Project on: Ratio analysis on RAK Ceramics

Course Code: FIN254

Section: 14

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Table Of Content

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Contents
Company Background...........................................................................................................................3
Liquidity Ratios.....................................................................................................................................4
Activity Ratios.......................................................................................................................................5
Debt Ratios............................................................................................................................................8
Profitability Ratios...............................................................................................................................10
Market Ratios......................................................................................................................................13
Appendix:............................................................................................................................................16

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Company Background

RAK Ceramics P.J.S.C is one of the largest ceramics brands in the world. RAK Ceramics was
established in Ras Al Khaimah in 1989. In 1993 RAK Ceramics opened of its first sanitaryware plant
in Ras Al Khaimah. By the year 2000, the company had opened its first overseas plant in Bangladesh.

From 2000 to 2004, RAK Ceramics invested heavily, expanding the company, and exporting
to almost 120 countries by 2004. In 2010 RAK Ceramics becomes the world’s largest
ceramics manufacturer and by 2012, RAK Ceramics had supplied 1 billion square metres of
tiles to projects around the world since the company began.

RAK Ceramics specialises in ceramic and gres porcelain wall and floor tiles, sanitaryware,
kitchen sinks, including faucets for walls, floors, bathrooms and kitchens.

Liquidity Ratios

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 Cur r ent R ati o
2014 2015 2016 2017
2.5

2.01
2

1.6 1.63 1.59

1.5

0.5

0
Current ratio

RAK ceramics seems to decrese in current ratio over the years.As there is 2.01 in 2014,1.6 in
2015,which slightly increased in 2016 and again decrese in 2017.So,it seems to maintain a low
liquidity.

Quick R ati o
2014 2015 2016 2017
1.6 1.49
1.4

1.2
1.07 1.05 1.07
1

0.8

0.6

0.4

0.2

0
Quick Ratio

The quick ratio is more conservative that the current ratio as it excludes inventories from current ratio.
The quick ratio provides a more rigorous assessment of a company’s ability to pay its current
liabilities. And the graph shows that RAK company didn’t have enough cash on hand to meet account
payable, interest expense and other bills.

Activity Ratios

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 Inventory Turnover

1.8 1.67 1.68

1.6
1.4 1.29 1.29
1.2
1
0.8
0.6
0.4
0.2
0
inventory turnover

2014 2015 2016 2017

Inventory turnover measures how many times average inventory is sold during a period.In 2014 RAK
sold average inventory for 1.67 times,in 2015 sold for 1.29 times,in 2016 sold 1.29 times,in 2017 sold
for 1.68 times.

Days in inventor y

2014 2015 2016 2017

300 282 284

250
218 218
200

150

100

50

0
Days in inventory

Days in inventory measures the average number of days the company holds its inventory before
selling it.

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 Accounts Receivable Turnover

2014 2015 2016 2017

11.97
9.15
8.69

7.93

ac c o u n t s r ec ei v ab l e t u r n o v er

Accounts receivable turnover is the number of times per year that a business collects its average
accounts receivable .RAK seems to have the higher accounts receivable turnover in year
2017.2014,2015

Average Collection Period

46
42
39.9

30

Average Collection Period

2014 2015 2016 2017

The average collection period of the company seems to be inconsistent over the 4 years.

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 Total Asset Turnover
0.7
0.6
0.6
0.53
0.51
0.5 0.47

0.4

0.3

0.2

0.1

0
Total asset Turnover

2014 2015 2016 2017

Total asset turnover measures a company’s ability to generate sales from its assets by comparing net
sales with average total asset.RAK company’s total asset turnover is inconsistent over the 4 years as
well.It has the highest asset turnover in the year 2017.

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Debt Ratios

Debt Rati o

2014 2015 2016 2017

0.45

0.45
0.44
0.38

D e b t r a ti o

From the analysis we see that RAK ceramics is taking more risk by having more debt.The debt ratio
has increased over the 4 years.From a pure risk perspective,lower ratios (0.4 or lower)are considered
better debt ratios.

Debt Equity Ratio

0.9
0.8
0.7
0.6
0.5
0.4 0.78 0.83 0.83

0.3 0.62

0.2
0.1
0
Debt Equity Ratio

2014 2015 2016 2017

From 2014-2017 RAK ceramics debt equity ratio seems to be increasing.It is consistant in year 2016
and 2017 respectively.

