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0 Financial Statement Analysis by ratio: For the performance measurement of Ashraf textile & Saiham textile millsLtd. In below we are going to analysis about the two companies financialstatement using ratio analysis. We used 11 methods to analyze the ratio. Here are belongs: 4.1 Liquidity Ratio: i) Current Ratio: Current assets divided by current liabilities. It shows a firms ability to cover its current liabilities with its current assets. In belowthere is the graph of the two textile companys current ratio:

00.20.4 ratioyear current ratio(Ashraf textile) Series10.32332 0.13204 0.167332 0 0 5 2 0 0 6 2 0 0 7 012 r a t i o year current ratio(Saiham textile) Series11.044 0.764 0.9822003- 2004- 2005From the graph we can see that Ashraf textile current ratio is 0.32 times in 2005 and 0.167 times in 2007. Here we see that current ratio has beendecreased and go down in less than 1. On the other hand Saiham textile current ratio is 1.044 in 2003-04 & next two year stay remain but it also be below the 1 and from the Ashraf textile. In the last year for both companywe suggested that the current liabilities cannot be covered if existing currentasset are liquated at their book values. 6

ii)Quick Ratio:

Current assets less inventories divided by current liabilities.It shows a firms ability to meet current liabilities with its most liquid assets. 00.050.10.150.2 ratioyear Quick ratio(Ashraf textile) Series10.197173 0.069725 0.1389132 0 0 5 2 0 0 6 2 0 0 7 00.10.20.30.4 r a t i o year Quick ratio(Saiham textile) Series10.26430530.156424130.382131142003-2004 2004-2005 2005-2006 From the graph we can easily identify that in 2006 Ashraf textile & Saihamtextile quick ratio is decreased dramatically. We say that in the last year of the both companys quick ratio increased. But Saiham textile has good posit ion than the Ashraf textile. 4.2 Financial Leverage debt ratio: i)Debt-To-Equity : Ratios that show the extent to which the firm is financed by debt.

-100 Ratioyear Debt to Equity(Ashraf textile) Series1- 5 . 2 3 9 - 2 . 1 7 - 1 . 2 5 3 2 0 0 5 2 0 0 6 2 0 0 7 00.51 Ratioyear Debt to Equity(Saiham textile) Series10.559443 0.887395 0.599952 0 0 3 - 2 0 0 4 - 2 0 0 5 If we consider the year 2007 of Ashraf textile, the ratio is -1.253 t h a t creditors are providing for each tk 1. In the case of Saiham textile in 2005 2006 the ratio is 0.599 that creditors are providing. So we can say that Ashraf textile is in a better position than the Saiham textile. 7

ii) Debt-To-Total Asset Ratio: The debt to total asset ratio is derived by dividing a firms total debt by its total assets. 0246 ratioyear S e b t t o A s s e t s ( A s h r a f t e x t i l e ) Series11.235926 1.854987 4.958052 0 0 5 2 0 0 6 2 0 0 7 00.20.40.6 ratioyear Debt to Assets(Saiham textile) Series10.358745 0.470169 0.3749812 0 0 3 - 2 0 0 4 - 2 0 0 5 -

From the graph we can realize that Ashraf textile ratio is more than Saihamtextile in their last three year. We know that the higher the debt to assets ratio, the greater the financial risk; the lower the ratio, the lower the risk. SoAshraf textile has more risk than the Saiham textile . 4.3 Coverage Ratio: i) Interest Coverage Ratio: Ratio earning before interest and taxes divided by interest charges. It indicates a firms ability to cover interest charges. It isalso called times interest earned. 00.511.522.53 ratioyear Interest coverage(Ashraf textile) Series1Series11.7272998 2.7067618 0.39356262 0 0 5 2 0 0 6 2 0 0 7 012345 ratioyear I n t e r e s t c o v e r a g e ( S a i h a m t e x t i l e ) Series14.3453871 3.1634257 2.59461422 0 0 3 - 2 0 0 4 - 2 0 0 5 This ratio serves as one measure of the firms ability to meet its interest p a y m e n t s a n d t h u s a v o i d b a n k r u p t c y . T h e h i g h e r t h e r a t i o t h e g r e a t e r company could cover its interest payment without difficulty. So analyze after the two graphs we can said that Saiham textile has more interest coveragethan the Ashraf textile Cement. Ashraf textile ratio is fluctuated highly in 2007. 8

