the students with the real life
business situations.
This reportrepresentsthe findingsof short study on“Financial Performance
of RSRM”. The report has been prepared by collecting information from
practical working, reference books, newspaper and various web sites. Then I
have analyzed collected data and included only those data which are
appropriate for my paper.
6. INDUSTRIAL TOUR REPORT 5
Extreme care has been taken in explaining the theoretical and statistical
aspects in a most logical manner. All the different items have been
systematically arranged under different headings.
Finally, I take entire responsibility of any deficiency that might have in the
report.
ACKNOWLEDGEMENT
In the commencement, I would like to say that, all praise due to Almighty
ALLAH. All the progress, achievement and success throughout our life are His
blessing. With His inestimable mercy and sympathy we are alive.
Now, I would like to convey my heartiest gratitude to our honorable
Chairperson Professor Dr. Abdur Rahaman for providing us forwarding
letter by which we have officially visited Ratanpur Steel Re-Rolling Mills
Ltd. And I also indebted and grateful to Mrs. Nasrin Jahan Nasu for helping
me momentously in conducting the tour and preparing this report
successfully.
To accomplish this sort of report visiting of industry is mandatory and to visit
and preparing this kind of report many officials and persons help is needed.
And the respondents of the questionnaire are the main key of this report.
Without their friendly cooperation there might be no primary data. And
exclusive of primary data the report could be meaningless. So we all, the
members of the tour group are very much thankful to Mr. Md. Mostafa
Kamal, AGM of HR& Admin, Mr. Md. Farid Iqbal, Assistant Manager of HR
and Mr. Subash Chad Shivdaras Sharma, In-charge Production of RSRM
who sacrifice their valuable time for answering the questionnaire and shared
their personal experience about overall management of KAFCO with us. In
addition, we would like to give credit to the officials who helped us to reach
the respondent.
To me this would bea great achievement, if the reportserves my purposeat
least to some extent. And I would liketo offer gratitude to all whoever helped
7. INDUSTRIAL TOUR REPORT 6
me in preparingthis paper. Asa finalpointI take entire responsibility of any
deficiency that might have crept in this report.
8. INDUSTRIAL TOUR REPORT 7
ABSTRACT
Keeping pace with globalization, Bangladesh is experiencing rapid
infrastructural development. In this situation iron & steel industry has a
bright growth prospect & Ratanpur Steel Re-Rolling Mills Ltd. is pioneer in
this industry. The slogan of the RSRM is “Steel for the nation”.
In this competitive market RSRM using most advanced and latest technology
suitable for the production of Termo–Mechanically Treated (TMT)
reinforcement bar renowned worldwide for its special features of having
strength with high elongation percent and toughness which is not possible in
other ordinary reinforcement bars of conventional processes.
Ratanpur Steel Re-Rolling Mills Ltd. was incorporated in Bangladesh as
private limited company on 22 April, 1986 as company limited by shares
under the CompaniesAct, 1913 and converted into public limited company on
26 June2012 under the Companies Act, 1994. The Company is engaged in the
manufacturing process of producing various grades of M.S. Deformed Bar
(300W/40 Grade, 400W/60 Grade and 500W/TMT) from M.S.Billet and
sales/export of the productsand other businessrelated thereto. The Company
has set up its Re-Rolling Mills factory at 176, Baizid Bostami I/A, Baizid
Bostami road, Nasirabad, Chittagong, and commenced commercial production
from 1986. The Company is listed with Dhaka Stock Exchange (DSE) and
Chittagong Stock Exchange (CSE)as a publicly quoted company. Tradingof the
shares of the company started in two stock exchanges from 22 September
2014.
10. INDUSTRIAL TOUR REPORT 9
3.3 ACTIVITYRATIOS:--------------------------------------------------------------------24
3.3.1 INVENTORY TURNOVERRATIO:--------------------------------------------------24
3.3.2 TOTAL ASSETSTURNOVER RATIO:----------------------------------------------25
3.3.3 DEBTOR TURNOVER RATIO: ------------------------------------------------------26
3.3.4 CREDITOR TURNOVERRATIO:----------------------------------------------------27
3.4 PROFITABILITYRATIOS:-----------------------------------------------------------28
3.4.1 GROSSPROFIT RATIO: --------------------------------------------------------------28
3.4.2 OPERATING PROFITRATIO:-------------------------------------------------------29
3.4.3 NETPROFIT RATIO:------------------------------------------------------------------30
3.4.4 EBITDA MARGIN TOSALES: -------------------------------------------------------31
3.4.5 RETURN ON SHAREHOLDERS’ EQUITY: ----------------------------------------32
3.4.6 RETURN ON CAPITAL EMPLOYED:-----------------------------------------------33
3.4.7 EARNING PER SHARE:---------------------------------------------------------------34
3.4.8 DIVIDEND PER SHARE:--------------------------------------------------------------35
3.5 USEFULINFORMATION TOEVALUATE RATIO ANALYSIS ----------------36
4 RECOMMENDATION -------------------------------------------------------------------37
5 CONCLUSION -----------------------------------------------------------------------------38
6 APPENDICES------------------------------------------------------------------------------39
7 REFERENCES -----------------------------------------------------------------------------41
11. INDUSTRIAL TOUR REPORT 10
1 . INTRODUCTION
1.1 PRELUDE
The basis of financial planning, analysis and decision-making is the financial
information. Financialinformation is needed to predict, compare and evaluate
the firm’s earning ability. It is also required to aid in economic decision-
makingand investment& financial decision-making. The financial information
of an enterprise is contained in the financial statements or accounting reports.
