1. Topics: Comparative analysis of financial statement between two Textile
Company’s
1.0 Introduction:
In our country textile companies are doing very well business. So many
competitors are in this sector. Lots of new companies entered this market.
From all of them we choose two cement company for our report. We collect
their financial statement & analyze them within three methods & we identify
their comparative advantage.
1.1 Origin: This is the report comes from our FIN-245 subject. The
course instructor Ms. Tarana Majid orally authorized the task of preparing
the report to a group of student. She gave this report to learn the way to
analyze the financial statements. To follow the syllabus of our subject so we
have to do some relevant study based on our report. That’s why this topic
comes forward.
1.2 Scope: We worked on Ashraf textile mills ltd. & Saiham textile
mills ltd for our report.
1.3 Limitation: We are very happy because we made our report
within some limitations and overcome it almost. For prepare this report we
faced some barrier. When we prepared this report all necessary data is not
available. For this we assume some of the data to complete the report. On
the other hand when we go to collect the financial statement we were unable
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2. to found our needed statement books. Finally, one limitation was on
shortage of knowledge that was reduced to make this report a better one.
1.4 Source of Data: For our report we collect data for finding &
analysis. At first we collected the annual report & take financial statements
of two companies’. We also collected some data from the internet.
1.5 Methodology: As a rule, we had to follow a particular
method for collecting data to complete the report accurately. At first we
make Income Statement, Balance Sheet & Cash Flow on a excel sheet. Than
we analysis the Income Statement & the Balance Sheet using the common
sizing & indexing method. Finally we used the eleven financial ratios for our
ratio analysis.
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3. 2.0 Brief History of company:
Saiham Textile Ltd.
Late Syed Sayeed Uddin Ahmed & Begum Hamida Banu, in remembrance
of whom, Saiham Textile Mills Limited has derived the name of the
company; would have been proud to know how well their offspring have
managed and extended the organization.
Saiham Textile Mills was set up in Noyapara, Hobiganj district in the year
1982 with an annual capacity of 7.5 m yards of finished cloth. It was
equipped with modern and sophisticated machineries from Japan. Initially it
was a weaving, dyeing printing and finishing plant. Saiham Textile claims to
be the pioneer in introducing the concept of modern fabrics in Bangladesh.
They were one of the first textile mills to start international standard
polyester fabric, TC fabric, synthetic and Georgette sarees with cross border.
The mother company of the present conglomerate is now comprised of
different industrial concerns. The entrepreneurship of Saiham, consists of
five directors, all from the same family. Although a company run and
managed by relatives, the standard and efficiency of the management does
not compromise on its quality.
Ashraf Textile mills Ltd.
Ashraf textile mills ltd is one of the another company which is run and
managed by relatives, the standard and efficiency of the management does
not compromise on its quality.
Addressed:
Ashraf Textile Mills Ltd.
New DOSH, Mohakhali
Dhaka - 1212
Ph : 9887051-53
Fax : 9887033
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4. 3 .0 Findings & Analysis:
According to our report subject our main objective is identifying the
difference between two companies financial statement. Also we want to find
out which company is more stable & which is not stable.
From the financial statement we can find out our requirements.
In below we give our finding & analysis in basis of company’s financial
statement.
3.1 Analyze of Income Statement, Balance Sheet
between two companies’s:
In below we are going to discuss about the two companies balance sheet,
Income Statement & Cash flow comparison in a briefly :
3.1.1 Balance Sheet Comparison:
Assets:
From the balance sheet of the both companies we can identify that Ashraf
textile had 504,741,251 tk total assets in 2005 but on the other hand Saiham
textile had only 425,320,371 tk total asset in 2003-2004. Next year Ashraf
textile companies total asset was decreased and Saiham textile company’s
total assets increase and in 2007 Ashraf textile reached in 167,726,578 tk
whereas in 2005-2006 Saiham textile’s total asset 436,650,516 tk. For the
total asset volume we can say that Saiham textile has more powerful rather
than Ashraf textile.
