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ANALYSIS ON FINANCIAL PERFORMANCE OF

RSRM

RSR
M

INDUSTRIAL TOUR
REPORT

INDUSTRIAL TOUR REPORT

Bismillahir Rahmanir Rahim

Industrial Tour Report


Topic: Analysis on Financial Performance of RSRM

Submitted To:
Mrs. Nasrin Jahan Nasu
Lecturer
Department of Accounting and Information Systems
University of Chittagong

Submitted By:
Abu Hasan Al-Nahiyan
ID No: 09301120
Session: 2008 -09
Department of Accounting and Information Systems
University of Chittagong

Date of Submission: -31/12/2014

INDUSTRIAL TOUR REPORT

SUPERVISORS CERTIFICATE
This is to certify that Abu Hasan Al-Nahiyan bearing ID
No09301120

has

completed

his

Industrial

Tour

Report

successfully under my supervision. It is to be noted that in this


report he tried to find out the Financial performance of
Ratanpur Steel Re-Rolling Mills Ltd. During the preparation
of the report he regularly contacted with me and took my
suggestions regularly as well as followed my direction as directed.
I wish his great success and prosperity in life.
I therefore recommend accepting the industrial tour report with
best wishes.

Signature
Mrs. Nasrin Jahan Nasu
Lecturer
Department of Accounting & Information Systems
University Of Chittagong

INDUSTRIAL TOUR REPORT

LETTER OF SUBMISSION
Date: 31st December, 2014.
Mrs. Nasrin Jahan Nasu
Lecturer
Department of Accounting & Information Systems
University of Chittagong
Subject:Submission of Industrial Tour Report.
Dear Madam,
With an enormous pleasure, I would like to submit my industrial
tour report on Ratanpur Steel Re-Rolling Mills Limited to
fulfill the requirement of the BBA Program. In preparing this
report, the relevant information related to this paper is collected
and integrated accordingly. It is highly pleasure for me to get you
as a supervisor of my theoretical with pragmatic experience work,
which is an integral part of my BBA Program.In every segment of
this report, I have made an honest endeavor to present it as good
combination of my knowledge, intelligence and the information
gathered from the research paper.
In preparing this report, perhaps some mistakes are there. You, I
hope, will consider these mistakes clemently. I also expect your
cooperation whenever I require.
Thanking You,
Yours faithfully,
.

INDUSTRIAL TOUR REPORT

(Abu Hasan Al-Nahiyan)


ID No: 09301120, Session: 2008-09
Department of Accounting & Information System
University of Chittagong

PREFACE
Now in the world competition is increasing smoothly. New types of
business are emerging day by day. Every single enterprise has to
complete several national and multinational organizations. To face
this competition business enterprise needs highly educated
employees who have knowledge about all the aspects influencing
the activities of business.
Field work is considered as a bridge between academic knowledge
and practical field. Practical knowledge is imperative for the
Business students especially BBA students. The business world is
going more critical in this new millennium & the practical
situations are changing day by day. For that, by doing this sort of
assignment task students can have first-hand idea about
organization and can get practical exposure by doing industrial
tour in different organizations. In developed countries, the
business schools give more preference to practical knowledge
than theoretical knowledge. That is why; the program on any
practical aspect is conducted for the BBA students of Faculty of
Business Administration, Chittagong University. Here students are
assigned with practical topics to prepare study report conducted
on the organization. In this respect, I have been assigned to
prepare industrial tour report on RATANPUR STEEL RE-ROLLING
MILLS LIMITED. The core object of such type of program is to
familiarize the students with the real life business situations.
This report represents the findings of short study onFinancial
Performance of RSRM. The report has been prepared by
collecting information from practical working, reference books,
newspaper and various web sites. Then I have analyzed collected

INDUSTRIAL TOUR REPORT

data and included only those data which are appropriate for my
paper.
Extreme care has been taken in explaining the theoretical and
statistical aspects in a most logical manner. All the different items
have been systematically arranged under different headings.
Finally, I take entire responsibility of any deficiency that might
have in the report.

ACKNOWLEDGEMENT
In the commencement, I would like to say that, all praise due to
Almighty ALLAH. All the progress, achievement and success
throughout our life are His blessing. With His inestimable mercy
and sympathy we are alive.
Now, I would like to convey my heartiest gratitude to our
honorable Chairperson Professor Dr. Abdur Rahaman for
providing us forwarding letter by which we have officially visited
Ratanpur Steel Re-Rolling Mills Ltd. And I also indebted and
grateful to Mrs. Nasrin Jahan Nasu for helping me
momentously in conducting the tour and preparing this report
successfully.
To accomplish this sort of report visiting of industry is mandatory
and to visit and preparing this kind of report many officials and
persons help is needed. And the respondents of the questionnaire
are the main key of this report. Without their friendly cooperation
there might be no primary data. And exclusive of primary data the
report could be meaningless. So we all, the members of the tour
group are very much thankful to Mr. Md. Mostafa Kamal, AGM
of HR& Admin, Mr. Md. Farid Iqbal, Assistant Manager of HR and
Mr. Subash Chad Shivdaras Sharma, In-charge Production of
RSRM who sacrifice their valuable time for answering the
questionnaire and shared their personal experience about overall

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management of KAFCO with us. In addition, we would like to give


credit to the officials who helped us to reach the respondent.
To me this would be a great achievement, if the report serves my
purpose at least to some extent. And I would like to offer
gratitude to all whoever helped me in preparing this paper. As a
final point I take entire responsibility of any deficiency that might
have crept in this report.

