2. financial statment analysis

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Introduction

Bangladesh is an emerging market. The economy is growing gradually. Though RMG,

Agricultural, Pharmaceuticals etc. sectors are considered as major part of business and economy,

but Ceramics Industries are also an old and important sector.

Ceramics has a high demand in the world. Bangladesh apparently has the perfect geographical

position, supply of raw materials and labor available to meet this demand. Ceramics industry of

Bangladesh produces wall and floor tiles, sanitary ware, ceramics plate and cup, tableware etc.

Ceramic industry of Bangladesh is a booming sector and the great potential of both domestic and

foreign market.

We have decided to select ceramics industry of Bangladesh for our topic. We will be comparing

and analyzing the performance of the two major ceramic companies. RAK Ceramics Ltd and

SHINEPUKUR Ceramics Ltd. We decided to select this industry because of its huge

contribution to improve the economic condition of our country.


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Background of the companies

RAK Ceramics:RAK Ceramics (Bangladesh) Ltd incorporated in Bangladesh on 26 November,

1998 as a private company limited by a share under the company act 1994. It is engaged in

manufacturing and marketing of ceramic tiles, bathroom sets and all types of sanitary ware. It

has started its commercial production 0n 12 November, 20000. RAK Ceramics Ltd, 90% held by

RAK Ceramics PSC and its nominees, a company incorporated under the laws of UAE and

remaining 10% owned by local investor Mr. S.A.K. Ekramuzzaman. With an annual turnover of

over BDT 3248 million, within the short span of 11 years RAK has firmly established itself as

one of the leading manufacturer of high quality ceramic wall floor tiles, and sanitary wares

products in Bangladesh. The core business of RAK Ceramics Ltd is to manufacture and sell of

tiles and sanitary wares. The company has over 1000 models active in the ceramic and porcelain

tile business and regularly adds several new designs to the product portfolio. The company

manufactures tiles in a very wide range of tiles in the size from 20 cm x 30 cm up to 60 cm x 60

cm in Bangladesh location. The company has over 40 models an exclusive range of sanitary ware

to offer with a very wide choice. Most of production is consumed in local market and balance

gets exported to UAE. RAK ceramics Bangladesh Ltd is an ISO certified organization.

SHINEPUKUR Ceramics:SCL is a member of BEXIMCO group which is the largest private

business conglomerate in Bangladesh. SHINEPUKUR ceramics has been registered inBangladesh in 1997 and plants were commissioned in 1998. Total investment in the company is

US$ 35 million. The company has already made additional investment of US$ 10 million to

expand its Bone china unit. SHINEPUKUR has well control laboratory facilities, and has its

disposal, own captive gas-based power generation capability, own water supply, and medical and

sanitary facilities. The company was certified ISO in Aug 2001. SCL produces variety and a

wide range of Bone china and porcelain tableware for retail as well as hotel, and Ivory china for

retail house ware. Complementing its superb range of bone china, SHINEPUKUR also offers

porcelain, ivory china, high alumina table ware for all different market segments and they

produce dinner to tea plates, soup tureens to soup spoons, retail tabletop to industrial. They

export their products in Australia, Argentina, Canada, Denmark, France, India and many other

countries.


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Objectives of the Study

BROAD:

The main objective of this study was to identify and assess the present financial position of two

Ceramics Industries Limited. The study was also attempted to evaluate the prospects of financialgrowth market growth of the organization. The study broadly aimed at analyzing the feasibility

of the expansion project of Comparative Performance Analysis between these two Ceramics

Industries Limited.

SPECIFIC:

(a) To analyze the overall financial position of Ceramics industries Limited.

(b) To comparing the ceramics industries limited.

(c) To assess the quality of the brand from the viewpoint of a manager.

(d)

To evaluate the current financial position of the companies.

(e) To find out the current financial position of Ceramics Limited.

(f) To prepare a target based on historical data.

(g) To analyze the forecasted element for future perspective.


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Methodology

Project design:

The nature of the study is evaluative one and it described different ratios of Ceramics Limited in

terms of financial position. This project report typically focused on ratio analysis but there is

some descriptive information too. It focused on two ceramics industries limiteds financial

position, performance, current position etc.

Data sources:

This report is prepared mainly on the extensive use of secondary data available in annual reports.

Based on the data from the annual reports the overall paper is prepared. The overall conceptual

and theoretical framework has been explained as well as the how the data are analyzed is

explained below:

o The Primary sources are absent in this case.

o The Secondary Sourcesof data and the information are used to prepare this

paper work.

Data collection:

o Annual Report of Shinepukur & RAK Ceramics Limited.

o

Website

o Various books, articles and compilations

o Journals

Data analysis:

Financial Analysis based on the performance comparison has been done with ratio formulas, and

used to compare the performances of ceramics industries. Ratio analysis is presented in a

standard manner so that the calculations and interpretations might clear to all. The decisioncriterion is based on the comparison of each ceramics performance with the Industry Average.

The industry average is calculated on the basis of the average of average of the banks that are

collected as sample for the comparison of performance between five ceramics limited.


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Limitation of Study

Shortage of time period:

Time constraint would be the major factor for the study. We have completed this report writing

within a shorter period of time. So the time constraint of the study hindering the course of vastarea and time for preparing a report within the mentioned period is really difficult.

Lack of sufficient well informed websites:

There are some lacks of information in financial statement (balance sheet and income statement).

So, we have faced many difficulties to collect information.

Organization do not want to provide all information needed to conduct study.

Small knowledge.

