“Financial Performance Analysis of Sajeeb Corporation”
CHAPTER 1
Introduction
Project means practical training through attending the particular work in the related field. Practical training means a way through which a person or a trainee can gather experience about the related subject practically and be able to apply his theoretical knowledge in the field of real life action. Practical training also pave the way for gaining practical knowledge through activities other than reading textbooks and attending formal academic courses. Practical training is necessary to achieve complete knowledge about something. Project program is actually a form of practical training. I confidently believe that practical training can open the inner eyes of a man. The works conducted during the Project Program will expand the horizon of our practical knowledge.
For the students of MBA of the Department of Finance & Banking, Project is an academic requirement. For every student the Project is required to work in a selected institution to enhance his practical Knowledge. The Project is managed and supervised by a supervisor who is a teacher of the department.
For my Project, I was sent to the Sajeeb Corporation, Dhaka under the supervision of Ms. Rubaba Rahman, Faculty, PUB. My Honorable Supervisor selects the Sajeeb Corporation for Project Program. My topic was “Financial Performance Analysis of Sajeeb Corporation.”
Background of the study
This report has been prepared to serve the purpose of “Project Report” for the MBA program of the assigned student in the department of Finance & Banking, The People’s University of Bangladesh.
The selected organization was Sajeeb Corporation (SC), Dhaka. The concerned authority in SC assigned me to go to the various departments of the Corporation to get an overview of its organizational structure and the activities.
The report has covered the area of overall activities and financial performance of the organization. The report is titled as “Financial Performance Analysis of Sajeeb Corporation.
Importance of Project:
Project prepares the trainee for the tough job conditions and future challenges of business activities. The trainee learns how to adapt himself in situations quickly and how to work in a team environment. Project increases the interpersonal communicative skill of the trainee as it opens in front of him a panorama towards the functioning of corporate institutions. In addition, Project helps a trainee to fulfill his practical knowledge and makes him fit for important jobs.
This study goes through to examine the role of SC in the Market and its Financial Performance. From this study we observed the overall activities of SC and its financial performance. I hope that this study will be helpful for the people who are associated with FMCG Company, entrepreneur, Investors, researchers and the students of Finance and Banking.
Objectives of Project:
The objective of Project Program is to gather practical experience and comply with MBA academic curriculum. To understand the functions of Sajeeb Corporation in the Market, mobilization of savings, investment for industrialization and its financial performance. The Project Program is going on the following objectives:
1) To know complete scenario of Sajeeb Corporation as a pioneer Fast Moving Consumer Goods (FMCG) Company in Bangladesh.
2) To get practical experience as a financial analyst.
3) To evaluate the Financial Performance of Sajeeb Corporation.
4) To exploit my theoretical knowledge in the practical world.
5) To gather knowledge about Corporate Culture.
6) To know about a company’s past, present and future position.
7) To prepare myself for the future challenges of modern business world.
8) To understand and compare a company’s internal position to make necessary aid.
CHAPTER 2
Methodology of the Study
The major objective of the study is to examine the financial performance of SC and to observe the overall activities of SC. In this study, decisions and calculations have been made basing on experiences and the available data of past activities. The following methodology used to complete this study:
Data Collection
The study in based on both primary and secondary data. Primary data were collect through face-to-face interviews with the corporation executives, Departmental heads or their approved officials gave briefs about their respective departments. Information gathered from these sessions has been use in this report.
While secondary data were collected from annual reports and published documents of SC. In this study, we used five years data of Balance sheet and Income statement from 2005 to 2009. These data collected in any one or more of the following ways:
Personal Interview
This is the most effective way of collecting information about any organization. Through this process, the trainees can confront the responsible officials of the selected organization and interview him. Through this interview, he gets the necessary information. I interviewed some departmental officials especially those related to the financial operations of SC.
Briefing Sessions
In case of corporate organizations, this method is useful. The different department chiefs brief the trainees. Through these Briefing Sessions, the trainees collect the necessary information about the different segments of the institution.
By observation
Through the process, data is collected by ways of investigators own observation without interviewing any body. It is a costly process and through this process, the observer gets limited information.
