Contents

Contents............................................................................................................................................... l
ABSTRACT.......................................................................................................................................... 2
l.0 lNTRODUCTlON.......................................................................................................................... 2
2.0 OBJECTlVES................................................................................................................................. 3
3.0 COMPANY PROFlLE..................................................................................................................... 3
4.0 FlNANClAL RATlOS: THEORETlCAL DlSCUSSlON.....................................................................5
4.l ACTlVlTY RATlOS......................................................................................................................... 5
4.2 LlQUlDlTY RATlOS ....................................................................................................................... 6
4.3 SOLVENCY (DEBT) RATlOS ........................................................................................................ 6
4.4 PROFlTABlLlTY RATlOS .............................................................................................................. 6
5.0 ANALYSlS AND FlNDlNGS............................................................................................................ 7
5.l ACTlVlTY RATlOS...................................................................................................................... 7
5.l.l lnventory Turnover Ratio...................................................................................................... 7
5.l.2 RECElVABLE TURNOVER RATlO...................................................................................... 7
5.l.3 FlXED ASSET TURNOVER RATlO..................................................................................... 7
5.l.4 TOTAL ASSET TURNOVER RATlO.................................................................................... 8
5.2 LlQUlDlTY RATlOS.................................................................................................................... 8
4.2.l CURRENT RATlO................................................................................................................ 8
5.2.2 QUlCK RATlO...................................................................................................................... 9
5.2.3 CASH RATlO........................................................................................................................ 9
5.2.4 DEFENSlVE lNTERVAL .................................................................................................... l0
5.3 SOLVENCY RATlOS................................................................................................................ l0
5.3.l DEBT TO EQUlTY RATlO ................................................................................................. l0
5.3.2 TlME lNTEREST EARNED................................................................................................ l0
5.4 PROFlTABlLlTY RATlOS......................................................................................................... ll
5.4.l GROSS MARGlN............................................................................................................... ll
5.4.2 RETURN ON SALES.......................................................................................................... ll
5.4.3 RETURN ON ASSET.......................................................................................................... l2
5.4.3 RETURN ON EQUlTY........................................................................................................ l2
5.4.4 OPERATlNG lNCOME TO SALES ....................................................................................l2
6.0 CONCLUSlON.............................................................................................................................. l3
7.0 Appendix....................................................................................................................................... l3
l
ABSTRACT
This assignment shows the performance evaluation of ceramic industry of Bangladesh and to test its
financial soundness. The main aim is achieved through ratio analysis of five selected ceramic (Fu
Wang, Monno, Shinepukur, RAK and Standard) companies in Bangladesh. Measurement of financial
performance by ratio analysis helps identify organizational strengths and weaknesses by detecting
financial anomalies and focusing attention on issues of organizational importance. The financial
performance of this industry is measured in terms of profitability, solvency, efficiency and liquidity
analysis and to test the financial soundness. The assignment covers five public sector ceramic
companies listed on Dhaka Stock Exchange. The assignment has been undertaken for the period of
one year on 20lland the necessary data has been obtained from the audited annual report of the
selected companies. This assignment will help us to identify the nature of financial performance of the
ceramic industry of Bangladesh and will also help to take investment decision.
1.0 INTRODUCTION
CERAMlC industry of Bangladesh is a booming sector and the growth potential of both domestic
and foreign market indicates it may become one of the big foreign currency earners for the
country. Now it's time to measure and analyze the performance of this industry. ln this gap of analysis
we have tried to evaluate and interpret the performance of the selected five ceramic companies
for the period of 20ll. Performance evaluation of a company is usually related to how well a
company can use it assets, share holder equity and liability, revenue and expenses. Financial ratio
analysis's one of the best tools of performance evaluation of any company. ln order to determine the
financial position of the ceramic company's and to make a judgment of how well the ceramic
company's efficiency, its operation and management and how well the company has been able to
utilize its assets and earn profit. We used ratio analysis for easily measurement of liquidity
position, asset management condition, profitability and market value and debt coverage situation
of the ceramic company's for performance evaluation. lt analysis the company use of its assets
and control of its expenses. lt determines the greater the coverage of liquid assets to short-term
liabilities and it also compute ability to pay ceramic companies short-term and tong-term payments
obligation from the cash generate. lt determines of share market condition of ceramic companies. lt
also used to analysis the ceramic company's past financial performance and to establish the future
trend of financial position. Finally, to measure and evaluate the overall financial performance
and financial soundness of the selected five companies (Fu Wang, Monno, Shinepukur, RAK
and Standard) some like mean, how individual ceramic company move with market.