In many cases, updated information is not available.

In some cases, respondents do not provide the required information.


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Financial Statement Analysis:(Ratios)

Shinepukur Ceramics Limited

Balance Sheetas at 31 December 2012-14 Amount in Taka (mn)

31-Dec-14 31-Dec-13 31-Dec-12

ASSETS

Non-Current Assets 5,644.821 5,163.869 5,323.600

Property, Plant and Equipment - Carrying Value 4,204.123 4,284.727 4,384.003

Investment in Shares 78.983 61.222 121.705

Capital Work in Progress 1,361.715 817.919 817.892

Current Assets 1,044.626 1,710.386 1,796.413

Inventories 671.351 912.642 845.059

Accounts & Other Receivables 157.873 674.987 853.413

Advances, Deposits & Prepayments 193.770 108.267 81.930

Cash and Cash Equivalents 21.631 14.488 16.010

Total Assets 6,689.447 6,874.255 7,120.013

EQUITY AND LIABILITIES

Shareholders' Equity 4,264.594 4,487.867 4,544.462

Issued Share Capital 1,469.661 1,469.661 1,277.966

Revaluation Surplus on Property, Plant and Equipment 2,966.690 2,966.690 2,966.690

Fair Value Loss on Investment in Shares (85.988) (103.749) (58.955)

Retained Earnings (85.768) (155.265) (358.761)

Non-Current Liabilities 627.018 629.398 803.484

Long Term Loan (Secured) 376.276 321.383 296.189

Long Term Loan (Unecured) - 301.584 498.838

Gratuity Payable 92.418 - -

Deffered Tax Liability 158.324 6.430 8.457

Current Liabilities 1,797.835 1,756.990 1,772.067

Short Term Loan from Banks (Secured) 1,065.658 964.471 1,183.796

Long Term Loan-Current Maturity (Secured) 183.015 322.693 143.242

Creditors, Accruals and Other Payables 549.162 469.825 445.029

Total Equity and Liabilities 6,689.447 6,874.255 7,120.013


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Income Statement

for the year ended 31 December 2012-14 Amount in Taka (mn)31-Dec-14 31-Dec-13 31-Dec-12

Sales (Revenue) 1,677.658 1,692.445 1,942.351

COGS (1,253.444) (1,241.105) (1,268.313)

Gross Profit 424.214 451.340 674.038

Other Income 22.627 12.241 -

Operating Expenses (165.076) (111.275) (105.872)

Administrative Expenses (73.013) (58.763) (54.107)

Selling and Distribution Expenses (92.063) (52.512) (51.765)

Profit from Operations 281.764 352.306 568.165

Loss on Sale of Shares - (6.192) (19.649)

Finance Cost (258.876) (393.026) (364.625)Profit/(Loss) Before Contribution to WPPF 22.888 (46.911) 183.890

Contribution WPPF (1.090) - (8.756)

Net Profit/(Loss) Before Tax 21.798 (46.911) 175.133

Income Tax Expense (24.134) (10.717) (84.849)

Net Loss After Tax for the Year (2.336) (57.629) 90.285

Other Comprehensive Income:

Fair Value Gain/(Loss) on Investment in Shares 17.761 44.794 (45.583)

Total Comprehensive Profit/(Loss) for the Year 15.425 (102.422) 44.702

EPS (0.020) (0.390) 0.610


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RAK Ceramics Bd) Limited

Balance Sheet

as at 31 December 2012-14 Amount in Taka (mn)31-Dec-14 31-Dec-13 31-Dec-12

ASSETS

Non-Current Assets 3,180.814 3,438.921 3,494.457

Property, Plant and Equipment 1,798.341 1,899.003 2,095.514

Intangible Assets 4.815 1.607 3.192

Capital work in progress 289.116 35.091 30.955

Investment in Subsidiaries 191.600 633.870 639.990

Investment in associates 191.600 266.350 229.600

Trade and other receivables 518.913 43.400 -

Loan to subsidiaries and associates 187.146 559.597 595.204

Current Assets 6,556.034 5,827.334 4,791.945

Inventories 361.914 1,858.379 1,612.374

Trade and other receivables 713.050 720.608 749.283

Loan Associates 40.661 35.606 4.795

Advances, deposits and prepayments 1,912.281 188.900 171.717

Advance Income Tax 1,774.687 1,586.060 1,272.294

Cash and Cash Equivalent 1,394.695 1,437.778 981.480

Total Assets 9,736.848 9,266.255 8,286.402

Equity 6,695.180 6,565.368 6,114.564Share Capital 3,368.506 3,062.278 2,783.889

Share Premium 1,473.647 1,473.647 1,473.647

Retained Earnings 1,853.026 2,029.441 1,857.027


Current Liabilities 3,000.104 2,643.929 2,187.758

Short term borrowing 323.755 255.783 212.530

Employers benefit payable 70.668 12.843 10.959

Trade and other payables 370.177 245.573 193.897

Accrued expenses 172.991 145.113 133.298

Provision for royalty and technical know-how fee - 225.676 219.094Provision for income tax 1,758.939 1,758.939 1,417.977

Total Equity and Liabilities 9,736.848 9,266.255 8,286.402


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Income Statement

for the year ended 31 December 2012-14 Amount in Taka (mn)31-Dec-14 31-Dec-13 31-Dec-12

Sales (Revenue) 5,009.387 4,687.262 4,507.821

COGS (3,161.225) (2,961.999) (2,851.121)