Study period and Area
We have chosen a five years period starting from 2005-2009 as the period of our study.
visited the different departments of Sajeeb Corporation, which depict in the following table:
| SL No. | Name of the departments |
| 1 | Managerial Body |
| 2 | Accounts Department |
| 3 | Finance Department |
| 4 | Audit Department. |
| 5 | Commercial Department. |
| 6 | Marketing Department |
Financial Tools
For the analysis of the financial performance of SC, I have used Ratio Analysis. SC is a production based company so all the ratios are applicable for the financial performance analysis of SC. The following are of importance in the study:
- Current Ratio
- Days Sales Outstanding Ratio
- Fixed Asset Turnover
- Total Asset Turnover
- Debt Ratio
6. Time Interest Earned Ratio
7. Net Profitability Ratio
8. Return on Asset- Profitability Ratio
9. Return on Common Equity- Profitability Ratio.
10. Receivable Turnover
Computer Programmed Use
Most commonly used statistical and financial package that used in computer for data analysis, such as:
1. Ms Excel
2. SPSS
Scope of the study
As has been mentioned earlier, the main focus of the study is the Financial Performance of Sajeeb Corporation. The report gives an overview of SC followed by a chapter on financial involvement of SC. After that the report establishes the theoretical and conceptual framework comparing with which the financial performance of SC will be judged. There is one elaborate chapter on the financial performance analysis of SC. This study will also present some problems of SC observed during the Project and the study will suggest some Project possible remedy of those problems.
Limitation of the Study
There are some limitations in my study. I faced some problems during the study, which given below:
i. Lack of time: The time period for this study was very shot. So, I could not go in depth analysis. Sometimes the officials were busy and were not able to give much time.
ii. Insufficient data: Some desired information could not be collect due to confidentiality of business.
iii. Lack of Supervision: Few officials sometimes felt disturbed, as they were busy with their tasks. Sometimes, they didn’t want to supervise due to pressure of work load.
iv. Other limitations: I was single person who collected all data. But my opinion is – it should be a group study. So it was very much difficult for me to gather all the information.
CHAPTER 3
Brief Company Profile
Sajeeb Corporation is one of the leading First Moving Consumer Goods (FMCG) Company in Bangladesh, Promoting new products than ever before. Moreover, Sajeeb Corporation is the Sister concern of Sajeeb Group. It is the leading manufacturing and distribution company in Bangladesh. In recognition of its outstanding contribution in the field of Exports, the Government of Bangladesh has awarded the most coveted NATIONAL EXPORT TROPHY to the company several times.
Situated on 18 acres land and having a covered area of 10 acres, the factory went into production in 1990. Currently the Company employs 800 Employees and 2700 Workers, who have requisite skill to ensure production of quality goods.
Hashem Foods Ltd. is the sister concern of Sajeeb Group. Who manufactured two world famous brand’s products under licence and technical collaboration of Shezan International Limited and K.S Sulemanji Esmailji & Sons Pvt. Ltd. In orderto brand Shezan and kolson.
Sajeeb Corporation also import a world famous soft drink powder TANG from Kraft Food Ltd. USA and marketing through his distribution channel. In the channel, he has about 200 dealers around the country.
Sajeeb Corporation’s factory is gas-based, labor intensive and skill oriented project. As such Bangladesh enjoys the comparative advantages in manufacturing products for local and foreign market due to competitive cost. The manufacturing Products are as follows:
Shezan Juice, Shezan Tomato Ketchup, Shezan Chilli Sauce, Shezan Jam/Jelly, Shezan Mango & Girlic Pickle, Shezan Mango Bar, Shezan Rose Water, Kolson Vermichilli, Kolson Lascha Semai, Kolson Macaroni, Kolson Egg Noodles, Sajeeb Biscuit, Sajeeb Soya Sauce, Sajeeb Isubgul Bhusi, Sajeeb Glocon-C, Top Testing Salt, ctc.
This company is exporting his versetile products in Kingdom of Saudiarabia, UAE,Jordan, Oman,Yeamen etc. countries.
Product Information
Tang is a sweet and tangy, orange-flavored, non-carbonated soft drink from the United States. Named after the tangerine, the original orange flavored Tang was formulated by William A. Mitchell for General Foods Corporation in 1957 and first marketed (in powdered form) in 1959.
Tang as a global brand.It is extremely popular in Latin America, Southeast Asia and in other parts of the world. Tang, along with Boca, Oreo, Maxwell House, Milka, Toblerone, Nabisco, Oscar Mayer and Kraft, are being established by Kraft Foods as global brands, even though some of them are global brands already. Tang is building up in third world countries where juice powder is cheap and it is a major source of certain vitamins and minerals for folk in those countries. Even though Crystal Light leads in the U.S., Tang is number one in the world.
