1.0
INTRODUCTION
1.1 BACKGROUND OF THE STUDY: This This term term paper paper has been made made as a part part of our course course Manageri Managerial al Financ Finance e (FIN201). Our course instructor Ms. alma aharat!ho"dhur# assigned us to de$elop a term paper based on ratio anal#sis of a corporation and anal#%e and interpret the current financial situation of that corporation.
1.2 PURPOSE OF STUDY: Through this term paper "e "ant to gain practical &no"ledge of the financial aspects of a corporation through ratio anal#sis. The perspecti$e of such a report is to ma&e us familiar "ith the financial instruments along "ith ratio anal#sis to measure the financial situation of corporation.
1.3 SCOPE OF THE STUDY: To acco accompl mplish ish the report report "e ha$e ha$e been been ass assign igned ed to !ement !ement Indust Industr# r# "hich "hich includ includes es 'afarge 'afarge urma !ement !ement 'td as the base compan compan# # and for indust industr# r# a$er a$erag age e "e choo choose se Me Megh ghna na !emen !ement t !onf !onfid iden ence ce !eme !ement nt and and eid eidel elbe berg rg !ement. *e use annual reports of these corporations to find out the financial situat situation ion of our base base compan compan# # throug through h ratio ration n anal#s anal#sis is compar comparing ing "ith "ith the industr# a$erage.
1.4 METHODOLOGY: To ac+uire data for our report primaril# "e use the annual reports of 'afarge urma !ement Meghna !ement !onfidence !ement and eidelberg !ement. The annual reports that "e use as our source are gi$en belo", • • • •
'afarge urma !ement -nnual eport 200/ 200 200. Meghna !ement -nnual eport 200. !onfidence !ement -nnual eport 200. eidelberg !ement -nnual eport 200.
*e ha$e ha$e also also coll collec ecte ted d the the nece necess ssar ar# # and and rele rele$a $ant nt data data from from diffe differe rent nt secondar# sources. These sources are, • • • •
'arfargeurma !ement *ebsite (""".lafarge3bd.com) Meghna !ement *ebsite (""".bg.com.bd) !onfidence !ement *ebsite (confidencegroupbd.com4cement4inde5.html) eidelberg !ement *ebsite (""".heidelbergcement.com)
1.5 LIMITATIONS OF STUDY: Ratio Analysis of Lafarge Surma Cement Ltd.
Page 1
The limitations of the stud# are defined b# the e5tensi$e of the facts co$ered b# the stud# and those that left out. o"e$er these limitations can be presented in the follo"ing lines, •
The first limitation is the lac& of intellectual thought and anal#tical abilit# to ma&e it the most perfect one.
•
2.0
*e ha$e to offset "ith the +ualit# due to time constraint.
COMPANY OVERVIEW EW::
For our term paper "e ha$e chosen 'afarge urma !ement 'td as our base comp compan an# # and and for for ou ourr indu indust str# r# a$er a$erag age e "e ha$e ha$e chose chosen n Me Megh ghna na !eme !ement nt !onfidence !ement and eidelberg !ement. The o$er$ie" of these companies are gi$en belo",
2.1 LAFARGE SURMA CEMENT: 'afarge urma !ement 'td. ('!) "as incorporated on 11 No$ember 1/ as a pri$ate limited compan# in 6angladesh under the !ompanies -ct 17 ha$ing its registered office in 8ha&a. On 20 9anuar# 200: 'afarge urma !ement 'td. "as made made into into a publ public ic limi limite ted d comp compan an# #. The The !omp !ompan an# # is list listed ed in 8ha&a 8ha&a and and !hittagong toc& ;5change. Toda# 'afarge urma !ement 'td. has more than 11000 shareholders. In No$ember 2000 the t"o
ri$ate 'td. ('=M>') being registered in India "hich operates its +uarr# at Nongtrai in Meghala#a. This commercial $enture "ith an in$estment of =8 20 million "hich is one of the largest foreign in$estments in 6angladesh has been financed b# 'afarge of France France "orld leader in building building materials !ementosMolins !ementosMolins of pain pain leading leading 6angladeshi 6angladeshi business business houses houses together together "ith Internatio International nal Finance Finance !orporati !orporation on Ratio Analysis of Lafarge Surma Cement Ltd.
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(IF! ? The *orld 6an&
6an& 6a n&
(8;<) 8;<)
;uro uropea pean
In$e In$est stme ment nt
6an& 6a n&
(;I6) ;I6)
and
the the
Netherlands 8e$elopment Finance !ompan# (FMO). 'afarge
2.2 MEGHNA CEMENT: Megh Me ghna na !emen !ementt Mill Mills s 'td. 'td. (M!M (M!M') ') the the firs firstt manu manufa fact ctur urin ing g ente enterp rpri rise se of 6ashundhara ashur i$er and in the industrial %one of Mongla >ort on .: acres of land to produce >ortland cement. M!M' has an e5cellent communication facilit# connecting all parts of the countr# through ri$er and roads. M!M' has started its commercial operation on 1Bth 9anuar# 1@. Follo"ing a successful successful public offerings offerings the compan# compan# "as listed "ith 8ha&a toc& ;5change ;5change
Ratio Analysis of Lafarge Surma Cement Ltd.
