CHAPTER ONE
INTRODUCTION
Bangladesh Jute Mills Corporation (BJMC), the sole jute mills
conglomerate of the govt.
of
significant role for the jute market here and abroad. It plays an important role for the economic
development of
BJMC acts as a commercial consideration with due regard to the interest of
industry, commerce, depositors, and investors and to the public in general. As
an investment bank BJMC plays a vital role in the economic development process
of the country. To play this vital role effectively as well as for providing better
customer services to clients, adequate disclosure of information is necessary
and to what extend to what extend BJMC in Bangladesh should disclose the
required information is a matter of deep concern.
Objectives of the Report-
The main objectives of education are to acquire the knowledge. To acquire
the knowledge ultimately we must do some practical applications in addition to
theoretical knowledge. Thus the following are the important objectives:
(i) Acquiring experience
that will help in future working life.
(ii) To get aware about the
working environment in advance that will
help to adjust us with
the future working life.
(iii) To know the activities
of the BJMC.
(iv) To know how BJMC play an
important role in the Jute market.
(v) To
know the contribution of BJMC to the Gross Domestic Product.
(vi) To
know the association of BJMC with other macro economic
Variables.
(Vii) To
evaluate the trend growth rate and acceleration of
Industrialization.
(Viii) To
get overall idea about the operation of BJMC.
Methodology
of the study:
In order to prepare the assigned
project paper I have collected necessary
information from three types of
sources as follows.
a. Primary
sources of information.
b. Secondary
sources of information and
c. Statistical
sources
a.
Primary sources of information:
I have collected primary information
from various sources which are given bellow:
1. Direct interviews
III.
Official records
b. Secondary information:
I
have collected secondary Information from various sources which are given
bellow-.
(I)
Annual reports of selected mills of BJMC.
(II)
Materials & document of BJMC.
(III
General Information
(IV)
Bureau of Statistics; and
c. Statistical information:
I
have collected statistical information from various sources which are given
bellow:
I. Graphical presentation,
II. Growth rate and
III. Trend analysis.
For
some certain causes I could not afford to conduct my study properly. I have
considered these causes as my limitation of the study which are follows-.
I. The authority did not provide us some
significant information because of their internal confidentiality.
II.
Political instability such as
hartal during our internship.
VII. The individual department does not
maintain any summary of their work..
IX. BJMC is a large institution and it is
very difficult to understand each and
every aspect of its operation within a very short time.
Chapter Two
Overview of BJMC and its three selected
mills
Background of Jute industry
Jute
was the principal cash crop of
Considering the importance of Jute. to the national economy, the Ministry of Jute
(now defunct and merged as
was created in 1976 as a separate ministry through elevating the Jute Division.
is the only country in the world having an exclusive ministry to look after the
cause of jute.
In
the past, jute sector was the major foreign exchange earner, contributing more
than 80 percent of the total foreign exchange of the country. But the share of
jute sector towards foreign exchange earning started to decline due to the
inroad of various synthetic substitutes and artificial fibers. Nevertheless,
the importance of Jute in the national economy of
overemphasized, as it is still the third important source of foreign exchange.
Jute is the major cash crop of the country and about 3-3.5 million farmers are
associated with production of Jute. Almost one fifth of the total population of
the country is directly or indirectly involved in Jute production,
transportation, processing and marketing. The jute sector provides about 10 per
cent of total employment in the economy.
The
Ministry of Jute is responsible for overall development of the jute sector. As
per the work distributions, the following are the functions of the ministry of
Jute:
* Jute policy.
* Administration of Jute Ordinance.
* Internal and external marketing of
jute.
* Determination and control of prices of
raw jute and jute goods and export price checks.
* Collection and publication of
statistics in respect of jute production, jute marketing and export thereof.
* Coordination and monitoring export of
jute and related matters.
* Formulation and administration of Jute industry’s policy.
* Collection and publication of
statistics in respect to the jute industry, production and exports, etc.
* Promotion and development of foreign
investment in jute industries and employment of foreigners in Jute industry and
trade.
* Correspondence, contracts and
agreements with international organization and other countries for technical
cooperation and assistance and promotion of Jute industry.
* Regulation and control of the standard
and quality of jute products in the Jute industry.
* Determination of the requirements of
spare parts and raw materials for Jute industries and reviewing- the -idling,
policies thereof
* Research on and development of Jute
industry.
* Administration of loan and government
subsidy to Jute industry.
* Fixation and control of price of jute
goods.
* Protection of
in Jute mills abroad.
* Collaboration in establishment of jute
industry with foreign countries.
* Super-vision and regulation of dealing
in jute and jute manufactures.
* Agreement for transports and shipments
of jute and jute manufactured within the country and to foreign countries.
* Regulation and issue of licenses to
dealers in or exporters of jute and jute manufactures and occupiers of jute
mills and if necessary, suspension and cancellation of such license,
* No matters, relating to jute and jute
products.
* Secretariat administration including
financial matters.
* Administration and control of
subordinate offices and organizations under this Ministry.
* Liaison with international
organizations and matters relating to treaties and agreements with other
countries and world bodies relating to subjects allotted to this Ministry.
* All laws on subjects allotted to this
Ministry.
* Inquiries and statistics on any of the
subjects allotted to this ministry.
* Fees in respect of any of the subjects
allotted to this ministry except fees taken in courts.