2
2.0 OBJECTIVES
The assignment is designed to achieve the following objectives:
l. To assess the financial performance of the selected ceramic companies.
ll. To compare individual performance with t he industry performance.
3.0 COMPANY PROFILE
1. Fu Wang Ceramics: Fu-Wang Ceramic lndustry Limited, the pioneer ceramic manufacturer in
Bangladesh was established in May l995 as a joint venture company. Subsequently, in l998, it was
listed in the Dhaka and Chittagong capital markets. Since then, it has been operating as a public
limited company with an authorized capital of Tk. l billion and a paid-up capital of Tk. 769 million. The
company is engaged in production of various types of wall and floor tiles. Within a short period, the
business expanded its market share by its unique quality, competitive price, exclusive designs, and
wide variety of sizes and models. lts effective and creative marketing campaign enabled the company
to establish its brand value in the tiles market in Bangladesh. Fu-Wang Ceramic lndustry Limited is
capable of meeting the increasing demand of customers countrywide. By using high quality raw
materials, ltalian/Chinese machinery and highly experienced foreign and local engineers, the
company has created good reputation in the Bangladesh ceramic market. The business is engaged in
selling luxurious glazed floor and wall tiles, that are produced by utilizing the latest printing and laser
cut technology. Fu-Wang Ceramic lndustry Limited meets European standards in production. With an
affordable pricing structure, the company aims to reach a vast residential and commercial property
development market that is presently experiencing rapid growth in Bangladesh. The company is also
exporting its products to the North Eastern region of lndia.
2. Monno Ceramics: Monno Ceramic lndustries began producing porcelain tableware for the
Bangladesh home market in l985, and secured its first export order the following year. Monno soon
earned an enviable reputation for both quality and value. The subsequent introduction of bone china
to its range of quality dinnerware has only served to strengthen that reputation. As the original
exporter of porcelain dinnerware Made in Bangladeshi Monno is proud to contribute to the growth
of the Bangladesh economy. ln a developing country the kudos accorded to exports and the valuable
foreign exchange derived is significant. Today in Bangladesh Monno is a household name and
regarded as one of the countrys premier companies. Bangladesh is still a relatively young country.
When after independence British lndia was partitioned in l947, West Pakistan and East Pakistan
were created. Subsequently East Pakistan proclaimed independence in l97l and Bangladesh
(meaning Bengali homeland) came into being. As a developing country Bangladesh is accorded
preferential tariffs by the European Union which means zero import duty on Monno tableware. Monno
offers products in Porcelain, New Bone China, lvory China, and real Bone China. ln fact they source
the materials in their bone china body and glaze from Stoke on Trent, to which is added pure water
3
filtered from their own wells. So Monno likes to think of it as English Bone China. Customers
include many well known prestigious department stores, specialty and chain stores around the world
for which they manufacture own label products. Some customers have been with Monno for as long
as 20 consecutive years and Monno is proud to enjoy a close relationship with them. They work with
customers to develop their own shapes or decorations, or can offer designs from their extensive
stable. Their talented teams of artists and designers work closely with the experienced technicians of
an own in-house decal print unit. That combination of man and machine helps achieve striking
results.
3. Shinepukur Ceramics: Shinepukur Ceramics Limited (SCL) is a member of BEXlMCO Group
which is the Largest Private Sector Business Conglomerate in Bangladesh with about over 45,000
people worldwide in the permanent payroll, have over 300000 shareholders, handling a diversified
range of merchandise to and from Bangladesh. The Group's operations and investments across a
wide range of industries including Textiles, Trading, Marine Food, Real Estate Development,
Hospitality, Construction, lnformation and Communication Technologies, Media, Ceramics, Aviation,
Pharmaceuticals, Financial Services and Energy. Shinepukur Ceramics has been registered in
Bangladesh in l997 and the Plants were commissioned in l998. Commercial production of Porcelain
Tableware started in April l999 and Bone China in November l999. SCL is located in the BEXlMCO
lndustrial Park, near Dhaka Export Processing Zone (DEPZ), 40 Km from Capital Dhaka City, where
captive power generation, water supply, effluent waste water treatment and all other infrastructural
facilities are available. Total lnvestment in the Company is in excess of US$ 35 Million. The Company
has already made additional lnvestment of US$ l0 Million to expand its Bone China Unit.