The Tang brand is owned by Kraft Foods. It is available in 38 flavors (some region-specific), and is sold both in powdered form (in sachets and larger canisters) as well as in a ready to drink form. A single 8 fl oz serving of Tang provides 9 grams of sugar; 40 calories (167 kJ); 100% RDA of vitamin C; 10% RDA of vitamin A, Calcium, Vitamin E, Riboflavin, Niacin, and Vitamin B6; and no caffeine. Kraft also makes a sugar-free version of Tang, containing aspartame, which comes in individually-measured packets and was introduced in March 1985.
Tang is most commonly served as a cold drink, although some people prefer to heat it or add it to smoothies.
Tang was famously used by the NASA Gemini. space program. A NASA engineer working with the Gemini Space Program on a life-support module explained the story of how and why it was used. Paraphrased:
“… There was a particular component of the Gemini life support-system module which produced H2O (water) among other things. This was a byproduct of a recurring chemical reaction of one of the mechanical devices on the life-support module. The astronauts would use this water to drink during their space flight. The problem was, the astronauts did not like the taste of the water because of some of the byproducts produced, which were not harmful of course. So, they added Tang to make the water taste better …”
New Tang
In 2007, Kraft introduced a new version of Tang (with Fruitrition) which has replaced half of the sugar with artificial sweeteners. The new packaging advertises “1/2 the Sugar of 100% juice.”The artificial sweeteners used in the new formulation are Sucralose, acesulfame potassium, and Neotame. The new formula is more concentrated and distributed in smaller containers, with a 12.3 oz (348 g) container making 8 U.S. quarts.
The recommended usage is two and one-half teaspoons per 8 fluid ounces of water. The lid on the new smaller plastic container acts as a measuring cup which may be used to make one or two quart quantities, the same as the original Tang.
In 2009, Tang introduced seven new flavors. These include: Horchata, Jamaica, Pineapple, Lime, Strawberry, Mango and a reformulated Orange. These new flavors were made available in the Southwest US.
The Shezan International Limited was incorporated on May 30, 1964 as a Private Limited Company. Shezan International Limited was conceived as a joint venture by the Shahnawaz Group, Pakistan and Alliance Industrial Development Corporation, U.S.A. in 1964. Shezan is the largest food processing unit having developed and installed the capacity to meet the country’s local as well as export needs. In 1971, Shahnawaz group purchased all the shares of Alliance Industrial Development Corporation with the permission of the Government of Pakistan. In 1980-81 a separate unit was installed in Karachi which now caters for Karachi, Sind and export demand. A bottle filling plant was set in 1983 in Lahore, Punjab. An independent Tetra Brik plant was commissioned in 1987.In the year 1990 it was decided to install a juice factory at the Hattar in North West Frontier Province of Pakistan. Shezan International’s Head Office Located in Lahore, Pakistan. In Canada, Target Foods is the authorized distributor for all Shezan Products. They carry all the export quality Juices, Jams, Pickles, Chutneys, Sauces, Syrups and Squashes.
The Company’s principal activity is to manufacture and distribute juices, beverages, pickles, preserves and flavorings derived from fresh fruits or vegetables. The products of the Company include tetrapak juice, mango juice, pickles, custards, vegetables, jellies and jams. The Company distributes the products under the Shezan brand name.
Nocilla is a hazelnut and chocolate spread similar to Nutella. It is only available in Spain, where it still outsells Nutella by a large margin, because it is considered to be a superior spread. It has become a symbol for happy childhood memories in Spanish pop culture. Nocilla sold in Bangladesh since 1984.
The Kolson brand is owned by K.S. Sulemanji Esmailji & Sons Pvt. Ltd. Ever Since its inception in 1942, as on today, Kolson enjoys the distinction of being one of the Pioneer food manufacturing and processing industries in Bangladesh and Pakistan. The name of Kolson is synonymous with dynamic and innovative food products.
The Philosophy of the company based on self-commitments to offer consumers greater choice of exclusive quality products. In doing so, the company has, in true sense, evolved its own marketing style to establish a more effective relationship with consumers.
Being a food manufacturing company, the company understands his responsibility to provide consumer high quality products and selection of best ingredients that add to the nutritional value of his products.
Kolson brands appeal to an extraordinarily diverse array of consumers. The consumer segment starts from as young as one year old who starts developing a taste for snacks and goes all the way up to older age people who consume pasta and breakfast cereals as part of their healthy diet. In consumer promotions, designed to enhance the Kolson image. Thus, the company therefore, tries to satisfy the growing needs of all his target segments.
