View With Charts And Images  

The textile
industry has always played a major role in the economy of Bangladesh. It is one
of the most labor-intensive sectors in Bangladesh, and plays a major role in
employing people, especially women who make up around 90% of the total labor
force. Around 45% of the total industrial labor force work here and this sector
currently contribute 5% of the total national income to the economy.

While it
contributed only US $ 6.4 million to the economy in 1981, the textile industry
of the country has now become an over
2.5-billion-dollar-foreign-exchange-earner, enjoying the status of 5th largest
garment exporter and largest shirt and T-shirt exporter to the EU and 6th
largest apparel exporter to USA. Bangladesh now exports ready-made garments to
as many as 30 countries of the world with EU as the major importer, followed by
USA, the largest importing country.

Although the
textile industry is one the largest industries in Bangladesh, it has some
problems that are hindering its progress. Some of these issues include lack of
raw materials and trade policy barriers. Hence the textile industry is
underperforming as compared to its potential.

For the last
five years, the industry has shown an average performance. The liquidity of the
industry has slightly decreased, while the long-term solvency has remained
constant. Also, the profitability of the industry as a whole has fallen. So,
companies in this sector are facing adverse conditions currently.

Alltex
Industries Limited began its journey on January 24. 1985. It started as a
private limited company under the Companies Act, 1913 now repealed and re-enacted
as the Companies Act, 1994. The company was converted into a public limited
company on the October 25, 1994. It was listed on the Dhaka Stock Exchange on
August 31, 1996 and on the Chittagong Stock Exchange on August 07, 1996.

The registered
head office of the company is located at 139 (3^rd floor), Motijheel
C/A, Dhaka and the factory at Ariabo, Rupgonj, Narayngonj. The company is a
100% export oriented industry of dyeing, finishing and printing Grey fabrics
towards making of Home Textiles products for export.

The company
prepares its financial statements in compliance with the requirements of the
Bangladesh Accounting Standards (BAS), Companies Act 1994 and Securities &
Exchange rules 1987, Listing Rules of Dhaka Stock Exchange Limited and
Chittagong Stock Exchange Limited, Income Tax Ordinance 1984 and other
applicable local laws and regulations.

The financial
statements from the year 2005 to the present have been audited by Howladar
Yunus and Co. Their immediate predecessors were Rahman Mostofa Alam and Co. The
Sonali Bank (Local Office, Dhaka) is the official bank for Alltex Industries
Limited. The fiscal year of the company starts on July 01 and finishes on June
30 of the following calendar year.

Alltex
Industries Limited just conducted their 23^rd Annual General Meeting
(AGM) on December 18, 2007.

ALLTEX
INDUSTRIES LIMITED

Comparative
Balance Sheets

June
30, 2006 and 2007

	June 30		Increase or (Decrease) 2007 over 2006		% of total assets June 30
	2007	2006	Dollars	Percents	2007	2006
ASSETS
Non-current assets	1,231,819,407	995,630,763	236,188,644	23.72	53.02	50.02
Property, plant and equipment carrying value	1,161,819,407	925,630,763	236,188,644	25.52	50.01	46.51
Investment in share	70,000,000	70,000,000	0	0.00	3.01	3.52
Current assets	1,091,580,490	994,751,707	96,828,783	9.73	46.98	49.98
Stock	479,864,472	519,230,964	-39,366,492	-7.58	20.65	26.09
Accounts receivable	305,677,740	183,445,699	122,232,041	66.63	13.16	9.22
Share issues expense	1,781,140	2,137,367	-356,227	-16.67	0.08	0.11
Advances, deposits & sundry receivables	230,941,398	242,274,334	-11,332,936	-4.68	9.94	12.17
Cash & cash equivalents	73,315,740	47,663,343	25,652,397	53.82	3.16	2.39
TOTAL ASSETS	2,323,399,897	1,990,382,470	333,017,427	16.73	100.00	100.00
EQUITIES & LIABILITIES
Shareholders’s fund	629,765,874	638,149,032	-8,383,158	-1.31	27.11	32.06
Capital	480,000,000	480,000,000	0	0.00	20.66	24.12
Dividend equalization reserve	35,000,000	38,000,000	-3,000,000	-7.89	1.51	1.91
Tax holiday reserve	169,650,000	169,650,000	0	0.00	7.30	8.52
Unappropriated profit	-54,884,126	-49,500,968	-5,383,158	10.87	-2.36	-2.49
Non-current liabilities
Long Term Liability	480,105,156	341,017,627	139,087,529	40.79	20.66	17.13
Project loan	–	64,328,690				3.23
Block loan	159,961,700	210,994,731	-51,033,031	-24.19	6.88	10.60
Deferred tax liability	72,524,408	65,694,206	6,830,202	10.40	3.12	3.30
Syndicated term loan	247,619,048	0	247,619,048	–	10.66	0.00
Current liabilities and provisions	1,213,528,867	1,011,215,811	202,313,056	20.01	52.23	50.81
Bank overdrafts – secured	1,045,110,312	938,684,801	106,425,511	11.34	44.98	47.16
Goods supplied	21,651,007	17,639,563	4,011,444	22.74	0.93	0.89
Liabilities for expense	63,365,822	24,262,924	39,102,898	161.16	2.73	1.22
Overdue installments if long term liabilities	57,258,383	0	57,258,383	–	2.46	0.00
Other finance	880,232	750,398	129,834	17.30	0.04	0.04
Unclaimed dividend	25,263,111	29,878,125	-4,615,014	-15.45	1.09	1.50
TOTAL LIABILITIES & EQUITIES	2,323,399,897	1,990,382,470	333,017,427	16.73	100.00	100.00