4. Standard Ceramics: Standard Ceramic lndustries Ltd., a public limited company with an
authorized capital of Tk. l00 million was floated on l3.08.l984. The factory was designed by famous
ceramist Mr. Kyoki Yamazaki of Some Ceramic, Japan (Later a JODC expert). The operating
machinery was mainly procured from famous producer of Japan. The factory went into commercial
production on September lst. l993. The factory is located l0 Km from Dhaka lnternational Airport. lt
has a working force of 600 people. Through the active and dedicated participation of all SCl
personnel, the factory is now turning out approximately 47,000 assorted pieces (l3.l M.Tons) of
tableware per day. The superb quality and design of vitrified Stoneware Products coupled with
competitive price made our product a popularly choice at home and abroad. SCl Products are
available in 4 continents of the world including the United States and European markets.
5. RA Ceramics: RAK Ceramics (Bangladesh) Limited, a UAE-Bangladesh joint venture
company, was incorporated in Bangladesh on 26 November, l998 as a private company
limited by shares under the Companies Act l994. The name of the Company was thereafter
changed to its name from RAK Ceramics (Bangladesh) Private Limited to RAK Ceramics
(Bangladesh) Limited as per resolution passed in extraordinary general meeting on l0 June
4
2008, certificate issued by the Registrar of Joint Stock Companies dated ll February, 2009. lt
is engaged in manufacturing and marketing of ceramics tiles, bathroom sets and all types of
sanitary ware. The company's headquartered in Dhaka with manufacturing facilities at
Gazipur. RAK Ceramics is Bangladesh's largest ceramic tiles and sanitary ware manufacturer. lt
has started its commercial production on l2 November, 2000. The commercial production of
new sanitary ware plant was started on l0 January, 2004. Further expansion of the existing
facilities of ceramics tiles plant took place in year 2004, and for tiles and sanitary plant were in
year 2007.
4.0 FINANCIAL RATIOS T!EORETICAL DISCUSSION
Financial analysis offers a system of appraisal and evaluation of a firm's performance and
operations; it is the analysis of the financial statement of an enterprise. The analysis of financial
statement can be best done by various yardsticks of which, the important is known as ratio or
percentage analysis. Ratio is a numerical or an arithmetical relation between two figures. lt is
expressed when one figure is divided by another. Accounting ratios show inter-relationship which
exist among various accounting data. Accounting ratio can be expressed in various ways such as,
a pure ratio, a rate or a percentage. Ratio analysis is certainly a very admirable device because it
is simple and it has a predictive value. Managements and other users thus, rely substantially on
the financial ratios based on accounting data for making assessments and predictions of past
performance, present position and probable future potentials. One important way for diagnosing the
financial health is to measure the profitability, liquidity, activity and solvency of the bankruptcy of
enterprise.
4.1 ACTIVITY RATIOS
Asset management (Activity) ratios compare the assets of a company to its sales revenue.
Analysis of asset management ratios tells h o w efficiently and ef f ect i vel y a company is
using its assets in the generation of revenues. They i ndi cat e the abi l i t y o f a company to
translate its assets i nt o the sales. Asset management ratios ar e computed for di f f er ent
assets. Common examples of asset turnover ratios include fixed asset turnover,
inventory turnover, accounts payable turnover ratio, accounts receivable turnover ratio,
and cash conversion cycle. The higher the asset turnover ratios, the more sales the
company i s generating from i t s assets. Low asset t ur nover ratios mean t hat the company is
not managing its assets wisely. They may al so indicate that the assets are obsolete.
Companies with low asset turnover ratios are likely to be operating below their full capacity.
5
4.2 LI"UIDITY RATIOS
Liquidity ratios are the ratios that measure the ability of a company to meet its short
term debt obligations. Liquidity is a prerequisite for the very survival of an enterprise.