Kolson is proud to be the pioneer in Pasta production in Bangladesh and Pakistan. More than 50 years back nobody could think of Pasta as forming a food habit being an absolutely new food concept for populace of Bangladesh and Pakistan. At present company is market leader in Pasta products such as Spaghetti, Macaroni, Lasagne, Noodles and Vermicelli.
Kolson also has a leading edge in manufacturing breakfast cereals that are innovative and extremely popular among the consumers of all ages.
As company hierarchy enters to the third generation, it befittingly coincides with yet another stunning product, an innovative range of high-class Biscuits. Jam Hearts, Cream Hearts, Katch and Bravo, being sandwich, crackers and traditional bakery biscuits respectively which are already fetching consumers’ recognition & appreciation because of its unique and smacking flavor and texture.
The whole range of Kolson products is made by using latest German, Dutch, Swiss and Italian etc latest technology and process to back prime raw materials. The raw materials are procured from the leading available sources in Germany, Denmark, Belgium and Nederland etc. The high quality Bangladeshi and Pakistani wheat products, procured from select bunch of millers, are pivotal in determining the final outcome of high quality products.
As the global economy is taking a different turn in its outlook and demand, Bangladesh can not afford to lag. Sajeeb Corporation is prepared to accept the challenge to be always one step ahead of changes in offing. This is the company’s simple promise to his die-hard and prospective consumers in Bangladesh and abroad.
Information of Sajeeb Corporation
3.3.1 Vanue
# HeadOffice:
Shezan point(5th Floor)
2 Indira Road, Farmgate, Dhaka-1215
Phone : 02-8150237-8 02-9116944, Fax:880-2-8124839
Email: sajeebbd@mail.syberbangla.com
Bangladesh
# Factory:
Vulta, Siddirgong, Naraongong
Phone: 01817169514
Managerial Body
# Chairman : Md. Abul Hashem
# Executive Director : Md. Fajlul Hoque
# General Manager : Mr. Bisnu Vottacharjjha
# Deputy General Manager : Md. Saifullah
# Manager (Sales & Marketing): Md. Feroj Ahmed
# Asst. Manager(S & M) : Md. Mamunul Islam Khan
# Asst. Manager(S & M) : Md. Faroq Ahmed
# Asst. Manager(A/C): Md Motaher Hossain
# Asst. Manager(Distribution): Md. Abdus Samad
# Asst. Manager(Export) : Md. Amdadul Haque
#Rigional Manager : Md. Shahabuddin
3.4 Strength, Weakness, Opportunity and Threats of SC
Internal Strength
#Better product quality relative to rivals
#Financially solvent and has enough financial resources to grow the business.
#Product innovation skill
#High volume production capacity
#Reputation for good customer service
Internal Weakness
#Delay in decision making
#No clear strategic direction
#No Just-in-Time System
#Higher over all unit cost
#Low integration among the departments
#Salary system is not good enough etc.
#Selection of manpower not following in proper.
3.3.3 External Opportunities
#Market expansion to the rural areas/abroad
#Food habit changed of the consumer
#Using the internet and E-Commerce tech. dramatically cut cost.
#Integrating backward system.
External Threats
#Foreign exchange rate fluctuation
#Government duty tax and policy
#Huge demand of electric power supply (Market close at 8 pm)
#Fluctuated political situation of Bangladesh.
#Time to time different rules changes
#Traffic rules (no delivery van parking)
#Raw materials price increasing internationally
#Electricity fluctuation happens very rapidly.
#Very narrow and busy road going to factory.
#Rainy and winter seasons.
