1.

Introduction of the Report

1.0 Introduction

Prepare a Report creates a unique opportunity for the student to apply their theoretical knowledge into practice and
gain valuable real world business experience. Student can also realize existing business condition apart from
having opportunities to solve the problem using various analytical tools.

Manufacturing Company is now an essential part of our economic development system. Modern manufacturing
company plays an important role in the economic development of a country. Manufacturing company provides
necessary goods for meet the various types of need as well as economic development. These types of
manufacturing company also provide necessary funds for social welfare and environmental development. Economy
of Bangladesh is in the group of world’s most underdeveloped economies. One of the reasons may be its
underdeveloped companying system. Government as well as different international organizations have also
identified that underdeveloped companying system causes some obstacles to the process of economic development.
So they have highly recommended for reforming industrial sector. Bangladesh Government must need to take
some immediate steps to develop the industrial and formulation and implementations of these reform activities has
also been participated by different international organization like World Bank, IMF etc.

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1.1 Background of the Study

As a requirement of the Managerial Finance course, we were assigned to do an assignment in National Tubes
Limited. From practical knowledge, we will be able to know real life situations and start a career with some
practical experience. National Tubes Limited is Tube Company incorporated in the People’s Republic of
Bangladesh with limited liability.

This report, “Performance Evaluation Of National Tubes Limited”, has been prepared to fulfill the partial
requirement of Managerial Finance course. While preparing this report, we had a great opportunity to have an in
depth knowledge of all the financial activities of National Tubes Limited.

1.2 Significance of the Report

Education will be the most effective when theory and practice blends. Theoretical knowledge gets its
perfection with practical application. We all know that there is no alternative of practical knowledge
which is more beneficial than theoretical aspects. The prime reason of this study is to become familiar
with the practical business world and to attain practical knowledge about the overall corporate world,
which is so much essential for each and every student to meet the extreme growing challenges in job
market.

1.3 Scope of the report

The presentation of the organizational structure and policy of National Tubes Limited and investigating the
strategies applies by it provide the scope of this report.

An infrastructure of the organization has been detailed and looks into the future. The scope of this report is limited
to the overall description of the company, its services, its position in the industry, its financial performance
analysis the practical progress of its operation. The scope of the study is limited to organizational setup, functions
and performances

 Recent performance of NTL in terms of production, investment and export.

 To analyze the company’s current financial flows performed by NTL.
 To obtain practical experience about general tube company activities by NTL’S financial performance
analyses.
 To build professional carrier in the corporate sectors as well as any manufacturing institution.

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1.4 Objectives of the Report

1.4.1. General Objective

The prime objective of the report is to analyze “Financial Performance of National Tubes Limited”
1.4.2. Specific Objective
The following aspects can be listed as the specific objectives for this practical orientation in National Tubes
Limited:

 To identify and assess the present financial performance of National Tubes Limited
 To calculate the financial ratios and identify the areas of concern.
 To understand the implications in analyzing and interpreting the financial ratios.
 To identify the findings and raise possible recommendations for improving the performance of National
Tubes Limited

1.5 Methodology:

1.5.1. Research Design

 This report is a descriptive type of research, which briefly reveals the overall activities performed by
National Tubes Limited. It has also been administered by collecting secondary data. Annual reports of
National Tubes Limited were the major secondary data sources in this regard. Ratio analysis and trend
analysis have also been used as major tools for the financial performance analysis. The study is performed
based on the information extracted from different sources collected by using a specific methodology. This
report is analytical in nature.

1.5.2. Sources of data:

 Secondary data:
A. Annual Report of National Tubes Limited.
B. Different text book and journals.
C. Various reports and articles related to study.
D. Some of my course elements as related to this report.
E. Web base support from the internet

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1.5.3. Data Collection Procedure and Instruments:

For the “Financial Performance Evaluation of National Tubes Limited” on the basis of time series analysis we
mainly used Secondary data.

1.5.4. Instruments Used For Analysis:

A. Ratio Analysis

B. Trend Analysis

 Ratio Analysis:

The quantitative (such as ratio analysis) tools are used to analyze the gathered data and different types of computer
software are used for reporting the gathered information from the analysis such as- Microsoft Word, Microsoft
Excel etc. Ratio can be classified into four broad groups-

1) Liquidity Ratio.
2) Activity Ratio.
3) Debt Ratio.
4) Profitability Ratio.

 Trend analysis:

It is really important to analysis trends in ratios as well as their absolute levels. This analysis informs us whether a
company’s financial condition improving or deteriorating.

1.6 Limitation

Observing and analyzing the broad performance of a tube company is not that easy. Moreover due to obvious
reasons of scrutiny and confidentiality, the company personnel usually don’t want to disclose all the statistical
information about their organization. However the some of the limitations we have face while preparing this
Report are listed as follows:

 Time Limitation: To complete the study, time was limited by one month. It was really very short time to
know details about an organization like National Tubes Limited.