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and !hittagong toc& ;5change the t"o bourses of the countr# in 1B and 1@ respecti$el#. The !ompan# mar&ets its products under the registered trade mar& GIN< 6-N8H. The manpo"er of Meghna !ement Mills 'td. is 720 persons out of "hich there are 0 Officers and :70 staff4"or&ers. The industr# enDo#s a uni+ue facilit# in cargo handling both in recei$ing ra" materials and in dispatching finished product through its o"n 02 nos. of Detties suitable for berthing sea going $essels. -t present the production capacit# of M!M' is appro5.1.0 million MT4annum. There are 7 nos. of grinding mill in M!M' ha$ing production capacit# of :000 MT4 da# and these mills are e+uipped "ith high efficienc# separator to segregate fine particle from the coarse one. The dimension of each of the 02 (t"o) mills is :m diameter 5 m length (production capacit# :0 T>) "hile the each of the rest 02 is :m diameter 5 11m length (production capacit# 70 T>). To ensure the product +ualit# the ualit# -ssurance (.-.) department collects samples from different areas of mill house e$er# after 1hrs. to e$aluate +ualit# of the crushed product and thus feed bac& to the production department. 6ased on the +ualit# +ualit# report report determi determined ned b# .- departmen department t
>roduction >roduction depart department ment
acts accordingl# acc ordingl#.. There are 7 nos. of cement silo for cement storing purpose in M!M' "here the capacit# capacit# of each of the first 02 silo is :B00 MT "hile the capacit# of each of the rest 02 is B000 MT. !ement is e5tracted from the cement silo through e5traction s#stem "hich consists of roots blo"er blo"er inlet bo5 pneumatic shut off $al$e flo" control $al$e etc. "hich are controlled from the control room of the pac& house. There are 2 nos. of roto pac&er ha$ing pac&ing capacit# of 100 MT 4 r. and 110 MT 4 r. respecti$el#. These pac&ers are the e+uipments of modern technolog# "here "eighing s#stem of the deli$ered cement sac& is full# electronic based to ensure proper "eight of e$er# sac& of cement. Mainl# paper made cement sac&s are preferred for filling purpose although small percentage of pol# sac& are also used based on the consumersA demand. It ma# be mentioned here that the paper sac&s are manufactured b# the ac& plant of 6<. To assist the production process i.e. to enhance the mill output as "ell as for securing dust free "or&ing en$ironment there are se$eral nos. of dust collectors "ith "ith modern modern deductin deducting g s#stem s#stem in the mill house house area. area. Moreo$ Moreo$er er there there are
Ratio Analysis of Lafarge Surma Cement Ltd.
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se$eral nos. of dust collector ha$ing larger capacit# of modern deducting s#stem to secu secure re almo almost st dust dust free free "or& "or&in ing g en$i en$iro ronm nmen ent. t.Th Ther ere e e5is e5ists ts 02 mode modes s of cement cement deli$er# deli$er# s#stem i.e. road deli$er# deli$er# and $essel $essel deli$er# deli$er# a$ailable a$ailable in this plant. To pre$ent bag bursting "hile loading in $essel one spiral chute has been designed "ith the barge loader. To ensure smooth deli$er# of cement sac&s 1 nos. ten "heeler and 1@ nos. si5 "heeler compan# deli$er# truc&s are being used.
There e5ists a modern e+uipped Dett# facilit# in this organi%ation "here the sea going $essel can berth easil#. There e5ists 02 nos. of h#draulic crane of modern techno technolog log# # of
belt belt con$e con$e#or #ors s "hich "hich has been designed designed technical technicall# l# and "hich
lengths lengths about 02 &ilometers. &ilometers. 6esides 6esides the t"o nos. of h#drauli h#draulic c crane there there also e5ists 02 nos. of mechanicall# dri$en crane namel# Fransiab !rane "hich are mainl# engaged for limestone unloading.
2.3 CONFIDENCE CEMENT: !onf !onfid iden ence ce
!eme !ement nt
'imi 'imite ted d
(!!' (!!'))
is
the the
fir first
pri$ ri$ate ate
sec ecttor
cem ce ment ent
manufa manufactu cturin ring g compan compan# # in 6angla 6anglades desh h establ establish ished ed in earl# earl# 0Js 0Js "ith "ith ha$ing ha$ing 700 70000 00 M4T annual annual product production ion capacit capacit# # at chitta chittagon gong g 1@ G.M a"a# a"a# from from chittagong port besides 8ha&a chittagong high"a#. !!' is the first IO3002 certif certified ied cement cement manufa manufactu cturin ring g in 6angla 6anglades desh. h. It has a uni+ue uni+ue manage managemen mentt s#stem in +ualit# -ssurance Mar&eting ales >rocurements. It manufactures ordinar# >ortland cement. Our compan# aims to be the number one cement manufacturing compan# in 6angladesh through continuous de$elopment and b# producing high consistent +ualit# cement to meet all customers re+uirement at all time. To achie$e these obDecti$es !!' uses modern machineries calibrated testing e+uipmentJs computeri%ed pac&ing ra" materials mi5ing de$ices in its produc productio tion n proces process. s. -dditi -dditiona onall# ll# the compan compan# # fre+ue fre+uentl ntl# # arrang arranges es intern internal al e5ternal training program for the staff of all le$el to de$elop the potentialit# and s&ill of its human resources. !!' is al"a#s &een to &eep the customers satisfied b# pro$ing the best possible ser$ice.
Ratio Analysis of Lafarge Surma Cement Ltd.
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In 17 after commencement of production !!' "as able to ma&e t"o most popular brands is cement in this countr#. No" 'ion brand is the brand leader in all o$er the countr#. aDmistr# brand is popular leading brand in o"n territories as "ell "ell as othe otherr part parts s of the the coun countr tr# #. !!' manu manufa fact ctur ures es Ordi Ordina nar# r# >o >orl rlan and d !ement (O>!) in conformance "ith 6TI re+uirements. It is noted that !!'Js cement cement specifi specificat cation ions s is much much higher higher than than the parame parameter ters s specif specified ied b# 68 2:2,1: or meets the 612,1@ -TM !1B0,B t#pe31. To ensure best +ualit# +ualit# !!' maintains a uni+ue computeri%ed ra" material mi5ing process to get the finest finest high high +ualit +ualit# # cement cement "ith "ith compre compressi ssi$e $e streng strength. th. The clin&e clin&err is graine grained d throug through h clo close se circui circuitt ball ball mills mills "ith "ith unifor uniform m blains blains "hich "hich gi$es gi$es the cement better spread. The uniform fineness of !!' cement helps in cutting do"n construction costs as onl# small +uantities are re+uired to co$er large areas. -part -part from the most modern modern techn technolo olog# g# the paper bags used b# !!' ha$e additional features. The bags ends are pasted not stitched. >asted means all the pile piles s of pape paperr are are o$ o$er erla lapp pped ed upon upon ea each ch othe otherr and and glue glued. d. 8ue 8ue to this this pilferage4-dulteration pilferage4-dulteration in a pasted sac& is protected.