ALLTEX
INDUSTRIES LIMITED

Comparative
Balance Sheets

June
30, 2005 and 2006

	June 30		Increase or (Decrease) 2006 over 2005		% of total assets June 30
	2006	2005	Dollars	Percents	2006	2005
ASSETS
Non-current assets	995,630,763	946,296,198	49,334,565	5.21	50.02	56.54
Property, plant and equipment carrying value	925,630,763	876,296,198	49,334,565	5.63	46.51	52.36
Investment in share	70,000,000	70,000,000	0	0.00	3.52	4.18
Current assets	994,751,707	727,252,042	267,499,665	36.78	49.98	43.46
Stock	519,230,964	316,607,366	202,623,598	64.00	26.09	18.92
Accounts receivable	183,445,699	64,466,701	118,978,998	184.56	9.22	3.85
Share issues expense	2,137,367	2,493,594	-356,227	-14.29	0.11	0.15
Advances, deposits & sundry receivables	242,274,334	284,076,860	-41,802,526	-14.72	12.17	16.97
Cash & cash equivalents	47,663,343	59,607,521	-11,944,178	-20.04	2.39	3.56
TOTAL ASSETS	1,990,382,470	1,673,548,240	316,834,230	18.93	100.00	100.00
EQUITIES & LIABILITIES
Shareholders’s fund	638,149,032	706,795,516	-68,646,484	-9.71	32.06	42.23
Capital	480,000,000	480,000,000	0	0.00	24.12	28.68
Dividend equalization reserve	38,000,000	40,000,000	-2,000,000	-5.00	1.91	2.39
Tax holiday reserve	169,650,000	169,650,000	0	0.00	8.52	10.14
Unappropriated profit	-49,500,968	17,145,516	-66,646,484	-388.71	-2.49	1.02
Non-current liabilities
Long Term Liability	341,017,627	389,234,834	-48,217,207	-12.39	17.13	23.26
Project loan	64,328,690	88,113,499				5.27
Block loan	210,994,731	26,828,000	184,166,731	686.47	10.60	1.60
Deferred tax liability	65,694,206	274,293,335	-208,599,129	-76.05	3.30	16.39
Syndicated term loan	0	0	0	–	0.00	0.00
Current liabilities and provisions	1,011,215,811	577,517,890	433,697,921	75.10	50.81	34.51
Bank overdrafts – secured	938,684,801	496,272,361	442,412,440	89.15	47.16	29.65
Goods supplied	17,639,563	19,913,305	-2,273,742	-11.42	0.89	1.19
Liabilities for expense	24,262,924	26,643,621	-2,380,697	-8.94	1.22	1.59
Overdue installments if long term liabilities	0	6,792,058	-6,792,058	–	0.00	0.41
Other finance	750,398	838,820	-88,422	-10.54	0.04	0.05
Unclaimed dividend	29,878,125	27,057,725	2,820,400	10.42	1.50	1.62
TOTAL LIABILITIES & EQUITIES	1,990,382,470	1,673,548,240	316,834,230	18.93	100.00	100.00