Gross Profit 1,848.162 1,725.263 1,656.700

Other Income 44.076 38.414 29.739

Operating Expenses (1,068.625) (722.651) (644.552)

Administrative Expenses (403.879) (235.662) (244.352)

Selling and Distribution Expenses (664.746) (486.989) (400.200)

Profit from Operations 823.613 1,041.026 1,041.887

Net Finance Income 197.475 200.312 165.625

Profit/(Loss) Before Contribution to WPPF 1,021.088 1,241.338 1,207.512Contribution WPPF (48.623) (59.111) (57.500)

Net Profit/(Loss) Before Tax 972.465 1,182.227 1,150.012

Income Tax Expense (383.311) (313.839) (319.482)

Net Loss After Tax for the Year 589.154 868.388 830.530

Other Comprehensive Income: - -

Total Comprehensive Profit/(Loss) for the Year 589.154 868.388 830.530

EPS 1.750 2.580 2.710


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Shinepukur Ceramics Limited SCL)

(Ratio Analysis)

Yr. 2014 Yr. 2013 Yr.2012 Comments

1. Current Ratio (Times) 0.58 0.97 1.01 SCLs Current Liabilities are growing

and Current Assets are declining. It

means the firms capability to pay

their current liabilities are not so well

in terms of their current assets. We

should be more focus on proper

current assets and current liabilities

management.

2. Quick Ratio(Times) 0.21 0.45 0.54 Firms liquidity situation of assets is

very poor gradually to cover its

current liabilities, which is a bad sign

for future growth.

3. Inventory Turnover Ratio

(Times)

1.87 1.36 1.50 Though the firms inventory turnover

ratio looks good on 2014, but overallcondition is not so well. As a

manager, we should focus more to

utilize inventory in a proper way.

4. DSO (Days) 33.88 143.58 158.17 SCLs average collection period of

credit sales amount is too good on

2014. Though it seems very slow in

2012 and 2013.

5. Fixed Asset Turnover/FAT

Ratio(Times)

0.30 0.33 0.36 SCL cannot cover the value of its fixed

assets by its sales with an efficient

way. As a manager, we should be

more concern to generate morerevenue and reduce the costs.

6. Total Asset Turnover/TAT

Ratio(Times)

0.25 0.25 0.27 SCL is not well-managed to cover the

value of its total assets by its sales

with an efficient way. As a manager,

we should be more concern to

generate more revenue and reduce

the costs.

7. Debt Ratio(%) 36.25 34.71 36.17 The firms liabilities are not well paid

by the total assets. It refers the

amount of total assets should be

increased in terms of total liabilities

to safeguard from any bad financial

situation.

8. Times-Interest-Earned/TIE

Ratio(Times)

0.90 0.00 2.06 SCLs payment of interests is not very

well managed by EBIT. It should be

more efficient to pay interest to avoid

bankruptcy.

9. Net Profit Margin (%) 0.92 6.05* 2.30 The margin is showing more volatile.


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It may be done cause of inefficient

cost management of the

organization.

10. ROE (%) 1.05 6.97* 3.50 It refers the organizations equity

management condition in terms of its

net income. The higher and

increasing ROE refers the strength of

the firms equity and debt

management. Here the situation is

showing volatile, which is a bad signal

for management.

11. ROA (%) 0.23 1.49* 0.63 ROA reflects the SCLs net income

cannot cover up the value of the

assets with an efficient manner. It

may create cause of the poor asset

and cost management of the

organization.

*Net Loss


(Ratio Analysis)

Yr. 2014 Yr. 2013 Yr.2012 Comments

1. Current Ratio (Times) 2.19 2.20 2.19 It reflects the RAKs strength of

liquidity of current assets is almost

double than its liability. So the firm

can handle the debt with a well-

managed way.

2. Quick Ratio(Times) 2.06 1.50 1.45 As we know the inventory is lessliquid. So, after deduction of

inventory from the current assets we

can find the RAKs actual liquidity of

current assets is strong and increasing

as a good manner.

3. Inventory Turnover Ratio

(Times)

8.73 1.59 1.77 Though the inventory turnover shows

an unexpected growth in 2014, but

the actual scenario seems like volatile.

It means the inventory has been

utilized in a maximum way on 2014 to

meet the cost of its production.

4. DSO (Days) 51.24 55.35 59.84 Here, we can see the RAK usually

draw its receivable from the market

within 50-60 days. Though it is

consistent, but as a manager we

should try to minimize the period.

5. Fixed Asset Turnover/FAT

Ratio(Times)

1.57 1.36 1.29 To generate sales, RAK is utilizing the

plants and equipments in an efficient

way. Its performance is increasing


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6. Total Asset Turnover/TAT

Ratio(Times)

0.51 0.51 0.54 Though RAK is utilizing the fixed

assets in sales related activities in a

very efficient way, but the efficiency

of using total assets are not very

satisfactory.

7. Debt Ratio(%) 31.24 29.15 27.42 The total assets of RAK is not

sufficient to cover-up the total

liabilities. It is not a good sign and the

situation is growing gradually.

8. Times-Interest-Earned/TIE

Ratio(Times)

21.00 21.00 21.00 RAK is paying the interest of debt in a

consistent way. Besides, it has

sufficient fund to pay interests.

9. Net Profit Margin (%) 11.76 18.53 18.42 Though the margin was little upward

moving on 2013, but it fell

tremendously on 2014. It may be

occurred cause of proper cost

management, managerial issues or,

any other factors.