2.4 HEIDELBERG CEMENT: eidelberg !ement 6angladesh 'td is one of the largest producers of +ualit# cement in 6angladesh. eidelberg !ement is a member of eidelberg group
manu manufa fact ctur urin ing g
plan plantt
near near
8ha&a ha&a
nam namel# el#
ca can n
!eme !ement nt
International 'tdH "ith an installed capacit# of 0./B million tones per #ear. In 2000 it brought !hittagong !ement !lin&er ortland !omposite !ement into the
Ratio Analysis of Lafarge Surma Cement Ltd.
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mar&et. The !ompan# also produces other t#pes of cement namel# Ordinar# >ortland !ement. The compan# further increased increased the capacit# capacit# of its Ganchpur Ganchpur plant b# setting setting up another grinding unit of 0.7B million tones per #ear that "as commissioned in 200. The compan# is also currentl# increasing the capacit# of its !hittagong plant b# installing another grinding unit of 0./B million tones per #ear e5pected to be commissioned b# end of 2011.
3.0 PRODUCTS AND SERVICES 3.1 LAFARGE SURMA CEMENT PRODUCT SERVICES: 'afarge 'afarge cements cements are designed designed to respon respond d to the re+uirem re+uirement ents s of all of the o >ort rtla land nd ceme cement nts, s, high high3+ 3+ua uali lit# t# basi basic c buil buildi ding ng mate materi rial als s that that are are both both efficient and $ersatile 2. !eme !ement nts s for for diff differ eren entt t#pe t#pes s of en$i en$iro ronm nmen ents ts,, prod produc ucts ts suit suitab able le for for e5posure to sea "ater "ater sulfates and other aggressi$e en$ironments :. pec pecia iall ceme cement nts s for for spec specifi ific c appl applic icat atio ions ns,, incl includ udin ing g "hit "hite e ceme cement nts s for for archit architect ectur ural al proDec proDects ts cement cements s for "ell "ell drilli drilling ng opera operatio tions ns cement cements s containing silica fume or fl# ash po%%olan cements and cements for road surfacing that incorporate slag and h#draulic binders 7. !ement !ements s for masonr# masonr# and mortar mortars s for concret concrete e bloc&s bloc&s tiles tiles renderin rendering g stucco etc. These different cements can all be used to produce concretes "ith a $ariet# of characteristics and properties.
5.S!" 5.S!"#$% #$%&'( &'( ) "!* "!* +!"!,) +!"!,)-$ -$" " / !&!" !&!"-: -: S!"#$% S!"#$%& & -!" -!" +$ +$) ) !&!"-# *!,! )%"! $" F,)"! $" 200. T! ),! $""6)-$6! $" 3 7! ,!#8!-#:
!leaner and more comfortable to use their dust3free composition ma&es it easier to obtain an e5cellent finish
Ratio Analysis of Lafarge Surma Cement Ltd.
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Mortar Mortar that is easier easier to handle handle and more "or&able concrete concrete "hich is more fluid and easier to spread. ensiumK re+uires less effort during application and ma&es construction "or& easier easier
-cce -c cele lerrated ated hard harden enin ing g
and and
incr increa ease sed d
resi resist stan ance ce resu result lts s
in a
substantial gain in producti$it# on building sites.
S%88,- )" )##$#-)"! L)/),+! //!,#: 1. Technica chnicall and logistic logistical al suppor supportt for orders orders and deli$eri deli$eries es so custom customers ers recei$e their cement at the right place and the right time 2. 8ocume 8ocumenta ntatio tion n demons demonstr trati ations ons and training training in the characte characteris ristic tics s and correct use of the
3.2 MEGHNA CEMENT PRODUCTS SERVICES: Meehan !ement Mills 'td "hich are3 is manufacturing t"o t#pes of cement3
>ort >o rtla land nd !omp !ompos osit ite e !eme !ement nt (>!! (>!!), ), Ingr Ingred edie ient nts s used used in >!! >!! are are !lin&er @B3/C lag Fl# -sh limestone 213B2C <#psum 030BC.
Ordinar# >ortland !ement (O>!), Ingredients used in O>! are !lin&er B3100C <#psum 030BC.
>!! are "idel# used in our countr# in all sorts of construction. 6ut no" fe" de$eloper use O>! for impro$ing strength of their construction.
3.3 HEIDELBERG CEMENT PRODUCTS SERVICES:
P,-)" C&8#$-! C!&!"- 9PCC: -s part of its relentless pursuit for inno inno$a $ati tion on and and cons consta tant nt dri$ dri$e e to impr impro$ o$e e +ual +ualit it# # eid eidel elbe berg rg !ement !ement has introd introduce uced d >o >ortl rtland and !ompos !omposite ite !ement !ement (>!!) (>!!) during during 200: 200:..
-bso -bsorrbin bing
;uro uropea pean
Nor Norms
in
ceme ce ment nt
pro produci ducin ng
made made
eidelberg !ement 6angladesh 'td. the pioneer in this sector. No"3a3 da#s all the cement factories of 6angladesh are producing cement as per ;uropean Norm. The categor# >ortland !omposite !ement (!;M II) is the mar&et leader in ;urope.
Ratio Analysis of Lafarge Surma Cement Ltd.