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing relationships between the
items of the balance sheet and the profit & loss account. Financial analysis can
be undertaken by management of the firm, or by parties outside the firm, viz.
owner, creditors, investors and others. Management, creditors, investors and
others to form judgment about the operating performance and financial
position of the firm use the information contained in these statements.
A financial ratio is a relationship between two financial variables. It helps to
ascertain the financial condition and performance of a firm. Ratio analysis is a
process of identifying the financial strengths and weakness of the firm. This
may accomplish either through a trend analysis of the firm’s ratios over the
period of the time or through a comparison of the firm’s ratios with its nearest
competitors and with the industry averages.
12. INDUSTRIAL TOUR REPORT 11
1.2 STATEMENTOF THE PROBLEMS
Financial analysis is the starting point for making plans, before using any
sophisticated forecasting and planning procedures. It helps to understand the
past which is prerequisite for anticipating the future. User of financial
statement can get further insight about financial strength and weakness of the
firm if they properly analyze information reported in these statements.
Managementshould particularly interest in knowing financial strengths of the
firm to make their best use and to be able to spot out financial weaknesses of
the firm to take suitable corrective actions. Management should always keep
an eye whether its current financial policy regarding financial performance is
doing well or not because one slight deviation from its optimal financial
performance may cause a significant problem to the firm.
From the literature review, we have come to know that in the financial year
2013-14 country faced a lot of challenges those are political unrest and
slowdown in the real estate sector and infrastructural development which
effects in the overall financial performance of RSRM such as decreasing gross
profit, decreasing operating profit, decreasing net profit etc. In this financial
year RSRM utilized 46% production capacity produced 85398 MT of MS
Deformed Bar. Whereas in the previous financial year it was 47% utilization
of capacity and produced 88040 MT of MS Deformed Bar. In this regard, the
financial performance of RSRM is not good. As we see that the company’s EPS
(Earning per share) for the year is tk. 5.24 which is 0.39 less than preceding
year. Decrease of EPS is a great concerned for shareholders. Apart from that
company declare15% dividend of which 5% cash and 10% stock dividendfor
the year ended June 30, 2014 which is good for shareholders. In absence of
adequate liquidity the firm would not be able to pay creditors who have
supplied goods and serviced on the due date promised.
The main purposeof this study is to know whether the financial condition and
performance of RSRM is good or not. If not then what corrections can make it
a perfect one.
13. INDUSTRIAL TOUR REPORT 12
1.3OBJECTIVES OF THE STUDY
The main purpose of the industrial visit is to acquire knowledge about the
internaland external environmentof an industry and find out the consistency
and inconsistency between theoretical and practical knowledge that we
acquired from an industry that is live. We also try to adjust with the gap to be
competent at the modern job market.
The areas on which we willgive emphasisare:
To find outthe financial strength of RSRM.
To find outthe financial weaknessof RSRM.
To evaluate financialcondition& performanceof RSRM.
To analyze critically the financial factors of RSRM.
Lastly, recommends solution related to their financial performance.
14. INDUSTRIAL TOUR REPORT 13
1.4 METHODOLOGYOF THE STUDY
The scopeof the study wasconfined. Oneof the most renowned enterprisesis
“Ratanpur Re-Rolling Stills Ltd. The methodology followed for the purpose of
the study has been desk research as well as filed survey. Wecollected all kinds
of data from primary & secondary sources.
Primary Data is collected through:
Makinga formalquestionnaire.
Questionnairehas been designed through departmentwise.
Discussion with high officials.
Practical experiencegained by studying& visiting.
Secondary Data is collected through:
Prospectus
AnnualReportof RSRM
Websites
The major portions of data source used in this report are from secondary
sources. Finally, the collected data are classified, tabulated, analyzed,
interpreted and presented in the form of research report thereafter.
15. INDUSTRIAL TOUR REPORT 14
1.5 LIMITATIONS OF THE STUDY
The study has been conducted subject to certain limitations. Time constraint
is one of the major limitations. I have been allowed only one day for the
industrial visit, which is not enough to study and industry in depth.
In addition to the above, our sample enterprise is a private limited company,
which does not provide all sophisticated information. So they provide us only
Annual Report. They are concerned about their competitor sensitivity in the
field of fertilizer production organization. Another important reason is as
follows:
Most of the official was so much busy to providemeenoughtime.
Difficultto contact with all top management.
Lack of proper communication withRSRM in the earlier stage.