They show the number of times the short term debt obligations are covered by the
cash and liquid assets. lf the value i s greater than l, it means the short t er m
obl i gations are fully covered. Generally, the higher the liquidity ratios are, the
higher the margin of safety that the company posses to meet its current l iabil i ti es.
Most common examples of liquidity ratios include current ratio, acid test ratio
(also known as quick ratio), cash ratio, cash flow from operation ratio and
working capital ratio.
4.3 SOLVENCY #DEBT$ RATIOS
Financial leverage ratios (debt ratios) indicate the ability of a company to repay principal
amount of its debts, pay interest on its borrowings, and to meet its other financial obligations.
They also give insights into the mix of equity and debt a company is using. They give
indications about the financial health of a company. Companies need to carefully manage
their financial leverage ratios to keep their financial risk at acceptable level. Careful
management of financial leverage ratios is also important when seeking loans from banks
and financial institutions. Favorable ratios can help the company to negotiate a favorable
interest rate. The long-term solvency of a company can be measured by the use of
solvency ratios named debt to total assets, the times interest earned and fixed
charge coverage ratio.
4.4 PROFITABILITY RATIOS
Profitability ratios measure a company's ability to generate earnings relative to sales, assets and
equity. These ratios assess the ability of a company to generate earnings, profits and cash
flows relative to relative to some metric, often the amount of money invested. They highlight how
effectively the profitability of a company is being managed. Different profitability ratios provide
different useful insights into the financial health and performance of a company. For example,
gross profit and net profit ratios tell how well the company is managing its expenses. Return on
capital employed (ROCE) tells how well the company is using capital employed to generate returns.
Return on investment tells whether the company is generating enough profits for its shareholders.
6
%.0 ANALYSIS AND FINDIN&S
%.1 ACTIVITY RATIOS
%.1.1 In'ento() T*(no'e( R+t,o
Name of The Company Year 20ll
Fu Wang 2.l3
Monno l.89
Shinepukur l.39
Standard 2.22
RAK l.62
Average l.85
ln inventory turnover ratio the market average is l.85. Here Fu Wang, Monno and Standard Ceramics
Company's performance is good. RAK and Shinepukur Ceramics Company's reflect dull business
that means more inventory remain in warehouse
%.1.2 RECEIVABLE TURNOVER RATIO
Name of The Company Year 20ll
Fu Wang l4.8l
Monno l0.5l
Shinepukur 3.23
Standard l0.63
RAK 9.29
Average 9.68
The receivable turnover ratio (debtors turnover ratio, accounts receivable turnover ratio)
indicates the velocity of a company's debt collection, the number of times aver- age receivables
are turned over during a year. This ratio determines how quickly a company collects outstanding
cash balances from its customers during an accounting period. This Table shows that the industry
average receivable turnover is 9.68. The average it is seen from the table that in l4.8l in Fu
Wang, l0.5l in Monno, 3.23 in Shinepukur, l0.63 in Standard and 9.29 in RAK ceramics. As we
know higher is better, indicate more cash sales and less quantity of credit sales. Fu Wang, Monno,
Standard Ceramics companies performance was good in year 20ll and Shinepukur ceramics
performance was not good in year 20ll.
%.1.3 FI-ED ASSET TURNOVER RATIO
Name of The Company Year 20ll
Fu Wang l.09
7
Monno 2.60
Shinepukur 0.42
Standard l.88
RAK l.65
Average l.52
Fixed asset turnover ratio compares the sales revenue of a company to its fixed assets. This ratio
tells us how effectively and efficiently a company is using its fixed assets to generate revenues.
There is no standard guideline about the best level of asset turnover ratio. Therefore, it is important
to compare the asset turnover ratio over the years for the same company. An increasing trend in fixed
assets turnover ratio is desirable because it means that the company has less money tied up
in fixed assets for each unit of sales. A declining trend in fixed asset turnover may mean that the
company is over investing in the property, plant and equipment. Some authors consider that an ideal
fixed assets turnover ratio for an enterprise like ceramic should be 3 times of the fixed assets. This
Table shows the fixed assets turnover ratios for the selected ceramic for the year 20ll. We see that
Monno, Standard, RAK ceramic company performance was good in year 20ll. Fu Wang
ceramics have to increase their fixed asset turnover little bit but Shinepukur ceramics
company performance is very bad.