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ABSTRACT
Keeping pace with globalization, Bangladesh is experiencing rapid
infrastructural development. In this situation iron & steel industry
has a bright growth prospect & Ratanpur Steel Re-Rolling
Mills Ltd. is pioneer in this industry. The slogan of the RSRM is
Steel for the nation.
In this competitive market RSRM using most advanced and latest
technology suitable for the production of TermoMechanically
Treated (TMT) reinforcement bar renowned worldwide for its
special features of having strength with high elongation percent
and toughness which is not possible in other ordinary
reinforcement bars of conventional processes.
Ratanpur Steel Re-Rolling Mills Ltd. was incorporated in
Bangladesh as private limited company on 22 April, 1986 as
company limited by shares under the Companies Act, 1913 and
converted into public limited company on 26 June 2012 under the
Companies Act, 1994. The Company is engaged in the
manufacturing process of producing various grades of M.S.
Deformed Bar (300W/40 Grade, 400W/60 Grade and 500W/TMT)
from M.S.Billet and sakes/export of the products and other
business related thereto. The Company has set up its Re-Rolling
Mills factory at 176, BaizidBostami I/A, BaizidBostami road,
Nasirabad, Chittagong, and commenced commercial production
from 1986. The Company is listed with Dhaka Stock Exchange
(DSE) and Chittagong Stock Exchange (CSE) as a publicly quoted
company. Trading of the shares of the company started in two
stock exchanges from 22 September 2014.

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TABLE OF CONTENTS
1 INTRODUCTION-------------------------------------------------------9
1.1PRELUDE--------------------------------------------------------------9
1.2STATEMENT OF THE PROBLEMS------------------------------10
1.3OBJECTIVES OF THE STUDY------------------------------------11
1.4METHODOLOGY OF THE STUDY-------------------------------12
1.5LIMITATIONS OF THE STUDY-----------------------------------13
2 AN OVERVIEW OF RSRM-----------------------------------------14
2.1COMPANY PROFILE-----------------------------------------------14
2.2BUSINESS PRINCIPLES------------------------------------------15
2.2.1------------------------------------------------------------------------VISSION:
15
2.2.2------------------------------------------------------------------------MISSION:
15
2.2.3-------------------------------------------------------------------OBJECTIVES:
15
2.2.4--------------------------------------------------------CORPORATE FOCUS:
15
2.2.5------------------------------------------------------------------------- VALUES:
16
2.2.6--------------------------------------------------------PRODUCT OF RSRM:
17
2.2.7-------------------------------------------------------STRENGTH OF RSRM:
17
2.3MANAGING BODY OF RSRM------------------------------------17
3 FINDINGS & ANALYSIS ON FINANCIAL PERFORMANCE OF
RSRM---------------------------------------------------------------------18

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3.1LIQUIDITY RATIOS:-----------------------------------------------18
3.1.1-------------------------------------------------------------CURRENT RATIO:
19
3.1.2------------------------------------------------------------ACID TEST RATIO:
20
3.2LEVERAGE RATIOS:-----------------------------------------------21
3.2.1--------------------------------------------------------DEBT-EQUITY RATIO:
21
3.2.2-----------------------------------------------------------COVERAGE RATIO:
22
3.3ACTIVITY RATIOS:------------------------------------------------23
3.3.1------------------------------------------INVENTORY TURNOVER RATIO:
23
3.3.2--------------------------------------TOTAL ASSETS TURNOVER RATIO:
24
3.3.3-----------------------------------------------DEBTOR TURNOVER RATIO:
25
3.3.4--------------------------------------------CREDITOR TURNOVER RATIO:
26
3.4PROFITABILITY RATIOS:-----------------------------------------27
3.4.1------------------------------------------------------GROSS PROFIT RATIO:
27
3.4.2------------------------------------------------OPERATING PROFIT RATIO:
28
3.4.3----------------------------------------------------------NET PROFIT RATIO:
29
3.4.4-----------------------------------------------EBITDA MARGIN TO SALES:
30
3.4.5--------------------------------RETURN ON SHAREHOLDERS EQUITY:
31

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10

3.4.6---------------------------------------RETURN ON CAPITAL EMPLOYED:


32
3.4.7------------------------------------------------------EARNING PER SHARE:
33
3.4.8-----------------------------------------------------DIVIDEND PER SHARE:
34
3.5USEFUL INFORMATION TO EVALUATE RATIO ANALYSIS 35
4 RECOMMENDATION------------------------------------------------36
5 CONCLUSION--------------------------------------------------------37
6 APPENDICES---------------------------------------------------------38
7 REFERENCES--------------------------------------------------------40

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11

1 . INTRODUCTION
1.1 PRELUDE
The basis of financial planning, analysis and decision-making is
the financial information. Financial information is needed to
predict, compare and evaluate the firms earning ability. It is also
required to aid in economic decision-making and investment &
financial decision-making. The financial information of an
enterprise is contained in the financial statements or accounting
reports.
Financial analysis is the process of identifying the financial
strengths and weaknesses of the firm by properly establishing
relationships between the items of the balance sheet and the
profit & loss account. Financial analysis can be undertaken by
management of the firm, or by parties outside the firm, viz.
owner, creditors, investors and others. Management, creditors,
investors and others to form judgment about the operating
performance and financial position of the firm use the information
contained in these statements.
A financial ratio is a relationship between two financial variables.
It helps to ascertain the financial condition and performance of a
firm. Ratio analysis is a process of identifying the financial
strengths and weakness of the firm. This may accomplish either
through a trend analysis of the firms ratios over the period of the
time or through a comparison of the firms ratios with its nearest
competitors and with the industry averages.

