Chapter One

1.1 Introduction

The basis of financial planning, analysis and decision-making is the financial information. Financial
information is needed to predict, compare and evaluate the firm’s 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 firm’s ratios over
the period of the time or through a comparison of the firm’s ratios with its nearest competitors and
with the industry averages.
1

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 that in the financial year 2018-
19 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 company’s 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 company declare 15% dividend of which 5%
cash and 10% stock dividend for 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.
12
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.

13

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.
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.
Chapter Two
2.1 Company Profile
Ratanpur Steel Re- rolling Mill (RSRM) is a local company has launched finest
quality rod in the country as Bangladesh’s 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.

The factory of this company is located at Nasirabad beside Baizid Bostami

road 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.

2.2. Vision
Our vision is to be the trend setter and the power force of the steel re-rolling
industry.

2.3 Mission
We will continue to be the first name in the region’s steel industry by
harnessing our assets & resources to achieve profitable growth, operational
and organizational excellence and good corporate citizenship.

2.4 Objectives
The 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.

2.5 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.
2.6 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
18
2.7 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.

2.8 Strength of RSRM

 Greater Ductility
 Superior Bend ability
 Better Weld ability
 High Corrosion-Resistance
 Ideal Property Balance
2.9 Managing Body of RSRM
NAME DESIGNATION
Mrs. Shamsun Nahar Rahman Chairman
Mr. MaksudurRahman Director& Managing Director
Mr. Md. Younus Bhuiyan Director

Mr. Md. Mizanur Rahman Director

Mr. Marzanur Rahman Director

Mr. Md. Jahangir Miah Independent Director

Mr. Zulfiker Ali Azad Executive Director-Marketing & Sales

Mr. Obaidur Rahman FCA Chief Financial Officer

Mr. Md. Jafar Imam Company Secretary

Mr. Md. Serajul Islam Consultant-Quality Control

Mr. Mohammad Ali Chief Electrical Engineer

Mr. TapanKanti Majumder Chief Mechanical Engineer

Mr. Md. Mostafa Kamal AGM, HR & Admin
Mr. Md. FaridIqbal Assistant Manager of HR
Mr. Md. Dewan Mabood Ahmed Manager-Commercial
Mr. Subash Chad Shivdaras Sharma In-Charge Production

Mr. Md. NizamUddin Head of Information Technology

Chapter Three
3.1 Production Process
Chapter four
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:

4.1 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 firm’s 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:-
4.1.1 Current Ratio

A short-term indicator of the company’s ability to pay its short-term liabilities from short-
term assets, how much of current assets are available to cover each dollar of current
liabilities.

Current ratio = /

2017-2018 Times 2016-2017 Times

=(2684574070/2786066653) 0.96 =(2864045873/2986124129) 0.89

Current Ratio
0.98

0.96

0.94

0.92
Times

0.9

0.88

0.86

0.84
2017-2018 2016-2017
Current Ratio 0.96 0.89

FIGURE: Current Ratio

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 2017- 2018-0.96:1 & 2016-2017-
0.95:1. 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.

4.1.2 Acid Test Ratio

It measures the company’s ability to pay off its short-term obligations from current assets,
excluding inventories.
Acid test ratio = ( − )/

2017-2018 Times 2016-2017 Times

=(2,684,574,070- 0.34 =(2,192,672,788- 0.23

1,751,235,595)/2,786,066,653 1,613,125,611)/2,474,310,929

Acid Test Ratio

0.4

0.35

0.3

0.25
Times

0.2

0.15

0.1

0.05

0
2017-2018 2016-2017
Acid Test Ratio 0.34 0.23

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 2016-2017- 0.23:1 & 2017-2018-
0.34:1 which is not acceptable. Thus, if the RSRM’s
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 good to see that year-to-year the quick assets are increasing against current liabilities.