Chapter-04
Definition of Financial Performance
Financial performance analysis is the process of identifying the financial strengths and weakness of the firm by properly establishing relationships between the items of the balance sheet and the profit and loss account. Financial analysis can be undertaken by management of the firm, or by parties outside the firm, i.e. Owners, creditors, Investors, and Others. We can get financial performance from company’s Balance sheet, Income Statement
Ways of measuring Financial Performance
The Balance Sheet and Profit and Loss Account are the basic financial statements of a business enterprise. They provide useful financial data regarding the operations of a firm. Financial statement contain a wealth of information which, if properly analyzed and interpreted, can provide valuable insights into a firm’s performance and position, A balance sheet reports the firm’s assets and liabilities at a certain point of time. The profit and loss account presents the summary of items of a firm during a particular period of time. Neither of these shows the nature of the transactions entered into during the period to finance the firm’s operations. Nevertheless, they provide some extremely useful information. “The Balance Sheet is a mirror of the financial position of a firm.” It show the assets the firm owns, the liabilities it is to pay to outsiders and the amount of internal liabilities in terms of capital supplied by the owners at a particular point of time. “The profit and loss account shows the results of business activities or operations during a certain period of time, usually a year.” It presents the summary of income obtained and the costs incurred by the firm during a year. Thus, the financial statements provide a summarized view of the operations of a firm. Much can be learn about a firm from careful examination of its financial statements. It is an important aid to financial statement analysis. Of the various methods of Financial Statements analysis, Ratio analysis based on different ratios, which are calculated, from the accounting data contained in the financial statements. Different ratios used for different purposes. Financial analysis depends largely on the use of ratios through there are other equally important tools of such analysis. In my study, I have used different ratios for the analysis of the financial performance of SC.
Ratio Analysis
Ratio analysis is a widely – used tool of financial analysis. It is define as the systematic use of ratio to interpret the financial statement so that the strengths and weakness of a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items/variables. The relationship can be express as Percentages, Fraction, and Proportion of numbers. These alternative methods of expressing items which are related to each other, for purposes of financial analysis, referred to as ratio analysis. It should note that computing the ratios does not add any information not already inherent in the above mentioned. The ratio analysis is one of the most useful and common methods of analyzing Financial statements. As compared to other tools of financial analysis, the ratio analysis provides very useful conclusions about various aspects of the working of an enterprise.
Meaning of Ratio
A ratio is only a comparison of the numerator with the denominator. The term ratio refers to the numerical or quantitative relationship between two figures. Ratios designed to show how one number is related to another. Ratios are relative form of financial data and very useful technique to check upon the efficiency of a firm.
Mode of expression
i) RATE, which is the ratio between the two numerical facts over a period of time, for example, stock turnover is three times a year.
ii) PURE OF PROPORTION, which arrived at by the simple division of one number by another, for example, current Asset to Current Liability ratio of SC for FY 2005-2005 is 1.47:1.
iii) PERCENTAGE, which is a special type of rate expressing the relationship in hundred. It is arrived at by multiplying the quotient by 100, for example, return on Investment of SC for the FY-2005-2005 is 3.04%.
Types of Ratios:
Several ratios, calculated from the accounting data, can be grouped into various classes according to financial activity or function to be evaluated. As stated earlier, the parties interested in financial analysis are short and long-term creditors, owners and management. Short- term creditors’ main interest is in the liquidity position or the short-term solvency of the firm. Long-term creditors, on the other hand, are more interested in the long-term solvency and profitability of the firm. Similarly, owners concentrate on the firm’s profitability and financial condition. Management is interested in evaluating every aspect of the firm’s performance. They have to protect the interests of all parties and see that the firm grows profitably. In view of the requirements of the various users of ratios, we may classify them into following four important categories:
A. Liquidity Ratios
B. Leverage Ratios
C. Activity Ratios
D. Profitability Ratios
A. Liquidity Ratios: Liquidity ratios measure the firm’s ability to meet current obligations. The most common ratios, which indicate the extent of liquidity or lack of it, are:
I. Current Ratio: The current ratio is calculated by dividing current asset by current liabilities:
Current Ratio =
Current assets include cash and those assets, which can be converting into cash within a year, such as marketable securities, debtors and inventories. Prepaid expenses are also included in current assets.
II. Quick Ratio: Quick ratio establishes a relationship between quick, or liquid, asset and current liabilities. An asset is liquid if it can be converting into cash immediately or reasonably soon without a loss of value. Generally, a quick ratio of 1 to 1 considered to represent a satisfactory current condition. The quick ratio is found out by dividing quick asset by current liabilities:
Current Ratio = Current Asset – Inventories/ Current Liabilities
B. Leverage Ratios: To judge the long-term financial position of the firm, financial leverage, or capital structure, ratios are calculated. These ratios indicate mix of funds provided by owners and lenders. The most common leverage ratio is:
1. Debt- Equity Ratio: The relationship between borrowed funds and owner’s capital is a popular measure of the long – term financial solvency of a firm. This relationship is shown by the debt-equity ratios. This ratio reflects the relative claim of creditors and shareholders against the assets of a firm.