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1.2 STATEMENT OF THE PROBLEMS


Financial analysis is the starting point for making plans, before
using any sophisticated forecasting and planning procedures. It
helps to understand the past which is prerequisite for anticipating
the future. User of financial statement can get further insight
about financial strength and weakness of the firm if they properly
analyze information reported in these statements. Management
should particularly interest in knowing financial strengths of the
firm to make their best use and to be able to spot out financial
weaknesses of the firm to take suitable corrective actions.
Management should always keep an eye whether its current
financial policy regarding financial performance is doing well or
not because one slight deviation from its optimal financial
performance may cause a significant problem to the firm.
From the literature review, we have come to know thatin the
financial year 2013-14 country faced a lot of challenges those are
political unrest and slowdown in the real estate sector and
infrastructural development which effects in the overall financial
performance of RSRM such as decreasing gross profit, decreasing
operating profit, decreasing net profit etc. In this financial year
RSRM utilized 46% production capacity produced 85398 MT of MS
Deformed Bar. Whereas in the previous financial year it was 47%
utilization of capacity and produced 88040 MT of MS Deformed
Bar. In this regard, the financial performance of RSRM is not good.
As we see that the companys EPS (Earning per share) for the
year is tk. 5.24 which is 0.39 less than preceding year. Decrease
of EPS is a great concerned for shareholders. Apart from that

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13

company declare 15% dividend of which 5% cash and 10% stock


dividendfor the year ended June 30, 2014 which is good for
shareholders. In absence of adequate liquidity the firm would not
be able to pay creditors who have supplied goods and serviced on
the due date promised.
The main purpose of this study is to know whether the financial
condition and performance of RSRM is good or not. If not then
what corrections can make it a perfect one.

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14

1.3 OBJECTIVES OF THE STUDY


The main purpose of the industrial visit is to acquire knowledge
about the internal and external environment of an industry and
find out the consistency and inconsistency between theoretical
and practical knowledge that we acquired from an industry that is
live. We also try to adjust with the gap to be competent at the
modern job market.
The areas on which we will give emphasis are:
To find out the financial strength of RSRM.
To find out the financial weakness of RSRM.
To evaluate financial condition& performance of RSRM.
To analyze critically the financial factors of RSRM.
Lastly, recommends solution related to their financial
performance.

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1.4 METHODOLOGY OF THE STUDY


The scope of the study was confined. One of the most renowned
enterprises is Ratanpur Re-Rolling Stills Ltd. The methodology
followed for the purpose of the study has been desk research as
well as filed survey. We collected all kinds of data from primary &
secondary sources.
Primary Data is collected through:
Making a formal questionnaire.
Questionnaire has been designed through department wise.
Discussion with high officials.
Practical experience gained by studying & visiting.
Secondary Data is collected through:
Prospectus
Annual Report of RSRM
Websites
The major portions of data source used in this report are from
secondary sources. Finally, the collected data are classified,
tabulated, analyzed, interpreted and presented in the form of
research report thereafter.

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1.5 LIMITATIONS OF THE STUDY


The study has been conducted subject to certain limitations. Time
constraint is one of the major limitations. I have been allowed
only one day for the industrial visit, which is not enough to study
and industry in depth.
In addition to the above, our sample enterprise is a private limited
company, which does not provide all sophisticated information. So
they provide us only Annual Report. They are concerned about
their competitor sensitivity in the field of fertilizer production
organization. Another important reason is as follows:

Most of the official was so much busy to provide me


enough time.

Difficult to contact with all top management.

Lack of proper communication with RSRM in the earlier


stage.

Lacks of information is prevailed in this report because the


representative of RSRM did not disclose many confidential
matter.

The success rate of this study may be limited due to lack


of our experience in collecting data.

In spite of these limitations, I have tried my best to pinpoint


various finding and to provide the students and researchers of
tomorrow with valuable information.

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17

2 . AN OVERVIEW OF RSRM
2.1 COMPANY PROFILE
Ratanpur Steel Re- rolling Mill (RSRM) is a local company has
launched finest quality rod in the country as Bangladeshs
construction industry looks for quake-resistance steel for
increasing number of high-rise buildings.Ratanpur Steel Re- rolling
Mill (RSRM) is one of well-known steel mill in steel re-rolling
sector. It has 24 years experience exclusively in steel making. It
is one of the
biggest steel

manufacturing companies in the private sector in Bangladesh. It


was established in 1984. The slogan of the Ratanpur steel mill is
Steel for the nation. Thinking about the increasing demand of
steel in the country this prominent entrepreneur decided to set up
this factory. It has been manufacturing plain and deformed bar to
meet the requirement of the customers of the country.

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18

The
factory
of
this
company
is
located
at
NasirabadbesideBaizidBostamiroad
in
Chittagong.
The
company is using latest and sophisticated technology to
manufacture product. Ratanpur steel mill has a modern chemical
analysis and physical testing lab to ensure the quality of the
product.