10. ROE (%) 8.80 13.23 13.58 The liquidity position is declining

gradually. It creates impact on the

ROE. It may cause others uninterested

to invest.

11. ROA (%) 6.05 9.37 10.02 RAKs ROA is rapidly moving

downward. That is not a good sign. It

shows the negative capability of firm

to utilize their assets for sales.


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Comparative Analysis: (Ratios)

Ratio Analysis SCL RAK

2014 2013 2012 2014 2013 2012

1. Current Ratio (Times) 0.58 0.97 1.01 2.19 2.20 2.19

Comments: The capability of paying current liabilities in terms of current assets is very

satisfactory of RAK than Shinepukur. The current liabilities are well managed by the current

assets of RAK. Shinepukur should provide concern on proper liabilities management.

2. Quick Ratio(Times) 0.21 0.45 0.54 2.06 1.50 1.45

Comments: The capability of liquidity is too high for RAK than SCL. So, RAK can get the

advantage to become risk free. But, SCL can face problem of being bankrupt or, any other debt

related issues.

3. Inventory Turnover Ratio (Times) 1.87 1.36 1.50 8.73 1.59 1.77

Comments:RAK is highly efficient to utilize the inventory towards the production. It is a good

factor to minimize cost for any organization. So, RAK will get more competitive advantage than

Shinepukur.

4. DSO (Days) 33.88 143.58 158.17 51.24 55.35 59.84

Comments:Though Shinepukurs previous years period of collection of receivables from the

market is too high than RAK but on current it has been minimized. So, it is showing a good sign.

On other hand, RAKs collection period is consistent within the range of 50-60 days. It shows

also an efficient sign of collection.

5. Fixed Asset Turnover/FAT Ratio(Times) 0.30 0.33 0.36 1.57 1.36 1.29

Comments: Fixed assets are utilized in a very well manner by RAK than Shinepukur. RAKs

efficiency is almost 5 times higher than SCL.

6. Total Asset Turnover/TAT Ratio(Times) 0.25 0.25 0.27 0.51 0.51 0.54

Comments: RAK is also able to utilize its total assets for selling good to gain profit with a

sufficient way than SCL. The utilization rate is almost double than SCL.

7. Debt Ratio(%) 36.25 34.71 36.17 31.24 29.15 27.42

Comments:In consideration of total liabilities and assets, both the firms are walking almost thesame path. They should be more concern for debt management to rescue their goodwill and

avoid bankruptcy.

8. Times-Interest-Earned/TIE Ratio(Times) 0.90 0.00 2.06 21.00 21.00 21.00

Comments: The RAKs interest-payments capability shows a consistency. They are highly

capable to pay interest by its net operating income. Though SCLs scenario is volatile and not

very well managed.


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9. Net Profit Margin (%) 0.92 6.05 2.30 11.76 18.53 18.42

Comments:Shinepukur should focus more on cost and debt management to maximize profit

margin. On other side, RAK should also re-focus on the same area. Though the scenario is good

for RAK than Shinepukur, but the actual condition is in gradually declining movement.

10. ROE (%) 1.05 6.97 3.50 8.80 13.23 13.58

Comments: The total equities of common stockholders are well-managed through the net

income by RAK. It is supportive to gain the royalty and faith of shareholders to grow future

investment and profitability. Though the current situation is little low of RAK, but it can be

managed as they have capabilities. But, the scenario for SCL is totally reverse.

11. ROA (%) 0.23 1.49 0.63 6.05 9.37 10.02

Comments: RAK has more efficiency to utilize the assets than Shinepukur to maximize net

income. That is reflected on the ROA. though the condition of ROA is declining gradually year

after year. So both the companies need to focus on that.

Overall Comparison

Shinepukur and RAK, both are the renowned name for the Bangladeshi market. The scenario of

financial background looks totally different from each other. Where RAKs strength is showing,

on other side Shinepukurs weakness is representing also in statements. RAK is strong for its

cost, assets, inventory, debt, and equity management. But, Shinepukur should work hard for

achieving the strength of the mentioned elements. This can be achieved by the efficient action of

the management.


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Financial Forecasting for 2015

1. Sales Forecast (Shinepukur & RAK Ceramics)

Forecasting is an essential part of the planning process, and a sales forecast is the most important

element of financial forecasting. The sales forecast generally starts with a review of sales duringthe past years.

If we consider the sales of RAK and Shinepukur Ceramics of last 3 years, we can see a volatility

of growth. Though, Shinepukur is showing a negative growth rate and RAK is showing positive

growth. But, for our forecasting, we are going to consider the sales have to be 10% increased

both for Shinepukur and RAK for 2015.

From the data and graphical representation given below, we can easily find out the trend of sales-

growth of the two companies. Now, we are going to analyze the impact of our forecasted sales

over the financial data.