Liability:
The total liability we saw that Ashraf textile had 623,823,012 tk liabilities
in 2005 & Saiham textile had 152,581,718 tk only in 2003-2004.Both
companies’ liabilities were also increased in next year. But clearly we can
comments that Ashraf textile had least liability than the Saiham textile. How
ever Saiham textile had the more Net asset than the Ashraf textile.
share holder’s equity
we can easily understand that Saiham textile had the more equity and it was
818,663,635 tk for 2004-06 & Ashraf textile had -1,123,244,182. So we can say
that Saiham textile had the more investment in the market.
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5. 3.1.2 Income Statement Comparison:
From our income statement we can identify that Saiham textile has a profit
74,932,529 tk in 2004 & 52,001,246 tk in 2005 & 57,295,427 tk in 2006. From
this we can say that the profit is decreasing by next two years. And this
shows that sale for Saiham textile decreasing during the next two year. On
the other hand Ashraf textile is in a loss of -62,609,854 tk in 2005 & -122,738,787 tk
in 2006 & -14,064,257 tk in 2007. They continue their business in loss where
Saiham textile doing their business with profitability.
3. 1.3 Analyzing Common Sizing & Indexing:
In common size analysis we express the various components of a balance
sheet as percentage of the total assets of the company.In addition this can be
done for the income statement,but here items are releted to net sales.In
Ashraf textile balance sheets over the three year span the percentage of
current assets increased.On the other hand Saiham textile current assets
fluctuated. We see that Ashraf textile account receivable showed a relative
diccreased from 2005 to 2007.Saiham textile account receivable flactuated
from 2003-04 to 2005-2006.On the liability & equity portion of the balance
sheets, Ashraf textile total debt of the company decline on a relative basis
from 2005 to 2007.but Saiham textile total debt diccreased in 2004-2005 &
increased in 2005-2006.
The common size income statement show the gross profit/loss margin from
year to year. We see that Ashraf textile operating expenses increase year to
year & in 2007 increases sharply.whereas Saiham textile operating expenses
diccreased in 2004-2005 & increase again in 2005-2006.In 2005-2007
Ashraf textile’s net profit had negetive percentage, whereas Saiham textile’s
net profit increased.
In indexes analysis all financial statement items are 100%. In 2006 & 2007
Ashraf textile current assets indexed is 91.53 & 9.95 whereas Saiham textile
current assets s indexed is 116.26 & 100.93 in 2004-2005 & 2005-2006.
The indexed income statements give much the same picture as the common
size income statements – namely, fluctuating behavior. In Ashraf textile
income statement total gross loss indexed are 100, 196.037491 &
22.46332822 in 2005 , 2006 & 2007.Whereas Saiham textile’s gross profit
are 100, 69.3974 & 76.4626 in 2003-04, 2004-05 & 2005-2006.
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6. 4.0 Financial Statement Analysis by ratio:
For the performance measurement of Ashraf textile & Saiham textile mills
Ltd. In below we are going to analysis about the two companies financial
statement using ratio analysis. We used 11 methods to analyze the ratio.
Here are belongs:
4.1 Liquidity Ratio:
i) Current Ratio: Current assets divided by current liabilities. It shows a
firm’s ability to cover its current liabilities with its current assets. In below
there is the graph of the two textile company’s current ratio:
current ratio(Ashraf textile) current ratio(Saiham textile)
2
0.4
rat io 1
ratio 0.2
0
0 2003- 2004- 2005-
2005 2006 2007
Series1 0.32332 0.13204 0.16733 Series1 1.044 0.764 0.982
year year
From the graph we can see that Ashraf textile current ratio is 0.32 times in
2005 and 0.167 times in 2007. Here we see that current ratio has been
decreased and go down in less than 1. On the other hand Saiham textile
current ratio is 1.044 in 2003-04 & next two year stay remain but it also be
below the 1 and from the Ashraf textile. In the last year for both company
we suggested that the current liabilities cannot be covered if existing current
asset are liquated at their book values.
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7. ii)Quick Ratio: Current assets less inventories divided by current liabilities.
It shows a firms ability to meet current liabilities with its most liquid assets.
Quick ratio(Ashraf textile) Quick ratio(Saiham textile)
0.2 0.4
0.15 0.3
ratio 0.1 rat io 0.2
0.05 0.1
0 0
2005 2006 2007 2003-2004 2004-2005 2005-2006
Series1 0.197173 0.069725 0.138913 Series1 0.2643053 0.15642413 0.38213114
year year
From the graph we can easily identify that in 2006 Ashraf textile & Saiham
textile quick ratio is decreased dramatically. We say that in the last year of
the both company’s quick ratio increased. But Saiham textile has good
position than the Ashraf textile.