ALLTEX
INDUSTRIES LIMITED

Comparative
Balance Sheets

June
30, 2005 and 2004

	June 30		Increase or (Decrease) 2005 over 2004		% of total assets June 30
	2005	2004	Dollars	Percents	2005	2004
ASSETS
Non-current assets	946,296,198	940,214,520	6,081,678	0.65	56.54	49.78
Property, plant and equipment carrying value	876,296,198	870,214,520	6,081,678	0.70	52.36	46.08
Investment in share	70,000,000	70,000,000	0	0.00	4.18	3.71
Current assets	727,252,042	948,417,902	-221,165,860	-23.32	43.46	50.22
Stock	316,607,366	436,516,099	-119,908,733	-27.47	18.92	23.11
Accounts receivable	64,466,701	234,982,786	-170,516,085	-72.57	3.85	12.44
Share issues expense	2,493,594	2,849,821	-356,227	-12.50	0.15	0.15
Advances, deposits & sundry receivables	284,076,860	188,860,155	95,216,705	50.42	16.97	10.00
Cash & cash equivalents	59,607,521	85,209,041	-25,601,520	-30.05	3.56	4.51
TOTAL ASSETS	1,673,548,240	1,888,632,422	-215,084,182	-11.39	100.00	100.00
EQUITIES & LIABILITIES
Shareholders’s fund	706,795,516	738,019,123	-31,223,607	-4.23	42.23	39.08
Capital	480,000,000	480,000,000	0	0.00	28.68	25.42
Dividend equalization reserve	40,000,000	40,000,000	0	0.00	2.39	2.12
Proposed dividend	0	48,000,000
Tax holiday reserve	169,650,000	169,650,000	0	0.00	10.14	8.98
Unappropriated profit	17,145,516	369,123	16,776,393	4,544.93	1.02	0.02
Non-current liabilities
Long Term Liability	389,234,834	179,034,899	210,199,935	117.41	23.26	9.48
Project loan	88,113,499	119,945,899	-31,832,400	-26.54	5.27	6.35
Additional term loan	26,828,000	59,089,000	-32,261,000	-54.60	1.60	3.13
Block loan	274,293,335	0	274,293,335		16.39	0.00
Current liabilities and provisions	577,517,890	971,578,400	-394,060,510	-40.56	34.51	51.44
Bank overdrafts – secured	496,272,361	890,804,321	-394,531,960	-44.29	29.65	47.17
Goods supplied	19,913,305	19,242,425	670,880	3.49	1.19	1.02
Liabilities for expense	26,643,621	24,276,680	2,366,941	9.75	1.59	1.29
Overdue installments of long term liabilities	6,792,058	28,785,630	-21,993,572	–	0.41	1.52
Overdue installments of leasing expenses	0	1,607,280	-1,607,280
Other finance	838,820	751,249	87,571	11.66	0.05	0.04
Unclaimed dividend	27,057,725	1,310,815	25,746,910	1,964.19	1.62	0.07
Dividend distribution tax	0	4,800,000	-4,800,000
TOTAL LIABILITIES & EQUITIES	1,673,548,240	1,888,632,422	-215,084,182	-11.39	100.00	100.00

Observations
from horizontal and vertical analysis:

·
The
non-current assets of the company have shown a steady increase from 2004 to
2007. The rate of the percentage increase has steadily risen throughout the
years from a mere 0.65 to 23.72.

·
The
current assets of the company sharply from 2004 to 2005, but then again
increased. The rate has declined from 2005 to 2007.

·
The
total assets of the company show the same trends as the current assets.

·
The
shareholder’s equity has been decreasing at a fluctuating rate. As of 2007, the
percentage difference is very low.

·
The
long term liabilities of the company almost double from 2004 to 2005 then fell
sharply; only to rise again in 2007.

·
The
current liabilities fell sharply in 2005, and then increased steadily.

·
From
the vertical analysis, we can see that the proportion of non-current assets in
the total assets of the company has increased from 2004 to 2007.

·
The
proportion of shareholder’s fund has decreased compared to the liabilities of
the company.