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 Inadequate Data: Lack of available information about export and import business operations of National
Tubes Limited. Because of the unwillingness of the busy key persons, necessary data collection became
hard. The employees are extremely busy to perform their duty.

 Lack of Record: Large-scale research was not possible due to constrain and restrictions posed by the
organization. Unavailability of sufficient written documents as required making a comprehensive study. In
many cases up-to-date information was not available.

 Lack of experiences: Lack of experiences has acted as constraints in the way of meticulous exploration on
the topic. Being outsider of the organization; it was not possible on our part to express some of the
sensitive issues. Lack of adequate knowledge about export and import business of any organization.

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2. ORGANIZATION’S OVERVIEW

2.1 Overview of NTL

National Tubes Limited was established in 1964 in the private sector. It was nationalized and placed
under Bangladesh Steel & Engineering Corporation (BSEC) in 1972. It is the only Government owned
steel pipe producer in Bangladesh. In 1989 the enterprise was transformed into a public limited company
by off-loading 49 percent shares to the general public. Now a sovereign Board of Directors manages the
company.

National Tubes produces three types (API, GI & MS) of steel pipes. Overall it produces 10,000 M.T API.
GI and MS, pipe in every year. National Tubes has acquired ISO 9001:2008 Certificate for its quality
system for MS, GI & API Line Pipe. General-purpose MS and GI pipes (1 /2 inch to 8 inch dia) are,
produced according to the British Standard BS-1387 and Bangladesh Standard BDS-1031. Galvanizing is
done according to the British Standard BS-729, which is equivalent to DIN-244 and IS-4736. GI pipes
are used for water supply and irrigation.
API pipes (3/4 to 8-5/8) produced under the license from American Petroleum Institute (API). These
pipes produced strictly according to the requirements of API. Spec 5L which correspond to the Grade-A-
53B of the ASTM (American Society for Testing and Materials), specification. API Pipes used for
Transmission & distribution of Natural Gas & Oil. The Major Buyer to the entire quantity of API Pipes
are gas Transmission & Distribution Companies of Petrobangla- i.e. Titas Gas, Bakhrabad Gas, Jalalabad
Gas, Pashchimanchal Gas and BAPEX.

National Tubes Limited

131-142, Tongi Industrial Area
Gazipur-1710, Bangladesh.

Phone: 9802303, 9802737, 9801985

2.2 Corporate Mission

To contribute to the well being of the nation by producing high quality import-substitute Gas/Oil line pipes
according to the specifications (Spec QI & 5L) of American Petroleum Institute (API) and Water line pipes (GI)
according to British Standard (BS-1387 & BS-729) as an API Licensee and an ISO 9001:2008 certified company.
We place Quality above all. We are firmly committed to all our stakeholders such as: Our valued customers, our
employees, our business associates, our fellow citizens and our valued shareholders.
2.3 Corporate Vision

It visions for the future encompasses a presence in major market in Bangladesh. Building a unique enterprise
reflecting utmost integrity, transparency and accountability at all levels and marketing, value-added products

6
manufactured under an uncompromising quality program devoted to continuous improvements for customers
satisfaction with modern technology, innovative vision and motivated workforce developed through strategic
management of human resource and training. And achieve maximum satisfaction by providing customs with
products that meet according their quality recruitment.

2.4 Human Resource Development

In order to improve productivity of human resources, the company continuously provides formal and informal
training to the employees at every level of operation and management. In the current fiscal year with the help of
“Central for Management Development” under Awareness of Internal Quality Audit 22 several levels officers
participated in the training session. Besides this, 34 numbers of officers, staff and workers were trained in different
trade in different training Institute of the country in a short course in the related profession. The people thus
trained, will ultimately make great contribution to the company’s overall growth by developing professional skill
in due course.

2.5 Strategies of NTL

NTL mainly follows top down approach to take necessary decisions for the company. Basically they follow the
centralize strategy where the Head Office of the company control and monitor all the activities.

2.6 Features of NTL

1. Installed production Capacity: 39,000 Metric Ton per year.

2. Production Range: ½” to 8” nominal dia pipes
3. Galvanizing Capacity: Maximum 8 Ton per hour.
4. Production process: Electric Resistance Welding (ERW) process, employing high frequency
system is used for manufacturing the pipe. Pipes are galvanized by Hot Dip Galvanizing process.
5. Length of pipe: Black pipes up to 3” nominal dia and all sizes of G.I. pipe are manufactured in 6.1
meter (20 ft) standard lengths with 10% of total supply in non-standard or short lengths. Black
pipes of 4” to 8” nominal dia are manufactured in 12 meter (40ft) standard lengths with 10% of
total supply in non-standard or short lengths.
6. End Finish: G.I. Pipes are taper threaded as per BS-21 Pipe thread. Black pipes are plain ended
(beveled

2.7 Formation of Digital Bangladesh

1. Some of the officers/staffs have been trained up in computer. Total 15 nos. of computer have been
purchased for this organization. Besides, they have purchased one data flex software for accounts
department, which serve for salary accounts, final accounts, provident fund, store accounts, cash books etc.
There is a plan to incorporate all departments under a network with LAN.