YEAR SCL Sales (Revenue in Millions) RAK Sales (Revenue in Millions)

2012 BDT 1,942.351 BDT 4,507.821

2013 BDT 1,692.445 BDT 4,687.262

2014 BDT 1,677.658 BDT 5,009.387

2015 (Forecasted) BDT 1,845.424 BDT 5,510.326

BDT 1,942.351 BDT 1,692.445 BDT 1,677.658 BDT 1,845.424

BDT 4,507.821 BDT 4,687.262 BDT 5,009.387

BDT 5,510.326

2012 2013 2014 2015 (Forecasted)

Sales Forecast

SCL Sales (Revenue in Millions) RAK Sales (Revenue in Millions)


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2. Forecasted Income Statement & Balance Sheet (SCL & RAK)

Shinepukur Ceramics Limited: Projected 2015 Income Statement & Balance Sheet


Income Statement (Projected)For the year 2015

Amount in Taka (mn)

2014 Results Forecast Basis 2015 Initial Forecast

Sales (Revenue) 1,677.658 X 1.10 1,845.424

COGS (1,253.444) X 1.10 (1,378.788)

Gross Profit 424.214 466.635

Other Income 22.627 -

Operating Expenses (165.076) (181.584)

Administrative Expenses (73.013) X 1.10 (80.314)

Selling and Distribution Expenses (92.063) X 1.10 (101.269)

Profit from Operations 281.764 285.052

Loss on Sale of Shares - -

Finance Cost (258.876) (258.876)

Profit/(Loss) Before Contribution to WPPF 22.888 26.176

Contribution WPPF (1.090) (1.254)a

Net Profit/(Loss) Before Tax 21.798 24.922

Income Tax Expense (24.134) (12.461)b

Net Loss After Tax for the Year (2.336) 12.461


Fair Value Gain/(Loss) on Investment in Shares 17.761 17.761

Total Comprehensive Profit/(Loss) for the Year 15.425 30.222

EPS (0.020) 0.039

Notes:

(a) Contribution to workers Profit Participation Funds (WPPF) will be increased by 15%

(b) Income Tax Expense will be half of Net Profit before Tax


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Balance Sheet (Projected)

For the year of 2015Amount in Taka (mn)

2014 Results Forecast Basis 2015 Initial ForecastASSETS

Non-Current Assets 5,644.821 6,065.233

Property, Plant and Equipment - Carrying

Value 4,204.123 X 1.10 4,624.535

Investment in Shares 78.983 78.983

Capital Work in Progress 1,361.715 1,361.715

Current Assets 1,044.626 1,149.088

Inventories 671.351 X 1.10 738.486

Accounts & Other Receivables 157.873 X 1.10 173.660

Advances, Deposits & Prepayments 193.770 X 1.10 213.147Cash and Cash Equivalents 21.631 X 1.10 23.794

Total Assets 6,689.447 7,214.321


Shareholders' Equity 4,264.594 4,239.595

Issued Share Capital 1,469.661 1,469.661

Revaluation Surplus on Property, Plant

and Equipment 2,966.690 2,966.690

Fair Value Loss on Investment in Shares (85.988) (85.988)

Retained Earnings (85.768) BDT 20.0 m (110.768)a

Non-Current Liabilities 627.018 627.018Long Term Loan (Secured) 376.276 376.276

Long Term Loan (Unsecured) - -

Gratuity Payable 92.418 92.418

Deferred Tax Liability 158.324 158.324

Current Liabilities 1,797.835 1,852.751

Short Term Loan from Banks (Secured) 1,065.658 1,065.658

Long Term Loan-Current Maturity

(Secured) 183.015 183.015

Creditors, Accruals and Other Payables 549.162 X 1.10 604.078

Total Equity and Liabilities 6,689.447 6,719.364Additional Fund Needed 494.957

Notes:

(a) Additional 20 million taka has been added as retained earnings in forecasted balance sheet for 2015.


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RAK Ceramics (Bd) Limited: Projected 2015 Income Statement & Balance Sheet


Income Statement (Projected)

For the year of 2015 Amount in Taka (mn)2014Results

Forecast

Basis

2015 Initial

Forecast

Sales (Revenue) 5,009.387 X 1.10 5,510.326

COGS (3,161.225) X 1.10 (3,477.348)

Gross Profit 1,848.162 2,032.978

Other Income 44.076 29.739

Operating Expenses (1,068.625) (1,175.488)

Administrative Expenses (403.879) X 1.10 (444.267)

Selling and Distribution Expenses (664.746) X 1.10 (731.221)


Net Finance Income 197.475 165.625

Profit/(Loss) Before Contribution to WPPF 1,021.088 1,052.855

Contribution WPPF (48.623) (55.916)a

Net Profit/(Loss) Before Tax 972.465 996.938

Income Tax Expense (383.311) (402.477)b

Net Loss After Tax for the Year 589.154 594.462

Other Comprehensive Income: - -

Total Comprehensive Profit/(Loss) for the

Year 589.154 594.462

EPS 1.750 1.766Notes:

(a) Contribution to workers Profit Participation Funds (WPPF) will be increased by 15%

(b) Income Tax Expense will be increased by 5% on current year.


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Balance Sheet (Projected)

For the year of 2015 Amount in Taka (mn)

2014 Results Forecast Basis 2015 Initial Forecast

ASSETS


Property, Plant and Equipment 1,798.341 X 1.10 1,978.175

Intangible Assets 4.815 4.815

Capital work in progress 289.116 289.116

Investment in Subsidiaries 191.600 191.600

Investment in associates 191.600 191.600

Trade and other receivables 518.913 518.913

Loan to subsidiaries and associates 187.146 187.146

Current Assets 6,556.034 6,639.548

Inventories 361.914 X 1.10 398.105

Trade and other receivables 713.050 X 1.10 784.355

Loan Associates 40.661 X 1.10 44.727

Advances, deposits and prepayments 1,912.281 X 1.10 2,103.509

Advance Income Tax 1,774.687 1,774.687

Cash and Cash Equivalent 1,394.695 X 1.10 1,534.165

Total Assets 9,736.848 10,000.913

Equity 6,695.180 6,715.179

Share Capital 3,368.506 3,368.506

Share Premium 1,473.647 1,473.647

Retained Earnings 1,853.026 BDT 20.0 m 1,873.026

Non-Current Liabilities 41.564 41.456


Short term borrowing 323.755 323.755

Employers benefit payable 70.668 70.668

Trade and other payables 370.177 X 1.10 407.195

Accrued expenses 172.991 X 1.10 190.290

Provision for royalty and technical know-how fee - -

Provision for income tax 1,758.939 1,758.939

Total Equity and Liabilities 9,736.848 9,507.482

Additional Fund Needed (AFN) 493.431

From the above forecasted income statement and balance sheet of Shinepukur and RAK