Conclusions
based on the horizontal and vertical analysis:

·
The
current liabilities have been increasing at a rate faster than that of the
current assets. So, this is bad for the company because their debt-paying
ability has been decreasing steadily.

·
The
proportion of shareholder’s equities in the total liabilities and equities has
decreased. This is good from the company perspective, but bad for the investors
because now they are getting fewer dividends.

ALLTEX
INDUSTRIES LIMITED

Comparative
Income Statements

June
30, 2006 and 2007

	June 30		Increase or (Decrease) 2007 over 2006		% of sales June 30
	2007	2006	Dollars	Percents	2007	2006
Export/sales	3,247,305,609	2,078,867,152	1,168,438,457	56.21	100.00	100.00
Less: Cost of goods sold	2,720,267,763	1,741,674,948	978,592,815	56.19	83.77	83.78
Gross Profit	527,037,846	337,192,204	189,845,642	56.30	16.23	16.22
Operating expenses	418,165,955	248,018,689	170,147,266	68.60	12.88	11.93
Administrative expenses	65,306,361	40,183,297	25,123,064	62.52	2.01	1.93
Marketing expenses	290,460,654	170,473,851	119,986,803	70.38	8.94	8.20
Agent’s commission on export sales	62,398,940	37,361,541	25,037,399	67.01	1.92	1.80
Profit from operations	108,871,891	89,173,515	19,698,376	22.09	3.35	4.29
Financing charges	61,669,268	45,507,578	16,161,690	35.51	1.90	2.19
Leasing expenses	28,361,520	27,551,340	810,180	2.94	0.87	2.19
Share issue expenses – write off	356,227	356,227	0	0.00	0.01	0.02
Net profit before contribution to WP/W fund	18,484,876	15,758,370	2,726,506	17.30	0.57	0.76
Less: Contribution to WP/W funds	880,232	750,399	129,833	17.30	0.03	0.04
Net profit before taxes	17,604,644	15,007,971	2,596,673	17.30	0.54	0.72
Current tax provision	0	0	0	–
Deferred tax provision	6,830,202	4,642,932	2,187,270	47.11	0.21	0.22
Net profit after taxes	10,774,442	10,365,039	409,403	3.95	0.33	0.50

ALLTEX
INDUSTRIES LIMITED

Comparative
Income Statements

June
30, 2005 and 2006

	June 30		Increase or (Decrease) 2006 over 2005		% of sales June 30
	2006	2005	Dollars	Percents	2006	2005
Export/sales	2,078,867,152	2,179,677,556	-100,810,404	-4.63	100.00	100.00
Less: Cost of goods sold	1,741,674,948	1,842,263,471	-100,588,523	-5.46	83.78	84.52
Gross Profit	337,192,204	337,414,085	-221,881	-0.07	16.22	15.48
Operating expenses	248,018,689	254,515,637	-6,496,948	-2.55	11.93	11.68
Administrative expenses	40,183,297	40,340,207	-156,910	-0.39	1.93	1.85
Marketing expenses	170,473,851	125,354,285	45,119,566	35.99	8.20	5.75
Agent’s commission on export sales	37,361,541	88,821,145	-51,459,604	-57.94	1.80	4.07
Profit from operations	89,173,515	82,898,448	6,275,067	7.57	4.29	3.80
Financing charges	45,507,578	32,814,212	12,693,366	38.68	2.19	1.51
Leasing expenses	27,551,340	32,112,797	-4,561,457	-14.20	1.33	1.51
Share issue expenses – write off	356,227	356,227	0	0.00	0.02	0.02
Net profit before contribution to WP/W fund	15,758,370	17,615,212	-1,856,842	-10.54	0.76	0.81
Less: Contribution to WP/W funds	750,399	838,820	-88,421	-10.54	0.04	0.04
Net profit before taxes	15,007,971	16,776,392	-1,768,421	-10.54	0.72	0.77
Current tax provision	0	0	0
Deferred tax provision	0	0	0
Net profit after taxes	15,007,971	16,776,392	-1,768,421	-10.54	0.72	0.77