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2.2 BUSINESS PRINCIPLES


2.2.1
VISSION:
Our vision is to be the trend setter and the power force of the
steel re-rolling industry.
2.2.2
MISSION:
We will continueto be the first name in the regions steel industry
by harnessing our assets & resources to achieve profitable
growth, operational and organizational excellence and good
corporate citizenship.
2.2.3
OBJECTIVES:
Our objectives are to conduct business operation based on market
mechanism within the legal and social frame work with aims to
attain the mission reflected by our vision.

2.2.4
CORPORATE FOCUS:
Our vision, our mission and our objectives are to emphasize on
the quality of product, process and services leading to
augmentation of the company with corporate governance
practices.

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2.2.5
VALUES:
QUALITY:
Providing products & services to our customers.
Constantly improving our processes reducing wastage.
Minimizing costs of products & services.
Developing our resources for creating skilled workforce.
TRUST:
Preserve the faith & goodwill of all our shareholders by
adopting ethical and transparent business practices.
Being fair and honest in all our dealing and good
governance and risk management process.
BUSINESS RELATIONSHIP:
By offering quality product.
By providing our best & timely service.
By honoring all our commitments even with challenges.
LEADERSHIP:
By setting landmark though our products, processes &
people.
By persistently moving ahead of competition by
differencing our products and processes.
By increasing our market share.
BUSINESS AUGMENTATION:
Improving the efficiency of processes.
By anticipating & responding to the changing business
and the environmental needs using experience within
the organization.
SOCIAL CARE:
Tree plantation program
Earthquake campaign
Building passenger shade in bus stands
Providing safety road sign
Scholarship program

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2.2.6
PRODUCT OF RSRM:
RSRM mainly produces 500W (TMT), 400W (60 Grade) and 300W
(40 Grade). Grade steel using most advanced and latest
technology suitable for the production of TMT bar which is
renowned worldwide for its special features of having high
strength with high elongation percent and toughness which is not
possible in other ordinary reinforcement bars of conventional
processes.
2.2.7
STRENGTH OF RSRM:
Greater Ductility
Superior Bendability
Better Weld ability
High Corrosion-Resistance
Ideal Property Balance

2.3 MANAGING BODY OF RSRM


NAME
Mrs. ShamsunNaharRahman
Mr. MaksudurRahman
Mr. Md. YounusBhuiyan
Mr. Md. MizanurRahman
Mr. MarzanurRahman
Mr. Md. Jahangir Miah
Mr. Zulfiker Ali Azad
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

ObaidurRahman FCA
Md. Jafar Imam
Md. Serajul Islam
Mohammad Ali
TapanKantiMajumder
Md. Mostafa Kamal
Md. FaridIqbal
Md. DewanMabood Ahmed
Subash Chad Shivdaras

DESIGNATION
Chairman
Director& Managing Director
Director
Director
Director
Independent Director
Executive Director-Marketing &
Sales
Chief Financial Officer
Company Secretary
Consultant-Quality Control
Chief Electrical Engineer
Chief Mechanical Engineer
AGM, HR & Admin
Assistant Manager of HR
Manager-Commercial
In-Charge Production

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Sharma
Mr. Md. NizamUddin

23

Head of Information Technology

3 . FINDINGS & ANALYSIS ON


FINANCIAL PERFORMANCE OF
RSRM
The present study has been undertaken for analyzing the financial
performance of RSRM. Various sources are used to make the
report more informative. The direct interview method has followed
as the primary source and annual reports of RSRM, the website of
RSRM and various journals& books related to financial analysis.
Financial statements are historical in their nature as they relate to
the past performance of the firm. When ratio analysis is applied to
the past financial statements, strength and weakness of the firm
could be analyzed and identified. Changes are inevitable as future
is not a replica of the past. Only management is aware of the
expected changes in policies,in future. So, ratio analysis can be
applied by the management to anticipate the future
performance / results, after considering the impact of changes in
policies to the past financial statements. An outsider is not aware
of the likely changes in policies. So, only management, not public,
is in a better position to use ratio analysis to forecast or predict
the future performance of a firm.
Performance of RSRM is evaluated using the ratio analysis in the
following different directions:

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3.1 LIQUIDITY RATIOS:


Liquidity ratios are highly useful to creditors and commercial
banks that provide short-term credit. Short-term refers to a period
not exceeding one year. Liquidity ratios measure the firms ability
to meet current obligations, as and when they fall due. A firm
should ensure that it does not suffer from lack of liquidity and also
does not have excess liquidity. The most common ratios which
indicate the extent of liquidity or lack of it are following with the
analysis of financial performance of RSRM:3.1.1
CURRENT RATIO:
A short-term indicator of the companys ability to pay its shortterm liabilities from short-term assets, how much of current assets
are available to cover each dollar of current liabilities.
Current ratio =
2014
2,684,574,070
= 2,786,066,653

Current assets
Current liabilities
Times
0.96

2013
2,192,672,783
= 2,474,310,829

Current Ratio

Times

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0

2013

2014

Times
0.89

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Interpretation:As a conventional rule, a current ratio of 2:1 is


considered satisfactory. The role is based on the logic that in the
worst situation even if the value of current assets becomes half,
the firm would be able to meet its obligations. In the diagram, as
we see that last two years current ratio of RSRM are respectively
2013-0.89:1 & 2014-0.96:1. In both situations RSRM maintains
insufficient liquidity to meet its short term obligations.In the
absence of liquidity, firm would not be able to make payments on
the due date. There would be delay for suppliers of goods and
services. Creditors would be unhappy with the repayment
behavior of the firm and may suspend or delay supplies that
would affect smooth production.
3.1.2
ACID TEST RATIO:
It measures the companys ability to pay off its short-term
obligations from current assets, excluding inventories.
Acid test ratio =