4.2 Financial Leverage debt ratio:
i)Debt-To-Equity: Ratios that show the extent to which the firm is financed
by debt.
Debt to Equity(Ashraf textile) Debt to Equity(Saiham textile)
0 1
Ratio R at i o 0.5
-10
2005 2006 2007 0
2003- 2004- 2005-
Series1 -5.239 -2.17 -1.253
Series1 0.559443 0.887395 0.59995
year year
If we consider the year 2007 of Ashraf textile, the ratio is -1.253 that
creditors are providing for each tk 1. In the case of Saiham textile in
2005-2006 the ratio is 0.599 that creditors are providing. So we can say that
Ashraf textile is in a better position than the Saiham textile.
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8. ii) Debt-To-Total Asset Ratio: The debt to total asset ratio is derived by
dividing a firm’s total debt by its total assets.
Sebt to Assets (Ashraf textile) Debt to Assets(Saiham textile)
6 0.6
4 0.4
ratio ratio
2 0.2
0 0
2005 2006 2007 2003- 2004- 2005-
Series1 1.235926 1.854987 4.95805 Series1 0.358745 0.470169 0.374981
year year
From the graph we can realize that Ashraf textile ratio is more than Saiham
textile in their last three year. We know that the higher the debt to assets
ratio, the greater the financial risk; the lower the ratio, the lower the risk. So
Ashraf textile has more risk than the Saiham textile.
4.3 Coverage Ratio:
i) Interest Coverage Ratio: Ratio earning before interest and taxes divided
by interest charges. It indicates a firm’s ability to cover interest charges. It is
also called times interest earned.
Interest coverage(Ashraf textile) Interest coverage(Saiham textile)
5
3
4
2.5
2
3
ratio
r at i o 1.5 2
1 Series1
1
0.5
0
0 2003- 2004- 2005-
2005 2006 2007
Series1 1.7272998 2.7067618 0.3935626 Series1 4.3453871 3.1634257 2.5946142
year
year
This ratio serves as one measure of the firm’s ability to meet its interest
payments and thus avoid bankruptcy. The higher the ratio the greater
company could cover its interest payment without difficulty. So analyze
after the two graphs we can said that Saiham textile has more interest
coverage than the Ashraf textile Cement. Ashraf textile ratio is fluctuated
highly in 2007.
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9. 4.4 Activity Ratio:
i) Receivable Turnover: the receivable turnover ratio provides insight into
the equality of the firm’s receivables and how to successful the firm is in is
collections. This ratio is calculated by dividing receivables into annual net
credit sales.
Receivable turnover(Ashraf textile) Receivable turnover (Saiham textile)
50
140
40
120
100 30
Day
80
Days 20
60
40
10
20 0
0 2003-2004 2004-2005 2005-2006
2005 2006 2007
Series1 101 6 125 Series1 14 6 42
year
Year
From the graph we can say that Ashraf textile received their receivable
money from the buyers within 101 days in 2005, 6 days in 2006 & 125 days
in 2007. On the other, Saiham textile received within 14 day in 2003-2004, 6
day in 2004-2005 and 42 days in 2005-2006. Eventually we can say that
Saiham textile was received money within short time rather than the Ashraf
textile.
ii) PAYABLE TURNOVER: There may be occasions when a firm wants to
study in own promptness of payment to suppliers or that of a potential credit
customer. This ratio is calculated by dividing purchase into total A/C
payable.
Payable turnover(Ashraf textile) Payable turnover(Saiham textile)
35
4 00 00 0
30
350 00 0
25
3 00 00 0
250 00 0 20
D a ys
D a ys 2 00 00 0 15
15000 0
10
1 00 0
00
50 00 0 5
0 0
2 00 5 2 006 20 07 2003-2 004 2004-2005 2005-2006
Series1 138 276 3 60 420 Series1 35 10 15
ye a r ye a r
From the graph we can say that Ashraf textile paid their payable money to
the sales within 138 days in 2005, 276 days in 2006 & 360420 days in 2007.