ALLTEX
INDUSTRIES LIMITED

Comparative
Income Statements

June
30, 2004 and 2005

	June 30		Increase or (Decrease) 2005 over 2004		% of sales June 30
	2005	2004	Dollars	Percents	2005	2004
Export/sales	2,179,677,556	2,119,877,374	59,800,182	2.82	100.00	100.00
Less: Cost of goods sold	1,842,263,471	1,828,071,623	14,191,848	0.78	84.52	86.23
Gross Profit	337,414,085	291,805,751	45,608,334	15.63	15.48	13.77
Operating expenses	254,515,637	209,728,071	44,787,566	21.36	11.68	9.89
Administrative expenses	40,340,207	37,416,553	2,923,654	7.81	1.85	1.77
Marketing expenses	125,354,285	108,369,554	16,984,731	15.67	5.75	5.11
Agent’s commission on export sales	88,821,145	63,941,964	24,879,181	38.91	4.07	3.02
Profit from operations	82,898,448	82,077,680	820,768	1.00	3.80	3.87
Financing charges	32,814,212	31,976,855	837,357	2.62	1.51	1.51
Leasing expenses	32,112,797	34,656,416	-2,543,619	-7.34	1.47	1.51
Share issue expenses – write off	356,227	356,227	0	0.00	0.02	0.02
Net profit before contribution to WP/W fund	17,615,212	15,088,182	2,527,030	16.75	0.81	0.71
Less: Contribution to WP/W funds	838,820	718,485	120,335	16.75	0.04	0.03
Net profit before taxes	16,776,392	14,369,697	2,406,695	16.75	0.77	0.68
Current tax provision	0	0	0
Deferred tax provision	0	0	0
Net profit after taxes	16,776,392	14,369,697	2,406,695	16.75	0.77	0.68

Observations
from horizontal and vertical analysis:

·
The
total sales of the company showed a decrease from 2005 to 2006, but then
increased tremendously from 2006 to 2007.

·
The
cost of goods sold and the gross margin a similar trend.

·
The
operating expenses have increased enormously over the years.

·
The
net profit increased from 2004 to 2005, then fell in 2006 only to rise again in
2007.

·
The
net profit is a very low percentage of the overall net sales.

Conclusions
based on the horizontal and vertical analysis:

·
The
company has increased in magnitude, but compared to the tremendous increase in
gross margin, the net profit has not risen that much.

·
The
company is not very profitable since a very small fraction of the revenue gets
converted into profits.

These are ratios
that are used to indicate a company’s short-term debt-paying ability.

ü  Current ratio
(Working capital ratio)

The current
ratio indicates the ability of a company to pay its current liabilities from
current assets and thus shows the strength of the company’s working capital
position. It is significant to both short and long term creditors.

Current Ratio= Current Assets ÷ Current Liabilities

Year	2002	2003	2004	2005	2006
Industry	1.18	1.18	1.046	1.094	0.98
Alltex	1.16	1.11	0.98	1.26	0.98

Source: Primary

Source: Primary

–
The
current ratio of Alltex Industries Limited has always been very near to the
industry average over the last 5 years; but has shown a large drop in 2006.

–
The
current ratio showed a peak in 2005. However, in 2006 the ratio went below 1
which means company does not have enough resources at hand to pay of its debts.

ü  Acid-Test ratio
(Quick ratio)

The quick or act
ratio tests a company’s ability to meet short-term obligations without having
to rely on inventory. It determines the immediate debt paying ability of a firm
by using quick assets (cash, marketable securities and net receivables).

Acid-test Ratio = Quick Assets ÷ Current Liabilities

Year	2002	2003	2004	2005	2006
Industry	0.37	0.36	0.424	0.392	0.49
Alltex	0.31	0.18	0.33	0.21	0.68

Source: Primary

–
The
acid-test ratio of the company has been fluctuating over the years. Currently,
the ratio is above the industry average. So, the company is in a slightly better
condition than its competitors.

–
The
ratio has shown an overall increase over the years.

ü  Accounts
receivable turnover

This ratio
roughly measures how many times a company’s accounts receivable has been turned
into cash during the year and determines the quality of accounts receivable.

Account’s Receivable Turnover= Net Credit Sales ÷ Average Net Sales

Year	2002	2003	2004	2005	2006
Industry	5.81	5.108	4.24	5.048	6.09
Alltex	10.76	7.66	11.5	14.56	16.77

Source: Primary

–
The
ratio has been more than double that of the industry average for all the years
except 2003, proving that Alltex is very efficient at collecting receivables.