Lacks of information is prevailed in this reportbecause the
representativeof RSRM did notdisclose many confidentialmatter.
The success rate of this study may be limited dueto lack of our
experience in collecting data.
In spite of these limitations, I have tried my best to pinpoint various finding
and to provide the students and researchers of tomorrow with valuable
information.
16. INDUSTRIAL TOUR REPORT 15
2 . AN OVERVIEW OF RSRM
2.1 COMPANYPROFILE
Ratanpur Steel Re- rolling Mill (RSRM) is a local company has launched finest
quality rod in the country as Bangladesh’s construction industry looks for
quake-resistance steel for increasing number of high-rise buildings.Ratanpur
Steel Re- rolling Mill (RSRM) is one of well-known steel mill in steel re-rolling
sector. It has 24 years’ experience exclusively in steel making. It is one of the
biggest steel manufacturing companies in the private sector in Bangladesh. It
was established
in 1984. The
slogan of the
Ratanpur steel
mill is “Steel for
the nation”.
Thinking about
the increasing
demand of steel
in the country
this prominent
entrepreneur
decided to set
up this factory.
It has been manufacturingplain and deformed bar to meet the requirement of
the customers of the country.
The factory of this company is located at Nasirabad beside Baizid Bostami
road in Chittagong. The company is using latest and sophisticated technology
to manufacture product. Ratanpur steel mill has a modern chemical analysis
and physical testing lab to ensure the quality of the product.
17. INDUSTRIAL TOUR REPORT 16
2.2BUSINESS PRINCIPLES
2.2.1 VISSION:
Our vision is to be the trend setter and the power force of the steel re-rolling
industry.
2.2.2 MISSION:
We will continue to be the first name in the region’s steel industry by
harnessing our assets & resources to achieve profitable growth, operational
and organizational excellence and good corporate citizenship.
2.2.3 OBJECTIVES:
Our objectives are to conductbusiness operation based on market mechanism
within the legal and social frame work with aims to attain the mission
reflected by our vision.
2.2.4 CORPORATE FOCUS:
Our vision, our mission and our objectives are to emphasize on the quality of
product, process and services leading to augmentation of the company with
corporate governance practices.
18. INDUSTRIAL TOUR REPORT 17
2.2.5 VALUES:
QUALITY:
Providingproducts& servicesto our customers.
Constantly improvingour processesreducingwastage.
Minimizingcosts of products& services.
Developingour resourcesfor creating skilled workforce.
TRUST:
Preservethe faith & goodwill of all our shareholders by adopting
ethical and transparentbusiness practices.
Beingfair and honest in all our dealingand good governanceand
risk managementprocess.
BUSINESS RELATIONSHIP:
By offeringquality product.
By providingour best & timely service.
By honoringall our commitmentseven with challenges.
LEADERSHIP:
By setting landmark thoughour products, processes& people.
By persistently movingahead of competition by differencingour
products and processes.
By increasing our marketshare.
BUSINESS AUGMENTATION:
Improvingthe efficiency of processes.
By anticipating & respondingto the changing business and the
environmentalneedsusingexperiencewithin the organization.
SOCIAL CARE:
Tree plantation program
Earthquake campaign
Buildingpassenger shade in bus stands
Providingsafety road sign
Scholarship program
19. INDUSTRIAL TOUR REPORT 18
2.2.6 PRODUCTOF RSRM:
RSRM mainly produces500W(TMT), 400W(60 Grade)and 300W(40 Grade).
Grade steel using most advanced and latest technology suitable for the
production of TMT bar which is renowned worldwide for its special features
of having high strength with high elongation percent and toughness which is
not possible in other ordinary reinforcement bars of conventional processes.
2.2.7 STRENGTH OFRSRM:
Greater Ductility
Superior Bendability
Better Weld ability
High Corrosion-Resistance
Ideal Property Balance
2.3 MANAGING BODY OF RSRM
NAME DESIGNATION
Mrs. Shamsun Nahar Rahman Chairman
Mr. Maksudur Rahman Director& ManagingDirector
Mr. Md. Younus Bhuiyan Director
Mr. Md. Mizanur Rahman Director
Mr. Marzanur Rahman Director
Mr. Md. Jahangir Miah IndependentDirector
Mr. Zulfiker Ali Azad Executive Director-Marketing& Sales
Mr. Obaidur Rahman FCA Chief Financial Officer
Mr. Md. Jafar Imam Company Secretary
Mr. Md. SerajulIslam Consultant-Quality Control
Mr. Mohammad Ali Chief Electrical Engineer
Mr. Tapan Kanti Majumder Chief Mechanical Engineer
Mr. Md. MostafaKamal AGM, HR & Admin
Mr. Md. Farid Iqbal Assistant Manager of HR
Mr. Md. Dewan Mabood Ahmed Manager-Commercial
Mr. Subash Chad ShivdarasSharma In-Charge Production
Mr. Md. Nizam Uddin Head of Information Technology
20. INDUSTRIAL TOUR REPORT 19
3 . FINDINGS & ANALYSIS ON
FINANCIAL PERFORMANCE OF RSRM
The present study has been undertaken for analyzing the financial
performance of RSRM. Various sources are used to make the report more
informative. The direct interview method has followed as the primary source
and annual reports of RSRM, the website of RSRM and various journals&
books related to financial analysis.