%.1.4 TOTAL ASSET TURNOVER RATIO
Name of The Company Year 20ll
Fu Wang 0.69
Monno 0.26
Shinepukur 0.26
Standard 0.9l
RAK 0.59
Average 0.54
lt measures the extent of sales generated by utilizing the total assets (both long term and short term
assets) Here Total Asset Turnover for ceramics industry in Bangladesh is 0.54. We see that Fu
Wang, RAK and Standard ceramics performance is good but other two company's performance is
very bad.
%.2 LI"UIDITY RATIOS
4.2.1 CURRENT RATIO
Name of The Company Year 20ll
Fu Wang l.66
8
Monno 0.94
Shinepukur 0.98
Standard 0.30
RAK 2.l5
Average l.20
The current ratio indicates a company's ability to meet short-term debt obligations. The current ratio
measures whether or not a firm has enough resources to pay its debts over the next l2
months. lf the current ratio is too low, the firm may have difficulty in meeting short run commitment as
they measure. ls the ratio is too high the firm may have an excessive investment in current assets or
to be under utilizing short term credit. The average current ratio is l.20. Fu Wang, RAK Ceramics
Company's performance is good. Monno and Shinepukur have to increase their current ratio.
Standard ceramics company performance is very bad.
%.2.2 "UIC. RATIO
Name of The Company Year 20ll
Fu Wang 0.30
Monno 0.28
Shinepukur 0.37
Standard 0.30
RAK l.39
Average 0.53
The quick ratio is a measure of a company's ability to meet its short-term obligations using its most
liquid assets (near cash or quick assets). Quick assets include those current assets that presumably
can be quickly converted to cash at close to their book values. This Table, shows that the industry
average of quick ratio is 0.53. Here RAK ceramics have good quick ratio. Other company's
performance is bad.
%.2.3 CAS! RATIO
Name of The Company Year 20ll
Fu Wang 0.l5
Monno 0.06
Shinepukur 0.02
Standard 0.l5
RAK 0.66
Average 0.2l
Cash ratio is the ratio of a company's cash and cash equivalent assets to its total liabilities. Cash
ratio is a refinement of quick ratio and indicates the extent to which readily available funds can pay off
current liabilities. Cash ratio is the most stringent and conservative of the three liquidity ratios
(current, quick and cash ratio). lt only looks at the company's most liquid short-term assets cash
and cash equivalents which can be most easily used to pay off current obligations. lndustry
9
cash ratio is 0.2l. Here RAK ceramics have pretty much good performance and other companies
performance is very bad.
%.2.4 DEFENSIVE INTERVAL
Name of The Company Year 20ll
Fu Wang l98.99
Monno ll3.46
Shinepukur l7l.96
Standard 82.64
RAK 262.2l
Average l65.85
Here Defensive lnterval for ceramics lndustry is l65.85. As we know lower defensive interval is good.
Here Standard Ceramics company performance is good and other ceramics companies have poor
performance.
%.3 SOLVENCY RATIOS
%.3.1 DEBT TO E"UITY RATIO
Name of The Company Year 20ll
Fu Wang 0.28
Monno 2.25
Shinepukur 0.58
Standard l.2l
RAK 0.03
Average 0.87
The analysis of a firm's capital structure is essential to evaluate its long-term risk and return prospect.
Excess return to shareholder, when ROl is greater than the cost of debt. The fixed cost (interest on
debt) may affect profitability if the demand or profit margins decline. This obligation may lead the
company to default or bankruptcy. Here industry average for debt to equity ratio is 0.87. RAK, Fu
Wang and Shinepukur performance is good. Standard and Monno ceramics companies have poor
performance in this particular ratio.
%.3.2 TIME INTEREST EARNED
Name of The
Company
20ll
l0
Fu Wang 2.l
Monno 2.99
Shinepukur l.99
Standard l.99
RAK 43.86
Average l0.59
This r at i o a l s o cal l ed l nt er es t Coverage Ratio ( lCR). lt measures a company's ability t o
meet i t s i nterest payments. Basically it measures the number of times a company coul d
make the interest payments on its debt wi t h its EBlT. lt determines how e a s i l y a company
can pay interest expenses on o u t s t a n d i n g debt. Times l n t e r e s t Earned Ratio i s also
known as interest coverage ratio, debt service ratio or debt service coverage ratio. The
table shows t he times interest earned ratio for the selected ceramic companies for the year
20ll is revealed from the table that the industry average l0. 59. The RAK ceramics have
good performance only in year 20ll.