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 2. With a view to building digital Bangladesh they have taken a 5 years work plan to computerize all official
works of this organization.
3. Now they have been open a new web-site for NTL to exhibit their product and activities through it.
4. To build-up digital Bangladesh they have a plan to develop a system through which they can introduce E-
Commerce and E-Tendering process.

2.8 Corporate Social Responsibilities

National Tubes Ltd. is committed to behave in a responsible way towards both the environment and the
society. We also encourage our employees to act responsibility towards the environment and the society
at their individual capacities. We work in harmony with the society for mutual interest.
1. Scholarships for 69 children’s 2009-2010 financial year of all employees is to be given for
continuing education.
2. Hazard Allowance and regular milk provided among the employees to maintain good health.
3. One day’s total salary of all officers of the Company has been donated in the government fund
for the affected people of Nimtoli, Dhaka in the fiscal year 2009-2010
4. A forestation activity is still continuing in useless land of the factory.

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2.9 ORGANIZATIONAL HIERARCHY:

Chairman

Mohammad Abu Hafiz

Directors

Md. Khalilur Rahman Siddiqui Md.Mazibur Rahman Khan

Engr. Shahidul Abedin P.E Md. Saiful Islam
Khizir Hayat Pirjada Torab Hossain
Jasimuddin Choudhury Umma Kulsum

Company Secretary

Md. Rezaul Karim

At present there are 10 members in the Board of Directors. In Board of Directors 1.chairmen, 8.Directors and
1.Company Secretary are involved in Board of directors. According to the Companying Company Act, Chairmen
are not elected by the directors. They are selected by shareholders represents individual body that then looks after
the periodic issue with the management and tries to solve the problem.

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2.10 Five Years of NTL at a Glance
(Taka in Lac)
Sl. No. Particulars 2005-06 2006-07 2007-08 2008-09 2009-10
01 Authorized Capital 700.00 2500.00 2500.00 2500.00 2500.00
02 Paid-up Capital 700.00 700.00 910.00 1365.00 1501.50
03 Retained Earnings 2244.24 2291.03 2564.87 2839.59 2970.82
04 Shareholders’ Equity 2944.24 3201.03 3929.27 4341.09 4472.32
05 Total Assets 8151.42 7422.78 9931.80 8785.58 8964.97
06 Fixed Assets (W.D.V.) 543.09 537.70 545.82 535.88 511.36
07 Long-term Liabilities 1557.33 1172.40 892.00 805.13 702.29
08 Gross Sales 6977.26 8338.92 10546.98 9895.00 5954.85
09 Total Expenses 6201.77 7866.31 9262.14 8716.56 5252.67
10 Operating Profit 813.69 506.53 1479.08 1348.74 656.14
11 Net Profit Before Tax 775.49 472.61 1284.84 1178.44 702.18
12 Net Profit After Tax 542.84 330.83 931.51 854.34 509.08
13 Number of Shares 586850 700000 794932 1083274 1425958
14 Book Value per Share (Tk.) 100.00 100.00 100.00 100.00 100.00
15 Earnings per Share 92.50 47.26 117.18 78.87 35.70
16 Cash Dividend 60.00% 10.00% 25.00% 30.00% 25.00%
17 Bonus Share _ 30.00% 50.00% 10.00% _
18 Number of Employees 370 368 367 340 324
19 Number of Shareholders 2156 2556 3171 3642 5029.00
20 Net Asset Value per Share 480.60 467.30 456.85 348.03 322.85

Table-1: Five Years of NTL

3.0. Theoretical Aspect

3.1. Financial Performance Analysis

Financial Performance is a subjective measure of how well a firm can use its assets from business and generate
revenues. Financial Performance term is also used as a general measure of a firm's overall financial situation over a

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given period of time, and can be used to compare with similar firms across the same industry or to
compare industries or sectors in aggregation.

Financial performance analysis refers to an assessment of the viability, stability and profitability of a business, sub-
business or project. It is performed by professionals who prepare reports using ratios that make use of information
taken from financial statements and other reports. These reports are usually presented to top level management as
one of their bases in making business decisions. Based on these reports, management may take decision. Financial
performance analysis is a vital to get a financial overview about a company. Generally it is consists of the
interpretation of balance sheet and income statement. Ratio analysis and trend analysis can be done by using these
two statements. These analyses are the major tools for analyzing the company’s financial performance.

3.2. Balance sheet

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of
a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a
specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's
financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to
a single point in time of a business' calendar year. A standard company balance sheet has three parts: assets,
liabilities and ownership equity.
3.3 Income Statement

Income statement also referred as profit and loss statement, earnings statement, operating statement or statement of
operations is a company's financial statement that indicates how the revenue is transformed into the net income. It
displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues,
including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income
statement is to show managers and investors whether the company made or lost money during the period being
reported.