Financial statements are historical in their nature as they relate to the past
performance of the firm. When ratio analysis is applied to the past financial
statements, strength and weakness of the firm could be analyzed and
identified. Changes are inevitable as future is not a replica of the past. Only
management is aware of the expected changes in policies,in future. So, ratio
analysis can be applied by the management to anticipate the future
performance results, after considering the impact of changes in policies to the
past financial statements. An outsider is not aware of the likely changes in
policies. So, only management, not public, is in a better position to use ratio
analysis to forecast or predict the future performance of a firm.
Performance of RSRM is evaluated using the ratio analysis in the following
different directions:
3.1 LIQUIDITY RATIOS:
Liquidity ratios are highly useful to creditors and commercial banks that
provide short-term credit. Short-term refers to a period not exceeding one
year. Liquidity ratios measure the firm’s ability to meet current obligations, as
and when they fall due. A firm should ensure that it does not suffer from lack
of liquidity and also does not have excess liquidity. The most common ratios
which indicate the extent of liquidity or lack of it are following with the
analysis of financial performance of RSRM:-
21. INDUSTRIAL TOUR REPORT 20
3.1.1 CURRENTRATIO:
A short-term indicator of the company’s ability to pay its short-term liabilities
from short-term assets, how much of current assets are available to cover
each dollar of current liabilities.
Current ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2014 Times 2013 Times
=
2,684,574,070
2,786,066,653
0.96 =
2,192,672,783
2,474,310,829
0.89
Interpretation: As a conventional rule, a current ratio of 2:1 is considered
satisfactory. The role is based on the logic that in the worst situation even if
the value of current assets becomes half, the firm would be able to meet its
obligations. In the diagram, as we see that last two years current ratio of
RSRM are respectively 2013-0.89:1 & 2014-0.96:1. In both situations RSRM
maintains insufficient liquidity to meet its short term obligations. In the
absence of liquidity, firm would not be able to make payments on the due
date. There would be delay for suppliers of goods and services. Creditors
would be unhappy with the repayment behavior of the firm and may suspend
or delay supplies that would affect smooth production.
2013 2014
Current Ratio 0.89 0.96
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Times
Current Ratio
22. INDUSTRIAL TOUR REPORT 21
3.1.2 ACID TESTRATIO:
It measures the company’s ability to pay off its short-term obligations from
current assets, excluding inventories.
Acid test ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠−𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2014 Times 2013 Times
=
2,684,574,070−1,751,235,595
2,786,066,653
0.34 =
2,192,672,783−1,613,125,611
2,474,310,829
0.23
Interpretation: As a conventional rule, a quick ratio of 1:1 is considered
satisfactory. In the diagram, as we see that last two years quick ratio of RSRM
are respectively 2013- 0.23:1 & 2014- 0.34:1 which is not acceptable. Thus, if
the RSRM’s inventories do not sell, and it has to pay all its current liabilities, it
may find it difficult to meet its obligations because its quick assets are 0.34
times of current liability. Apart from this this good to see that year-to-year the
quick assets are increasing against current liabilities.
2013 2014
Acid Test Ratio 0.23 0.34
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Times
Acid Test Ratio
23. INDUSTRIAL TOUR REPORT 22
3.2 LEVERAGE RATIOS:
The long-term creditors, like debenture holders, financial institutions etc. are
more concerned with the firm’s long term financial strength. The most
common ratios which indicate the extent of debt financing in a firm are:
3.2.1 DEBT-EQUITY RATIO:
This ratio is calculated to measure the relative claims of outsiders (lenders)
and owners against the firm’s assets. The ratio shows the relationship
between the outsiders’ funds and shareholders’ funds.
Debt equity ratio =
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 𝑠′ 𝑒𝑞𝑢𝑖𝑡𝑦
2014 Times 2013 Times
=
3,005,258,500
1,744,278,182
1.72 =
2,721,373,158
1,589,320,327
1.71
Interpretation: Asa conventionalrule, a debt-equity ratio of 1:1isconsidered
satisfactory. In the diagram, as we see that last two years debt-equity ratio of
RSRM are respectively 2013-1.71:1 & 2014- 1.72:1 which is unfavorable. It is
clear that from the debt-equity ratio that RSRM’s lenders/creditors have
contributed more funds than owners; lenders’/creditors’ contribution is 1.72
times of owners’ contribution. A high debt-equity ratio may be unfavorable as
the firm may not be able to raise further borrowing, without paying higher
interest, and accepting stringent conditions. This situation creates undue
pressures and unfavorable conditions to the firm from the lenders/creditors.