Ceramics Limited, it is estimated that we need additional fund BDT 494.957 and BDT 493.431

additional fund to increase the additional 10% of sales. If we want to meet the additional sales

target to generate revenue on 2015, we need that fund. And the fund may be managed from

external or internal or both sources.


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3. Raising the AFN and Financing Feedbacks (Shinepukur & RAK Ceramics)

As a manager we can raise the additional fund from different internal and external sources. We

can issue new shares/ use retained earnings/ borrow from financial institutions/ issue notes or

bonds to arrange the additional fund to achieve the forecasted revenue generating target. Besides,

we can also create a mixed source to collect the additional fund. As a manager it is a key concernto find suitable sources to create fund. Cause too much borrowing or issuing new shares will

never make a firms efficiency. It creates problem of debt management. However, the

borrowings from financial institutions are needed to get rebate from tax. So, having provided a

look on overall sources, we have to find out the way of sourcing our AFN.

Additional Fund Needed

(AFN)

Shinepukur Ceramics Limited RAK Ceramics (Bd) Limited

BDT 494.957 millions BDT 493.431 millions

As we know, the used retained earning portion should be covered by the external or internalfinancing. As we need to maintain a minimum retained earnings portion for the organization.

Though we use the retained earnings in terms of financing as required additional funds, but we

need to cover the amount through other sources of borrowings.

We can segment the total amount of additional required fund for Shinepukur and RAK on the

basis of collections sources in following ways.

Shinepukur's Funding for AFN

Sources Amount (In Millions)

Retained Earnings BDT (5.597)

Issued Share Capital BDT 194.957

Long Term Loan (Secured) BDT 131.000

Short Term Loan from Banks (Secured) BDT 174.597

Total Collection of AFN BDT 494.957

RAK's Funding for AFN

Sources Amount (In Millions)

Retained Earnings BDT (8.000)

Issued Share Capital BDT 100.431

Long Term Borrowings BDT 208.000Short term borrowing BDT 193.000

Total Collection of AFN BDT 493.431

The funding is segmented by the mentioned way, as it is better to play risk-free. Though interests

are related with borrowings, so it is create cost for long time borrowings. But, it can be paid


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earlier to reduce that cost. On other side, long time borrowings are well to reduce risk and

additional pressure to pay the debt.

Shinepukurs debt management and financial condition is severe bad. As a manager it is tough to

arrange funding from internal source. So, it is better to collect maximum amount from long term

borrowings, and the rest amount can be collected with issuing new stocks and short term debts.

On other side, RAK is well managed on debt and business. Though it is easy to provide their

debt with the internal source, but it is needed to play safe. Long term debt can reduce their risk

and it can be paid at any time. Time duration can provide them a relaxing environment over here.

Besides, as a manger we can mix-up the funding with some short term borrowings and issuing

common stocks. It can also be helpful for the firm.

4. Analysis of the Forecast (Shinepukur & RAK)


Income Statement (Forecasted)

For the year of 2015Amount in Taka (mn)

Int. Forecast Adj. Forecastg Adjustment

Sales (Revenue) 1,845.424 1,845.424

COGS (1,378.788) (1,378.788)

Gross Profit 466.635 466.635

Other Income - -Operating Expenses (181.584) (181.584)

Administrative Expenses (80.314) (80.314)

Selling and Distribution Expenses (101.269) (101.269)


Loss on Sale of Shares - -

Finance Cost (258.876) (263.473) (4.597)

Profit/(Loss) Before Contribution to WPPF 26.176 21.579 (4.597)

Contribution WPPF (1.254) (3.254) (2.000)

Net Profit/(Loss) Before Tax 24.922 18.325 (6.597)

Income Tax Expense (12.461) (11.461) 1.000Net Profit/(Loss) After Tax for the Year 12.461 6.864 (5.597)


Fair Value Gain/(Loss) on Investment in Shares 17.761 25.761

Additional Retained Earning - (5.597)


EPS 0.039 0.024


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Balance Sheet (Forecasted)

For the year 2015 Amount in Taka (mn)

Ini. Forecast Adj. Forecast Adjustment

ASSETS


Property, Plant and Equipment - Carrying Value 4,624.535 4,624.535

Investment in Shares 78.983 78.983

Capital Work in Progress 1,361.715 1,361.715

Current Assets 1,149.088 1,149.088

Inventories 738.486 738.486

Accounts & Other Receivables 173.660 173.660

Advances, Deposits & Prepayments 213.147 213.147

Cash and Cash Equivalents 23.794 23.794

Total Assets 7,214.321 7,214.321


Shareholders' Equity 4,239.595 4,428.955

Issued Share Capital 1,469.661 1,664.618 194.957

Revaluation Surplus on Property, Plant and Equipment 2,966.690 2,966.690

Fair Value Loss on Investment in Shares (85.988) (85.988)

Retained Earnings (110.768) (116.365) (5.597)

Non-Current Liabilities 627.018 758.018

Long Term Loan (Secured) 376.276 507.276 131.000

Long Term Loan (Unecured) - -

Gratuity Payable 92.418 92.418

Deffered Tax Liability 158.324 158.324


Short Term Loan from Banks (Secured) 1,065.658 1,240.255 174.597

Long Term Loan-Current Maturity (Secured) 183.015 183.015

Creditors, Accruals and Other Payables 604.078 604.078

Total Equity and Liabilities 6,719.364 7,214.321 494.957

For the additional fund to earn targeted revenue, the firm should manage the debt on the basis of

above mentioned way. We can easily find the impact of borrowing over the Income Statement

and Balance Sheet of Shinepukur. In ratio analysis, we will get the potential result.