Current assetsClosing Inventory


Current liabilities

2014

Times

2013

0.34

2,684,574,0701,751,235,595
2,786,066,653

2,192,672,7831,613,125,611
2,474,310,829

Time
s
0.23

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Acid Test Ratio


0.4
0.35
0.3
0.25
Times

0.2
0.15
0.1
0.05
0

2013

2014

Interpretation: As a conventional rule, a quick ratio of 1:1 is


considered satisfactory. In the diagram, as we see that last two
years quick ratio of RSRM are respectively 2013- 0.23:1 & 20140.34:1 which is not acceptable. Thus, if the RSRMs inventories do
not sell, and it has to pay all its current liabilities, it may find it
difficult to meet its obligations because its quick assets are 0.34
times of current liability. Apart from this this good to see that
year-to-year the quick assets are increasing against current
liabilities.

3.2 LEVERAGE RATIOS:


The long-term creditors, like debenture holders, financial
institutions etc. are more concerned with the firms long term
financial strength. The most common ratios which indicate the
extent of debt financing in a firm are:
3.2.1
DEBT-EQUITY RATIO:
This ratio is calculated to measure the relative claims of outsiders
(lenders) and owners against the firms assets. The ratioshows the

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relationship between the outsiders funds and shareholders


funds.
Debt equity ratio =
2014
3,005,258,500
= 1,744,278,182

Total debt
Shareholder s ' equity

Times
1.72

2013
2,721,373,158
= 1,589,320,327

Times
1.71

Debt-Equity Ratio

Times

2013

2014

Interpretation:As a conventional rule, a debt-equity ratio of


1:1is considered satisfactory. In the diagram, as we see that last
two years debt-equity ratio of RSRM are respectively 2013- 1.71:1
& 2014- 1.72:1 which is unfavorable. It is clear that from the debtequity ratio that RSRMs lenders/creditors have contributed more
funds than owners; lenders/creditors contribution is 1.72 times
of owners contribution. A high debt-equity ratio may be
unfavorable as the firm may not be able to raise further
borrowing, without paying higher interest, and accepting stringent
conditions. This situation creates undue pressures and
unfavorable conditions to the firm from the lenders/creditors.
3.2.2
COVERAGE RATIO:
It indicates the ability of the company to meet its annual interest
costs. The Interest Coverage ratio or the Times-Interest-Earned

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(TIE) ratio is used to test the firms debt-servicing capacity. It


shows the number of times the interest charges are covered by
funds that are ordinarily available for their payment.
Coverage ratio =

Net profit before income tax


Interest expense

2014
209,829,235
= 169,083,190

Times
1.24

2013
279,533,824
= 159,680,646

Times
1.75

Coverage Ratio

Times

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

2013

2014

Interpretation:In the diagram, as we see that last two years


interest coverage ratio of RSRM are respectively 2013- 1.75 times
& 2014- 1.24 times. The higher the coverage ratio, better it is
both for the firm and lenders. For the firm, the probability of
default in payment of interest is reduced and for the lenders, the
firm is considered to be less risky. But in 2014 the coverage ratio
of RSRM is down 1.75 to 1.24 which is not good because a lower
coverage ratio indicates the excessive use of debt.

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3.3 ACTIVITY RATIOS:


Activity ratios are employed to evaluate the efficiency with which
the firm manages and utilizes its assets. It indicates the speed
with which assets are being converted or turned over into sales.
Several activity ratios can be calculated to judge the effectiveness
of asset utilization3.3.1
INVENTORY TURNOVER RATIO:
It measures the number of times that average inventory of
finished goods was turned over or sold during a period of time,
usually a year.
Cost of goods sold

Inventory turnover ratio = Average inventory


Average Inventory =
2014
=

Opening inventory +Closing Inventory


2

Times
2.5

4,301,993,578
1,613125,611+1,751,235,595
2

2013
=

Times
3.31

4,738,541,235
1,250,041,298+1,613,125,611
2

Inventory Turnover Ratio


3.5
3
2.5
2
Times

1.5
1
0.5
0

2013

2014

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Interpretation:In the diagram, we see that then debt inventory


turnover ratio of RSRM in 2013 is much higher than the ratio of
2014. RSRM is turning its inventory of finished goods into sales
2.5 times in a year while in 2013 it was 3.31 times. Generally, a
low inventory turnover implies excessiveinventory levels than
warranted by production and sales activities.
3.3.2
TOTAL ASSETS TURNOVER RATIO:
It measures the utilization of all the companys assets, measures
how many sales are generated by those assets. Therefore, a firm
should manage its assets efficiently to maximize sales. The
relationship between sales and assets is called assets turnover. If
the firm manages the assets more efficiently, sales would be
more and equally profits would be up.
Total assets turnover =
2014
4,766,995,506
= 4,749,536,683