On the other, Saiham textile paid within 35 day in 2003-2004, 10 day in
2004-2005 and 15 days in 2005-2006. Eventually we can say that Saiham
textile was paid money within short time rather than the Ashraf textile.
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10. iii) INVENTORY ACTIVITY: To help determine how effectively the firm
is managing inventory and also to gain an indication of the liquidity of
inventory. This ratio is calculated by dividing inventory into COGS.
Inventory Activity(Saiham textile)
Inventory Activity(Ashraf textile)
400 250
300 200
Days 200 150
Days
100 100
50
0
2005 2006 2007
0
2003- 2004 2004- 2005 2005- 2006
Series1 60 53 369
Series1 170 225 176
year year
The figures tell us how many days, on average, before inventory is turned
into accounts receivable through sales. Here we see that Ashraf textile was
faster than Saiham textile in case of inventory activity.
iv) TOTAL ASSET TURNOVER: The relationship of net sales to total
assets is known as the total asset turnover, or capital turnover.
Total Asset turnover(Saiham textile)
Total asset turnover(Ashraf textile)
0.8
0.7
0.7
0.6
0.6
0.5
0.5
0.4 r at i o
r at i o 0.4
0.3 0.3
0.2 0.2
0.1 0.1
0 0
2005 2006 2007 2003-2004 2004-2005 2005-2006
Series1 0.6780095 0.4476056 0.05087134 Series1 0.77632571 0.56348701 0.5969018
year year
The median total asset turnover for the industry is 1.66. For this ratio
analysis we saw that Ashraf textile & Saiham textile both are less efficient
than the industry in this regard. On the other hand Saiham textile is in a
better position than the Ashraf textile.
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11. 4.5 Profitability Ratio:
i) PROFITABILITY RATIO IN RELATION TO SALES: The ratio we
consider is the gross profit margin or simply gross profit divided by net
sales.
Profitability in ratio to sales(Ashraf Profitability in relation to
textile) sales(Saiham textile)
4 1.83
3.5 1.82
3 1.81
1.8
2.5
1.79
rat i o 2 rat io
1.78
1.5
1.77
1 1.76
0.5 1.75
0 1.74
2005 2006 2007 2003- 2004 2004- 2005 2005- 2006
Series1 2.1829524 2.688959397 3.648320722 Ser ies1 1.773060426 1.820902862 1.780171958
year year
It is a measure of the efficiency of the firm’s operations, as well as an
indication of how products are priced. From the above graphs we saw that
Ashraf textile has relatively more effective at producing and selling products
above cost.
ii)PROFITABILITY RATIO IN RELATION TO INVESTMENT: this
profitability ratio relates profits to investment. One of those measures is the
rate of return on investment, or return on asset.
P ro f i t ab i l i t y i n rel at i o n t o Profitability in relation to
i nves t ment ( A s hr af t ext i l e)
investm ent(Saiham textile)
0 0.025
0.02
- 0.5
0.015
ratio -1 rat io
0.01
- 1.5
0.005
-2 0
2005 2006 2007 2003- 2004 2004- 2005 2005- 2006
Series1 -0.235798631 - 0.507839396 -1.707107588 Ser ies1 0.023235772 0.018004789 0.023118956
year year
The standard ratio compares for this is nearly 8%. From our analysis we
found that Saiham textile ratio simply fluctuates. Their percentage is not so
good. On the other handAshraf textile had negative percentage from
2005-2007.
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12. 5.0Conclusion:
We examine the analysis of Ashraf textile & Saiham textile mills ltd. We see
that the liquidity position is nit good both of the company. Comparatively
Saiham textile better than Ashraf textile mills ltd. Ashraf textile mills ltd.
should change the credit policy & proper use of its assets. The profitability
ratio of Ashraf textile mills ltd. Good than the Saiham textile mills ltd. The
company should avoid the use of debt; otherwise company would be fall into
bankruptcy.
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13. 6.0Bibliography:
i) Annual report- -Ashraf textile mills ltd.
For the year of 2005,
2006 & 2007.
-Saiham textile mills ltd.
For the year of
2003-2004, 2004-2005 &
2005-2006.
ii) Fundamental of financial management
(Twelfth edition) -James C. Van Horne &
John M Wachowicz, JR.
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