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C!&!"- 8,%! ),$"+ - -! BDS EN: can !ement and ub# !ement are designed to achie$e the best characteristics for its customersL this this result result is achie$e achie$ed d b# design design using clin&er clin&er and high +ualit +ualit# # other other constituents. >!! has the optimum of, 8urabilit# 'ong3term strength and "or&abilit#. "or&abilit#. can !ement and ub# !ement are produced according to the ;uropean norm.
L$&!;#-"! )" $&!;8,%-#: 'imestone aggregates limestone sand sa nd pul$ pul$er eri% i%ed ed lime limest ston one e burn burntt lime limest ston one e "hit "hite e pul$ pul$er eri% i%ed ed limestone and limestone h#drate.
S)";$&! S)";$&! <,$7#: <,$7#: and3lim and3lime e bric& constructio construction n s#stems s#stems solid solid perforated o$ersi%e and facing sand lime bric&s.
E"6$,"&!"-) -!"+: -!"+: pecialt# products and ser$ices for "aste stabili%ation landfill construction and immobili%ation of to5ic compounds.
3.4 CONFIDENCE CEMENT PRODUCTS SERVICES: !onfidence !) (>!) pole :. >aint 7. o >ole le fitti fittings ngs and and hard" hard"ar are e 10.
;lectr ;lectroni onic c and and elect electro3 ro3mec mechan hanica icall meter meters s e etc. tc.
Ratio Analysis of Lafarge Surma Cement Ltd.
Page
4.0 PERFORMANCE EVALUATION OF LAFARGE SURMA CEMENT LTD THROUGH RATIO ANALYSIS: 4.1 CURRENT RATIO: !urren !urrentt ratio ratio indica indicates tes the e5tent e5tent to "hich "hich curren currentt liabil liabiliti ities es are co$ere co$ered d b# assets e5pected to be con$erted into cash in the near future. The current ratio of three #ears of 'afarge urma !ement is gi$en belo", 200 0.:15
200 0.:25
200/ 0.2@15
Industr# -$erage 1.B5
T)<!;1
F$+%,!;1
-t 200/it is re$ealed that the firm has used a huge amount of debt because of poor li+uidit# condition "ithin the firm. It couldnAt use its assets properl# to co$er the current liabilities b# con$erting current assets into cash. Though its 8O is less or e+ual to da#s in$entories are not used properl# to generate the sales. o all means of generate the returns is depressing. Thus has a $er# poor current ratio is .2@1C less than industr# a$erage rate.
Ratio Analysis of Lafarge Surma Cement Ltd.
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6ut in 200 though the 8O is presenting a high deliberate in pa#ing cash credit usage of current assets and fi5ed assets start impro$ing for pa#ing the debt interest someho". -nd in$entor# turno$er is also increased. Thus the ratio is also increased in 200 is .:2C. -nd managing of both financial and current assets are impro$ing in 200 and 8O is e+ual to the a$erage industr# point. -nd the order of the debt ratio is also increased in 200 and it all paid in li+uid cash. 6ut the usage of in$entories is more than last t"o #ears in 200. -nd a large portion of debt is paid on cash. It sho"s the reason "h# the firmAs current ratio is some"hat less than from 200 is .:1C.
4.2 =UICK 9ACID TEST RATIO: The ratio is calculated b# deducting in$entories from the current assets and di$iding the result b# current liabilities. It is a $ariation of the current ratio. The +uic& ratio of three #ears of 'afarge urma !ement is gi$en belo", 200 0.17/5
200 0.1/5
200/ 0.12/5
Industr# a$erage 1.0B5
T)<!;2
F$+%,!;2
In 200/ the amount if in$entor# used is less than an# other #ear in the firm but still firm has lac&ed behind in managing in asset both fi5ed and current assets that can meet the current liabilities. -nd the account recei$ables are also $er#
Ratio Analysis of Lafarge Surma Cement Ltd.
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lo". Thus compan# has poor amount of li+uidit# cash in hand. -ll this turns the ratio 0.12/ in 200/. In 200 the compan# has started impro$ing its asset management. Thus the recei$ables also in increased but 8O is ta&ing a long time to pa#ing the credit sale. -nd its li+uidit# of mone# is still lac&ed behind. -nd still the firm has to pa# a huge current liabilities or debt interest. Thus its ratio has come in a slight impro$ed "a# and it is 0.1/. 6ut in 200 the compan# has managed its debt interest b# managing its current asset. 6ut as firm has paid huge amount of interest interest automatical automaticall# l# the firm has less li+uidit# of cash in hand. ThatAs "h# its ratio is decreased to 0.17/ times.
4.3 DAYS SALES OUTSTANDING 9DSO: The ratio indicates that the a$erage length of time it ta&es the firm to collect its credit sales. The 8O of three #ears of 'afarge urma !ement is gi$en belo", 200 1 da#s
200 :/ da#s
200/ da#s
Industr# a$erage 1 da#s
T)<!;3
F$+%,!;3
The 8O represents the a$erage length of the time the firm must "ait after ma&ing sales before recei$ing cash "hich is the a$erage collection period. -t
Ratio Analysis of Lafarge Surma Cement Ltd.
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200/ firm has da#s outstanding customers pa#ing credit sales much earlier at da#s comparing to industr# period. 6ut at 200 the customers are dela#ing the credit sales. Thus it ta&es :/ da#s much than a$erage rate. -nd the last #ear -t 200 it sho"s that the compan# managed to collect itAs credit sales in 1 da#s "hich is e+ual to the industr# a$erage.