3.4 Ratio Analyses

A tool used by individuals to conduct a quantitative analysis of information in a company’s financial

statements.Ratios are calculated from current year numbers and are then compared to previous years, other
companies,the Industry, or even the economy to judge the performance of the company.The basic inputs to ratio
analysis are the firm’s income statement and balance sheet for the periods to be examined. Ratio analysis is
predominately used by proponents of fundamental analysis.

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In finance, a financial ratio or accounting ratio is a ratio of two selected numerical values taken from an
enterprise’s financial statements. There are many standard ratios used to try to evaluate the overall financial
condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by
current and potential shareholders (owners) of a firm, and by a firm’s creditors. Security analysts use financial
ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a
financial market, the market price of the shares is used in certain financial ratios. In short, ratio analysis is
essentially concerened with the calculation of relationships which, after proper identification and interpretation
may provide information about the operations and state of affairs of a business enterprise.The analysis is used to
provide indicators of past performance in terms of critical success factors of a business.This assistance in decision-
making reduces reliance on guesswork and intution and establishes a basis for sound judgement.

3.5. Significance of using ratios

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial statements.
2. It is compared with the same ratio in previous financial statements (trend analysis).
3. It is compared with a standard of performance (industry average).Such a standard may be either the ratio
which represents the typical performance of the trade or industry, or the ratio which represents the target set
by management as desirable for the business.

3.6. Types of Ratio Comparisons

Ratio analysis is not merely the application of a formula to financial data to calculate a given ratio. More
important is the interpretation of the ratio value. To answer such questions as is it too high or too low? Is
it good or bad? Two types of ratio comparisons can be made: Cross-sectional and Time-series analysis.

 Time-series Analysis:

Time-series analysis evaluates performance over time. Comparison of current to past performance, using ratios,
allows the firm to determine whether it is progressing as planned. Additionally, time-series analysis is often helpful
in checking the reasonableness of a firm’s projected financial statements.

 Cross-Sectional Analysis:

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 Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same point in time.

 Combined Analysis:

The most informative approach to ratio analysis is one combines cross-sectional and time-series analysis. A
combined view permits assessment of the trend in the behavior of ratio in relation to the trend for the industry.

3.7 Cautions about Ratio Analysis

Before discussing specific ratios, we should consider the following cautions:

 A single ratio does not generally provide sufficient information from which to judge the overall
performance of the firm.
 Be sure that the dates of the financial statements being compared are the same.
 It is preferable to use audited financial statements for ratio analysis.
Be certain that the data being compared have all been developed in the same way.

3.8 Groups of Financial Ratios

Financial ratios can be divided into four basic groups or categories:

i. Liquidity ratios
ii. Activity ratios
iii. Debt ratios and
iv. Profitability ratios
Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return. In the near
term, the important categories are liquidity, activity, and profitability, because these provide the
information that is critical to the short-run operation of the firm. Debt ratios are useful primarily when the
analyst is sure that the firm will successfully weather the short run.

Financial
Ratios

Liquidity Activity Debt Ratio Profitability Market

Ratio Ratio Ratio Ratio

Inventory
Quick Turnover Gross
(Acid- Degree of The Profit Price/Earnin
Test) Indebtedne Ability to Margin gs Ratio
Ratio ss 13 Service
 Average
Collectio Debt Operating
Current n Period Ratio Time Profit
Ratio Interest Margin
Earned
Average
Payment Net Profit
Period Margin

Total Returns on
Asset Investmen
Turnover t

Return on
Equity

Earnings
Per Share

Figure -1: Groups of Financial Ratios

3.8.1 Analyzing liquidity:

The liquidity of a business firm is measured by its ability to satisfy its short term obligations as they
come due. Liquidity refers to the solvency of the firm’s overall financial position. The three basic
measures of liquidity are:

 Current ratio = Current Assets / Current Liability

 Quick Ratio = Cash + Government Securities + Receivable / Total Current Liabilities

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3.8.1. a. Current Ratio:
One of the most general and frequently used of these liquidity ratios is the current ratio. Organizations
use current ratio to measure the firm’s ability to meet short-term obligations. It shows the company’s
ability to cover its current liabilities with its current assets.

Current Ratio = Current Asset/Current Liabilities

Standard ratio: 2:1

3.8.1. b. Quick Ratio:

The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to
meet current liabilities with its most liquid assets.

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Standard ratio: 1:1

3.8.2 Analyzing Activity:

Activity ratios measure the speed with which accounts are converted into sale or cash. With regard to current
accounts measures of liquidity are generally inadequate because differences in the composition of a firm’s current
accounts can significantly affects its true liquidity.