4.2 Leverage Ratios

The long-term creditors, like debenture holders, financial institutions etc. Are more
Concerned with the firm’s 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 firm’s assets. The ratio shows the relationship
between the outsiders’ funds and shareholders’ funds.

Debt equity ratio = / ′

2017-2018 Times 2016-2017 Times

=3005258500/1744278192 1.72 =2721373158/1589320327 1.71

Debt Equity Ratio

1.722
1.72
1.718
1.716
1.714
Times

1.712
1.71
1.708
1.706
1.704
2017-2018 2016-2017
Debt Equity Ratio 1.72 1.71
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
2017- 1.71:1 & 2018- 1.72:1 which is unfavorable. It is clear that from the debt-equity
ratio that RSRM’s 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.

4.2.2 Coverage Ratio:

It indicates the ability of the company to meet its annual interest costs. The Interest
Coverage ratio or the Times-Interest-Earned (TIE) ratio is used to test the firm’s 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 = /

2017-2018 Times 2016-2017 Times

209829235/169088190 1.24 279533924/159682646 1.75

 Coverage Ratio
2
1.8
1.6
1.4
Times

1.2
1
0.8
0.6
0.4
0.2
0
2017-2018 2016-2017
Coverage Ratio 1.75 1.24

FIGURE: Coverage Ration

Interpretation: In the diagram, as we see that last two years’ interest coverage ratio of
RSRM are respectively 2016-2017- 1.75 times & 2017-2018- 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 2017-2018 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.

4.3 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
utilization-

4.3.1 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.
 Inventory turnover ratio = / Average Inventory = + / 2

2017-2018 Times 2016-2017 Times

=4301993578/ 2.5 =4738541235/ 3.31

((1613125611+1751235595)/2) ((1250041298+16131256110)/2)

Inventory Turnover Ratio

3.5

2.5

2
Times

1.5

0.5

0
2017-2018 2016-2017
Inventory Turnover Ratio 2.5 3.31

FIGURE: Inventory Turnover Ratio

Interpretation: In the diagram, we see that then debt inventory turnover ratio of RSRM in
2016-2017 is much higher than the ratio of 2017-2018. RSRM is turning its inventory of
finished goods into sales 2.5 times in a year while in 2016-2017 it was 3.31 times.
Generally, a low inventory turnover implies excessive inventory levels than warranted by
production and sales activities.
4.3.2 TOTAL ASSETS TURNOVER RATIO:

It measures the utilization of all the company’s 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 = ( / )/

2017-2018 Times 2016-2017 Times

=4766995506/4749536683 1.05 =5253806261/4310693485 1.30

Asset Turnover Ratio

1.4

1.2

0.8
Times

0.6

0.4

0.2

0
2017-2018 2016-2017
Asset Turnover Ratio 1.05 1.3

Figure: Asset Turnover Ratio

Interpretation: In the diagram, we see that the assets turnover ratio of RSRM in 2017-
2018 is 1.05 times, while in 2016-2017 it was 1.3 times. So it is clearly observing 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.

4.3.3 Debtor Turnover Ratio:

It indicates the number of times that accounts receivable is 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 = ( / )/

Average accounts receivable = ( . .+ . .)/ 2

2017-2018 Times 2016-2017 Times

=4766995506/638787191 7.46 =5253806261/489946817 10.72

Debtor collection period = 365/

2017-2018 Days 2016-2017 Days

=365/7.46 49 =365/10.72 34
 Debtor Turnover Ratio
12

10

8
Times

0
2017-2018 2016-2017
Debtor Turnover Ratio 10.72 7.46

FIGURE: Debtor Turnover Ratio

Interpretation: In the diagram, we see that the RSRM is able to turnover its debtors 7.46
times in the year of 2017-2018, 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.