4.4 INVENTORY TURNOVER: Theratio is calculated b# di$iding cost of goods sold b# in$entories. The in$entor# turno$er of three #ears of 'afarge urma !ement is gi$en belo", 200 : . / 75
200 :.75
200/ 2./5
Industr# a$erage B . 0 25
T)<!;4
F$+%,!;4
In 200/ it is sho"n on the anal#sis that the firm is not used its current assets properl# as "ell as cannot utili%ed its in$entories properl# to generated sales. Ma# be there are some unused in$entories or some obsolete in$entories. Thus the ratio is less then industr# le$el is 2./5. In 200 compan# has started using its asset management in an e5act "a#. -lso increased increased its in$entor in$entor# # utili%atio utili%ation. n. Thus it generated generated sales greater greater than 200/. -nd it sho"s the ratio to increased to :.75. :. 75.
Ratio Analysis of Lafarge Surma Cement Ltd.
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-nd lastl# in 200 the firm has met its financial obligations in a better "a#. -nd used its in$entor# to generate a better sales. Thus the ratio is impro$ed to :./7C. 6ut still less than industr# le$el cause there must be some problem lies "ith the entire firmAs management of both financial current assets and debt management. - great share of income is used for pa#ing the interest. o there is automaticall# alteration in the income statement "here it is sho"n that the contribution margin is still undersi%ed to co$er up the "hole fi5ed e5penses or it be con$ con$er erte ted d into into in a small smaller er perc percen enta tage ge "ith "ith rela relati tion on of ea earn rn a high higher er profitabilit# margin.
4.5 FI>ED ASSET TURNOVER: The ratio ratio measur measures es ho" efficien efficientl# tl# the firm firm uses uses its fi5ed assets assets to help to generate sales. The fi5ed asset turno$er of three #ears of 'afarge urma !ement is gi$en belo", 200 0.B15
200 0.715
200/ .1B5
Industr# -$erage 2.B5
T)<!;5
F$+%,!;5
The The fi5e fi5ed d asse assett turn turno$ o$er er rati ratio o measu measure res s the the comp compan an#Js #Js effe effect cti$ i$en enes ess s in genera generatin ting g sales sales from from its in$estmentsin in$estmentsin plant propert# and e+uipment. From the abo$e table "e can see that in 200/ fi5ed assets turno$er is $er# lo" "hich is e+ual to 0.1B times. The reason of lo" fi5ed assets turno$er is that the# had in$ested more on fi5ed assets but proportion to in$estment in fi5ed assets the sales is $er# lo" "hich indicates the# are not utili%ing their fi5ed assets properl#.
Ratio Analysis of Lafarge Surma Cement Ltd.
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In 200 fi5ed asset ratio ratio increased to 0.71 times that means the compan# has been able to increase their sales and started to lo"er their in$estment in fi5ed assets. 6ut the score is not good enough because it is less than one times.
In 200 fi5ed assets turno$er is 0.B1 times "hich indicates that it is graduall# increasing their sales b# using their fi5ed assets properl#. 6ut the# are not using their fi5ed assets li&e the other firms of the industr#. The industr# a$erage of fi5ed asset turno$er is 2.B times "hereas the fi5ed assets turno$er for 'afarge urma !ement is onl# 0.B1 times "hich indicates that the# are not efficient to utili%e their fi5ed assets li&e the other firms in the industr#.
4.? TOTAL ASSETS TURNOVER: The ratio measures the turno$er of all the firm assets. The total asset turno$er of three #ears of 'afarge urma !ement is gi$en g i$en belo", 200 0.775
200 0.:B5
200/ 0.1:B5
Industr# -$erage 2.@25
T)<!;?
F$+%,!;?
The total asset turno$er ratio measures the abilit# of a compan# to use its assets to generate sales. In 200/ it is onl# 0.1:B times. The reason of lo" total asset turno$er is that there is a problem of using us ing the assets properl#.
In 200 the total asset turno$er has increased from 0.1:B times to 0.:B times "hich indicates that the firm is able increase their sales in this #ear but not good enough.
Ratio Analysis of Lafarge Surma Cement Ltd.
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In 200 200 tota totall asse assett turn turno$ o$er er has has incr increa ease sed d from from 0.:B 0.:B to 0.77 0.77 time times s b# increasing their sales but still it is belo" the industr# a$erage. The reason of lo" total total ass asset et turno$ turno$er er is a proble problem m "ith "ith the ass asset et catego categori ries es compos composing ing total total asse assets ts 3 in$e in$ent ntor or# # rece recei$ i$ab able les s or fi5ed fi5ed asse assets ts..
Ther There e is a prob proble lem m "ith "ith
in$entor#. The firm is holding obsolete in$entor# and not selling in$entor# fast enough enough.. *ith *ith regard regard to acc accoun ounts ts recei$ recei$ab able le the firmJs firmJs col collec lectio tion n period period is fluctuating and credit accounts ma# be on the boo&s too long. Fi5ed assets such as plant and e+uipment could be sitting idle instead of being used to their full capacit#. There is also li+uidation problem of current assets. -ll of these issues lo"er the total asset turno$er ratio of 'afarge urma !ement.
4. DEBT RATIO: The ratio measures the percentage of funds pro$ided b# creditors. The debt ratio of three #ears of 'afarge urma !ement is gi$en g i$en belo", 200 / 7C
200 0./C
200/ 1.@C
Industr# a$erage 7BC
T)<!;
F$+%,!;
It sho"s the debt financing in the firm. -t 200/ compan# has used 1.@Cdebt. Means its creditors ha$e supplied about most of the firmAs total financing. It sho"s that it is the sales are lo"er lo"er or the net income is also lo"er. lo"er. -nd e5pected costs are also high as there is a problem lies "ith operational obligations and
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 16
current asset management. Thus it sho"s that there is a ban&ruptc# position in 200/. 6ut graduall# in 200 it has started to use itAs current assets a better "a# than 200/. -nd also successes in rising the#Are income or sales or both. Thus in 200 the debt ratio has come 0./C. -nd -n d at 200 200 it has has incr increa ease sed d itAs itAs sale sales s or inco income me and and usag usage e of asse assets ts management at a healthier position than pre$ious #ears. -nd it becomes /7C "hich sho"s a decreasing rate of using debt finance. f inance.