A number of ratios are available for measuring the activity of the important current accounts, which includes
inventory, accounts receivable, and account payable. The activity (efficiency of utilization) of total assets can also
be assessed.

3.8.2. a. Inventory turnover:

A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover= Cost of goods sold/ Average Inventory

The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell
the inventory on hand or "inventory turnover days". This ratio should be compared against industry averages. A
low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or

15
ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return
of zero. It also opens the company up to trouble should prices begin to fall.

3.8.2. b. Average Collection Period:

Average collection period is useful in evaluating credit and collection policies. This ratio also measures the quality
of debtors. It is arrived at by dividing the average daily sales into the accounts receivable balance:

Average Collection Period=Accounts receivable/ (Credit sales/365)

A short collection period implies prompt payment by debtors. It reduces the chances of bad debts. Similarly, a
longer collection period implies too liberal and inefficient credit collection performance. It is difficult to provide a
standard collection period of debtors.

3.8.2. c. Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it represents
the number of days by the firm to pay its creditors. A high creditor’s turnover ratio or a lower credit period ratio
signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company.
However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit
facilities allowed by the creditors. It can be calculated using the following formula:

Average Payment Period=Accounts payable/ Average purchase per day

3.8.2. d. Total Asset Turnover:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover = Sales/ Total Asset

3.8.3. Analyzing Debt:

The debt position of that indicates the amount of other people’s money being used in attempting to generate profits.
In general, the more debt a firm uses in relation to its total assets, the greater its financial leverage, a term use to
describe the magnification of risk and return introduced through the use of fixed-cost financing such as debt and
preferred stock.

3.8.3. a. Debt Ratio:

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The debt ratio measures the proportion of total assets provided by the firm’s creditors.

Debt Ratio = Total Liabilities / Total Assets

3.8.3. b. Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the company able to pay
interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

3.8.4. Analyzing profitability:

These measures evaluate the company’s earnings with respect to a given level of sales, a certain level of assets, the
owner’s investment, or share value. Without profits, a firm could not attract outside capital. Moreover, present
owners and creditors would become concerned about the company’s future and attempt to recover their funds.
Owners, creditors, and management pay close attention to boosting profits due to the great importance placed on
earnings in the marketplace.

3.8.4. a. Gross Profit Margin:

The Gross Profit Margin measures the percentage of each sales dollar remaining after the firm has paid
for its goods. Higher the gross profit margin, the better. The gross profit margin is calculated as follows:

Operating Profit Margin = Gross Profit / Sales

3.8.4. b. Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar. A high
operating profit margin is preferred. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales

3.8.4. c. Net profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes,
have deducted. The higher the net profit margin is better. The net profit margin is calculated as follows:

Net profit Margin = Net profit after Taxes / Sales

3. 8.4. d. Earnings per share (EPS):

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Earnings per share (EPS) are the earnings returned on the initial investment amount.

EPS= Net income/no. of share outstanding

3.8.4. e. Return on Total Assets (ROA):

Return on total assets (ROA), which is often called the firms return on total assets, measures the overall
effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Total Assets (ROA) = Net profit after Taxes / Total Assets

3.8.4. f. Return on Common Equity (ROE):

The Return on Common Equity (ROE) measures the return earned on the owners (both preferred and common
stockholders) investment. Generally, the higher this return, the better off the owners.

Return on Common Equity (ROE) = Net profit after Taxes / Stockholders Equity

3.8.5 Analyzing Market ratio:

3.8.5. a. Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the
income or profit earned by the firm per share.

P/E ratio - Price per share / earnings per share

4.0 Quantitative Analysis of National Tubes Limited:

4.1 Ratio Analysis:

4.1.1 Liquidity Ratio:

a. Current ratio

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 The current ratio, one of the most commonly cited financial ratios, measures the firm’s ability to meet
its short term obligations. The higher the current ratio, the better the liquidity position of the firm. It is
expressed as:
Current Ratio=Current Asset/Current Liabilities

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Current 2.52 2.49 1.97 2.64 2.55

Ratio
Table-2: Current Ratio
Source: Annual Report of National Tubes Limited
Graphical Presentation:

CurrentRatio
3 2.52 2.64 2.55
2.49
2.5 1.97
2
1.5
1
0.5
0
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Figure-2: Current Ratio
Interpretation:

That is the higher the current ratio; the more liquid the firm is considered to be. Current ratio of NTL is good
because it maintains average 2.434 tk current assets against 1tk current liabilities where as normally manufacturing
Company maintains 2: 1 current ratio. But this graph shows that, this company maintains the average 2.43:1
current ratio per year except year 2007-2008.

b. Quick (Acid-Test) Ratio:

The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to
meet current liabilities with its most liquid assets. It is calculated by:
Quick (Acid-Test) Ratio=Current Asset-Inventory-Prepaid Insurance/Current Liabilities

