Financial Performance | Course Paper

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Letter of Transmittal

September 10,2019

Naznin Sultana Chaity

Assistant Professor

School of Business

Ahsanullah University of Science & Technology

Subject: Submission of a financial ratio analysis and findings

Dear Mam,

This is to inform you with profound respect that our group has completed the report on

“financial performance analysis” prepared for the completion of the course, Financial

Management. The companies we have chosen are Rahim Textile Mills Ltd, Paramount

Textile Ltd, and Saiham Textile Mills Ltd. We have strictly maintained the report format

instructed by you.

We would like to thank you, our esteemed faculty, in giving us the privileged and scope of

writing this report. This has been a great learning experience for us. We fervently hope that

we were able to fulfill the course requirements effectively through the submission of this

report and that it will reach your level of expectations.

Please note that this report has been prepared under your supervision. Under no

circumstances will this report or information in this report be shared or republished without

your authorization.

Sincerely,

Rakib Ricky Farabi

Md Rakib Mia Raihanul Haque Ricky Ayman Al Farabi

Eshmam Redwan sajjad

Eshmam Redwan Sabbir Sajjad Hossain

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Acknowledgement:

First of all, we would like to thank the almighty Allah, for preparing this report.

We have taken efforts in this Report. However, it would not have been possible without the kind support and

help of many individuals and organizations.

We are highly indebted to our respective Course Teacher, Ms. Naznin Sultana Chaity, Assistant professor in

School of Bussiness, Ahsanullah University of Science and Technology for her guidance, valuable and thoughtful

comments, and suggestion. We are very grateful to her for giving us valuable guideline.

Especially, we would like to convey our thanks to Abdullah Al Mahin providing us with valuable information

that was very much needed for the completion for this report.

Finally, our sincere gratitude goes to our friends ( Raihanul Haque Ricky, Md Rakib Mia) who engaged all the

time in this report which must be needed.

Despite our sincere efforts, there may appear some shortfalls in the report. We apologize for any such

unintentional errors.

Abstract:

For this report we collect 3 textiles for past 2 years income statement and balance sheet from their websites.

Saiham textile, Paramount textile, and Rahim textile are the leading textile now. We analyse their financial

position, we used almost 15 types ratio analysis so that we can identify which textile is now on a better position.

By the ratio analysis of the textiles we can clearly says that Saiham or paramount textile is on the better position.

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Table of Contents

Letter of Transmittal

Acknowledgement

Abstract

1.1. Introduction ………….………………………………………….………………………………………………….…..………… 1

1.2 Objective ………….………….……………………………………………………….…………………….…………………. 1

1.3. Methodology …….…………………………………………………….……………….…………..…………………………. 1

1.3.1. Scope ……..………………………..………………………………………….………………………….…………………….. 2

1.3.2. Data analysis……………………...………..……………………….……………………………………………………….. 2

1..3.3 Formula and Basic Concepts on Ratio analysis

2.1 Company Background…………………………………………………

2.1.1 Rahim Textile Mills Ltd (RTML) …………………………..……………..…………………………………….……… 5

2.1.2. Saiham Textile Mills Ltd (STML) ………………………….…………………………………………………...……. 16

2.1.3 Paramount Textile Limited (PTL) ………………………………………………………………………………...…… 19

3.1 Ratio Analysis and Findings…………………………………

4.1 Limitation of the study

5.1 Conclusion:……………………………………………………………………………………….. 22

6.1 Recommendation

……………………………………………………………………………………………….. 23

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1.1. Introduction

Financial performance analysis is the process of identifying the financial strengths and weaknesses of the

firm by properly establishing the relationship between the items of balance sheet and profit and loss

account. It also helps in short-term and long term forecasting and growth can be identified with the help

of financial performance analysis. The analysis of financial statement is a process of evaluating the

relationship between the component parts of financial statement to obtain a better understanding of the

firm’s position and performace. This analysis can be undertaken by management of the firm or by parties

outside the namely, owners, creditors, investors.

Textile is an important adjunct of industrialization in Bangladesh. Nowadays, textile industry is the

economic pulse of Bangladesh; its growth reflects the financial health of the country. There are 39 listed

textile companies in Dhaka Stock Exchange and 33 listed in the Chittagong Stock Exchange.

Therefore, the research attempts to evaluate the financial performance in the textile industry of

Bangladesh, the good practices accomplished in managing financial capital and its various components,

how the companies measure goo performance in relation to their competitors, how to measure

consistency in performance in relation to competitors, and whether good practices pay off in giving edge

over competitors in the market.

1.2. Objectives of Study:

The main objectives of the study are as follows:

1. To analyse and evaluate the financial position and performance of three selected company

(Rahim Textile Mills Ltd, Saiham Textile Mills Ltd, Paramount Textile Limited) for the period

of last two years (2017,2018)

2. To evaluate and assess the financial performance of the Rahim Textile Mills Ltd, Saiham

Textile Mills Ltd, Paramount Textile Limited in terms of solvency, profitability, liquidity

position and earnings applying ratios.

3. To undertake the factors which have led to the current financial performance of Rahim Textile

Mills Ltd, Saiham Textile Mills Ltd, Paramount Textile Limited.

4. To suggest measures, on the basis of study results, to improve further the financial performance

of Rahim Textile Mills Ltd, Saiham Textile Mills Ltd, Paramount Textile Limited.

5. To determine the level of profit generate, expense, and investments of the company.

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1.3. Methodology

Data were obtained from three different textiles in Bangladesh. The study covered a period of

two years from 2017-2018. The study was based on secondary data. Secondary time series data

were taken mainly from the published annual reports of the companies. Moreover, extensive

literature survey was done by searching different online libraries. The collected data were

analyzed and interpreted with the help of different relevant financial ratios – current ratio,

inventory turnover, etc.

1.3.1 Scope

Through analyzing and interpreting the working financial position practices of the three

different textile companies in the industry, we can furnish an approximate idea regarding the

general behaviour of the working capital management by the textile industry.

1.3.2 Data analysis:

We used the model for performance evaluation of selected three textiles. In this work by using

the data from financial report such as balance sheet, income statement and ratio analysis of

respected textiles, and using ratio analysis method we investigated the performance of Rahim

Textile Mills Ltd, Saiham Textile Mills Ltd, Paramount Textile Limited.

1.3.3 Formula and Basic Concepts on Ratio analysis:

Ratio analysis involves the methods of calculating and interpreting financial ratios to assess

the firm’s performance and status. It is a widely used tool of financial analysis. It can be used

to compare the risk and return relationships of firms of different sizes. Ratio analysis 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. There are different method of ratio analysis which is as follows:

▪ Liquidity Ratios

The liquidity of a firm is measured by its ability to satisfy its short-term obligation. Liquidity

also stands for ability of a company to convert its assets into cash quickly and with lower

costs as possible. Such liquid assets are necessary to cover any “financial emergencies” and

play as a buffer in company’s operations. Liquidity ratios reflect the short term financial

strength/solvency of a company.

The liquidity of a business firm is usually of particular interest to its short-term creditors

since the liquidity of the firm measures its ability to pay those creditors. Several financial

ratios measure the liquidity of the firm. Those ratios are the current ratio, the quick ratio or

acid test, cash ratio and net working capital.

1. Current Ratio:

The current ratio, one of the most commonly cited financial ratios, measures the company’s

ability to meet its short-term obligations by using only current assets. The current assets