Project Objective

This report is being concern for Analyzing some companies previous two years ratio analysis and implementing those by time series method. Determining the financial weakness and strength of the company. Deciding whether investment of this company is profitable or not. If yes then Why.

Limitations
In order to make this report a relevant one, the group members required to meet several times. As the group members are all professionals thats wyt it was a bit tuff for meeting all of us together for a particular time. But number of time we manage sitting for group meeting and that is how we are able to present the report. The annual report of the companies which are not available to us are Fuwang Foods Ltd, AMCL (Pran) and Shyampur Sugar Mills Ltd. from Securities & Exchange Commissions Library. So we have worked upon the four relevant companies among the suggested seven with the honorable faculties concern.

We have tried our level best to present the report as accurate as possible with its relevant information. Though time is a limited factor for every projects concern, in that case if we could get more time for it, then it might be a more better one.

However while making of this report we had faced difficulties in collection of information. Which we think that if the information we were looking for were all available to us, then it could be more relevant one.

Ratio Analysis

Page 1

Methodology
The qualitative method is being applied for making this report a relevant one. The source of collecting data is secondary. And we did collect our required annual reports from Securities & Exchange Commissions Library.

Literature Review

Ratio Analysis
Ratio Analysis provides us with the means by which financial information can be analyzed and evaluated. In short, ratios are used to interpret financial statement. They attempt to highlight the relationships between significant items in the accounts of an organization. It is used to compare a firms performance and status with that of other firms or to itself over time.

By calculating the ratios we can assess the profitability, efficiency, performance, solvency and status of the organization. They can also be used in forecasting and planning as well as to summarize data. Assisting decision making is another way to use ratio analysis. Ratios can also identify problems before they became acute.

Ratio analysis does not consider the non-quantitative information, such as the goodwill, labor relations and the Research and Development program. It does not include some of the positive factors within a business such as the quality of the staff or the location, both of which affect performance. Even though Ratios helps to recognize the problems; however, they will not provide the business with the solutions. Nevertheless, ratio is considered to be the best available technique for evaluating performance. Ratio Analysis Page 2

Financial ratios are usually divided into four basic groups. They are Liquidity ratio Activity ratio Debt ratio Profitability ratio.

Liquidity ratio, Activity Ratio and Debt ratio primarily measures risk whereas Profitability ratio measures return. Ratio analysis facilitates the evaluation of business performance by making comparisons over time or with other similar organizations, using the following method:

a) Current Ratio = _ Current Assets__ Current Liabilities This ratio measures the ability of the company to meet its short term obligations. Whenever Current ratio is 1; then it means that the net working capital is zero and also that the firm has the ability to pay for all of its current obligations. Current ratio is less than 1; it means that the organization will have negative net working capital. It may be facing over trading or over borrowing which could result in difficulties when paying immediate bills.

However, when the Current ratio is more than 1, it usually suggests that money is tied up unprofitably in excess current asset. This could be either money remaining in banks or excess stock levels which may result in high opportunity cost. b) Quick Ratio (Acid Test Ratio) = Current Assets Inventory Current Liabilities

Ratio Analysis

Page 3

This ratio excluded stock from the current assets because inventory/stock is the least liquid able. In other words, Acid test ratio considers only those current assets which can be converted into liquid very quickly. The higher the value the more liquid the firm is considered to be. c) Long Term Debt Ratio = Long Term liabilities Total Assets This ratio specifies how much asset of the firm is financed by Long Term Debt. It is often called leverage Ratio. d) Debt Ratio = Total liabilities Total Assets This ratio specifies how much asset of the firm is financed by liability and how much is financed by owners equity. High debt ratio leads to high default risk. e) Inventory Turnover Ratio = Cost of goods sold_ Average inventory

This ratio indicates the number of times in a trading year a firm sells the value of its stocks. A high stock turnover suggests that the business is active and efficient in selling goods quickly to customers. The result will vary from business to business but, in general, firm supplying high value goods will turn over stock slowly, whereas suppliers of low value goods will turn over stock more rapidly. f) Total Asset Turnover = Sales_ Total Assets Both Fixed Asset Turnover and Total Asset Turnover measures of the productivity of assets. In other words, they show how much an investment in asset pays off in terms of an increase in sales. Higher ratios show that the assets are more productive, that is, assets are being used more effectively. g) Times Interest Earned Ratio = Earnings before interest and taxes Interest

Ratio Analysis

Page 4

It is a profit and loss account measure of financial risk. This ratio assesses the businesss ability to pay interest by comparing profit and interest payments.