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 Year 2005-06 2006-07 2007-08 2008-09 2009-10
Quick (Acid- 1.98 1.46 1.41 1.89 1.79
Test) Ratio
Table-3: Quick (Acid-Test) Ratio
Source: Annual Report of National Tubes Limited
Graphical Presentation:

Quick(Acid -Test)Ratio
2.5
1.98 1.89 1.79
2
1.46 1.41
1.5

0.5

0
2005 -06 2006-07 2007-08 2008-09 2009-10
Year
Figure-3: Quick (Acid-Test) Ratio

Interpretation:

In this figure we see that the overall quick ratio trend line slowly decreasing. Quick ratio of NTL is good because it
maintains average 1.706 tk quick assets against 1tk current liabilities where as normally manufacturing
Company maintains 1: 1 quick ratio. But this graph shows that, this company maintains the average 1.706:1
current ratio per year.

4.1.2 Activity Ratio:

a. Inventory Turnover Ratio:

A ratio showing how many times a company's inventory is sold and replaced over a period. It is expressed as:
Inventory Turnover =Cost of Goods Sold/Inventory

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 Year 2005-06 2006-07 2007-08 2008-09 2009-10

Inventory 3.02 2.21 2.74 2.75 1.58

Turnover

Table-4: Inventory Turnover

Source: Annual Report of National Tubes Limited

Graphical Presentation:

InventoryTurnoverRatio
3.5 3.02
2.74 2.75
3
2.21
2.5
2 1.58
1.5
1
0.5
0
2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
Year

Figure-4: Inventory Turnover

Interpretation:

The average sales period varies company to company. But NTL turn their inventory slowly that means
average turnover is 2.46 times per year or average sales period 148 days. But the standard is 4times per
year or average sales period 90 days.

b. Average Collection Period:

Average collection period is useful in evaluating credit and collection policies. This ratio also measures the quality
of debtors. It is arrived at by dividing the average daily sales into the accounts receivable balance:

Average Collection Period =Accounts Receivable/Average Sales per Day

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 Year 2005-06 2006-07 2007-08 2008-09 2009-10

Average Collection 76.19 47.31 124.52 45.65 81.78

Period

Table-5: Average Collection Period

Source: Annual Report of National Tubes Limited

Graphical Presentation:

AverageCollectionPeriod
140 124.52

120
100 76.19 81.78
80
47.31 45.65
60
40
20
0
2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
Year
Figure-5: Average Collection Period
Interpretation:

Average collection period varies company to company. But most of the manufacturing concern gives the customers
30 days credit facilities. But NTL average collection period is 75 days may indicate poorly managed credit.

c. Total Asset Turnover Ratio:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate
sales.
Total Asset Turnover= Sales/Total Asset

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 Year 2005-06 2006-07 2007-08 2008-09 2009-10

Total Asset 0.74 0.98 0.92 0.98 0.58

Turnover
Table-6: Total Asset Turnover

Source: Annual Report of National Tubes Limited

Graphical Presentation:

TotalAssetTurnover
1.2

1 0.98 0.98
0.92
0.8
0.74
0.6 0.58
0.4

0.2

0
2005 -06 2006 -07 2007 -08 2008 -09 2009 -10
Year

Figure-6: Total Asset Turnover

Interpretation:

Generally total asset turnover of the company is higher this means that its asset have been used
efficiently. But this graph shows that its average asset turnover rate is 0.84 times per year. But year 2009-
10 shows it is sloping down word, this means that the management performance is poor in compare to
previous year.

4.1.3 Analyzing Debt Ratio:

a. Debt Ratio:

The debt ratio measures the preparation of total assets provided by the firm’s creditors.

Debt ratio= Total Liabilities/Total Assets

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 Year 2005-06 2006-06 2007-08 2008-09 2009-10

Debt Ratio 44.49% 44.40% 56.37% 53.55% 56.64%

Table-7: Debt ratio

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Debt Ratio
56.37% 56.64%
60.00% 53.55%
44.49% 44.40%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Figure-7: Debt ratio

Interpretation:
This graph shows that, the debt ratio was increasing year by year. That’s average is 51.09. This value indicates that
the company has financed closed to half of its assets with debt. The higher this ratio the greater the company’s
degree of indebtness. In this case increase debt comes with greater risk as well as higher potential return.

b. Time Interest Earned Ratio:

The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability to
make contractual interest payments.
Time Interest Earned Ratio =Earnings before interest and Taxes/Interest

Year 2005-06 2006-07 2007-08 2008-09 2009-10

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 Time Interest 42.26 11.74 11.09 11.79 23.84
Earned Ratio
Table-8: Time Interest Earned Ratio
Source: Annual Report of National Tubes Limited

Graphical Presentation:

TimesInterest Earned Ratio

42.26
45
40
35
30 23.84
25
20 11.74 11.79
11.09
15
10
5
0
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Figure-8: Times Interest Earned Ratio

Interpretation:

In this graph we see that the company would still be able to pay their interest against their long term debt.
Because their average EBIT is 20.144 per year that considered sufficient to protect long term creditors.