4.4 Activity Ratio: i) Receivable Turnover: the receivable turnover ratio provides insight intothe equality of the firms receivables and how to successful the firm is in iscollections. This ratio is calculated by dividing receivables into annual netcredit sales. 020406080100120140 Daysyear Receivable turnover(Ashraf textile) Series11 0 1 6 1 2

2 0 0 5

2 0 0 6

2 0 0 7

01020304050 Day Year Receivable turnover (Saiham textile) Series11 4 6 4 2 2003-2004 2004-2005 2005-2006 From the graph we can say that Ashraf textile received their receivable money from the buyers within 101 days in 2005, 6 days in 2006 & 125 daysin 2007. On the other, Saiham textile received within 14 day in 2003-2004, 6day in 2004-2005 and 42 days in 2005-2006. Eventually we can say thatSaiham textile was received money within short time rather than the Ashraf textile. ii) PAYABLE TURNOVER: There may be occasions when a firm wants tostudy in own promptness of payment to suppliers or that of a potential creditc u s t o m e r . T h i s r a t i o i s c a l c u l a t e d b y d i v i d i n g p u r c h a s e i n t o t o t a l A / C payable. 050000100000150000200000250000300000350000400000 Daysyear Payable turnover(Ashraf textile) Series11 3 8 2 7 6 3 6 0 4 2 0 2 0 0 5 2 0 0 6 2 0 0 7 05101520253035 Daysyear Payable turnover(Saiham textile) Series13 5 1 0 1 5 2003-2004 20042005 2005-2006 From the graph we can say that Ashraf textile paid their payable money to the sales within 138 days in 2005, 276 days in 2006 & 360420 days in 2007.On the other, Saiham textile paid within 35 day in 2003-2004, 10 day in2004-2005 and 15 days in 20052006. Eventually we can say that Saihamtextile was paid money within short time rather than the Ashraf textile. 9

iii) INVENTORY ACTIVITY: To help determine how effectively the firmis managing inventory and also to gain an indication of the liquidit y of inventory. This ratio is calculated by dividing inventory into COGS. 0100200300400 Daysyear Inventory Activity(Ashraf textile) Series16 0 5 3 3 6 9 2 0 0 5 2 0 0 6 2 0 0 7 050100150200250 Daysyear Inventory Activity(Saiham textile) Series11 7 0 2 2 5 1 7 6 2003-2004 2004-2005 2005-2006 The figures tell us how many days, on average, before inventory is turnedinto accounts receivable through sales. Here we see that Ashraf textile wasfaster than Saiham textile in case of inventory activity. iv) TOTAL ASSET TURNOVER: The relationship of net sales to total assets is known as the total asset turnover, or capital turnover. 00.10.20.30.40.50.60.7 ratioyear Total asset turnover(Ashraf textile) Series10.6780095 0.4476056 0.050871342 0 0 5 2 0 0 6 2 0 0 7 00.10.20.30.40.5 0.60.70.8 ratioyear Total Asset turnover(Saiham textile) Series10.77632571 0.56348701 0.59690182003-2004 2004-2005 2005-2006 The median total asset turnover for the industry is 1.66. For this ratio analysis we saw that Ashraf textile & Saiham textile both are less efficientthan the industry in this regard. On the other hand Saiham textile is in a better position than the Ashraf textile. 10

Financial analysis on annual report on two company Imran Hossain +8801674892776 BBA, MBA Download or Print Add To Collection 49.2K READS 267 READCASTS 22 EMBED VIEWS

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