Information Chart on Jute Goods for the
Last 5 Years:
(Volume
in thousand MT)
Year |
Production |
Internal |
|
11997-98 |
544 |
102 |
354(65%) |
9358.2 $205,872 |
1998-99 |
516 |
93 |
440(85%) |
11296.9 $235.037 |
||||
1999-2000 |
498 |
93 |
414(85%) |
11330.7 $225.212 |
||||
2000-2001 |
483 |
87 |
426(88%) |
12040.1 $233.133 |
||||
2001-2002 |
536 |
81 |
42 |
1260 $219.999 |
||||
2002-2003 |
548 |
80 |
423(82%) |
12846.50 $221.483 |
the Ministry of Jute:
of Jute*.
Jute Mills Corporation (BJMC)
Jute Corporation (BJC)
Diversification Promotion Centre (JDPC)
(BJMA)
Association (BJSA)
Department of Jute is relatively a new establishment, which was set up in
through Merger of the then Directorate of jute and Directorate of Inspection
Jute and Jute Goods. The functions and responsibilities of the directorate are
as
control measures in accordance with the Jute Growers’ (Borders Areas) Act 1974.
the businessmen engaged in illegal trading of Jute and jute goods without trade license and punish them as
per the existing rules.
revenue from issuance and renewal of license in trading of jute and jute goods.
and evaluate quality of jute goods produced by the Jute mills.
standard testing methods of jute mills.
the jute mills in the inspection and maintaining quality control aspects.
audit of annual stock of jute and Jute goods and maintain it for use by concerned agencies.
(BJMC) was established as a statutory body under the Presidential Order 27 of
order, the overall operation, management, maintenance and future development
agenda of all the jute mills of
under private ownership and erstwhile East Pakistan Industrial Development
Corporation (EPIDC) were placed under BJMC.
organization were to run the jute mills under a single organization and to
expand the industry towards augmenting foreign exchange earning from jute goods.
At the time of nationalization, there were a total of 77 jute mills in the
country. But subsequently, it was evident that the nationalization attempt did
not really help improve the performance of the jute mills. Rather, their
performance marked continuous deterioration, which called for the necessity of
privatization of Jute industry of the 77 nationalized jute mills, 35 mills were
transferred to their original owners in between 1982-1983, leaving the rest to
continue under BJMC. Presently BJMC has an installed loom capacity of over
13,000 of which around 70-75 % remain in operation.
200-250 thousand metric tons of jute goods
are exported fetching about Tk. 6000 million on an annual basis. The products
are mainly Hessian, Sacking, CBC, Carpets, Mats, Felts, Yarn/Twine, etc. The
non-traditional product range includes natural, Bleached and Colored Finer Jute
Fabric (FJF) and products thereof, such as decorative fabric, household items, carry bags, fashion bags, purses and
other consumer items, BJMC also produces Food-Grade Jute Bags, Jute
Intermediate Bulk Container (JIBC), Geo-jute (Soil saver), and various rot
proof fabrics, sacks and sheets.
BJMC products during the last 5 years are as follows:
Year |
Production (in.000 |
(in |
(in |
1997-98 |
255 |
160 |
4620 |
1998-99 |
236 |
220 |
5614 |
1999-00 |
235 |
202 |
5411 |
2000-01 |
246 |
223 |
5996 |
2001-02 |
249 |
217 |
6474 |
12002-03 |
252 |
220 |
6528 |
BJMC / MIS)
Liquidated)
was established in 1985 thought merger of the erstwhile Jute Marketing
Corporation (JMC), Jute Trading Corporation (JTC), Bangladesh Jute Exporting
Corporation (BJEC) and APC Rally to conduct jute-trading activities on a
commercial basis both in domestic and international market under public sector.
The operation and management of the organization was vested on a management
board headed by a Chairman and assisted by, among others, three regular
directors and two directors nominated by the Ministry of Jute and Ministry of
Finance.
incurred by the organization, the government decided to abolish the same
through liquidation of its physical assets spreading over various parts of the
country through competitive bidding. Although started much earlier, the
progress of disposal of the assets is very slow as yet. The details of assets
of BJC and the progress of liquidation are as follows:
Bangladesh has set up Jute Diversification Promotion Centre (JDPC) through an
Office Memorandum on
October, 2002
reviving the past glory of Jute as “Golden Fiber” through extension
of uses of Jute by vertical and horizontal diversification and thereby
improving the socio-economic conditions of the all section of people involved
directly and indirectly with the Jute Sector. The major objectives of the
Centre are as follows
technologies for production of high value added diversified Jute products by
maintaining, close contact with various R & D organizations and by way of
conducting feasibility studies, surveys etc. and disseminate those to the
prospective entrepreneurs,
policies for diversification of jute, goods on a continuous basis.
identified diversified projects.
diversified products both at home and abroad.
manufacturing high value added diversified jute products in the existing
“jute mills and if possible, promote and provided support for it.
diversified products and of projects submitted to the JDPC.
Jute projects. The Jute Diversification Promotion Centre (JDPC) is comprised of
the following three sections-
feasibility section,
project areas so far identified for establishing diversified Jute industries
with the help of JDPC and private entrepreneurs’.
Treatment of Jute for Dezincification.
Spinning of Jute Blended Yarns.
Yarn Spinning of Jute Blended with other Fibers.
Wet Processing Plant.
Reinforced Plastics Granules.
Jute Bags for Tea Packaging.
Jute Products.
Spinning Technology.
Substitute from Jute. Sliver.
Technology.
going on both nationally and internationally through constant contact with
R&D organizations like BJRI, BCSIR, URIA, IFIH, IJSG etc. Moreover various
information about wet processing technologies is available for ready reference.
different Banks for sanctioning loans. Out of those, 2 projects designed for
producing Jute blended fine yam and linoleum have been sanctioned with loans
and implementation of one of the projects is nearing completion. Two other
diversified pr Jests Outer blended denim and Jute blended yam) are in the
process of granting loans by the Bank. Two other diversified projects aiming,
at producing blanket and fine yarn for household textiles are under active
considerations of the JDPC. Other prospective entrepreneurs, who are lacking
zeal and enthusiasm, are under scrutiny and continuous touch of the JDPC and
different commercial banks. However, at the same time the JDPC is looking for
new entrepreneurs.