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Income Statement

For the year of 2015 Amount in Taka (mn)Int. Forecast Adj. Forecast Int. Forecast

Sales (Revenue) 5,510.326 5,510.326

COGS (3,477.348) (3,477.348)

Gross Profit 2,032.978 2,032.978

Other Income 29.739 29.739

Operating Expenses (1,175.488) (1,175.488)

Administrative Expenses (444.267) (444.267)

Selling and Distribution Expenses (731.221) (731.221)


Net Finance Income 165.625 159.625 (6.000)

Profit/(Loss) Before Contribution to WPPF 1,052.855 1,046.855 (6.000)Contribution WPPF (55.916) (58.916) (3.000)

Net Profit/(Loss) Before Tax 996.938 987.938 (9.000)

Income Tax Expense (402.477) (401.477) 1.000

Net Loss After Tax for the Year 594.462 586.462 (8.000)


Additional Retained Earnings (8.000)


EPS 1.766 1.620

On the income statement of RAK, we have tried to draw a scenario about the impact of using

retained earnings. By the time, we have seen the impact of borrowings on interest and tax

payment.


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Balance Sheet

as at 31 December 2012-14 Amount in Taka (mn)Int. Forecast Adj. Forecast Adjustment

ASSETSNon-Current Assets 3,361.365 3,361.365

Property, Plant and Equipment 1,978.175 1,978.175

Intangible Assets 4.815 4.815

Capital work in progress 289.116 289.116

Investment in Subsidiaries 191.600 191.600

Investment in associates 191.600 191.600

Trade and other receivables 518.913 518.913

Loan to subsidiaries and associates 187.146 187.146

Current Assets 6,639.548 6,639.548

Inventories 398.105 398.105Trade and other receivables 784.355 784.355

Loan Associates 44.727 44.727

Advances, deposits and prepayments 2,103.509 2,103.509

Advance Income Tax 1,774.687 1,774.687

Cash and Cash Equivalent 1,534.165 1,534.165

Total Assets 10,000.913 10,000.913

Equity 6,715.179 6,807.610

Share Capital 3,368.506 3,468.937 100.431

Share Premium 1,473.647 1,473.647Retained Earnings 1,873.026 1,865.026 (8.000)



Short term borrowing 323.755 516.755 193.000

Employers benefit payable 70.668 70.668

Trade and other payables 407.195 407.195

Accrued expenses 190.290 190.290

Provision fro royalty and technical know-how fee - -

Provision for income tax 1,758.939 1,758.939

Total Equity and Liabilities 9,507.482 10,000.913 493.431

The balance sheet of RAK is showing the scenario of debt and equity, which are adjusted cause

of loans and new share issues. What can be the impact of the borrowings; we can see the things

on ratio analysis portion.


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Financial Statement Analysis: (Adjusted Data)

SHINEPIKUR's RATIO ANALYSIS: (Adjusted Data)

Current Ratio (Times) 0.57

The current ratio shows that the current liability is more than the current assets. So, we need to focus to

increase the amount of current assets to become free of risk from short-term liabilities.

Inventory Turnover (Times) 1.87

The inventories are not well-managed to minimize the cost of sales. So, it should be managed with an

efficient way.

DSO (Days) 33.88

As it shows the similarity as present year DSO, so we do not have to be worried for that. We just need to

focus on minimize the time period.

TAT (Times) 0.26

It means the assets are not being well managed. So, we have to take action to reduce the cost and

managed the assets efficiently to maximize profit.

Debt Ratio (%) 38.61

The debt ratio has indicated the portions of assets are not sufficient to pay liabilities. So we should be

focus to increase assets to liquidate whenever is needed to pay liabilities.

TIE (Times) 6.63

It is showing the strength to pay interest with net operating expenses. On 2015, the performance may

be good enough.

Profit Margin (%) 1.46

It is showing the profit will be 1.46% higher than the per dollar sales. It is definitely better than previous

years.

ROA (%) 0.37

The amount of ROA is very low. So, it should be increased by proper asset management.ROE (%) 1.62

The rate of return from every single unit of equity is very low. It can cause severe problem for the firm

for near future.


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RAK's RATIO ANALYSIS: (Adjusted Data)

Current Ratio (Times) 2.41

The current assets are sufficient to pay the current liabilities. It is a good sign.

Inventory Turnover (Times) 8.73

The inventories are well-managed to minimize the cost of sales. So, it should be managed with an

efficient way and managers should be aware to increase the performance level more to achieve the

competitive advantage.

DSO (Days) 51.24

It is showing constant in terms of current year. So it can be a satisfactory level as it remains equal.

TAT (Times) 0.55

It means the assets are not well managed. So, we have to take action to reduce the cost and managed

the assets efficiently to maximize profit.