4.@ TIMES INTEREST EARNED: It measures the abilit# of the firm to meets its annual interest pa#ments. The TI; of 'afarge urma !ement for three #ears is gi$en belo",
200
200
200/
Industr# a$erage
/./5
1.75
30.:5
10.0:5
T)<!;@
F$+%,!;@
-s in 200/ firm has a negati$e operating income. It is occurred due to decrease in sales or decrease in income and the cost of both operating and financial "as high in 200/. -nd the interest "as so high as the debt ratio sho"n a higher percentage. o TI; become negati$e in 200/ is 30.:C.
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 17
6ut in 200 compan# has started pa#ing its debt interest and sales "as raising or net income "as rising. Thus usage of assets both current and fi5ed "as increased in 200. o the change is ta&en place in 200 and the TI; has come 1.7C. -nd in 200 the firm has earned a greater operating profit due to increase in sales and it helps to co$er the fi5ed operating cost. -nd also the debt ratio has redu reduce ced d to /7C. /7C. -s the the oper operat atin ing g prof profit it has has incr increa ease sed d thus thus it resul results ts an impr impro$ o$ed ed perc percen enta tage ge in TI; TI; and and this this is 2.@C. 2.@C. 6u 6utt stil stilll lac&i lac&ing ng behi behind nd the the indu indust str# r# le$e le$el l caus cause e ma# ma# be the# the# used used a huge huge amou amount nt of debt debt and and the the management does not properl# finance the management of operation. -nd there is insufficienc# of li+uid cash. !ertainl# firm has a great difficult# dealing "ith this under3poor situation. o the firm has lac& behind.
4. RETURN ON ASSET 9ROA: The ratio of net income to total assetsit pro$ides an idea of the o$erall return on in$estment earned b# the firm. The O- of 'afarge urma !ement for three #ears is gi$en belo",
200 B./BC
200 1C
200/ [email protected]
Industr# -$erage .1BC
T)<!;
F$+%,!;
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 18
In 200/ O- is [email protected] it indicates that the# ha$e incurred loss in 200/ and the reason is using of huge debt and poor asset management to generate sales.
In 200 the increase to 1C because the# ha$e use lot of debt "hich is almost 0C and the current assets ha$e been used for the problem of huge debt for that their sales gone do"n and net income decline.
In 200 the O- has again increased to B./BC because the# ha$e lo"ered their debt and paid up some debt and sales and net income also increased but that is still belo" the industr# a$erage. The reason is that the firm is not using their assets ass ets effici efficient entl# l# to increa increase se the re$enue re$enue of the firm. firm. The# The# ha$e ha$e li+uid li+uidati ation on problem of current assets and also using huge debt abo$e the a$erage le$el of industr# a$erage.
4.10 RETURN ON E=UITY 9ROE: The ratio of net income to common e+uit# it measures the rate of return on common stoc&holdersA in$estment. The O; of 'afarge urma !ement of three #ears is gi$en belo",
200 22.7C
200 B.1BC
200/ 3::.@C
Industr# -$erage 1/.0BC
T)<!;10
F$+%,!;10
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 1
In 200/ O; for 'afarge urma !ement is 3::.@C. O; is negati$e because firm is using 1.@C debt "hich is $er# higher the# are using more debt for their in$estment rather than common e+uit# and for using more debt and poor asset management the# ha$e incurred loss as a result there is no earning a$ailable for common stoc&holders in 200/.
In 200 O; increased to B.1BC. It indicates that for each dollar of common e+uit# there is a return of t&. 0.0B1B. The# ha$e profit in this #ear because the# ha$e impro$ed their asset management and Dust able to ma&e a profit though the# ha$e huge debt.
In 200 O; increased to 22.7C and it is abo$e industr# a$erage. It indicates that the# are able to use the common e+uit# efficientl# than the other firms. The# ha$e paid up some.>rofit goes up as a result O; also goes up.
4.11 NET PROFIT MARGIN ON SALES: This ratio measures net income per dollar of sales. The net profit margin on sales of 'afarge urma !ement for three #ears is gi$en belo",
200 1:.1C
200 2.7C
200/ 37B.@C
Industr# a$erage .::C
F$+%,!;11
In industr# a$erage it is .::C. Thus at 200/ the compan# has huge gap in managing their operational obligations and asset management. The usage of debt debt is also also high. high. For larg large e amou amount nt of debt debt it has has to pa# pa# a larg large e inte intere rest st
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 2!
pa#ment. Thus compan#As ;6IT is also lo". -nd all these caused a negati$e or loss in profit margin on sale and it is ?7B.@C. 6ut as it has mentioned that compan# graduall# starts using its current assets in$entor# or fi5ed assets a good "a# it caused the profit margin to increased b# 2.7C. -nd at the end #ear at 200 it has come 1:.1C. That indicates the compan# is increasingl# boosted its current asset management as "ell as its operational functions. Thus manage its in$entor# to generate the sales largel#. Thus ;6IT also increased. o it has crossed the industr# le$el a$erage.
4.12 PRICEEARNINGS RATIO: The ratio of the price per share to earnings per share. It sho"s the amount in$estors "ill pa# for each dollar of current earnings. The >4; ratio of 'afarge urma !ement is gi$en belo" for three #ears. 200 2.7@5
200 1@./B5
200/ N4-
Industr# -$erage /1.125
T)<!;12
F$+%,!;12
8ue to a huge loss in 200/ the compan# does not pro$ide the >4; ratio. Thus it cannot be determinened. 6ut in 200 the compan# ma# gain fa$orable earnings that can satisf# the shareholders "ealth. Thus demands on in$esting the shares on 'afarge !ompan#
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 21
ha$e 1@./B "hich is greater than the industr# a$erage le$el. It sho"s that compan# ma# ha$e a potential high gro"th that fascinated the in$estorAs mind for in$est mone# at this point. For e$er# dollar of earnings earnings in$estors in$estors are li&e to pa# 1@./BC. In 200 the compan# has paid a huge amount of debt as interest. -nd it decreases the amount of profit or income though the sales are high in 200. It reduced the income of shareholders or ma# be for unfa$orable circumstance in econom# or mar&et condition. o the >4; ratio has decreased to 2.7@C less than industr# le$el.