Related Private Associations
owners of the private Jute mills operating in the country. The organization was
created for sharing the problems and prospects in running the Jute mills under
private sector smoothly. There are 35 Jute mills under the organization having
a bristled loom capacity of more than 10 thousand. But for various reasons, 10
jute mills are currently running with 25 percent of the installed loom in
operation. Having more than 40 percent of the loom capacity in case of
composite mills, BJMA mills are contributing20-25 of the total production of
the traditional jute goods. The BJMA produces about 60-70 thousand metric tons
of jute goods annually, of which 50-60 percent is exported, earning about Tk
1300-1400 million in foreign exchange on an annual basis. The products are
mainly Hessian, sacking and CBC.
years are as follows:
Year |
Production (in thousand MT) |
Actual Export(in thousand MT) |
Export earnings in million taka (in |
1997-98 |
154 |
76 |
2209.0(48.60) |
1998-99 |
132 |
79 |
2011.6(41.84) |
1999-2000 |
104 |
68 |
1904.6(37.86) |
2000-2001 |
82 |
43 |
1344.2(24.91) |
2001-2002 |
72 |
40 |
1362.50(23.79) |
2002-2003 |
75 |
43 |
1564.84(25.68) |
started activities in 1950 and was registered in 1959 in the name of ‘Pakistan
Jute Association’. After the emergence of
it has become
jute association (BJA).
promote and protect the Jute Trade in
commercial interests in every sphere of the jute trade of
of persons engaged in the jute trade in
connected with or affecting, the jute trade.
other matters affecting the jute trade.
To collect and circulate statistics and other information relating to
the jute trade. To make adjustment if
controversies arise between members of the Association, To arbitrate and settle the disputes arising
out of the commercial transactions of all kinds and grades of raw jute referred
to the Association by the buyers’ sellers (both at home and abroad). To establish Just and equitable principles in
the jute trade.
to simplify and facilitate transaction of business in jute.
THE CRESCENT JUTE MILLS LTD., Situation- It established in town khalishpur,
58.40 Acres
CRESCENT JUTE MILLS LTD. is a prestigious mill of the Bangladesh Jute Mills
Corporations (BJMC). It has five units
as under:
Unit |
No. |
Types |
Established |
1. |
506 |
Narrow |
1953 |
2. |
200 |
Narrow |
1956 |
3. |
100 |
Broad |
1970 |
4. |
10 |
Premier |
2002 |
5 |
20 |
Looms |
2003 |
as on
[ |
Set |
Existing |
Short |
Excess |
a. |
170 |
131 |
39 |
0 |
b. |
445 |
378 |
67 |
0 |
Total |
615 |
509 |
106 |
0 |
c. |
|
|
|
|
i) ii |
4734 0 |
3536 2073 |
1198 0 |
0 |
Grand |
5469 |
5604 |
1304 |
0 |
mills own general workshops. The rest quantities are purchased from local
market or imported from foreign market.
Union: There are four registered trade unions in the mill compound as
under-.
Jute Mills Sramik Shangha Registered No. 190
Jute Mills Sramik Parishad Registered No. 145.
Parishad Registered No.
been elected as Collective Bargaining Agent (CBA) through election for a period
of two years.These unions maintained good relation with the mill’s management.
In most cases, the leaders trade union play constructive role to improve the
performance of the mill.
Types of Employee |
Family Accommodation |
Bachelor Accommodation |
II. Officers |
53 |
29 |
|
|
|
11I, Staffs |
35 |
54 |
|
|
|
III Workers |
4 |
1660 |
|
|
|
Total |
92 |
1743 |
|
|
|
is run by mill’s management, which extends free education to children of
workers, staffs and officers.
workers for entertainment. The working environment o f the mill is
satisfactory. If the manufactured goods Could be marketed in time at a good
competitive price the mill would be viable.
there are used the manual accounting system. All the document of the accounts
and audit section are maintained on the basis of manual accounting system even
section of Management Information System. Manual based accounting system is not
converted into the computer based accounting because of various reasons which
are~
Lack of skilled manpower.
of financial resources.
of willingness of the general manager and also employee to change the accounting system of organization.
of the leader of trade union.
the ancient method. They prepare all document and even financial statement
through the typewriter and also the hand writing rather than computer-based
system. There is no changed o f recording system of BJMC after the liberation
of
As a result, documents of BJMC are stored in a room for the purposes of future
needs. If accounting system is computer based there are many benefit on behalf
of organization, which are~
the employee of TCJML.
the skilled manpower.
reduce the time consumption.
reduce the costs of recording document.
is no need of physical storage room.
To make financial statement easily
Rajshshi Jute mills Limited. Situation- It established at SHYMPUR in RAJSHAHI
Jute Mills Limited is a prestigious mill of the Bangladesh Jute Mills
Corporations (BJMC). It has five units
as under
Unit |
No. |
Types |
Established |
1. |
385 |
Narrow |
1953 |
2. |
113 |
Narrow |
1956 |
3. |
58 |
Broad |
1970 |
4. |
5 |
Premier |
2002 |
5 |
15 |
Looms |
2003 |
[ |
Set |
Existing |
Short |
Excess |
a. |
105 |
95 |
24 |
0 |
b. |
340 |
278 |
62 |
0 |
Total |
395 |
209 |
86 |
0 |
c. |
|
|
|
|
i) ii |
2120 0 |
1006 2073 |
2564 0 |
0 |
Grand |
|
|
|
0 |
21862 million ton and 7359 million ton per day for the financial year
2004-2005. The mill runs three shifts (A, &C), in mill inside and two in
factory side. The mill produces mainly Hessian , Sacking and Carpet Backing
Cloth (CBC) and all types of bags.
quantities are purchased from local market or imported from foreign market.
marketing division. 90% of the finished goods are exported to foreign countries
and rests 10% are sold all over the country.