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 Equity m ulti plier
2014 2015 2016 2017

1.83

1.83
Equity Multiplier
1.78

1.62

1.5 1.55 1.6 1.65 1.7 1.75 1.8 1.85

The equity multiplier shows the percentage of assets that are financed or owned by the
shareholers.RAK company has the highest financed percentage of assets in year 2017.

Times Interest Earned

3690071.43

2861651.25
Times interest earned
2989707.47

14.15

0 500000 1000000 1500000 2000000 2500000 3000000 3500000 4000000

2014 2015 2016 2017

Times interest earned ratio is the measure of the firm’s capability to make contractual interest
payments which makes it an important ratio for potential creditors. RAK ceramics times interest ratio
has increased over the 4 years.

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Profitability Ratios

Net Profit Margin

0.22

0.16
0.14

0.11

Net Profit margin

2014 2015 2016 2017

RAK ceramic’s net profin margin is 0.11 in the year 2014,0.22 in the year 2015,0.16 in the year 2016
which is decreasing and 0.14 in the year 2017 which also seems to be decresed.

Operati ng Profi t Margin

0.35

0.3 0.29

0.25 0.24
0.22
0.21
0.2

0.15

0.1

0.05

0
Operating Profit margin

2014 2015 2016 2017

RAK seems to have a stable operating profit margin over the years. It seems to have the highest
operaring profit in the year 2015.So,it means they had the highest profitability after accounting all
costs in the year 2015

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 Gross Profit Margin

0.43 0.43

0.4

0.39

Gross profit Margin

2014 2015 2016 2017

Generally, the higher the gross profit margin the better. It indicates that a company did well in
managing its cost of sales. But it seems from the analysis that RAK is not doing well in managing
their cost of sales in the year 2014 and 2017 but in the year 2015 and 2016 they did slightly well.

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 Earning Per Share

3.25

2.88
2.72

1.67

Earning Per Share

2014 2015 2016 2017

Hig
her EPS indicates better profitability. It seems they had the highest EPS in the year 2015.

Return On Total Assets

2014 2015 2016 2017
0.1

0.09
0.08
0.06

R et u r n On To t al Asset s

ROA gives a analyst an idea about how efficiently a company is using its assets to generate earnings.
It seems like RAK company used their assets to generate the most earnings in the 2015 which is 10%.

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 Return On Equity
0.35
0.32
0.3 0.29
0.27
0.25

0.2
0.17
0.15

0.1

0.05

0
Return On Equity

2014 2015 2016 2017

ROE measures the ability of a firm to generate profits from its shareholder s investments in the
company. They generated the higher profit in 2015.In 2016 it decreased and in 2017 it slightly
increased. It indicates that they are not generating profit from its shareholder s investments
efficiently.

Market Ratios

Price Earnings Ratio

2014 2015 2016 2017
25
22.53 22.27

20

15
13.1
11.42
10

0
Price Earnings Ratio

A company with a high P/E ratio indicates positive future performances and investors are willing to
pay more for a company’s shares. But RAK seems to be not doing so well in this criteria.

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 Market/Book Ratio
2014 2015 2016 2017
12 11.42

10

6 5.77

4.1 4.26
4

0
Market/Book Ratio

Market/book ratio is important for the long term investors. A market ratio below 1 implies that
investors are willing to pay more for a company. RAK ceramics market ratios are higher than 1 over
the four years which means investors will not be willing to pay more for this company.

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 Dividend Per Share
2014 2015 2016 2017
3

2.48
2.5

1.47
1.5 1.36

1
0.68
0.5

0
Dividend Per Share

The DPS ratio is important measure for investor as it gives a insight about how much of an income
stream they might generate by investing in a company. High DPS is good for a company.

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Appendix:

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References:
Rak Ceramics Bangladesh Stock Dividend. (n.d.). Retrieved from
https://www.investing.com/equities/rak-ceramics-bangladesh-ltd-dividends
(n.d.). Retrieved April 16, 2019, from https://www.dsebd.org/displayCompany.php?
name=RAKCERAMIC
Rosid. (n.d.). Retrieved April 13, 2019, from http://www.rakcerambd.com/investor-annual-
reports.php

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