Debt Ratio (%) 31.93

To pay liabilities, we need to focus more over here.

TIE (Times) 17.77It is showing the strength to pay interest with net operating expenses. On 2015, the performance may

be good enough.

Profit Margin (%) 10.50

It is showing the profit will be 10.50% higher than the per dollar sales. It is definitely better than

previous years.

ROA (%) 5.78

The amount of ROA is satisfactory. But, it should be increased by proper asset management.

ROE (%) 16.68

Rate of return is good for shareholders. Equity is properly managed with the net income of the

organization. But, proper asset management should be increased.


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Comparison on Financial Statement Analysis: (Adjusted Data)

Ratios Shinepukur RAK Comments

Current Ratio (Times) 0.57 2.41

The asset management is far

better of RAK than Shinepukur to

recover their liability. It indicates astrong liquidity power of the

organization.

Inventory Turnover (Times) 1.87 8.73

Inventory is highly managed for

production purpose by RAK. It is a

competitive advantage over

Shinepukur.

DSO (Days) 33.88 51.24

Shinepukur has the capability to

collect the receivables from the

market within a shortest time. It is

definitely a good sign. So, RAK

should try to minimize the thing.

TAT (Times) 0.26 0.55

Though RAK is showing more

efficiency in this section, but both

of them are staying near to each

other. They should be more focus

to maximize the use of their assets

in terms of earning revenue.

Debt Ratio (%) 38.61 31.93

The debt management is showing a

good indicator for RAK. But, SCL is

almost near to them. They both

should be more cautious to

manage liability efficiently in termsof their assets.

TIE (Times) 6.63 17.77

RAK is highly efficient to manage

the interest of their debts with the

net operating income. It is a big

safeguard for the companys

reputation.

Profit Margin (%) 1.46 10.50

RAK has greater cost management

capability and it is indicated by the

margin ratio. SCL should focus

more on that.

ROA (%) 0.37 5.78

The value of the assets is highly

covered with the net income of

RAK. It is a good sign. On other

hand, SCLs condition is too poor.

ROE (%) 1.62 16.68

RAKs equity return strength is 16

times higher than the SCL. Showing

a strong satisfaction level for the

shareholders of RAK.


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Overall Comparison on Financial Statement Analysis: (Adjusted Data)

From our analytical findings, we can easily say that the forecasted target can be achieved by the

RAK very easily. Though it is tough for Shinepukur, but it is not impossible. RAK is holding a

strong competitive advantage in almost every aspect. But, if we consider about Shinepukur, the

cost, asset, debt and overall management is not satisfactory. To achieve the targeted sales andrebuild the reputation, it should focus more on the mentioned management system.

Findings

1. Shinepukurs inventory management is not efficient.

2. Cost management is improper for Shinepukur.

3. Asset management is not well designed in Shinepukur.

4. Equity management is not properly managed by Shinepukur.

5. Shinepukurs business does not run efficiently cause of the ineffective managerial decision.

6. RAKs receivable collection process is not good enough.

7. Both the firms have some managerial and functional lackings.

8. Though RAK is running well but the functional management should be improved for both

RAK and Shinepukur Ceramics Limited.


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Recommendation

After studying the total scenario of the companies, the following recommendations may be

offered for improving present condition of the market as well as its prospects:

1. Shinepukur and RAK should maintain the liquidity, profitability, asset management and

debt management ratio.

2. Both companies should follow the ratio analysis and try to improve their loss and

maintain their profit.

3. Firms should inform its consumers and customers about the new improvement of its

products.

4. Shinepukur and RAK can encourage its customers (retailers) by providing different types

of trade offers, complementary samples, gift offerings etc.

5.

Companies should confirm the availability of its products for more convenience of the

end users;

6. Firms should cover as much outlet it can ensuring the availability of the brands.

7. Firms should make aware all about its brand to the consumers as well as customers for

creating image of brand assistance;

8. Both companies should focus on asset management.

9.

Debt should be managed properly.

10. They should be concern about stockholders value maximization.

11. Inventories and cost should be maintained efficiently.


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Conclusion

The desirable qualities of the tableware beauty of design, excellence in making and affordable

price are rooted with the ceramics industries mission and commitment. The tableware is made

to the most exact standards to please the most apprehensive customers. The quality control

supervisors at every stage of production ensure that all items meet the most critical standards in

the world. Giving dignity and distinction to the users, the ceramics industries tableware becomes

centerpiece in any stylish home. It blends together the outstanding technology and timeless

craftsmanship to catapult Bangladesh into the new millennium.

In our country tableware ceramics industry is developing day by day. Already many companies

are in the market and are serving consumers delivering quality products. To compete smartly in

the domestic and international markets companies need to set appropriate financial and

marketing strategies. For setting correct strategies companies need to find out appropriate

financial position. For setting right positioning strategies companies need to know the needs and

requirements of the customers. International players under ceramic industry of Bangladesh are

doing above described activities more or less correctly. If individual organizations can set

appropriate marketing and financial strategies that will be beneficial for the organizations as well

as for the industry. Lots of changes have taken place in tableware ceramics industry in last few

years. Once upon a time consumers were not concerned about shape, design and other factors.

But now-a-days these things are considered. In modern world consumers demand is changing

day by day and they switch companies frequently. So, to retain the consumers is important and it

will be possible when companies will be aware about perception of customers and will be able to

take position according to that perception. By creating competitive advantages companies have

to do something special for customers and by this way company can increase their relative

market share as well as achieve top position also.

2. financial statment analysis

Documents