4.1.4 Analyzing Profitability Ratio:

a. Gross Profit Margin:

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The Gross Profit Margin measures the percentage of each sales dollar remaining after the firm has paid
for its goods. Higher the gross profit margin, the better. The gross profit margin is calculated as follows:

Gross Profit Margin Ratio=Gross Profit/Sales

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Gross Profit 20.61% 13.72% 21.53% 21.57% 23.36%

Margin
Table-9: Gross Profit Margin

Source: Annual Report of National Tubes Limited

Graphical Presentation:

GrossProfit Margin 23.36%

25.00% 20.61% 21.53% 21.57%

20.00%
13.72%
15.00%

10.00%

5.00%

0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Figure-9: Gross Profit Margin
Interpretation:
The company gross profit margin in 2005-06 to 2009-10 that is 20.61%-23.36% which indicates that profit margin
is increasing day by day and its good situation. But in 2006-07 NTL’s gross profit margin is very low in compare
to other years.

b. Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar. A high
operating profit margin is preferred. The operating profit margin is calculated as follows:

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 Operating Profit Margin Ratio=Operating Profit/Sales

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Operating 13.42% 6.99% 16.13% 15.67% 12.67%

Profit Margin
Table-10: Operating Profit Margin

Source: Annual Report of National Tubes Limited

Graphical Presentation:

OperationProfitMargin
18.00% 16.13% 15.67%
16.00% 13.42% 12.67%
14.00%
12.00%
10.00% 6.99%
8.00%
6.00%
4.00%
2.00%
0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Figure-10: Operating Profit Margin
Interpretation:
In this figure it has seen that the operating profit margin of the company is decreasing from 13.42%-
12.67 in the preceding 5 years. In 2007-08 it was increased but they do not able to keep their position
after 2007-08 operating profit margin is decreasing day by day. It is not a good sign for NTL.

c. Net Profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including
taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a
commonly cited measure of the company’s success with respect to earnings on sales

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 Net Profit Margin=Net profit after tax/operating income

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Net Profit 8.95% 4.56% 10.16% 9.93% 9.83%

Margin

Table-11: Net Profit Margin

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Net Profit Margin

12.00% 10.16% 9.93% 9.83%
8.95%
10.00%
8.00%
6.00% 4.56%

4.00%
2.00%
0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
Year
Figure - 11: Net Profit Margin

Interpretation:
The Company net profit margin is often to a stable position from 2006-07-2009-10 in compare to previous two
years. But ultimately it is decreasing now. It is not a good situation for the company.

d. Earnings per Share:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including
taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a
commonly cited measure of the company’s success with respect to earnings on sales

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 Earnings per Share=Net Profit after Tax/No. of Common Shareholder

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Earnings per 92.50 47.26 117.18 78.87 35.70

Share

Table-12: Earnings per Share

Source: Annual Report of National Tubes Limited

Graphical Presentation:

EarningsperShare
140 117.18
120
92.5
100 78.87
80
47.26
60 35.7
40
20
0
2005 -06 2006 -07 2007 -08 2008 -09 2009-10
Year
Figure - 12 : Earnings per Share
Interpretation:

The graph shows that the company received their highest earnings per share in 2007-08 and lowest in
2009-10, it means that the NTL’s earnings per share is decreasing day by day after 2007-08. So the
management should work hard to reduce the fluctuation of earnings per share.

5. Return on Total Asset (ROA):

The return on total asset (ROA), which is often called the firm’s return on total assets, measures the
overall effectiveness of management in generating profits with its available assets. The higher the ratio is
better.

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 Return on Asset (ROA) =Net Profit after tax/Total Asset

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Return on 6.66% 4.46% 9.38% 9.72% 5.67%
Asset
Table-13: Return on Asset
Source: Annual Report of National Tubes Limited

Graphical Presentation:

Returnon Asset
12.00%
9.38% 9.72%
10.00%
8.00% 6.66%
5.67%
6.00% 4.46%

4.00%
2.00%
0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
Year

Figure-13: Return on Total Asset

Interpretation:

From the figure it has seen that the company’s return on total asset decreased in 2006-07 in compare to the
following year 2005-06 but it increased in 2007-08. In the year 2009-10 it also decreased. So the NTL earns less
profit from the assets. This is not a good sign for the company.

6. Return on Common Equity (ROE):

The return on common equity measures the return earned on the owner’s (both preferred and common
stockholders’) investment. Generally the higher the return is the better off the owner’s.