–
The
accounts receivable turnover has increased steadily.

ü  No. of days
sales in accounts receivable

This ratio tests
the quality of accounts receivable by measuring the average number of days it
takes to collect an account receivable. Shorter collection periods indicate a
higher quality of accounts receivable.

No. of days’ sales in accounts receivable = Number
of Days in a year ÷ Accounts Receivable
Turnover

Year	2002	2003	2004	2005	2006
Industry	79.42	83.16	92.298	116.9	102.21
Alltex	33.94	47.67	31.74	25.07	21.76

Source: Primary

–
The
ratio for the company has remained steadily better than the industry average.
So, the receivables of the company have a high quality.

–
However,
the ratio for the company has decreased steadily.

ü  Inventory
turnover

This ratio
measures the number of times a company’s average inventory has been sold and
replaced during the year and tests whether sufficient volume of business is
being generated relative to inventory.

Inventory Turnover = Cost of Goods Sold ÷ Average Inventory

Year	2002	2003	2004	2005	2006
Industry	3.27	3.25	3.7475	3.43	4.03
Alltex	3.52	2.87	4.28	4.89	4.17

Source: Primary

–
The
inventory turnover remained above the industry average for all the years except
2002. This shows that the company has been very efficient inventory handling.

–
The
ratio shows an increase over the years.

ü  No. of days of
inventory turnover

This ratio
measures the number of times a company’s average inventory has been sold and
replaced during the year and tests whether sufficient volume of business is
being generated relative to inventory.

No. of days of inventory turnover = Number of Days
in a year ÷ Inventory Turnover

Year	2002	2003	2004	2005	2006
Industry	115.87	121.69	117.05	175.71	110.53
Alltex	103.69	127.18	85.28	74.64	87.52

Source: Primary

–
Alltex
Industries is in a better position compared to the industry averages.

–
The
company has been steadily improving in this aspect.

ü  Total assets
turnover

This ratio shows
the relationship between the dollar volume of sales and the average total
assets used in the business. The ratio measures the efficiency with which a
company uses its assets to generate sales.

Total Assets Turnover = Net Sales ÷ Average Total Assets

Year	2002	2003	2004	2005	2006
Industry	0.78	1.25	0.44	1.114	0.68
Alltex	1.51	1.27	1.12	1.3	1.04

Source: Primary

Source: Primary

–
The
total assets turnover of Alltex Industries has been very high over the last 5
years as compared to the industry.

–
It
has been declining over the years. So, even though the company is efficient
according to industry standards, the efficiency has been decreasing.

These ratios
show the relationship between debt and equity financing in a company.

ü  Equity ratio

The equity ratio
indicates the proportion of total assets provided by the stockholders on any
given date.

Equity Ratio = Stockholders’ Equity ÷ Total Assets (or total equities)

Year	2002	2003	2004	2005	2006
Industry	0.40	0.42	0.370	0.3138	0.31
Alltex	0.74	0.72	0.39	0.42	0.35

Source: Primary

Source: Primary

–
The
equity ratio of the company has been high throughout the 5 years. It has
remained above the industry throughout.

–
However,
it has shown a steady decrease over the years. A high equity ratio is good for
the creditors since more funds are existing to pay off debts in case of
bankruptcy.

ü 
Debt to Equity Ratio (Stockholder’s Equity to Debt
ratio):

This ratio
measures the amount of assets being provided by stockholders for each dollar of
assets being provided by creditors.

Debt to Equity Ratio = Stockholders’ Equity ÷ Total Debt

Year	2002	2003	2004	2005	2006
Industry	0.27	0.37	0.47	0.64	0.56
Alltex	0.34	0.24	0.55	0.39	0.58

Source: Primary

–
The
company situation for this ratio is near to the industry average.

–
The
debt to equity ratio for the company has increased in recent years. This is not
good for the investors since this means that the creditor’s holding interest in
the business has increased.

Profitability is
an important criterion for evaluating a company’s operating success. The two
main aspects under consideration are the company’s ability to recover costs and
expenses earn income on assets employed.

ü  Rate of return
on operating assets

The rate of
return on operating asset ratio is designed to show the earning power of a
company relative to its operating assets. This ratio measures the profitability
of a company on carrying out its primary business functions by excluding both
non-operating income and non-operating assets from the calculation.