Debt- Equity Ratio =
The D/E ratio indicates the margin of safety to the creditors. If, for instance, the D/E ratio is 1:2, it implies that for every taka of outside liability, the firm has two taka of owner’s capital.
C. Activity Ratios: Activity ratios employed to evaluate the efficiency with which the firm manages and utilizes its assets. These ratios also called turnover ratios because they indicate the speed with which assets are being converted or turned over into sales. In our analysis we do not use these ratios.
D. Profitability Ratios: The profitability ratios calculated to measure the operating efficiency of the company. Besides the management of the company, creditors and owners are also interested in the profitability of the company. The most common ratios, which indicate the operating efficiency of a company, are as follows:
1. Return on Investment (ROI): The return on investment (ROI), which often called the firm’s return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher the firm’s return on investment is better. The return on investment calculated as follows:
Return on investment = ´ 100
2. Return on Equity: The return on equity (ROE) measures the return earned on the owners’ investment. Generally the higher this return, the better off the owners. Return on equity calculated as follows:
Return on Equity =
3. Earning Par Share (EPS): The earning per share represent the number of dollars earned on behalf of each outstanding share of common stock. They closely watched by the investing public and considered an important indicator of corporate success. Earnings per share calculated as follows:
Earning per share =
4. Price Earnings (P/E) Ratio: The P/E ratio reflects the currently being paid by the market for each taka of currently reported EPS. In other words, the P/E ratio measures investors’ expectations and the market appraisal of the performance of a firm. The P/E ratio calculated is as follows:
Price Earning Ratio =
5. Dividend payout (D/P) ratio: It measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them. In other words, the D/P ratio shows what percentage share of the net profits after taxes and preference dividend is paid out as dividend to the equity holders. The D/P ratio calculated as follows:
Dividend per ordinary share (DPS)
Dividend payout (D/P) ratio =Earnings per share (EPS) ×100
6. Dividend Yield: The dividend yield evaluates the shareholders’ return in relation to the market value of the share. From the dividend yield ratio we can know the real rate of earnings on the share. The dividend yield ratio is as follows:
Dividend Yield =
7. Book value par share =
8. Net profit to total income = Net profit / Total income×100
CHAPTER-5
Sajeeb Corporation
Income Statement
For the Year Ended December 31, 2009
| Tk. In million | |
| Sales………………………………………………………….. | Tk.154.00 |
| Cost of goods sold………………………………………….. | 91.00 |
| Gross Profit…………………………………………. | 63.00 |
| Selling and Admin Expense……………………………… | 29.40 |
| Depreciation………………………………………………… | 10.50 |
| Operating Income………………………………….. | 23.10 |
| Interest expense…………………………………………… | 6.30 |
| Earning before Tax…………………………………. | 16.80 |
| Taxes………………………………………………………… | 5.60 |
| Earning after Tax……………………………………. | 11.20 |
| Preferred stock dividends………………………………….. | 0.70 |
| Earning available to common stockholders……………… | 10.5 |
| Shares outstanding…………………………………………. | 8.40 |
| Earning per share…………………………………………… | 1.25 |
Sajeeb Corporation
Balance Sheets
For the Year Ended December 31, 2009
| Assets | Tk. In million |
| Current assets | |
| Cash…..………………….…………………………….. | Tk.7.00 |
| A/C receivable……………………………………. | 24.50 |
| Inventory………..……………………………… | 30.10 |
| Prepaid expenses………………………… | 2.10 |
| Total Current assets……………………… | 63.70 |
| Investment (long term)……………………… | 4.90 |
| Plant and equipment …..……………………. | 168.00 |
| Less: Accumulated depreciation…… | 80.50 |
| Net plant and equipment…………………………. | 87.50 |
| Total assets………………………………………………….. | 156.10 |
| Liabilities and Stockholders’ Equity | |
| Current liabilities | |
| A/C payable……………………………………………… | 30.80 |
| Notes payable…………………………………………… | 28.00 |
| Accrued expenses………………………………………. | 3.50 |
| Total Current Liabilities……………………………. | 62.30 |
| Long term liabilities | |
| Bonds payable, 2013…………………………………… | 8.40 |
| Total Liabilities……………………………………… | 70.70 |
| Stockholders equity: | |
| Preferred stock ………………………………………… | 6.30 |
| Common stock…………………………………………. | 8.40 |
| Capital paid in excess of per ………………………… | 28.70 |
| Retained earning ……………………………………… | 42.00 |
| Total Stockholders equity………………………. | 85.40 |
| Total Liabilities and Stockholders equity………………… | 156.10 |
Communize Analysis/ Time Series Analysis
This analysis we can evaluates performance of the internal progress year to year. Here we have analyzed of the year 2009, 2007, 2006, 2005 and 2005.