Registered No. 23.
Registered No. 106.
Registered No. 1515.
Parishad Registered No. 1248.
been elected as Collective Bargaining Agent (CBA) through election for a period
of two years. These unions maintained good relation with the mill’s management.
In most cases, the leaders trade union play constructive role to improve the
performance of the mill.
free medical facilities or treatment form its medical center to workers, staff,
officers and their family members.
Officers
Staffs
Workers
are canteens where form workers are supplied with food and breakfast at
subsidized rate.
which extends free education to children of workers, staffs and officers.
mill has separate clubs for officers, staffs and workers for entertainment.
there are used the manual accounting system. All the document of the accounts
and audit section are maintained on the basis of manual accounting system even
section of Management Information System. Manual based accounting system is not
converted into the computer based accounting because of various reasons which
are:
Lack of skilled manpower.
of financial resources.
manager and also employee to change the accounting system of organization.
of the leader of trade union.
the ancient method. They prepare all document and even financial statement
through the typewriter and also the hand writing rather than computer-based
system. There is no changed o f recording system of BJMC after the liberation
of
As a result, documents of BJMC are stored in a room for the purposes of future
needs. If accounting system is computer based there are many benefits on behalf
of organization, which are:
the employee of RJM.
the skilled manpower.
reduce the time consumption.
reduce the costs of recording document.
is no need of physical storage room.
make financial statement easily.
Situation: It established at atra in khulna
prestigious mill of the Bangladesh Jute Mills Corporations (BJMC). It has five
units as under
Unit No. |
No. of Machinery |
Types of Machinery |
Established |
1. |
292 |
1973 |
|
2. |
159 |
Narrow looms |
1973 |
3. |
67 |
Broad looms |
1980 |
4. |
8 |
Premier Lamination plant |
2002 |
5 |
10 |
Looms Associate ABC |
2003 |
[ Types |
Set up |
Existing |
Short |
Excess |
a. Officers |
110 |
102 |
18 |
0 |
b. Staffs |
310 |
202 |
28 |
0 |
Total |
410 |
304 |
56 |
0 |
c. Workers: |
|
|
|
|
i) Permanent ii Badli |
1150 0 |
788 558 |
962 0 |
0 |
Grand -Total |
|
|
|
0 |
budget of 5862 million ton and 959 million ton per day for the financial year
2004-2005. The mill runs three shifts (A-B&C), in mill inside and two in
factory side. The mill produces mainly Hessian -, Sacking and Carpet Backing
Cloth (CBC) and all types of bags.
quantities are purchased form local market or imported form foreign market.
Union: There are four registered trade unions in the mill compound as
under-.
796.
Mills Sramik Kallayan Parishad Registered No.196.
been elected as Collective Bargaining Agent (CBA) through election for a period
of two years. These unions maintained good relation with the mill’s management.
In most cases, the leaders trade union play constructive role to improve the
performance of the mill.
Types of Employee |
Family Accommodation |
Bachelor Accommodation |
I. |
44 |
22 |
|
|
|
II. |
35 |
54 |
|
|
|
III. |
4 |
1021 |
|
|
|
Total |
83 |
1097 |
|
|
|
are canteens where form workers are supplied with food and breakfast at
subsidized rate.
which extends free education to children of workers, staffs and officers.
mill has separate clubs for officers, staffs and workers for entertainment.
there are used the manual accounting system. All the document of the accounts
and audit section are maintained on the basis of manual accounting system even
section of Management Information System. Manual based accounting system is not
converted into the computer based accounting because of various reasons which
are~
of willingness of the general manager and also employee to change the
accounting system of organization.
union.
the ancient method. They prepare all document and even financial statement
through the typewriter and also the hand writing rather than computer-based
system. There is no changed o f recording system of BJMC after the liberation
of
As a result, documents of AJML are stored in a room for the purposes of future
needs. If accounting system is computer based there are many benefits on behalf
of organization, which are:
the employee of AJML.
the skilled manpower.
reduce the time consumption.
reduce the costs of recording document.
is no need of physical storage room.
make financial statement easily
involves evaluating three characteristics of a company: its liquidity, its profitability and its solvency. A short-term
creditor, such as a bank, is primarily interested in the ability of the
borrower to pay the obligations when they come due. The liquidity of a borrower
is extremely important in evaluating the safety of a loan. A long-term
creditor, such as a bondholder however looks to profitability and solvency
measures that indicate the company’s ability to survive over a long period of
time. Long-term creditors consider such measures as the amount of debt in the
company’s capital structure and its ability to meet interest payments.