4.13 MARKETBOOK RATIO: The ratio of a stoc&As mar&et price to its boo& $alue. It indicates that ho" the in$estors regard the compan#. The M46 ratio of 'afarge urma !ement is gi$en belo" for three #ears. 200 @.@25
200 . @ 5
200/ N4-
Industr# -$erage 7.@5
T)<!;13
F$+%,!;13
In 200 the M46 ratio is .@ times "hich means for each dollar of boo& $alue b# .@ times larger price the share is selling in the mar&et. In 200 "e can see that the M46 ratio decreased to @.@2 times "hich is abo$e the industr# a$erage but the ratio is fluctuating. That means in 200 people Ratio Analysis of Lafarge Surma Cement Ltd.
Page 22
"ere "ere more more e5ci e5cite ted d abou aboutt the the futu future re pros prospe pect cts s of the the commo common n stoc stoc& & as an in$estment than in 200. The reason fluctuating ma# be people ma# feel that the firm has poor asset management and li+uidit# problems.
5.0 FINDINGS AND RECOMMENDATIONS: F$"$"+#: I.
-sset -ss et mana managem gement ent is e5tr e5treme emel# l# in in a poor poor condit condition ion.. The The "a# "a# of using using it it is not that much effecti$e.
II.
In$ent In$entor# or# is is utili% utili%ed ed in a good good "a# "a# in recent recent #ears. #ears. 6ut 6ut it it is not not appl applica icable ble because of poor asset management.
III. III.
Thus Thus compa compan# n# is is using using the the debt debt to fin finan ance ce the the compa compan# n#As As "or "or&l &loa oad d in a large amount. It can be more dangerous for ban&ruptc#.
I. I.
The 8O 8O is is also also $er# $er# fluct fluctuat uating ing o$er o$er time. time. It coul couldnAt dnAt fi5 fi5 its its time time of cred credit it period.
".
The price price earnin earnings gs ratio ratio is fluctu fluctuate ated d b# ha$ing ha$ing a great great differ differenc ence e in compan# in$estment. The compan# ma# loss the financial in$estment due to ha$ing fluctuating earnings.
R!&&!")-$"#: I.
!ompan !ompan# # shoul should d manag manage e its its both both curren currentt asset asset manage managemen mentt and and fina financi ncial al obligations efficientl#.
II. II.
The The perc percen enta tage ge of debt debt rati ratio o must must be lo"er lo"ered ed for for sa$in sa$ing g the the compa compan# n# from the ris& of ban&ruptc#.
III. I. I.
-nd the# the# s shou hould ld be strict stricter er in recei$ recei$ing ing their their credit credit sales. sales. Firm Firm ma# tr# to boos boostt its its posi positi tion on "here "here it can can auto automa mati tica call ll# # attr attrac acte ted d more in$estors for further e5pansion.
.0 CONCLUSION:
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 23
From the abo$e content "e can conclude that in li+uidit# ratios 'afarge urma !ement 'td are belo" industr# a$erage and the $alues are far a"a# from the ind industr ustr# #
a$er $erage. ge.
o
the# the#
defi efinite nitel# l#
ha$ ha$e
li+u li+uiidit dit#
pro problem blem..
In
asse as sett
management 'afargeAs position is not good. The# are lagging behind from the other companies in this industr#. Their in$entor# turno$er fi5ed asset turno$er and total asset turno$er are impro$ing e$er# #ear but good enough. There 8O is Dust as the industr# a$erage but it is fluctuating e$er# #ear. o the# ha$e poor asset management. The# are inefficient in managing current and fi5ed assets. The# are using a huge debt "hich is a great ris& of ban&ruptc# to the compan#. Their debt ratio is higher than the industr# a$erage. Times interest earned is belo" the industr# a$erage but it is impro$ing each #ear. In profitabilit# ratios O- is belo" industr# a$erage but O; and profit margin is abo$e industr# "hich means the# are tr#ing to impro$e their asset management and li+uidit# position. In mar&et ratios "e can see that the# ha$e a good position in 200 but in 200 it declined though the ratios are abo$e industr# a$erage. That means people are becoming less interested to the compan# than the pre$ious #ear. o to impr impro$ o$e e from from the the curr curren entt situ situat atio ion n the# the# need need to impr impro$ o$e e thei theirr asse assett management li+uidit# position and use lo" debt and must be strict in recei$ing credit sales and finall# tr# to attract the customers through e5pansion of firm.
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 24
APPENDI>
CURRENT RATIO
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 25
200:
!urrent atio
0.2@15
200@:
!urrent atio
0.:25
200:
!urrent atio
0.:15
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 26
=%$7 R)-$
200:
uic& atio
0.12/5
200@:
uic& atio
0.1/5
200:
uic& atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 27
0.17/5
I"6!"-, T%,"6!,
200:
In$entor# Turno$er atio
2.//5
200@:
In$entor# Turno$er atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 28
:.75
200:
In$entor# Turno$er atio
:./75
D)# S)!# O%-#-)"$"+ 9DSO
200:
8O
.7 8a#s
200@:
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 2
8O
:/ 8a#s
200:
8O
1 8a#s
F$! A##!- T%,"6!,
200:
Fi5ed -sset Turno$er
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 3!