Times
1.05

Revenue / Net Sales


Total assets
2013
5,253,806,261
= 4,310,693,485

Total Asset Turnover Ratio


1.4
1.2
1
0.8
Times

0.6
0.4
0.2
0

2013

2014

Times
1.30

INDUSTRIAL TOUR REPORT

31

Interpretation:In the diagram, we see that the assets turnover


ratio of RSRM in 2014 is 1.05 times,while in 2013 it was 1.3 times.
So it is clearly observe that the asset turnover ratio of RSRM is
declined. The Total assets turnover of 1.05 times implies that
RSRM generates a sale of Tk. 1.05 for one taka investment in
fixed assets & current assets together.
3.3.3
DEBTOR TURNOVER RATIO:
It indicates the number of times that accounts receivable are
cycled during the period, usually in a year. The higher the value of
debtor turnover, the more efficient is the management of credit.
Debtor/Accounts

receivable

turnover

Sales/Credit Sales
Average accountsreceivable

Average accounts receivable =


2014
4,766,995,506
= 638,797,191

Times
7.46

Debtor collection period =


2014
365
= 7.46

Days
49

Opening A . R .+Closing A . R .
2

2013
5,253,806,261
= 489,946,817

Times
10.72

365
Debtor turnover
2013
365
= 10.72

Days
34

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32

Debtor Turnover Ratio


12
10
8
Times

6
4
2
0

2013

2014

Interpretation:In the diagram, we see that the RSRM is able to


turnover its debtors 7.46 times in the year of 2014, while in the
previous year it was 10.72 times. So the management of credit of
RSRM is inefficient in this year compared to previous year. Again
the debtor collection period of RSRM is increased 34 days to 49
days which is also not a good sign because the shorter the
collection period, the better the quality of debtors.
3.3.4
CREDITOR TURNOVER RATIO:
It indicates the average length of time in days that the company
takes to pay its credit purchases.
Creditor/Accounts payable turnover =
Average accounts payable =
2014
4,440,103,562
= 1,005,198,353

Times
4.21

Creditor payment period =


2014

Days

Puchases /Credit Purchases


Average accounts payable

Opening A . P+Closing A . P .
2
2013
4,876,651,219
= 937,053,485

Times
5.20

365
Creditor turnover
2013

Days

INDUSTRIAL TOUR REPORT


365
= 4.21

87

365
= 5.20

33

70

Creditor Turnover Ratio


6
5
4
Times

3
2
1
0

2013

2014

Interpretation:In the diagram, we see that the RSRM is able to


turnover its creditors 4.21 times in the year of 2014, while in the
previous year it was 5.2 times. Again the creditor collection period
of RSRM is increased 87 days to 70 days which is also not a good
sign. If the period is more, it indicates the firm is defaulting in
payments and enjoying longer period of credit from the suppliers.
Creditors can understand that they may be getting false
promises.

3.4 PROFITABILITY RATIOS:


Profitability ratios are to measure the operating efficiency of the
company. Creditors want to get interest and repayment of
principal regularly. Owners want to get a required rate of return on
their investment. This is possible only when the company earns
enough profits. Following are profitable ratios:
3.4.1
GROSS PROFIT RATIO:
It indicates the total margin available to cover other expenses
beyond cost of goods sold and still yield a profit.

INDUSTRIAL TOUR REPORT


Gross profit ratio =
2014
465,001,928
= 4,766,995,506 100

Gross profit
100
Net sales

Percentag
e
9.75

2013
515,265,026
= 5,253,806,261 100

Gross Profit Ratio


9.82%
9.80%
9.78%
Percentage

9.76%
9.74%
9.72%
9.70%

34

2013

2014

Percenta
ge
9.81

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35

Interpretation:In the figure, we see that the ratio has declined


from 2013 to 2014 respectively 9.81% to 9.75% which is not
expectable at all because it effects on overall net profit of RSRM.
Low gross profit ratio is not sign of good management. The gross
profit ratio of RSRM falls because it may be increased in cost of
raw materials due to political unrest; inefficient utilization of plant
and machinery which resulting in higher cost of production;
excessive competition, compelling to sell at reduced prices etc.
3.4.2
OPERATING PROFIT RATIO:
It indicates the percentage of difference between the gross profit
and operating expenses. It reflects the efficiency of operation of a
company.
Operating ratio =
2014
389,122,952
= 4,766,995,506 100

Operating profit
100
Net sales
Percenta
ge
8.16

2013
453,643,321
= 5,253,806,261 100

Operating Profit Ratio


8.70%
8.60%
8.50%
8.40%
Percentage

8.30%
8.20%
8.10%
8.00%
7.90%

2013

2014

Percenta
ge
8.63

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36

Interpretation:In the figure, we see that the ratio has declined


from 2013 to 2014 respectively 8.63% to 8.16% which
isunfavorable because it effects on overall net profit of RSRM
which resulting decrease of net profit as well as selling price will
be increased.

3.4.3
NET PROFIT RATIO:
Net Profit ratio indicates the overall efficiency of the management
inmanufacturing, administering and selling the products. It also
indicates the firms capacity to withstand adverse economic
conditions.
Net profit ratio =
2014
154,957,856
= 4,766,995,506 100

Net profit after income tax


100
Net sales
Percenta
ge
3.25

2013
166,740,993
= 5,253,806,261 100

Percenta
ge
3.17

INDUSTRIAL TOUR REPORT

37

Net Profit Ratio


3.26%
3.24%
3.22%
3.20%
Percentage

3.18%
3.16%
3.14%
3.12%
3.10%

2013

2014

Interpretation:In the figure, we see that the ratio has increased


from 2013 to 2014 respectively 3.17% to 3.25%. As we expected
the decreasing ratio of Gross profit& Operating profit affects the
net profit but it is not happening this is because of big difference
in deferred tax expense of RSRM. In 2014 the deferred tax
expense is tk. 8,915,075 while in 2013 it was 72,896,584.