2013 2014
Debt-Equity Ratio 1.71 1.72
1.7
1.702
1.704
1.706
1.708
1.71
1.712
1.714
1.716
1.718
1.72
1.722
Times
Debt-Equity Ratio
24. INDUSTRIAL TOUR REPORT 23
3.2.2 COVERAGE RATIO:
It indicates the ability of the company to meet its annual interest costs. The
Interest Coverage ratio or the Times-Interest-Earned (TIE) ratio is used to test
the firm’s debt-servicing capacity. It shows the number of times the interest
charges are covered by funds that are ordinarily available for their payment.
Coverage ratio =
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
2014 Times 2013 Times
=
209,829,235
169,083,190
1.24 =
279,533,824
159,680,646
1.75
Interpretation: In the diagram, as we see that last two years interest
coverage ratio of RSRM are respectively 2013- 1.75 times & 2014- 1.24 times.
The higher the coverage ratio, better it is both for the firm and lenders. For the
firm, the probability of default in payment of interest is reduced and for the
lenders, the firm is considered to be less risky. But in 2014 the coverage ratio
of RSRM is down 1.75 to 1.24 which is not good because a lower coverage
ratio indicates the excessive use of debt.
2013 2014
Coverage Ratio 1.75 1.24
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Times
Coverage Ratio
25. INDUSTRIAL TOUR REPORT 24
3.3 ACTIVITY RATIOS:
Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. It indicates the speed with which assets are
being converted or turned over into sales. Several activity ratios can be
calculated to judge the effectiveness of asset utilization-
3.3.1 INVENTORY TURNOVER RATIO:
It measures the number of times that average inventory of finished goods was
turned over or sold during a period of time, usually a year.
Inventory turnover ratio =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Average Inventory =
𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦+𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
2
2014 Times 2013 Times
=
4,301,993,578
1,613125,611+1,751,235,595
2
2.5
=
4,738,541,235
1,250,041,298+1,613,125,611
2
3.31
Interpretation: In the diagram, we see that then debt inventory turnover
ratio of RSRM in 2013 is much higher than the ratio of 2014. RSRM is turning
its inventory of finished goods into sales 2.5 times in a year while in 2013 it
was 3.31 times. Generally, a low inventory turnover implies excessive
inventory levels than warranted by production and sales activities.
2013 2014
Inventory Turnover Ratio 3.31 2.5
0
0.5
1
1.5
2
2.5
3
3.5
Times
Inventory Turnover Ratio
26. INDUSTRIAL TOUR REPORT 25
3.3.2 TOTAL ASSETS TURNOVER RATIO:
It measures the utilization of all the company’s assets, measures how many
sales are generated by those assets. Therefore, a firm should manage its assets
efficiently to maximize sales. The relationship between sales and assets is
called assets turnover. If the firm manages the assets more efficiently, sales
would be more and equally profits would be up.
Total assets turnover =
𝑅𝑒𝑣𝑒𝑛𝑢𝑒/𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
2014 Times 2013 Times
=
4,766,995,506
4,749,536,683
1.05 =
5,253,806,261
4,310,693,485
1.30
Interpretation: In the diagram, we see that the assets turnover ratio of RSRM
in 2014 is 1.05 times, while in 2013 it was 1.3 times. So it is clearly observe
that the asset turnover ratio of RSRM is declined. The Total assets turnover of
1.05 times implies that RSRM generates a sale of Tk. 1.05 for one taka
investment in fixed assets & current assets together.
2013 2014
Total Asset Turnover Ratio 1.3 1.05
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Times
Total Asset Turnover Ratio
27. INDUSTRIAL TOUR REPORT 26
3.3.3 DEBTOR TURNOVER RATIO:
It indicates the number of times that accounts receivable are cycled during the
period, usually in a year. The higher the value of debtor turnover, the more
efficient is the management of credit.
Debtor/Accounts receivable turnover =
𝑆𝑎𝑙𝑒𝑠/𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒
Average accounts receivable =
𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝐴.𝑅.+𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝐴.𝑅.
2
2014 Times 2013 Times
=
4,766,995,506
638,797,191
7.46 =
5,253,806,261
489,946,817
10.72
Debtor collection period =
365
𝐷𝑒𝑏𝑡𝑜𝑟 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟
2014 Days 2013 Days
=
365
7.46
49 =
365
10.72
34
Interpretation: In the diagram, we see that the RSRM is able to turnover its
debtors 7.46 timesin the year of 2014, whilein the previous year it was 10.72
times. So the management of credit of RSRM is inefficient in this year
compared to previous year. Again the debtor collection period of RSRM is
increased 34 days to 49 days which is also not a good sign because the shorter
the collection period, the better the quality of debtors.
2013 2014
Debtor Turnover Ratio 10.72 7.46
0
2
4
6
8
10
12
Times
Debtor Turnover Ratio
28. INDUSTRIAL TOUR REPORT 27
3.3.4 CREDITOR TURNOVER RATIO:
It indicates the average length of time in days that the company takes to pay
its credit purchases.