Rate of return on operating assets = Net operating
income ÷ Operating assets

Year	2002	2003	2004	2005	2006
Industry	0.40	0.42	0.370	0.3138	0.31
Alltex	0.04	0.02	1.78	0.06	0.06

Source: Primary

–
The
rate of return on operating assets is very low compared to the industry
averages. So, the company is quite inefficient at carrying out its business
function.

–
The
ratio showed an increase in 2005 but overall has not changed much.

ü  Return on sales
ratio (Net income to net sales ratio)

This ratio
measures the proportion of the sales dollar that remains after all expenses
have been deducted.

Return on sales = Net income ÷ Net sales

Year	2002	2003	2004	2005	2006
Industry	0.35	0.03	0.379	0.023	0.12
Alltex	0.02	0.04	0.68	–	0.01

Source: Primary

–
The
company has always been under the industry average except for the year 2004.

–
The
return on sales ratio for the company has shown a very fluctuating value. The highest
value occurred in 2004 while the lowest value in 2006. This shows that the
company is very unprofitable at the moment.

ü  Return on
equities (ROE)

This is a very
significant measure of the income producing ability of a company. For
stockholders, this is the one of the most important ratios because this ratio
tells the income generated per taka of investment.

Return on Equity = Net Income ÷ Average Common Stockholder’s Equity

Year	2002	2003	2004	2005	2006
Industry	0.06	0.07	0.22	0.045	0.05
Alltex	0.05	0.027	0.020	0.016	0.021

Source: Primary

Source: Primary

–
The
ROE ratio of the company has always remained below the industry average.

–
The
value of the ROE ratio has remained constant throughout the years.

ü  Earnings per
share (EPS)

The earning per share is the
most widely used measure of a company’s operational success. It is very
important to the investors since it indicates how much they can earn on each
share. The EPS usually plays a major role in determining the market price of a
share.

EPS = Earnings Available to Common Stock ÷ Weighted Average Number of Common Shares
Outstanding

Year	2002	2003	2004	2005	2006
	8.54	7.65	5.96	5.93	7.03
Alltex	6.85	4.20	3.00	3.5	3.13

Source: Primary

Source: Primary

–
The
EPS value of the company has always remained below that of the industry
average.

–
The
EPS of the company has shown a declining rate over the years. It rose slightly
in 2004 but fell again in 2006. As such, it is not a very attractive figure to
potential investors since that they will not get sufficient returns compared to
their investment.

Market Tests
help investors and potential investors assess the relative merits of a
company’s stock in relation to stocks of other companies.

ü  Dividend yield

This ratio helps
investors decide whether a share is underpriced or overpriced.

Dividend Yield =
Dividend per Share of Common Stock ÷ Current Market Price per Share of Common
Stock

Year	2002	2003	2004	2005	2006
Industry	4.24	4.00	0.095	0.08	0.10
Alltex	0.07	–	0.14	0.1	0.14

Source: Primary

–
The
dividend yield of the company has been close to the industry average
throughout. This is good for the investors since the company can pay more to
its shareholders.

–
The
ratio has doubled compared to 2002.

ü  Cash flow per
share

The cash flow
per share of common stock ratio can be used to judge a company’s ability to pay
liabilities and dividends.

Cash Flow per Share = Operating Cash Flow ÷ Current Market Price per Share of Preferred
Stock

Year	2002	2003	2004	2005	2006
Industry	11.37	14.26	24.185	24.0625	25.51
Alltex	15.45	30.26	62.64	67.88	68.97

Source: Primary

–
The
cash flow per share is very high compared to the industry average. This is very
attractive to investors since the company has a good ability of paying
liabilities and dividends.

–
The
ratio of the company has increased more than 4 times in the last 5 years.

ü  Price earning
ratio

This ratio shows
the proportion of earnings that is paid out as dividends among the shareholders
and also indicates the proportion of earnings that are reinvested in the
company.

Price earnings ratio = Current market price per
share of common stock ÷ EPS

Year	2002	2003	2004	2005	2006
Industry	9.94	12.42	0.1925	7.42	12.63
Alltex	9.97	15.71	0.22	0.2	17.80

Source: Primary

–
The
price earnings ratio has been fluctuating. In 2006, the ratio is well above the
industry average. This is not a good sign for investors since the stock is
selling at a very high price compared to its earnings.