4.3.4 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 = ( ℎ / ℎ )/

Average accounts payable = ( . + . )/ 2

 2017-2018 Times 2016-2017 Days

=4,440,103,562/ 1,005,198,353 4.21 =4,876,651,219/ 937,053,485 5.20

Creditor payment period = 365/

2017-2018 Days 2016-2017 Days

=365/4.21 87 =365/5.20 70

Creditor Turnover Ratio

6

4
Axis Title

0
2017-2018 2016-2017
Creditor Turnover Ratio 4.21 5.2

FIGURE: Creditor Turnover Ratio

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

its creditors 4.21 times in the year of 2017-2018, 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

4.4 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:

4.4.1 Gross Profit Ratio

It indicates the total margin available to cover other expenses beyond cost of goods sold
and still yield a profit.

Gross profit ratio = ( / ) × 100

2017-2018 Percentage 2016-2017 Percentage

=(465001928/4766995506)×100 9.75 =(515265026/5253806261)×100 9.81

 Gross Profit Ratio
9.82

9.81

9.8

9.79
Percentage

9.78

9.77

9.76

9.75

9.74

9.73

9.72
2017-2018 2016-2017
Gross Profit Ratio 9.75 9.81

Interpretation: In the figure, we see that the ratio has declined from 2016-2017 to 2017-
2018 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.

4.4.2 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 = ( / ) × 100
 2017-2018 Percentage 2016-2017 Percentage

= (389,122,952 8.16 = (453,643,321/5,253,806,261) × 8.63

/4,766,995,506) ×100 100

Operating Profit Ratio

8.64%

8.63%
Percentage

8.63%

8.62%

8.62%

8.61%

8.61%

8.60%
2017-2018 2016-2017
Operating Profit Ratio 8.61% 8.63%

Interpretation: In the figure, we see that the ratio has declined from 2016-2017 to 2017-
2018 respectively 8.63% to 8.16% which is unfavorable because it effects on overall net
profit of RSRM which resulting decrease of net profit as well as selling price will be
increased.
4.4.3 Net Profit Ratio

Net Profit ratio indicates the overall efficiency of the management in manufacturing,
administering and selling the products. It also indicates the firm’s capacity to withstand
adverse economic conditions.
Net profit ratio = ( / )× 100

2017-2018 Percentage 2016-2017 Percentage

=(154,957,856/4,766,995,506) 3.25 =(166,740,993/5,253,806,261) 3.17

×100 × 100

Net Profit Ratio

3.26

3.24
Percentage

3.22

3.2

3.18

3.16

3.14

3.12
2017-2018 2016-2017
Net Profit Ratio 3.25 3.17

FIGURE: Net Profit Ratio

Interpretation: In the figure, we see that the ratio has increased from 2016-2017 to 2017-
2018 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 2017-2018 the deferred tax expense is tk.
8,915,075 while in 2016-2017 it was 72,896,584.

4.4.4 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 = ( / ) ×100

2017-2018 Percentage 2016-2017 Percentage

= (446,180,514/4,766,995,506) 9.36 =(507,791,687/5,253,806,261) × 9.67

×100 100

EBITDA Margin to Sales

9.70%

9.65%

9.60%
Percentage

9.55%

9.50%
9.40%
9.45%

9.35%

9.30%

9.25%

9.20%
2017-2018 2016-2017
EBITDA Margin to Sales 9.36% 9.67%

FIGURE: EBITDA Margin to Sales

Interpretation: In the figure, we see that the ratio has declined from 2016- 2017 to 2017-
2018. The EBITDA margin to sales of RSRM in 2017- 2018 is 9.36% while it was in
2016-2017 it was 9.67% which is not satisfactory. It indicates the operating expense has
gone up.

4.4.5 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 = (/

ℎ ℎ′ )

2017-2018 Percentage 2016-2017 Percentage

=(154,957,856/1,744,278,182)× 8.88 =(166,740,993/1,589,320,327) 10.49
100 ×100

Return on Share Holder's Equity

11.00%

10.50%
Percentage

10.00%

9.50%

9.00%

8.50%

8.00%
2017-2018 2016-2017
Return on Share Holder's Equity 8.88% 10.49%

FIGURE: Return on Share Holders’ Equity

35 | P a g e
Interpretation: In the diagram, we see that the return on shareholders’ equity of RSRM in
the year of 2017-2018 is much lower than the year of 2016-2017. In 2018 the ROE of
RSRM is 8.88% while in 2016-2017 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.