Analysis
The analysis of the ratios is being presented beneath:

Current Ratio
Current Ratio Organization
CVO Rahima Food Gulf Food Zeal Bangla Average

2011 0.5607 1.0075

3.6308

2010 0.4148 0.9771 3.7308 0.2765

1.3498

0.2224
1.3553

This ratio indicates the ability of the company to meet its short term obligations. In our case both the years 2010 and 2011, the average current ratio of four companies was about 1.35 which is good. Because a current ratio of 1.35 indicates that the company has the ability to meet its current liabilities with its current assets and the company is running with positive balance of net working capital. Ratio Analysis Page 5

Zeal Bangla Sugar Mills Ltd. and CVO Petrochemical Refinery Ltd. has very low current ratio, which simply indicate that the companies are in running with negative net working capital; and they dont have the ability to pay their current liabilities from their current assets. Most probably these two companies are managing their net working capital from short term loan.

For the years 2010 and 2011, Rahima Food Corporation Ltd. was maintaining a decent current ratio of 0.9771 and 1.0075. It is good to have a current ratio of one if they can really manage their assets and liabilities in an efficient way. On the other hand, Current ratios of Gulf Food Ltd. were really too high compare to the average value for both of the years. It indicates that the management couldnt able to manage their current assets and current liabilities in an efficient manner.

Quick Ratio
Quick Ratio Organization
CVO Rahima Food Gulf Food Zeal Bangla Average

2011 0.3791 0.4046

1.9433

2010 0.1676 0.3429 1.9194 0.1789

0.6522

0.1269
0.7135

Ratio Analysis

Page 6

Quick ratio considers only those current assets which can be converted into liquid very quickly; so it excludes Inventories from current assets. In our case for the years 2010 and 2011, the average current ratio of four companies was 0.7135 and 0.6522 which is good.

Because a current ratio exceeding 0.5 indicates that the company has tied up less of its current assets in Inventories; and thus the company is efficient in handling their Inventory. Zeal Bangla Sugar Mills Ltd. and CVO Petrochemical Refinery Ltd. has very low quick ratio, which reflect the current ratios of the companies. For the years 2010 and 2011, Rahima Food Corporation Ltd. was maintaining a decent quick ratio of .4046 and 0.3429 which is good for any Production oriented company as they have to maintain a certain level of inventories for their operation.

Quick ratios of Gulf Food Ltd. were really too high compare to the average value for both of the years. They are using their current assets in an inefficient way.

Long Term Debt Ratio

Long Term Debt Ratio Organization

CVO Rahima Food Gulf Food Zeal Bangla Average

2011 0.0000

2010 0.0000

0.0624
0.0000 0.5907
0.1633

0.0118 0.0000
0.6463 0.1645

Ratio Analysis

Page 7

Long Term Debt ratio compares Long Term Debt (LTD) with Total Assets to measure the Leverage. In our study, we have found the average Long Term Debt ratio for our selected four companies is very low and which is about 0.16 for both of the years. It indicates that the companies have a very good opportunity to take long term debt.

Both Zeal Bangla Sugar Mills Ltd. and CVO Petrochemical Refinery Ltd. dont use long term loan. So their Long Term Debt ratio is Zero (0). Rahima Food Corporation Ltd. was using LTD but which were very low in amount. But Zeal Bangle Sugar Mills Ltd. using a huge amount of LTD compare to the average value.