Return on Common Equity=Net Profit after Tax/ Shareholders equity

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 Year 2005-06 2006-07 2007-08 2008-09 2009-10
18.44% 10.33% 23.70% 19.68% 11.38%
Return on
Equity

Table-14: Return on Common Equity

Source: Annual Report of NTL

Graphical Presentation:

Returnon Common
23.70%
Equity
25.00%
19.68%
18.44%
20.00%

15.00% 11.38%
10.33%
10.00%

5.00%

0.00%
2005-06 2006-07 2007-08 2008-09 2009-10
Year

Figure -14: Returns on Common Equity

Interpretation:

The company’s return on equity deviates from 18.44% to 11.38% in the preceding 5 years and the highest value
can be observed in 2007-08 and the lowest value can be observed during the 2006-07, which is not desirable. So
the management should work hard to increase the return associated with equity.

5.1. Major Finding:

 From the current ratio Analysis we have seen that NTL has enough current assets to pay their
short term obligations.
 From the quick ratio Analysis we have seen that the company maintains average 1.706 tk. to pay 1
tk current liability.

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  From the inventory turnover Analysis we have seen that it is decreasing day by day.
 NTL average collection period is 75 days may indicate poorly managed credit.
 From the total asset turnover is increasing from year 2005-06 to 2008-09. But at year 2009-10 the
turnover rate is decreasing.
 Debt Ratio of NTL is not in satisfactory range because its year by Year increasing.
 From the times interest earned ratio it has seen that the average EBIT is 20.144 per year that
considered sufficient to protect long term creditors.
 Gross profit margin of the company is increasing in 2005-06 to 2009-10 but in 2006-07 NTL’s gross profit
margin is decreasing which indicates that the company’s profit is decreasing.
 Operating profit margin of the company is downward sloping day by day.
 The Company net profit margin is in a stable position from 2006-07-2009-10 in compare to previous two
years.

 The graph shows that, in 2007-08 earnings per share of NTL is higher than 2005-06 and 2006-07
and it decreasing day by day after year 2007-08.

 The company’s return on asset overall decreasing day by day except year 2007-08 to 2008-09.

 The return on common equity is decreasing day by day.

5.2. Conclusion:

National Tubes Limited (NTL) setting new standards in the companying arena in the time of turbulent economic
conditions. As part of the long-term financial reform and modernization plan of the government, the enterprise was
transformed into a public limited company in1989 by –loading 49 percent shares to the general public. Though it

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has a wide range of network and confidence from the customers but it has some problems those problems reduce it
income .It is PLC but the authority is not that flexible and it takes time to take decision.

From our point of view we can declare boldly that we really have enjoyed our assignment of this company from
the very first day. Moreover, this type of assignment is very important for managerial Finance course. We have
tried our soul to incorporate the research report with necessary relevant information in our report.

Although National Tubes Limited is achieve maximum good well by satisfying customers with products that
meet according their quality requirement. It is the sole objective of the Company. Customer satisfaction should
be increased to give appropriate service to them. And treat them as an asset of the company. Despite of these
problems National Tubes Limited trying to improve this condition and take some necessary measure to improve its
condition.

5.3. Some Recommendation for National Tubes Limited:

It is not unexpected to have problems in any organization. There must be problems to operate an organization. But
there must be remedies to follow. The following commendations can be suggested to solve the above-mentioned
problems:

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  As we have seen that Current Ratio of NTL is satisfactory range so first it is recommended that, NTL
should invest their idle current asset to increase their profit.
 As we have seen that the company maintains higher quick ratio. So they should try to maintain 1:1 quick
ratio.
 The company should try to increase their inventory turnover because their efficiency of inventory turnover
is poor.
 NTL should reduce their average collection period because their collection process of A/R is not efficient.
 NTL should try to hold increasing flow of total asset turnover.
 NTL must reduce their Debt ratio because their debt position is increasing day by day.
 NTL should try to increase their operating profit margin.
 The company should try to hold their current net profit position and try to increase it.
 NTL should try to increase their earning per share and also try to reduce their fluctuation
 The company should try to increase return on asset. From the trend analysis we have seen ROA of NTL is
fluctuating. So they should try improving this and should take necessary steps to increase ROA.
 The company should try to increase return on common equity.

BIBLIOGRAPHY:

Books
2. Khan, AR 2008, “Bank Management: A Fund Emphasis (1/e)”, Ruby Publications, Nilket-Dhaka.

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 3. Gitman, LJ 2003, “Principles of Managerial Finance (10/e)”, Person Education (Singapore) Pte.
Ltd. Indian Branch.
4. Garrison, RH, Noreen, EW & Brewer, PC 2006, “Managerial Accounting (11/e)”, McGraw-Hill
International Edition, United States of America.
5. Garrison, Ray, H, CPA & D.B.A., 2009-10, “Managerial Accounting”, International Edition,
McGRAK Hill.
Publications
 Booklets published by National Tubes Ltd
 Annual Report of National Tubes Ltd of 2005-06 to 2009-10
 Chowdhury, T.A., Modes of Payment in International Trade, Reading Materials on International
Trade & Finance (E-102), BIBM, 2000.

Internet
 Web Site: nationaltubes.bd.com

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