Creditor/Accounts payable turnover =
𝑃𝑢𝑐ℎ𝑎𝑠𝑒𝑠/𝐶𝑟𝑒𝑑𝑖𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑝𝑎𝑦𝑎𝑏𝑙𝑒
Average accounts payable =
𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝐴.𝑃+𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝐴.𝑃.
2
2014 Times 2013 Times
=
4,440,103,562
1,005,198,353
4.21 =
4,876,651,219
937,053,485
5.20
Creditor payment period =
365
𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟
2014 Days 2013 Days
=
365
4.21
87 =
365
5.20
70
Interpretation:In the diagram, we see that the RSRM is able to turnover its
creditors 4.21 times in the year of 2014, while in the previous year it was 5.2
times. Again the creditor collection period of RSRM is increased 87 days to 70
days which is also not a good sign. If the period is more, it indicates the firm is
defaulting in payments and enjoying longer period of credit from the
suppliers. Creditors can understand that they may be getting false promises.
2013 2014
Creditor Turnover Ratio 5.2 4.21
0
1
2
3
4
5
6
Times
Creditor Turnover Ratio
29. INDUSTRIAL TOUR REPORT 28
3.4 PROFITABILITYRATIOS:
Profitability ratios are to measure the operating efficiency of the company.
Creditors want to get interest and repayment of principal regularly. Owners
want to get a required rate of return on their investment. This is possible only
when the company earns enough profits. Following are profitable ratios:
3.4.1 GROSS PROFIT RATIO:
It indicates the total margin available to cover other expenses beyond cost of
goods sold and still yield a profit.
Gross profit ratio =
𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
× 100
2014 Percentage 2013 Percentage
=
465,001,928
4,766,995,506
× 100 9.75 =
515,265,026
5,253,806,261
× 100 9.81
Interpretation: In the figure, we see that the ratio has declined from 2013 to
2014 respectively 9.81% to 9.75% which is not expectable at all because it
effects on overall net profit of RSRM. Low gross profit ratio is not sign of good
management. The gross profit ratio of RSRM falls because it may be increased
in cost of raw materials due to political unrest; inefficient utilization of plant
and machinery which resulting in higher cost of production; excessive
competition, compelling to sell at reduced prices etc.
2013 2014
Gross Profit Ratio 9.81% 9.75%
9.70%
9.72%
9.74%
9.76%
9.78%
9.80%
9.82%
Percentage
Gross Profit Ratio
30. INDUSTRIAL TOUR REPORT 29
3.4.2 OPERATING PROFIT RATIO:
It indicates the percentage of difference between the gross profit and
operating expenses. It reflects the efficiency of operation of a company.
Operating ratio =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
× 100
2014 Percentage 2013 Percentage
=
389,122,952
4,766,995,506
× 100 8.16 =
453,643,321
5,253,806,261
× 100 8.63
Interpretation: In the figure, we see that the ratio has declined from 2013 to
2014 respectively 8.63% to 8.16% which isunfavorable because it effects on
overall net profit of RSRM which resulting decrease of net profit as well as
selling price will be increased.
2013 2014
Operating Profit Ratio 8.63% 8.16%
7.90%
8.00%
8.10%
8.20%
8.30%
8.40%
8.50%
8.60%
8.70%
Percentage
Operating Profit Ratio
31. INDUSTRIAL TOUR REPORT 30
3.4.3 NET PROFIT RATIO:
Net Profit ratio indicates the overall efficiency of the management
inmanufacturing, administering and selling the products. It also indicates the
firm’s capacity to withstand adverse economic conditions.
Net profit ratio =
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑖𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
× 100
2014 Percentage 2013 Percentage
=
154,957,856
4,766,995,506
× 100 3.25 =
166,740,993
5,253,806,261
× 100 3.17
Interpretation: In the figure, we see that the ratio has increased from 2013 to
2014 respectively 3.17% to 3.25%. As we expected the decreasing ratio of
Gross profit & Operating profit affects the net profit but it is not happening
this is because of big difference in deferred tax expense of RSRM. In 2014 the
deferred tax expense is tk. 89,15,075 while in 2013 it was 7,28,96,584.
2013 2014
Net Profit Ratio 3.17% 3.25%
3.10%
3.12%
3.14%
3.16%
3.18%
3.20%
3.22%
3.24%
3.26%
Percentage
Net Profit Ratio
32. INDUSTRIAL TOUR REPORT 31
3.4.4 EBITDA MARGIN TO SALES:
EBITDA means Earnings Before Income Tax & Depreciation Allowance. It
measures the overall profit before income tax & depreciation margin on sales.
EBITDA margin to sales =
𝐸𝐵𝐼𝑇𝐷𝐴
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
× 100
2014 Percentage 2013 Percentage
=
446,180,514
4,766,995,506
× 100 9.36 =
507,791,687
5,253,806,261
× 100 9.67
Interpretation:In the figure, we see that the ratio has declined from 2013 to
2014. The EBITDA margin to sales of RSRM in 2014 is 9.36% while it was in
2013 itwas 9.67% which is not satisfactory. It indicates the operatingexpense
has gone up.