Debt Ratio

Debt Ratio Organization

CVO Rahima Food Gulf Food Zeal Bangla Average

2011 34.73% 73.29% 9.26% 447.61% 141.22%

2010 41.11%

63.12% 8.85%
387.04% 125.03%

Ratio Analysis

Page 8

Debt Ratio indicates the amount of the asset of the firm is financed by liability. In our study, the average Debt ratio of our selected four companies are 141.22% for the year 2011 and 125.03% for the year 2010. Both of the figures are really too bad for any company. It indicates that Total Assets of the company is lower than Total Debt so the company is in highly risky position as high debt ratio leads to high default risk.

The average values reflect the Debt Ratio of Zeal Bangla Sugar Mill Ltd. Its Debt ratio was 447.61% in 2011 and 387.04% in 2010. The company is really in risky position as its debt is 3.8 to 4.4 times of its total assets. A gulf food is rarely use debt for their operation whereas Rahima Food Corporation and CVO Petrochemical Refinery ltd. are using debt to finance their assets in a balanced way.

Inventory Turnover Ratio

Inventory Turnover Ratio Organization
CVO Rahima Food Gulf Food Zeal Bangla Average

2011 9.2124

2010 1.7565

9.6333
4.0193 2.9427 6.4519

3.0349 3.6845
2.5097 2.7464

Ratio Analysis

Page 9

Inventory Turnover Ratio indicates how many times in a year a company sells its entire stocks. A high stock turnover suggests that the business is active and efficient in selling goods quickly to customers.

In our study, the averages Inventory Turnover Ratio of our selected four companies are 6.4519 times for the year 2011 and 2.7464 times for the year 2010. The average value for the year 2011 is seems to be better than 2010 as it has larger value; the larger value of Inventory Turnover Ratio indicates that the companies are active throughout the years.

Inventory Turnover Ratio of Gulf Foods Ltd. and Zeal Bangla Sugar Mill has increased slightly from the year 2010 to 2011 whereas the Inventory Turnover Ratio of CVO Petrochemical Refinery Ltd. and Rahima Food Corporation Ltd. has increased from the year 2010 to 2011 by a striking amount. It may be the case that these two companies were not that active before 2010.

Ratio Analysis

Page 10

Total Asset Turnover Ratio

Total Asset Turnover Ratio Organization
CVO Rahima Food Gulf Food Zeal Bangla Average

2011 0.8130 4.0175 0.7558 1.0131 1.6498

2010 0.2810 1.3095 0.6861 0.7574 0.7585

Total Asset Turnover Ratio indicates how much an investment in assets pays off in terms of an increase in sales. Higher ratios show that the assets are more productive, that is, assets are being used more effectively.

Our study shows that the averages Total Asset Turnover Ratio of our selected four companies are 1.0131 times for the year 2011 and 0.7585 times for the year 2010. The average value for the year 2011 is looking better than 2010 as it has larger value; it simply means that the companies were generate more than 100% sales compare to its total assets.

Ratio Analysis

Page 11

Both CVO Petrochemical Refinery Ltd. and Gulf Foods Ltd. were doing bad to utilize its total assets as their sales per year were less than their fixed assets for the year 2010 and 2011.Zeal Bangla Sugar Mills was also not in good position in the 2010 but they have recovered slightly during the year 2011.

Rahima Food Corporation Ltd. was really very and good in the year 2011 as their Total Asset Turnover ratio was 4.0175 times. It means that the company can generate sales which accumulate more than 4 times of its Total Assets.

Times Interest Earned Ratio

Times Interest Earned Ratio Organization
CVO Rahima Food Gulf Food Zeal Bangla Average

2011 0.0000 0.0000 0.0000 Loss 0.0000

2010 0.0000 0.0000 0.0000 Loss 0.0000

None of our companies show interest expenses in their income statement so we are in a position to find out Times Interest ratio for the selected companies.

Ratio Analysis

Page 12

Conclusion
So after analyzing all the ratio analysis of the given companies (CVO, Rahima Food, Gulf Food and Zeal Bangla) amongst the seven of our report we have come to the conclusive part. Where we would like to remark our ending in a way of saying that among the four companies analysis its been visible that according to the relevant information, Rahima food corporation is performing best in their field comparing with the other relevant companies information.

Ratio Analysis

Page 13