%.4 PROFITABILITY RATIOS
%.4.1 &ROSS MAR&IN
Name of The Company Year 20ll
Fu Wang 0.ll
Monno 0.22
Shinepukur 0.34
Standard 0.20
RAK 0.4l
Average 0.26
Gross profit margin (gross margin) is the ratio of gross profit (gross sales less cost of sales) to sales
revenue. lt is the percentage by which gross profits exceed production costs. Gross margins reveal
how much a company earns taking into consideration the costs that it incurs for producing its
products or services. Gross margin measures a company's manufacturing and distribution
efficiency during the production process. Here industry average is 0.26. RAK and Shinepukur have
great performance. Monno and Standard ceramics companies have to increase their gross margin
but Fu Wang have poor performance.
%.4.2 RETURN ON SALES
Name of The Company Year 20ll
Fu Wang 0.l4
Monno 0.03
ll
Shinepukur 0.93
Standard 0.02
RAK 0.l7
Average 0.26
lt shows that how return or net income is come from sales. Higher ROS show that the good ratio.
Here lndustry average is 0.26. Shinepukur have good performance. Other companies have bad
performance.
%.4.3 RETURN ON ASSET
Name of The Company Year 20ll
Fu Wang 0.08
Monno 0.008
Shinepukur 0.27
Standard 0.l2
RAK 0.l0
Average 0.l2
lt shows that how return or net income is come from assets. Higher ROA show that the good ratio.
Here lndustry average is 0.l2. Shinepukur and Standard have good performance. Other companies
have bad performance.
%.4.3 RETURN ON E"UITY
Name of The Company Year 20ll
Fu Wang 0.09
Monno 0.0l
Shinepukur 0.39
Standard 0.04
RAK 0.l4
Average 0.l3
lt shows that how return or net income is come from equity. Higher ROE show that the good ratio.
Here lndustry average is 0.l3. Shinepukur have very much good performance, RAK ceramics move
with market. Other companies have bad performance.
%.4.4 OPERATIN& INCOME TO SALES
Name of The Company Year 20ll
Fu Wang 0.l5
Monno 0.04
Shinepukur 20.99
Standard 0.03
RAK 0.20
Average 4.28
l2
lt means how much operating income is come from sales Higher is better. lndustry average is 4.28.
Here Shinepukur have very much good position, others have poor performance.
/.0 CONCLUSION
ln the preceding analysis, it has been observed that the financial position and
operational performance of the selected ceramic companies in terms of profitability and
efficiency is good and shown an increasing trend. Due to inefficiency i n liquidity management
and n o t t o utilize the debt financing as suggested, the industry shown very low performance.
By calculating the Z score it is seen that the overall financial health of the selected companies
was at the medium level of bankruptcy.
0.0 A11en2,3
RA!" A#A$%S!S F"RM&$AS:'
1. Acti(it) Ratios:'
i.
ii.
iii. Fi*ed Asset +urno(er , Sa-es . Fi*ed Assets
i(. +ota- Assets +urno(er , Sa-es . +ota- Assets
l3
2. $i/uidit) Ratios:'
i.
ii.
iii.

i(. 0e1ensi(e !nter(a- , 2Cash 3 Marketa4-e securities 3 Account recei(a4-es5 . Cost o1
goods So-d
3. So-(enc) Ratios:'
i.
ii. +ime !nterest 6arned, 6arnings 4e1ore !nterest and ta* . !nterest 6*pense
4. 7ro1ita4i-it) Ratios:'
i. 8ross Margin, #et income . Sa-es
ii. "perating !ncome to sa-es , !ncome 9e1ore +a* 3 !nterest . Sa-es
iii. Return on Sa-es , #et !ncome . Sa-es
i(. Return "n Assets , #et !ncome 3 !nterest . +ota- Assets
(. Return on 6/uit) , #et !ncome. 6/uit)
l4