Similarly, stockholders are interested in the profitability and solvency of the
company. They want to assess the likelihood of the dividend and the growth
potential of the stock.
statement has significance. When a company reports cash of $120 million on its
balance sheet, we know the company had that amount of cash on the balance sheet
date. But, we do not know whether the amount represents an increase over prior
years, or whether it is adequate in relation to the company’s cash. To obtain
such information, it is necessary to compare the amount of cash with other
financial statement data.
of different bases. Three are illustrated in this chapter.
basis compares an item or financial relationship within a company in the
current year with the same item or relationship in one or more prior years. Intercompany
comparisons are useful in detecting changes in financial relationships and
significant trends.
basis compares an item or financial relationship of a company with industry
averages (or norms) published ratings organizations. Comparisons with industry
averages provide information as to a company’s relative performance within the
industry.
compares an item or financial relationship of one company with the same item or
relationship in one or more competing companies. The comparisons are made on
the basis of the published financial statements of the individual companies. Intercompany
comparisons are useful in determining a company’s competitive position.
the significance of financial statement data. Three commonly used tools are
these:
of financial statement data over a period of time.
statement data by expressing each item in a financial statement as a percent of
a vase amount.
among selected items of financial statement data.
in intra-company comparisons. Two features in published financial statements
facilitate this type of comparison: First, each of the basic financial
statements is presented on a comparative basis for a minimum of two years.
Second, a summary of selected financial data is presented on a comparative
basis for a minimum of two years or more. Vertical analysis is used in both
intra and intercompany comparisons. Ratio analysis is used in all three types
of comparisons.
explain and illustrate only ratio analysis because it covers the previous two
analyses i.e. the horizontal analysis and vertical analysis.
relationship among selected items of financial statement data. A ratio
expresses the mathematical relationship between one quantity and another.
of financial analysis. It is defined as the systematic use of ratio to
interpret the financial statements so that the strengths and weaknesses 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 or variables. The relationship is expressed in
terms of a percentage, a rate, or a simple proportion.
statements, ratios can be used to evaluate liquidity, profitability, and
solvency. Ratios can provide clues to underlying conditions that may not be
apparent from individual financial statement components. However, a single
ratio by itself is not very meaningful. Accordingly, in the discussion of
ratios we will use the following types of ratios.
in the fact that it presents facts on a comparative basis and enables the
drawings of inferences regarding the performance of a firm. Ratio analysis is
relevant in assessing the performance of a firm in respect of the following
aspects.
conclusion can be drawn regarding the liquidity position of a firm. The
liquidity position of a firm would be satisfactory if it is able to meet
current obligations when they become due. This ability is reflected in the
liquidity ratios of a firm. The liquidity ratios are particularly useful in
credit analysis by bands and other suppliers of short-term loans.
for assessing the long-term financial viability of a firm. This aspect of the
financial position of a borrower is of concern to the long-term creditors,
security analysts and the present and potential owners of a business. The
long-term solvency is measured by the leverage and profitability ratios, which
focus on earning power and operating efficiency.
of the ratio analysis, relevant from the viewpoint of management, is that it
throws light on the degree of efficiency in the management and utilization of
assets.
are interested in one aspect of the financial position of a firm, the
management is constantly concerned about the over-all profitability of the
enterprise.
light on the financial position of a firm but also serves as a stepping stone
to remedial measures. This is made possible due to inter-firm, comparison with
industry averages. A single figure of particular ratio is meaningless unless it
is related to some standard or norm.
firm to take the time dimension into account. In other words, whether the
financial position of a firm is improving or deteriorating over the years. This
is made possible by the use of trend analysis.
can be classified, for purposes of exposition, into three broad groups:
Liquidity ratios
short-term ability of the enterprise to pay its maturing obligations and to
meet unexpected need for cash. Short-term creditors such as bankers and
suppliers are particularly interested in assessing liquidity. The ratios can
short-term debt-paying ability are the current ratio, the acid test ratio, the
current cash debt coverage ratio, receivables turnover, and inventory turnover.
measure for evaluating a company’s liquidity and short term debt-paying
ability. The ratio is computed by dividing current assets by current
liabilities.
referred to as the working capital ratio because working capital is the excess
of current assets over current liabilities. The current ratio is amore
dependable indicator of liquidity than working capital. Two companies with the
same amount of working capital may have significantly different current ratios.
of liquidity. It does not take into account the composition of the current
assets. For example, a satisfactory current ratio does not disclose the fact
that a portion of the current assets may be tied up in slow-moving inventory. A
dollar of cash would be more readily available to pay the bills than a dollar
of slow-moving inventory.
Ratio =
Liabilities
immediate short-term liquidity. It is computed by dividing the sum of cash,
short-term investments, and net receivables by current liabilities. Thus it is
an important complement to the current ratio.
receivables (net) are highly liquid compared to inventory and prepaid expenses.
The inventory may not be readily saleable, and the prepaid expenses may not be
transferable to others. Thus the acid-test ratio measures immediate liquidity.
ratio =
Liability
acid test ratios is that they use year-end balances of current assets and
current liability accounts. These balances may not represent the company’s
current position during most of the year. A ratio that partially corrects for
this problem is the current cash debt
coverage ratio. It is calculated by dividing net cash provided by operating
activities by average current liabilities. Because it uses net cash provided by
operating activities rather than a balance at a point in time, it may provide a
better idea of a company’s liquidity.
provided by
Cash Debt Coverage Ratio =
be converted to cash. How liquid, for example, are the receivables? The ratio
used to assess the liquidity of the receivables is receivables turnover. It
measures the number of times, on average, receivables are collected during the
period. Receivables turnover is computed by dividing net credit sales (net sales
by cash sales) by the average net receivables. Unless seasonal factors are
significant, average net receivables outstanding can be computed from the
beginning and ending balances of the net receivables.
turnover ratio is to convert it to an average collection period in terms of
days. This is done by dividing the receivables turnover ratio into 365 days.
For example, the receivable turnover of 10.2 times is divided into 365 days to
obtain approximately 35.8 days. This means that receivables are collected on
average every 36 days, or about every 5 weeks. The average collection period is
frequently used to assess the effectiveness of a company’s credit and
collection policies. The general rule is that the collection period should not
greatly exceed the credit term period (the time allowed for payment).