0.175
200@:
Fi5ed -sset Turno$er
0.70/5
200:
Fi5ed -sset Turno$er Turno$er
0.B0@5
T-) A##!- T%,"6!,
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 31
200:
Total -sset Turno$er
0.1:B5
200@:
Total -sset Turno$er
0.:B5
200:
Total Total -sset Turno$er Turno$er
0.7:@5
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 32
D!<- R)-$
200:
8ebt atio
1.@7C
200@:
8ebt atio
0.0 0C
200:
8ebt atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 33
0./7 /7C
T$&!# I"-!,!#- E),"! 9TIE
200:
TI;
30.:5
200@:
TI;
1.75
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 34
200:
TI;
2.@5
R!-%," " A##!-# 9ROA
200:
O-
3.0@1 [email protected]
200@:
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 35
O-
0.01 1C
200:
O-
0.0B/B B./BC
R!-%," " E%$- 9ROE
200:
O;
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 36
30.::@ 3::.@C
200@:
O;
0.0B1B B.1BC
200:
O;
0.227 22.7C
N!- P,/$- M),+$" " S)!#
200:
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 37
Net >rofit >rofit Margin on ales
30.7B@ 37B.@C
200@:
Net >rofit >rofit Margin on ales
0.027 2.7C
200:
Net >rofit >rofit Margin on ales
1:.1C
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 38
P,$! E),"$"+# R)-$ 9PE
200:
>rice ;arnings atio
N4-
200@:
>rice ;arnings atio
1@./B5
200:
>rice ;arnings atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 3
2.7@5
M),7!-B7 9MB R)-$
200:
Mar&et46oo& atio
N4-
200@:
Mar&et46oo& atio
.@B5
200:
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 4!
Mar&et46oo& atio
@.@25
INDUSTRY AVERAGE OF THE RATIOS CURRENT RATIO
M!+") C!&!"-:
!urrent atio
1.25
H!$!
!urrent atio
2.0:5
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 41
C"/$!"! C!&!"-:
!urrent atio
1.725
I"%#-, A6!,)+!
1.B5
=%$7 R)-$
M!+") C!&!"-:
uic& atio
0./B5
H!$!
uic& atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 42
1.B25
C"/$!"! C!&!"-:
uic& atio
0.:5
I"%#-, A6!,)+!
1.0B5
I"6!"-, T%,"6!,
M!+") C!&!"-:
In$entor# Turno$er atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 43
B.05
H!$!
In$entor# Turno$er atio
@.25
C"/$!"! C!&!"-:
In$entor# Turno$er atio
:.@@5
I"%#-, A6!,)+!
B.025
D)# S)!# O%-#-)"$"+ 9DSO
M!+") C!&!"-:
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 44
8O
22 8a#s
H!$!
8O
2 8a#s
C"/$!"! C!&!"-:
8O
B 8a#s
I"%#-, A6!,)+!
Ratio Analysis of Lafarge Surma Cement Ltd.
1 8a#s
Page 45
F$! A##!- T%,"6!, M!+") C!&!"-:
Fi5ed -sset Turno$er
7.25
H!$!
Fi5ed -sset Turno$er
2./25
C"/$!"! C!&!"-:
Fi5ed -sset Turno$er Turno$er
0./2:5
I"%#-, A6!,)+!
Ratio Analysis of Lafarge Surma Cement Ltd.
2.B5
Page 46
T-) A##!- T%,"6!,
M!+") C!&!"-:
Total -sset Turno$er
1.7:5
H!$!
Total -sset Turno$er
1.25
C"/$!"! C!&!"-:
Total Total -sset Turno$er Turno$er
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 47
0.B25
I"%#-, A6!,)+!
2.@25
D!<- R)-$
M!+") C!&!"-:
8ebt atio
1.1C
H!$!
8ebt atio
0.:71: :7.1:C
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 48
C"/$!"! C!&!"-:
8ebt atio
0.1B 1.BC
I"%#-, A6!,)+!
7BC
T$&!# I"-!,!#- E),"! 9TIE
M!+") C!&!"-:
TI;
1./5
H!$!
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 4
TI;
/./5
C"/$!"! C!&!"-:
TI;
20.715
I"%#-, A6!,)+!
10.0:5
R!-%," " A##!-# 9ROA
M!+") C!&!"-:
O-
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 5!
0.071 7.1C
H!$!
O-
0.1710 17.10C
C"/$!"! C!&!"-:
O-
@.1/C
I"%#-, A6!,)+!
.1BC
R!-%," " E%$- 9ROE
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 51
M!+") C!&!"-:
O;
0.211 21.1C
H!$!
O;
0.2171 21.71C
C"/$!"! C!&!"-:
O;
0.0/: /.:C
I"%#-, A6!,)+!
Ratio Analysis of Lafarge Surma Cement Ltd.
1/.0BC
Page 52
N!- P,/$- M),+$" " S)!#
M!+") C!&!"-:
Net >rofit >rofit Margin on ales
2.1C
H!$!
Net >rofit >rofit Margin on ales
0.11 11.C
C"/$!"! C!&!"-:
Net >rofit >rofit Margin on ales
11.C
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 53
I"%#-, A6!,)+!
.7C
P,$! E),"$"+# R)-$ 9PE
M!+") C!&!"-:
>rice ;arnings atio
1/7.@@5
H!$!
>rice ;arnings atio
17.275
C"/$!"! C!&!"-:
>rice ;arnings atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 54
1.75
I"%#-, A6!,)+!
/1.125
M),7!-B7 R)-$ 9MB
M!+") C!&!"-:
Mar&et46oo& atio
10.@25
H!$!
Mar&et46oo& atio
Ratio Analysis of Lafarge Surma Cement Ltd.
Page 55
2.015
C"/$!"! C!&!"-:
Mar&et46oo& atio
1.75
I"%#-, A6!,)+!
Ratio Analysis of Lafarge Surma Cement Ltd.
7.@5
Page 56