2013 2014
EBITDA margin to sales 9.67% 9.36%
9.20%
9.25%
9.30%
9.35%
9.40%
9.45%
9.50%
9.55%
9.60%
9.65%
9.70%
Percentage
EBITDA margin to sales
33. INDUSTRIAL TOUR REPORT 32
3.4.5 RETURN ON SHAREHOLDERS’ EQUITY:
It measures the rate of return on the book value of shareholders’ total
investment in the company. It indicates how well the firm has used the
resources of owners.
Return on shareholders’ equity =
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑖𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠′ 𝑒𝑞𝑢𝑖𝑡𝑦
× 100
2014 Percentage 2013 Percentage
=
154,957,856
1,744,278,182
× 100 8.88 =
166,740,993
1,589,320,327
× 100 10.49
Interpretation: In the diagram, we see that the return on shareholders’
equity of RSRM in the year of 2014 is much lower than the year of 2013. In
2014 the ROE of RSRM is 8.88% while in 2013 it was 10.49%. This is because
the profit after tax to shareholders’ equity of RSRM is comparatively lower
than previous year. The higher the ratio, the better it is for equity
shareholders.
2013 2014
Return on Shareholders' Equity 10.49% 8.88%
8.00%
8.50%
9.00%
9.50%
10.00%
10.50%
11.00%
Percentage
Return on Shareholders'Equity
34. INDUSTRIAL TOUR REPORT 33
3.4.6 RETURN ON CAPITALEMPLOYED:
Another way to calculate return on investment is through capital employed or
net assets. Net assets are equal to net fixed assets plus current assets minus
current liabilities. Net assets andcapital employed convey the same meaning,
though called differently.
Return on capital employed =
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥
𝑇𝑜𝑡𝑎𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑
× 100
2014 Percentage 2013 Percentage
=
209,829,235
1,963,470,029
× 100 10.69 =
279,533,834
1,836,382,657
× 100 15.22
Interpretation:In the diagram, we see that the return on capital employed of
RSRM in the year of 2014 is much lower than the year of 2013. In 2014 the
return on capital employed of RSRM is 10.69%whilein 2013 it was15.22%. A
lower percentage of return on capital employed will not satisfy the owners
that their funds are not profitably utilized.
2013 2014
Return on Capital Employed 15.22% 10.69%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Percentage
Return on Capital Employed
35. INDUSTRIAL TOUR REPORT 34
3.4.7 EARNING PER SHARE:
It indicates the profitability of the firm on a per share basis, it does not reflect
how much is paid as dividend and how much is retained in the business.
Earnings per share =
𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑎𝑓𝑡𝑒𝑟 𝑖𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥
𝑁𝑜.𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
2014 Taka 2013 Taka
=
154,957,856
29,600,000
5.24 =
166,740,993
29,600,000
5.63
Interpretation: EPS calculation, over the years, indicates how the firm’s
earning power, per share basis, has changed over the years. EPS of the firm is
to be compared with the industry and its immediate competing firm to
understand the relative performance of the firm. But in 2014 the EPS is 5.63
while it was 5.24 in 2013. In 2014 the earning per share of RSRM is decreased
compare to previous year which is not good sign at all for shareholders of
RSRM because they always expect better EPS from an organization. Otherwise
they are not interested to invest anymore.
2013 2014
Earning Per Share 5.63 5.24
5
5.1
5.2
5.3
5.4
5.5
5.6
5.7
Taka
Earning Per Share
36. INDUSTRIAL TOUR REPORT 35
3.4.8 DIVIDEND PER SHARE:
It is the earning distributed to ordinary shareholders. A large number of
present and potential investors may be interested in DPS rather than EPS.
Dividend per share =
𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑑𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑒𝑑 𝑡𝑜 𝑒𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠
𝑁𝑜.𝑜𝑓 𝑜𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
2014 Taka 2013 Taka
=
74,000,000
29,600,000
2.5 =
0
29,600,000
0
Interpretation:After payment of dividend to preference shareholders,
balance net profit belongs to equity shareholders, whether distributed in the
form of dividend or retained in business.RSRM distribute Tk. 2.5 per share as
dividend outof Tk. 5.24 earned per share. The difference per share is retained
in the business. While in 2013 RSRM retained Tk. 5.63 earned per share fully.