Turnover:
variant of inventory turnover is the average days to sell the inventory. It is
calculated by dividing the inventory turnover ratio by 365 days.
success of an enterprise for a given period of time. Income or lack of it
affects the company’s ability to obtain debt and equity financing. It also
affects the company’s ability to obtain debt and equity financing. It also
affects the company’s liquidity position and the company’s ability to grow. As
a consequence, both creditors and investors are interested in evaluating
earning power – profitability. Profitability is frequently used as the ultimate
test of management’s operating effectiveness.
percentage of each dolor of sales that results in net income. It is computed by
dividing net income by net sales.
margin on sales =
accrual-based ratio, using net income as the numerator. The cash-basis
counterpart is the cash return on sales. It uses net cash provided by operating
activities as the numerator and net sales as the denominator. The difference
between these two ratios relates to differences between accrual-basis
accounting and cash-basis accounting, that is, differences in the timing of
revenue and expense recognition.
Return On Sales =
Turnover =
is return on assets. This ratio is computed by dividing net income by average
assets.
on Assets =
Assets
ratio is return on common stockholders equity. It measures profitability from
the common stockholder’s viewpoint. These ratio shows how many dollars of net
income were earned for each dollar invested by the owners. It is computed by
dividing net income by average common stockholders equity.
preferred dividend requirements are deducted from net income to compute income
available to common stockholders.
on Common
Equity =
stock must be deducted from total stockholders equity to determine the amount
of common stock equity used in this ratio. The ratio than appears as follows
of Return on
Stockholders Equity =
measure of the net income earned on each share of common stock. It is computed
by dividing net income by the number of weighted average common shares
outstanding during the year. A measure of net income earned on a per share
basis provides a useful perspective for determining profitability.
per Share (EPS) =
“net income per share” refer to the amount of net income applicable to each
share of common stock. Therefore, in computing EPS if there are preferred
dividends declared for the period, they must be deducted from net income to
determine income available to the common stockholders
Ratio:
oft-quoted measure of the ratio of the market price of each share of common
stock to the earnings per share. The price-earnings (PE) ratio reflects
investors’ assessments of a company’s future earnings. It is computed by
dividing the market price per share of the stock by earnings per share.
ratio =
Ratio:
percentage of earnings distributed in the form of cash dividends. It is
computed by dividing cash dividends by net income. Companies that have high
growth rates generally have low payout ratios because they reinvest most of
their net income into the business.
Ratio =
of the company to survive over a long period of time. Long-term creditors and
stockholders are particularly interested in a company’s
due and to repay the face value of debt at maturity. Debt to total assets,
times interest earned, and cash debt coverage are three ratios that provide information
about debt paying ability.
measures the percentage of the total assets provided by creditors. It is
computed by dividing total debt by total assets. This ratio indicates the
company’s degree of leverage. It also provides some indication of the company’s
of the company’s ability to withstand losses without impairing the interests of
creditors. The higher the percentage of debt to total assets, the greater the
risk that the company may be unable to meet its maturing obligations.
Total Assets =
judged in the light of the company’s earnings. Generally, companies with
relatively stable earnings (such as public utilities) have higher debt to total
assets ratios than cyclical companies with widely fluctuating earnings (such as
many high tech companies).
indication of the company’s ability to meet interest payments as they come due.
It is computed by dividing income before interest expense and income taxes by
interest expense.
Interest Earned =
Debt Coverage Ratio:
operating activities to average total liabilities is the cash debt coverage
ratio. This ratio is a cash basis measure of solvency. It demonstrates a
company’s ability to repay its liabilities from cash generated by operating
activities, without having to liquidate assets.
Debt Net cash provided by
operating activities
Ratio =
liabilities
mentioned, a widely used tool of financial analysis. Yet it suffers from
various limitations. The operational implications of this are that while using
ratios, the conclusions should not be taken on their face value. Some of the
limitations, which characterize ratio analysis, are:
analysis arises out of the difficulty associated with their comparison to draw
inferences. One technique that is employed is inter-firm comparison. But some
comparisons are vitiated by the different procedures adopted by different
procedures adopted by various firms. The differences may relate to:
the basis of inventory valuation (e.g., LIFO, FIFO, Average cost and costs).
depreciation methods (i.e., straight line vs. accelerated basis);
working life of assets, particularly of plant and assets;
intangible assets like goodwill, patents and so on;
deferred revenue expenditure such as preliminary expenditure and discount on
issue of share;
of lease;
extraordinary items of income and expenditure; and so on.
procedures, companies may have different accounting periods, implying
differences in the composition of the assets, particularly current assets. For
these reasons the ratios of two firms may not be strictly comparable.
industry average. This presupposes the availability on a comprehensive scale of
various ratios for each industry group over a period of time. If however, as is
likely, such information were not compiled and available, the utility of ratio
analysis would be limited.
ratio analysis, as a tool of financial analysis is associated with price level
changes. This, in fact is a weakness of the traditional financial statements,
which are based on historical costs. The one implication of this feature of the
financial statements as regards ratio analysis is that assets acquired at
different periods are, in effect, shown at different prices in the balance
sheet, as they are not adjusted for changes in the price level. As a result,
ratio analysis will not yield strictly comparable and, therefore, dependable
results.
usefulness of ratios is that there is difference of opinion regarding the
various concepts used to compute the ratios.
particular purpose may not be a conclusive indicator. For instance, the current
ratio alone is not an adequate measure of short-term financial strength; it
should be supplemented by the acid test ratio, debtors turnover ratio and
inventory turnover ratio to have a real insight into the liquidity aspect.
what has happened between two balance sheet dates. For one thing the position
in the interim period is not revealed by the interim period is not revealed by
the ratio analysis. More over they give no clue to the future.
serious limitations. The analyst should not be carried away by its
oversimplified nature, easy computation with a high degree of precision. The
reliability and significance attached to ratios will largely depend upon the
quality of data on which they are based. They are as good as the data itself.