3.4.4
EBITDA MARGIN TO SALES:
EBITDA means Earnings Before Income Tax & Depreciation
Allowance. It measures the overall profit before income tax &
depreciation margin on sales.
EBITDA margin to sales =
2014

Percentag
e

EBITDA
100
Net sales
2013

Percentag
e

INDUSTRIAL TOUR REPORT


446,180,514
= 4,766,995,506 100

9.36

38

9.67

507,791,687
100
5,253,806,261

EBITDA margin to sales


9.70%
9.65%
9.60%
9.55%
9.50%
Percentage

9.45%
9.40%
9.35%
9.30%
9.25%
9.20%

2013

2014

Interpretation:In the figure, we see that the ratio has declined


from 2013 to 2014. The EBITDA margin to sales of RSRM in 2014
is 9.36% while it was in 2013 it was 9.67% which is not
satisfactory. It indicates the operating expense has gone up.

3.4.5
RETURN ON SHAREHOLDERS EQUITY:
It measures the rate of return on the book value of shareholders
total investment in the company. It indicates how well the firm
has used the resources of owners.
Return on shareholders equity =

Net profit after income tax


100
Shareholder s ' equity

INDUSTRIAL TOUR REPORT


2014
154,957,856
= 1,744,278,182 100

Percentag
e
8.88

2013

39

Percentag
e
10.49

=
166,740,993
100
1,589,320,327

Return on Shareholders' Equity


11.00%
10.50%
10.00%
Percentage

9.50%
9.00%
8.50%
8.00%

2013

2014

Interpretation: In the diagram, we see that the return on


shareholders equity of RSRM in the year of 2014 is much lower
than the year of 2013. In 2014 the ROE of RSRM is 8.88% while in
2013 it was 10.49%. This is because the profit after tax to
shareholders equity of RSRM is comparatively lower than
previous year. The higher the ratio, the better it is for equity
shareholders.

3.4.6
RETURN ON CAPITAL EMPLOYED:
Another way to calculate return on investment is through capital
employed or net assets. Net assets are equal to net fixed assets
plus current assets minus current liabilities. Net assets andcapital
employed convey the same meaning, though called differently.

INDUSTRIAL TOUR REPORT


Return on capital employed =
2014
209,829,235
= 1,963,470,029 100

Percentag
e
10.69

40

Net profit before income tax


100
Total capital employed
2013

Percentag
e
15.22

=
279,533,834
100
1,836,382,657

Return on Capital Employed


16.00%
14.00%
12.00%
10.00%
Percentage

8.00%
6.00%
4.00%
2.00%
0.00%

2013

2014

Interpretation:In the diagram, we see that the return on capital


employed of RSRM in the year of 2014 is much lower than the
year of 2013. In 2014 the return on capital employed of RSRM is
10.69% while in 2013 it was 15.22%. A lower percentage of return
on capital employed will not satisfy the owners that their funds
are not profitably utilized.

INDUSTRIAL TOUR REPORT

41

3.4.7
EARNING PER SHARE:
It indicates the profitability of the firm on a per share basis, it
does not reflect how much is paid as dividend and how much is
retained in the business.
Earnings per share =
2014
154,957,856
= 29,600,000

Taka
5.24

Net profit after income tax


No . of ordinary shares outstanding
2013
166,740,993
= 29,600,000

Taka
5.63

Earning Per Share


5.7
5.6
5.5
5.4
Taka

5.3
5.2
5.1
5

2013

2014

Interpretation:EPS calculation, over the years, indicates how the


firms earning power, per share basis, has changed over the
years. EPS of the firm is to be compared with the industry and its
immediate competing firm to understand the relative
performance of the firm. But in 2014 the EPS is 5.63 while it was
5.24 in 2013. In 2014 the earning per share of RSRM is decreased
compare to previous year which is not good sign at all for
shareholders of RSRM because they always expect better EPS
from an organization. Otherwise they are not interested to invest
anymore.

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42

3.4.8
DIVIDEND PER SHARE:
It is the earning distributed to ordinary shareholders. A large
number of present and potential investors may be interested in
DPS rather than EPS.
Dividend

per

share

Dividend distributed

equity shareholders
No . of ordinary shares outstanding
2014
74,000,000
= 29,600,000

Taka
2.5

2013
0
= 29,600,000

Taka
0

Dividend Per Share


3
2.5
2
Taka

1.5
1
0.5
0

2013

2014

Interpretation:After payment of dividend to preference


shareholders, balance net profit belongs to equity shareholders,
whether distributed in the form of dividend or retained in
business.RSRM distribute Tk. 2.5 per share as dividend out of Tk.

INDUSTRIAL TOUR REPORT

43

5.24 earned per share. The difference per share is retained in the
business. While in 2013 RSRM retained Tk. 5.63 earned per share
fully.