4.4.6 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 and capital employed convey the same meaning, though called differently.

Return on capital employed = ( / ) ×100

2017-2018 Percentage 2016-2017 Percentage

= 10.69 =(279,533,834/1,836,382,657) 15.22

(209,829,235/1,963,470,029) × 100
×100
 Return on Capital Employed
16.00%

14.00%

12.00%
Pecentage

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2017-2018 2016-2017
Return on Capital Employed 10.69% 15.22%

FIGURE: Return on Capital Employed

Interpretation: In the diagram, we see that the return on capital employed of RSRM in the
year of 2017-2018 is much lower than the year of 2016-2017. In 2017-2018 the return on
capital employed of RSRM is 10.69% while in 2017 it was 15.22%. A lower percentage
of return on capital employed will not satisfy the owners that their funds are not
profitably utilized.

4.4.7 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 = / .

 2017-2018 TAKA 2016-2017 TAKA

=154,957,856/29,600,000 5.24 =166740993/29600000 5.63

Earning Per Share

5.7

5.6

5.5

5.4
TAKA

5.3

5.2

5.1

5
2017-2018 2016-2017
Earning Per Share 5.25 5.63

FIGURE: Earning Per Share

Interpretation: EPS calculation, over the years, indicates how the firm’s 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 2017-2018 the EPS is 5.63 while it was 5.24 in 2016-2017. In 2017-2018 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.
4.4.8 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 =

2017-2018 TAKA 2016-2017 TAKA

=74,000,000/29,600,000 2.5 =654854852/256840512 2.3

Dividend Per Share

2.55

2.5

2.45
TAKA

2.4

2.35

2.3

2.25
2017-2018 2016-2017
Dividend Per Share 2.5 2.36

FIGURE: Dividend Per Share

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. 5.24 earned per share.
The difference per share is retained in the business. While in 2016-2017 RSRM retained
Tk. 5.63 earned per share fully.
 ”

4.5 Useful Information to Evaluate Ratio Analysis

Particulars 20117-2018 2016-2017

Current assets 2,684,574,070 2,192,672,783

Current liabilities 2,786,066,653 2,474,310,829

Total assets 4,749,536,683 4,310,693,485

Total debt/liabilities 3,005,258,500 2,721,373,158

Opening inventory 1,613,125,611 1,250,041,298

Closing inventory 1,751,235,595 1,613,125,611

Average inventory 1,682,180,603 1,431,583,455

Accounts receivable 787,647,565 489,946,817

Average accounts receivable 638,797,191 489,946,817

Accounts payable 1,173,343,220 937,053,485

Average accounts payable 1,055,198,353 937,053485

Revenue/Net sales/Credit sales 4,766,995,506 5,253,806,261

Cost of goods sold 4,301,993,578 4,738,541,235

Net purchases/Credit purchases 4,440,103,562 4,876,651,219

Gross profit 465,001,928 515,265,026

Operating profit 389,122,952 453,643,321

EBITDA 446,180,514 507,791,687

Net profit before income taxes 209,829,235 279,533,824

Net profit after income taxes 154,957,856 166,740,993

Shareholders’ equity 1,744,278,182 1,589,320,327

Dividend distributed 74,000,000 68411500

Interest expense 169,083,190 159,680,646

Total capital employed 1,963,470,029 1,836,382,657

No. of ordinary shares outstanding 29,600,000 29,600,000

Chapter five
5.1 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 improve its 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 industry’s average
collection period and 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.
5.2 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 competitor’s 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.
Reference
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).