Sajeeb Corporation
TK-in million
| SI | Name of the Ratio | 2009 | 2008 | 2007 | 2006 | 2005 |
| 1 | Receivables turnover-Asset utilization ratio | 6.29 | 7.5 | 9.8 | 8.7 | 12 |
| 2 | Current Ratio- Liquidity Ratio | 1.02 | 1.27 | 1.07 | 0.93 | 1.02 |
| 3 | Days Sales Outstanding- Activity Ratio | 57 | 50 | 45 | 40 | 48 |
| 4 | Fixed Asset Turnover Ratio- Activity Ratio | 1.76 | 2.80 | 3.50 | 3.3 | 5.70 |
| 5 | Total Asset Turnover Ratio- Activity Ratio | 0.98 | 0.95 | 2.10 | 1.50 | 1.20 |
| 6 | Debt. Ratio- Debt mgt ratio | 45 | 42 | 48 | 65 | 55 |
| 7 | Time Interest Earned Ratio | 4 | 4.10 | 4.30 | 4.5 | 4.9 |
| 8 | Net Profit margin- Profitability Ratio | 7.27 | 6.30 | 4.00 | 4.00 | 3.50 |
| 9 | Return on Asset- Profitability Ratio | 7.17 | 12.2 | 13.5 | 15.00 | 13.00 |
| 10 | Return on Common Equity- Profitability Ratio | 13.11 | 14.51 | 17.90 | 14.70 | 15.79 |
Receivables turnover
Receivables turnover is one of Asset utilization ratio; it measure the speed at which the firm is turning over account receivables. It is express as:
Receivables turnover= Sales / Receivables
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 6.29 | 7.5 | 9.8 | 8.7 | 12 |
Interpretation
In 2009, the Receivables turnover of SC was 6.29 days, which was, increased then 2007, where the time was 7.5 days. However, this also too much time to collect Receivables turnover then 2006 and 2005, and also short time then 2005 (12 days) to recover the A/R.
Recommendation
Lower Receivables turnover is better for company.
Current Ratio
The Current ration measures then ability firm’s to meet its short-tern obligations. It is expressed as follows:
CA
Current Ratio:
CL
Current Asset includes cash, account receivable and inventories. Moreover, current liabilities consist of all payables, current maturities of long tern debt, accrued expenses. It the current liabilities are rising fast than current Assets, the CR will fall and when CR is increased this post year, the present performance of the company will be better then post performance. Here are the 5 years CR of SC:
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 1.02 | 1.27 | 1.07 | 0.93 | 1.02 |
Interpretation:
In 2009 the CR of SC was tell which was lower then 2007 when the ratio 1.27, which is best position during 5 years. In another year, 2006 was better than 2005 and 2005 where the ratios were 0.93, 1.02, and the CR of 2005 and 2009 are the same, which considered as good performance.
Recommendation
By the analysis of 5 years CR of SC. We can find that the company hasn’t done well over the year and to improve the situation it should graphically enlarge CR by increasing CA or decreasing CL.
DSO (Days Sales Outstanding Ratio)
Day’s sales outstanding Ratio indicates the average amount of time needed to collect account receivable. It is arrived at by dividing the average daily Sales, into the accounts receivable balance.
Account Receivable
DSO =
Annual Sales
360
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 57 | 50 | 45 | 40 | 48 |
Interpretation
In 2009, the DSO of SC was 57 days, which was, increased then 2007, where the time was 50 days. However, this also too much time to collect A/R. in 2006 then time in 2005, where the required time was 40 and also short time then 2005 (48 days) to recover the A/R.
Recommendation
Much should aware about this fact and should try to lessen the time period to collect money from A/R to get a good position.
Fixed Asset Turnover
The fixed asset turnover ration measures how effectively the firm uses its plant and equipment to help generate sales. It is the ration of sales to fixed assts.
Sales
Fixed Assets Turnover Ratio =
Fixed Assets
If the present fixed asset turnover ratio is greater than past ratio that would be better for a company. Our analysis of SC for fixed asset turnover ratio of 5 years is
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 22.31 | 23.05 | 15.00 | 17.68 | 11.32 |
Interpretation
In 2009, fixed asset turnover ratio was 1.76, which was less then 2007, where the ratio was 2.80. We can also see in 2005’s ratio 5.70 which was arise then 2005 at 3.30 but it fall in 2006 and the ratio of 2006 was 3.50.