INDUSTRIAL TOUR REPORT

44

3.5 USEFUL INFORMATION TO EVALUATE RATIO


ANALYSIS
Particulars
Current assets
Current liabilities
Total assets
Total debt/liabilities
Opening inventory
Closing inventory
Average inventory
Accounts receivable
Average accounts receivable
Accounts payable
Average accounts payable
Revenue/Net
sales/Credit
sales
Cost of goods sold
Net
purchases/Credit
purchases
Gross profit
Operating profit
EBITDA
Net profit before income
taxes
Net profit after income taxes
Shareholders equity
Dividend distributed
Interest expense
Total capital employed
No.
of
ordinary
shares
outstanding

2014
2,684,574,070
2,786,066,653
4,749,536,683
3,005,258,500
1,613,125,611
1,751,235,595
1,682,180,603
787,647,565
638,797,191
1,173,343,220
1,055,198,353
4,766,995,506

2013
2,192,672,783
2,474,310,829
4,310,693,485
2,721,373,158
1,250,041,298
1,613,125,611
1,431,583,455
489,946,817
489,946,817*
937,053,485
937,053485*
5,253,806,261

4,301,993,578
4,440,103,562

4,738,541,235
4,876,651,219

465,001,928
389,122,952
446,180,514
209,829,235

515,265,026
453,643,321
507,791,687
279,533,824

154,957,856
1,744,278,182
74,000,000
169,083,190
1,963,470,029
29,600,000

166,740,993
1,589,320,327
0
159,680,646
1,836,382,657
29,600,000

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45

*Note: In the year of 2013 the Average Accounts Receivable


&Average Accounts Payable are calculated only with the Closing
Accounts Receivable & Closing Accounts Payable respectively
because there are no further information about the Opening
Accounts Receivable & the Opening Accounts Payable.

INDUSTRIAL TOUR REPORT

46

4 . RECOMMENDATION
Though the Ratanpur Steel Re-rolling Mills Ltd. is undoubtedly a
benefited company for the country, we recommend some
particular factors which, we think can make some more
betterment for the company in the practice of financial policies
and programs. The recommendations are given:
They should utilize maximum amount of its production
capacity which leads to increase annual turnover as well as
profit margin.
The industry should increase its channels of distribution of
products which helps to meet local demand as result
revenue will increase.
The company should increase the production volume by
installing new machine as it has been informed that
Government takes some big project which will increase
demand in near future such as Padma Multipurpose Bridge,
Metro rail, Tunnel under the Karnaphuli River etc.
They should maintain proper balance between high liquidity
& lack of liquidity.
They should have short-term as well as long-term solvency
for financial strength.
They should improveits operational efficiency or retire the
debt, early, to have a coverage ratio, comparable to the
industry if the coverage ratio is low.
They should compare the collection period of the firm with
the industrys average collection periodand decide whether
the firm has to make any change in credit policy.
They should have to paid creditors within the assured period.
They should increase earnings per share to attract the
shareholders.

INDUSTRIAL TOUR REPORT

47

5 . CONCLUSION
RSRM is one of the biggest steel manufacturing companies in the
private sector in Bangladesh. RSRM has strong customer
relationship with a local image and always sensitive about
competitors price. RSRM also gives honorarium to the engineers
to encourage further purchase. It is one of potential steel mill
among the graded bar producer because they have huge financial
strength and long experience in producing no graded bar. The
slogan of the Ratanpur steel mill is Steel for the nation.
And finally, we are hopeful to see that the construction sector of
Bangladesh has grown at a calculated average growth rate of
12.2% over the last 10 years and it is expected to continue in the
coming years. The real estate sector also tries to recover slowly
after temporary slowdown of demand due to overall
macroeconomic pressure and contraction policy of government.
Government also undertakes some big project which will increase
demand in near future which is the great opportunity for steel
industries like RSRM to meet the incremental demand of MS
Deformed Bar.
Hence the Government should come forward to ensure bright
future of this sector of industry.

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48

7 . APPENDICES
QUESTIONNAIRE
(Information collected by questionnaire will be used for academic
purpose only)

1. Name of the organization.


2. Location...
3. Name of Respondent...
4. Designation
5. Form of ownership
6. Commencement of operation.
7. Managing body of the company
8. Nature of company:
o Public
o MNC
o Joint
o Venture
o Private Ltd.
9. Total number of employees
o Managerial Staff
o Non Managerial Staff
o Skilled/ Unskilled

INDUSTRIAL TOUR REPORT

49

Finance & Accounting Department


1. Please give the following information about the Capital
o Initial capital
o Present capital
2. Please mention the total investment of your plant
o Fixed capital
o Working capital
3. Did your company go to share market?
o Yes
o no
4. Is your company profitable?
o Yes
o no
5. What are the sources of short- term financing?
6. What are the sources of long term financing?
7. Is your company able to meet current obligation?
8. Is your company able to meet long-term obligation?
9. Is your company distributing dividend to shareholders?
10. Would you please show yearly turnover of the last 5 years?
Year
2010
2011
2012

Yearly Turnover

INDUSTRIAL TOUR REPORT

50

2013
2014

8 . REFERENCES

Websites:
www.rsrmbd.com
www.investopedia.com
www.businessdictionary.com
Books:
I. M. Pandey Financial Management.
Weygandt, Kieso & Kimmel Accounting Principles.
George Foster Financial Statement Analysis.
Annual Report of RSRM.
Miller, H. Merton. Debt and taxes. The Journal of Finance
(May, 1977).