2013 2014
Dividend Per Share 0 2.5
0
0.5
1
1.5
2
2.5
3
Taka
Dividend Per Share
37. INDUSTRIAL TOUR REPORT 36
3.5 USEFUL INFORMATION TO EVALUATE RATIO ANALYSIS
Particulars 2014 2013
Current assets 2,684,574,070 2,192,672,783
Current liabilities 2,786,066,653 2,474,310,829
Total assets 4,749,536,683 4,310,693,485
Total debt/liabilities 3,005,258,500 2,721,373,158
Opening inventory 1,613,125,611 1,250,041,298
Closing inventory 1,751,235,595 1,613,125,611
Average inventory 1,682,180,603 1,431,583,455
Accounts receivable 787,647,565 489,946,817
Average accounts receivable 638,797,191 489,946,817*
Accounts payable 1,173,343,220 937,053,485
Average accounts payable 1,055,198,353 937,053485*
Revenue/Net sales/Credit sales 4,766,995,506 5,253,806,261
Cost of goods sold 4,301,993,578 4,738,541,235
Net purchases/Credit purchases 4,440,103,562 4,876,651,219
Gross profit 465,001,928 515,265,026
Operating profit 389,122,952 453,643,321
EBITDA 446,180,514 507,791,687
Net profit before income taxes 209,829,235 279,533,824
Net profit after income taxes 154,957,856 166,740,993
Shareholders’ equity 1,744,278,182 1,589,320,327
Dividend distributed 74,000,000 0
Interest expense 169,083,190 159,680,646
Total capital employed 1,963,470,029 1,836,382,657
No. of ordinary shares outstanding 29,600,000 29,600,000
*Note: In the year of 2013 the Average Accounts Receivable & Average
Accounts Payable are calculated only with the Closing Accounts Receivable &
Closing Accounts Payable respectively because there are no further
information about the Opening Accounts Receivable & the Opening Accounts
Payable.
38. INDUSTRIAL TOUR REPORT 37
4 . RECOMMENDATION
Though the Ratanpur Steel Re-rolling Mills Ltd. is undoubtedly a benefited
company for the country, we recommend some particular factors which, we
think can make some more betterment for the company in the practice of
financial policies and programs. The recommendations are given:
They should utilize maximum amount of its production capacity which
leads to increase annual turnover as well as profit margin.
The industry should increase its channels of distribution of products
which helps to meet local demand as result revenue will increase.
The company should increase the production volume by installing new
machine as it has been informed that Government takes some big
project which will increase demand in near future such as Padma
Multipurpose Bridge, Metro rail, Tunnel under the Karnaphuli River etc.
They should maintain proper balance between high liquidity & lack of
liquidity.
They should have short-term as well as long-term solvency for financial
strength.
They should improveits operational efficiency or retire the debt, early,
to have a coverage ratio, comparable to the industry if the coverage
ratio is low.
They should compare the collection period of the firm with the
industry’s average collection periodand decide whether the firm has to
make any change in credit policy.
They should have to paid creditors within the assured period.
They should increase earnings per share to attract the shareholders.
39. INDUSTRIAL TOUR REPORT 38
5 . CONCLUSION
RSRM is one of the biggest steel manufacturing companies in the private
sector in Bangladesh. RSRM has strong customer relationship with a local
image and always sensitive about competitor’s price. RSRM also gives
honorarium to the engineers to encourage further purchase. It is one of
potential steel mill among the graded bar producer because they have huge
financial strength and long experience in producing no graded bar. The slogan
of the Ratanpur steel mill is “Steel for the nation”.
And finally, we are hopeful to see that the construction sector of Bangladesh
has grown at a calculated average growth rate of 12.2% over the last 10 years
and it is expected to continue in the coming years. The real estate sector also
tries to recover slowly after temporary slowdown of demand due to overall
macroeconomic pressure and contraction policy of government. Government
also undertakes some big project which will increase demand in near future
which is the great opportunity for steel industries like RSRM to meet the
incremental demand of MS Deformed Bar.
Hence the Government should come forward to ensure bright future of this
sector of industry.
40. INDUSTRIAL TOUR REPORT 39
7 . APPENDICES
QUESTIONNAIRE
(Information collected by questionnaire will be used for academic purpose only)
1. Name of the organization………………………………….
2. Location……………………………………………………..…….
3. Name of Respondent………………………………………...
4. Designation………………………………………………………
5. Form of ownership……………………………………………
6. Commencementof operation…………………………….
7. Managingbody of the company…………………………
8. Nature of company:
o Public
o MNC
o Joint
o Venture
o Private Ltd.
9. Total number of employees
o ManagerialStaff
o Non Managerial Staff
o Skilled/ Unskilled
41. INDUSTRIAL TOUR REPORT 40
Finance & Accounting Department
1. Please give the following information about the Capital
o Initial capital
o Present capital
2. Please mention the total investment of your plant
o Fixed capital
o Working capital
3. Did your company go to share market?
o Yes
o no
4. Is your company profitable?
o Yes
o no
5. What are the sources of short- term financing?
6. What are the sources of long term financing?
7. Is your company able to meet current obligation?
8. Is your company able to meet long-term obligation?
9. Is your company distributing dividend to shareholders?
10. Would you please show yearly turnover of the last 5 years?
Year Yearly Turnover
2010
2011
2012
2013
2014
42. INDUSTRIAL TOUR REPORT 41
8 . REFERENCES
Websites:
www.rsrmbd.com
www.investopedia.com
www.businessdictionary.com
Books:
I. M. Pandey – Financial Management.
Weygandt, Kieso & Kimmel – AccountingPrinciples.
George Foster – Financial Statement Analysis.
AnnualReport of RSRM.
Miller, H. Merton. Debt and taxes. The Journalof Finance (May, 1977).