Recommendation
By the analysis, we can understand that sales position is good according to its fixed asset, which indicate that company effectively to uses the fixed assets.
Total Asset Turnover
The total Asset turnover ratio measures how effectively the firm uses its total assets to help generate sales. It is the ratio of sales to total assets.
Sales
Total asset turnover:
Total assets
If the present total assets turnover ratio is higher then previous it would be better for the company’s present performance. Our analysis of this ratio of SC of 5 years is,
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 0.98 | 0.95 | 2.1 | 1.5 | 1.2 |
Interpretation
In 2009 the total asset turnover was 0.98 which is better then 2007, where the ratio was 0.95. But there is lower performance then 2006, 2005 and 2005 where the ratios were 2.1, 1.5 and 1.2.
Recommendation
By the analysis, we can say that, company should increase their sales.
Debt Ratio
The debt ratio measures the proportion of total assets financed by the firm’s creditors. It’s formula:
Total Liabilities
Debt Ratio =
Total Assets
Total debt includes both CL and LLB tern debt, creditors prefer low debt ratios because the lower the ratio the greater the cushion against creditors losses in the event of liquidation. Our analysis of this ratio of SC for five years is:
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 45 | 42 | 48 | 65 | 55 |
Interpretation:
In 2009, the debt ratio of the SC was 45%, which is higher then 2007, where the ratio was 42%. However, this is lower then 2006, 2005 and 2005, where the ratios were 48%, 65%, and 55%.
Recommendation
Company must decrease the ratio by decreasing total liabilities or increasing total asset in better position.
Time Interest Earned Ratio
The time interest earned ratio, measures the firm’s ability to make contractual interest payment, Sometimes it also called as interest coverage ratio, the formula of this ratio is:
Earning before interest taxes
Time interest earned Ratio =
Interest Charges
This ratio measures the extent to which operating income can decline before the form is unable to meet its annual interest costs. If the present ratio is higher then post then it would better for the firm. However, the company has to pay tax fewer for lower time interest earned. Our analysis of this SC is,
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 0.51 | 0.50 | 0.51 | 0.54 | 0.65 |
Interpretation
In 2009, the time interest earned ratio was 4, which is just lower then 2007, where the ratio was 4.10. In 2006, though ratio was 4.30, which was higher then 2007 but also lower then 2005 and 2005, where the ratios were 4.50 and 4.90.
Recommendation
By the analysis of 5 years ratio we can say that, if the company wishes to decrease its taxation, the company should increase their EBIT.
Net Profitability Margin Ratio
Net profitability margin ratio measures the percentage of each sales money remaining after all costs and expenses, including interest, taxes and preferred stock dividends, have been deducted. It is calculates as this formula:
Net Profit
Net Profit Margin Ratio =
Sales
The analysis of 5 years of SC is, as follows:
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 7.27% | 6.30% | 4% | 4% | 3.5% |
Interpretation
In 2009 the net profitability margin ratio was 7.27% which is higher then 2007, 2006, 2005 and 2005 where the ratios where 6.301%, 4.00%, 4.00% and 3.50% and this as not better performance of the firm.
Recommendation
Company should increase their EBIT to keep increasing net profit.
Return on Asset
Return on asset, often called the return on investment. It measures the overall effectiveness of management in generating profits with its available assets. We can get this ratio by this formula,
Net Income
ROA =
Total Assets
Higher rate of this ratio indicates the higher/ better position of a firm. Our analysis of the firm SC is:
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 7.17 | 12.2 | 13.5 | 15 | 13 |
Interpretation
In 2009, the ratio was 7.17, which was lower then 2007, 2006, 2005 and 2005 where the ratios were 12.2, 13.5, 15 and 13,
Recommendation
The position of the firm is very bad according to this ratio and improve the situation company must should increase its Net Income as soon as possible.
Return on Common Equity
The ratio of net income to common equity measures the return on common equity or the rate of return on stockholders investment,
Net Income
Return on equity =
Total common equity
If the present return on equity is more then past ratios that indicates the better position to the present then past. Our analysis of ROE of SC are given below
| 2009 | 2008 | 2007 | 2006 | 2005 |
| 16.1 | 17.6 | 20.8 | 17.8 | 18.8 |
In