–
Overall,
the ratio has almost doubled in the last 5 years.

Balance Sheet

As on June 30	2002	2003	2004	2005	2006
ASSETS
Non-current/fixed assets	100.00	113.06	110.10	110.81	116.58
Current assets	100.00	86.78	106.24	81.46	111.43
TOTAL ASSETS	100.00	99.63	108.12	95.81	113.95
EQUITIES & LIABILITIES
	100.00	101.08	102.21	97.89	97.48
Long-term liabilities	100.00	98.29	70.20	152.63	107.96
Current liabilities & provisions	100.00	98.71	126.24	75.04	131.39
TOTAL EQUITIES & LIABILITIES	100.00	99.63	108.12	95.81	113.95

Source: Primary

Visible trends
in the balance sheet:

·
The
non-current assets have shown a steady increase from 2002 to 2006.

·
The
current assets fluctuated heavily. It decreased in 2003 and 2005 but increased
in 2004 and 2006.

·
The
total assets of the company follow the trend of the current assets.

·
The
percentage of shareholder’s equities in the total liabilities of the company
has declined steadily over the years.

·
The
long-term liabilities decreased from 2002 to 2004. It increased massively in
2005 but again fell in 2006.

·
The
current liabilities follow a similar trend to current assets.

·
The total equities and liabilities
decreased in 2003 and 2005 but increased again in 2004 and 2006.

 Source: Primary

Evaluation:

·
The
company has shown an overall increase in magnitude of operations.

·
The
liquidity of the company has decreased.

·
The
proportion of shareholder’s funds in the total equities has decreased, so
shareholders will get lesser proportionate dividends.

Income Statement

As on June 30	2002	2003	2004	2005	2006
Export/sales	100.00	80.07	143.68	147.73	140.90
Cost of goods sold	100.00	78.28	138.46	139.54	131.92
Gross Profit	100.00	95.37	188.13	217.53	217.39
Operating expenses	100.00	98.68	319.80	388.09	378.19
Profit from operations	100.00	92.94	91.68	92.59	99.60
Non-operating expenses	100.00	112.84	121.80	118.70	133.49
Net profit before taxes & contributions	100.00	61.23	43.69	51.01	45.63

Source: Primary

Visible trends
in the income statement:

·
The
net sales of the company showed a decline in 2003, but after that it showed an
increase steadily. The highest net sales were achieved in 2005, but after that
it fell again.

·
The
cost of goods sold followed the same pattern as the net sales with a peak in
2005. After that, the company saw a decrease again in 2006.

·
The
gross profit of the company has shown a tremendous increase which is more than
double the base year amount.

·
The
expenses of the company (both operating and non-operating) has shown even
greater increase compared to the gross margin.

·
The
net profit before taxes for the company has shown a sharp decline over the
years. From 2002 to 2004, the value fell; then rose slightly in 2005 only to
decrease again in 2006. In 2006, this value is even less than half of the base
year value.

Source: Primary

Evaluation:

·
A
quantum rise in expenses as opposed to the revenues speaks of inefficiency in
the company.

·
The
net profit of the company is steadily declining despite the increase in
revenues. This bodes ill prospects for the future.

Based on the analysis
of the financial statements of the Alltex Industries Limited, it can be
observed that the company has grown in size. The report has shown that compared
to the performance of the textile industry (comprised of the five chosen
companies), Alltex Industries Limited has been performing on an ordinary level
from the perspective of a stockholder.

The liquidity
ratios show that the company has been showing a declining liquidity when compared
to the industry. The equity ratios show long-term stability of the company. So,
even though the company long-term solvency, it does not have short-term
liquidity. Also, the market tests tell us that the shares are being transacted
at a price much higher than what it is actually earning.

The
profitability ratios are not satisfactory either. The Earnings Per Share (EPS)
is very low compared to other companies. This could be a possible result of the
huge rise in operating expenses. Also, the net profit of the company has been
steadily declining over the years.

Hence, it can be
concluded that Alltex Industries Limited is not in a good position at the
moment. It has to address some of its inefficiency issues otherwise it could
lose investors in the future. From a prospective shareholder’s point of view,
it is not very suitable to invest in the company.