Nevertheless, they are an important tool of financial analysis.
like to calculate the ratios of three selected mills. . The names of the mills are THE CRESCENT
JUTE MILLS CO LIMITED, ALIM JUTE MILLS LIMITED & RAJSHAHI JUTE
MILS LIMITED
Ratio |
Formula |
CJMCL |
RJM |
AJML |
Current Ratio |
Current |
746451714 1643410107 =.454 |
210818751 335853718 =.627 |
72351835 443542387 =1.631 |
Quick |
Quick Current |
462363559 1643410107 =0.281 |
132692547 335853718 =.395 |
29676886 443542387 =1.166 |
Current |
Net
Average |
(2079451632)
1643410107 = |
N/A |
(131,263,641) 406,487,759 =(0.323) |
Receivables |
Net Average |
652898916 339194993 =1.924 |
157659147 102794819 =1.533 |
339,616,394 393,344,309 =0.863 |
Inventory |
COGS Average |
769089237 284052155 =2.707 |
N/A |
121151926 42674949 =2.838 |
Ratio |
Formula |
CJMCL |
RJM |
AJML |
|||
Profit Margin |
Net Income Net Sales |
(227113386) 652898916 =(.347) |
(24552660) 158106784 =(.155) |
(5878738) 83385589 =(.07) |
|||
Cash Return on Sales |
Net cash provided by operating
Net Sales |
(169,896,891) 2079451632 .0816 |
(33,659,501) 329,349,173 =(0.102) |
N/A |
|||
Asset |
Net
Average |
652898916 1781581559 =.0366 |
158106784
210818751 =0.750 |
83385589 443542378 =0.188 |
|||
Return on Assets |
Net Income Average Assets |
(227113386) 1781581559 =(0.036) |
(24552660) 210818751 =(0.1162) |
(58,78738) 443542378 =(0..01325) |
to Total Assets Ratio
Debt
Assets
Debt Coverage Ratio
cash provided by operating activities
total Liabilities
N/A
LIQUIDITY RATIOS
Current Ratio
Definition: The ratio between all current assets and all current liabilities
another way to expressing liquidity.
Formula: Current Assets
Current Liabilities
Analysis: 0.949 current ratio for TCJML,
3.915for RJM and 1.590 for AJML means the company has $0.949, 3.91and 1.590 in
current assets respectively to cover each $ 1.00 in current liabilities. Look
for a current ratio above. 1:1 and standard current ratio is 2:1 as possible.
Here only RJM is capable enough to pay its debts as its current ratio is above
standard and AJML is also solvent enough to in terms of its current ratio. One
problem with the current ratio is that it ignores timing of cash received and
paid out. For Example, if all the bills are due this week, and inventory is the
only current asset, but won’t be sold until the end of the month, the current
ratio tells very little about the company’s ability to survive.
Quick Ratio
Definition: The ratio between all
assets quickly convertible into cash and all current liabilities. Specifically
excludes inventory.
Formula: Cash + Accounts Receivable
Analysis:inventory to pay the bills. Here RJM
and AJML are up to the standard and TCJML are below the standard. Although a
little better than the Current Ratio, the Quick ratio still ignores timing of
receipts and payments.
SAFETY: Indicator of the businesses’
vulnerability to risk. These ratios are often used by creditors to determine
the ability of the business to repay loans.
Current Cash Debt Coverage Ratio
This ratio measure the capability of
current assets to pay the debt of the company by dividing net cash provided by
operating activities by average current liabilities. Here the ratio is negative
for all the companies. This indicates that none of the mill is capable enough
to pay current liabilities by its current assets. Here this ratio is (.211) for
TCJML, (.493) for RJM and (.323) for AJML.
Receivables Turnover
Definition: This calculation shows
the amount of credit sale duly collected as receivables.
Formula: Net Credit Sales
Average Net Receivables
Analysis: Here the receivables turnover is
satisfactory for all the three factory and the ratios are 1.164for TCJML, 4.415
for RJM and .836 for AJML. Look for trends that indicate a change in your
customers’ payment habits. Compare the calculated days in receivables to your
stated terms. Compare to industry standards. Review an Aging of Receivables and
be familiar with your customer’s payment habits and watch for any changes that
might indicate a problem.
Inventory Turnover
Definition: Number of times that you
turn over (or sell) inventory during the year.
Formula: Cost of Goods Sold
Analysis: Generally, a high inventory turnover
-is an indicator of good inventory management. But a high ratio can also mean
there is a shortage of inventory. A low turnover may indicate overstocking, or
obsolete inventory. Compare to industry standards.
PROFITABILITY RATIOS
The ratios in this section measure
the ability of the business to make a
profit.
Profit Margin
Definition:
Shows how much profit comes from every dollar of sales.
Formula: Net Profit
Total Sales
Analysis:
Compare to other businesses in the same industry to see if your business is operating as profitably as it
should be. Look at the trend from month
to month. Is it staying the same? Improving? Deteriorating Are you generating enough sales to
leave an acceptable profit? Trend
from month to month can show how well you are managing your operating or overhead costs. Here the
ratios are negative like (.184) for TCJML, (.369) for RJM and (.171) for AJML.
So it proves that these are the loosing concern.
Cash Return on
This ratio measures the return of
cash trough selling of goods. The higher the
ratio is the effective selling
technique the mills adopt.
Formula: Net
cash provided by operating activities
Net
Sales
Analysis: Here
the mills show their poor performance by negative ratios. The ratios are (.297)
for TCJML, (0.102) for RJM and (0.386) for AJML.
Asset Turnover
This measures the capability of
assets to generate sales. It is an important ratio to measure the performance
of assets to earn profit.
Formula:
Average Assets
Analysis: Here the ratios for three
selected mills are 0.196 for TCJML, 0.278 for RJM and 0.192 for AJML. These
indicate that the performance of assets to generate profit is moderate.
Return on Assets
Definition: Considered a measure of
how effectively assets are used to generate a return. (This ratio is not very
useful for most businesses.)
Formula: Net Profit
Total Assets
Analysis: ROA shows the amount of income for
every dollar tied up in assets. Year to year trends may be an indicator … but
watch out for changes in the total asset figure as you depreciate your assets
(a decrease or increase in the denominator can affect the ratio and doesn’t
necessarily mean the business is improving or declining.
SOLVENCY RATIOS
These ratio measures the overall
solvency of the firm.
Debt to Total Assets Ratio
It is an indicator of the solvency by
relating two vital aspect of the business the asset and the debt.
Formula:
Total Debt
Total Assets
Analysis: Here
these ratios are .063 for TCJML, .713 for RJM and .557 for AJML. These indicate
that assets are sufficient to cover the debts. But these ratios are not well
enough for the solvency because it should be more less than the existing one.
Cash Debt Coverage Ratio
This
ratio indicates the sufficiency of cash to cover debts.
Formula:
Average total Liabilities
Here the ratios for three selected
mills are (.047) for TCJML, (.037) for RJM and (.095) for AJML. Here the ratios
are negatives it means there is no cash available to cover the debt of the
mills.
CHAPTER FIVE
RECOMMENDATION AND CONCLUDING REMARK
Suggested Recommendation:
* Govt. policy
should be jute industry oriented.
* BMRE of the jute
mills;
* Encourage new
investment in jute industry;
* Encourage jute
growers;
* Encourage
innovation in jute goods;
* Marketing of
jute should be reshuffled;
* Adopt
computerized accounting systems and use of computer in other official
procedures;
* The promotion
system should be fair.
* The service
rules should be strictly maintained.
* The new
appointment is essential for organization.
* The vacant
position should be filled up within short time.
* There should be
monitoring systems of administration department who try implementing the
service rules.
* The political
influence relating to trade union should be banned.
* Every department
should keep same business.
* Reforms to
change political economy
* Creation of
enabling business environment through improved governance, transparency and
accountability,
* To create an
enabling legal environment by thoroughly recasting existing obsolete labor laws
and creating new ones to stay with time,
* To establish
rule of law in order to bring about healthy growth of private investment;
* To undertake
extensive training programme for updating skill of the retrenched workers.
* To ensure fair
wage and fringe benefits to the workers through collective bargaining;
* To provide
social security to the workers in terms of adequate provident fund, gratuity,
group insurance, pension benefits etc.;
* To practice
corporate culture in management, production chain and distribution network; and
* To establish
mutual trust, respect and understanding between the workers and employers
through transparency and accountability.
* Capacity
building through social compact/dialogues;
* Working out
clear agenda;
* To be proactive
(through social dialogues) rather than reactive;
* To strengthen
labor movement ‘in terms of improved capability of the workers through new
knowledge and skill up gradation,
* To refrain from
confronting the employers and to cooperate with them in achieving shared goals
in order to ensure common good and job security of the workers;
* To eliminate multiplicity of trade unions
to unify and establish workers’ rights;
Concluding
Remark
in spite of a developing country
much depends on agro-based products. In order for its industrialization, the
country should build up a strong base upon which industrialization will be
grown up. For this reason Government should take forward step considering all
sorts of threats and opportunities. BJMC can play a very important role in this
respect, for it is the prime development socio-economic institution of the
country. Over the past the BJMC is showing a deteriorating trend in
profitability. The main reason for loses is the huge amount of non-performing
employees for which the BJMC has to maintain large amount of provision from its
profit each year. Borrowed funds constitute a major source of the bank’s
lending assets and posting of accrued interest in interest suspense account has
higher interest rates. This is constantly creating a huge problem for BJMC’s
overall operation and deteriorating performance
While
working in BJMC I have discovered some major problems associated with different
departments in this organization. These problems can be classified from
bureaucratic, political as well as financial perspective. Since this
organization is now fully owned by government, political pressure is always
create some problems against its smooth operation. During the last three years
a number of steps have been taken to strengthen the country’s organizational
system. These include improvement of the regulatory environment, enforcement of
group classification guidelines and recapitalization of nationalized lute
mills. I have already given some recommendations for jute mills of BJMC which
are attached previously. If the recommendations are to be followed by the
government and BJMC, I think this organization will be able to improve its
performance which in turn will contribute to the industrialization and
development of the country to a very treat extent.
Bibliography
2. Annul
Report, Rajshshi Jute Mills Limited.
3.
Annual Report, ALIM Jute Mills Limited.
4
Wagnant and Keiso, Principles of Accounting, ninth edition.
managerial
emphasis, Tenth Edition, Prentice Hall of India Private limited, 2000.
No.2, December
1992.
10. Planning
Commission, a Study on Jute and Cotton Textile, Volume 1.
11. Bangladesh
Bank, Economic Trends, October 1992
13.
Pocket Book of
1992,
Government
of
December 1992
14. World
Bank: Survey of Fifth Credit Program