NSU FALL 2012 FIN254.

9 TERM PAPER ON ARAMIT LIMITED

GROUP MEMBERS OF THE TERM PAPER Name .

Sadman Hossain 1130727030 Imtiaz Ahmed Chowdhury 1110673030 Robiul Qayum Mozumder 1110972030 MD. Tunazzin-Ul-Arefin 1110715030 Ramisa Maliyat 1110781030

ID

Table Of Contents
1. Introduction 2. Executive Summary 3. Liquidity Ratio 4. Asset management ratio 5. Debt Management Ratio 6. Profitability Ratio 7. Stock Market Ratio 8. Du Point Equation 9. Conclusion 10. Appendix Page 1 Page 2 Page 3-4 Page 4-8 Page 8-9 Page 10-14 Page 14-16 Page 17 Page 18 Page 19-21

Introduction
Aramit limited is the oldest and main sponsor of the other sister companies of the group. It was established in 1963 with the technical collaboration of team S.A Luxemburg and is the sole manufacturer of cement coated roofing materials, drainage pipes, ceiling insulating sheets etc. the products are marketed through Bangladesh using its strong network. By the virtue of its excellent performance in the industry sector, it has earned huge reputation among the customers and shareholders of the company since its incorporation as a public limited company by shares on 22 July, 1972. Aramit Group of Companies currently produced diversified products with its following Enterprises: Aramit limited Aramit Thai aluminum limited Aramit cement limited Aramit steel pipes limited Aramit footwear limited Aramit power limited

Executive summary
We have done five major types of ratio analysis on Aramit limited company. They are: 1) Liquidity ratio 2) Asset management ratio 3) Debt management ratio 4) Profitability ratio 5) Stock market ratio We have found out that the company was not going through a good condition in 2011 compare to its last four years. Majority ratios declined from the last four years. The company needs to take necessary steps to improve its overall performance.

1. Liquidity ratio: Year Current Ratio Quick Ratio 2007 2.8 times 2.14 times 2008 1.96 times 1.65 times 2009 1.73 times 1.38 times 2010 1.93 times 1.44 times 2011 1.88 times 1.37 times

Current ratio: In the year 2011, Aramit Ltds current assets were 1.88 times of their current liabilities. The companys current ratio has declined slightly. This might have occurred because the proportionate change in current liabilities is more than the proportionate change in current assets. Therefore the current ratio is not very good and the ratio was fluctuating over the past 5 years.

Quick Ratio: In the year2011, Aramit Ltds current assets excluding inventories were 1.37 times of its current liabilities. The companys quick ratio has declined because the proportionate increase in the current liabilities is more than the proportionate increase in current asset excluding inventories. Therefore the companys quick ratio is not very good and the ratio is decreasing.

In conclusion, the companys liquidity ratio has declined over the past 5 years which is not a good sign for the company. 2. Asset Management Ratio: Year Inventory Turnover Ratio Total Asset Turnover Ratio Fixed Asset Turnover Ratio Average collection period Average payment period 104 Days 263 Days 258 Days 282 Days 217 Days 98 Days 130 Days 115 Days 139 Days 108 Days 20.36 Times 20.28 Times 3.68 Times 3.25 Times 4.77 Times 0.93 Times 0.70 Times 0.66 Times 0.53 Times 0.69 Times 2007 3.73 Times 2008 3.80 Times 2009 3.63 Times 2010 2.26 Times 2011 2.74 Times

Inventory Turnover Ratio: In 2011 the company had sold out and restocked their inventory 2.74 times. It has slightly risen up from the previous year because the proportioniate change in Cost of Goods Sold was more than proportioniate change in Inventory. So the ratio is good. We further see a slight decreasing trend of ratios in the last 5 years.

Total Asset Turnover Ratio: In 2011 every dollar worth of asset generates $0.69 of sales. It has been increased up slightly from the last year because proportionate change in Sales was more than proportionate change in Total Asset. So the ratio is good. We also see a very slight decreasing trend of ratios in the last 5 years.

Fixed Asset Turnover Ratio: In 2011 every dollar worth of Fixed Asset generates $4.77 of sales. It has been increased up from the last year because proportionate change in Sales was more than proportionate change in Fixed Asset. So the ratio is good. We see a very strong decrease of ratios in the 3rd year considering the last 5 years.

Average collection period: In 2011 on average, it took 108 days Accounts Receivable collection from the customers. The ratio has decreased from the previous year because relative change in Accounts Receivable was less than relative change in sales. We also see a trend of fluctuations in the last 5 years.

Average payment period: In 2011 on average, it took 217 days to make payment to the suppliers. The ratio has decreased from the previous year because relative change in Accounts Payable was less than relative change in sales. We also see a trend of fluctuations in the last 5 years. So, the company policy is good because accounts payment period is almost 2 times than accounts collection period.

Overall conclusion: The company is in good situation because we see the companys sales have increased considering the assets and also the receiving period of money from the customers is also in favorable to payment period to the creditors.

3. Debt Management Ratio: year 2007 2008 2009 2010 2011

Debt to Total Asset Ratio Time Interest Earned

19.76%

36.86%

33.98%

32.36%

31.47%

1479.3 Days

1527.12Day s

1810.728Da 392.70Days ys

2006.91Day s

Debt to Total Asset Ratio:

In 2011,the Aramit Limited s 31.47% of the total assets were financed by debt. During the last four years the increase of total assets are greater than total debt. As a result the ratio in decreasing. This is a positive change for the company.But in 2007 the ratio was 19.76% , which was better than present situation.It is seen that in 2008 the asset increase almost 50 % but the liabilities increased almost 150%, as a result their ratio shifted from 36.86% to 19.76%.Relative change in total asset is mere than relative change in total debt , thats why the percentage change mere in overtime.

Times interest earned: In 2011 , EBIT is 2006.91 times higher than than the interest expenses.It is seen that the ratio are too much higher.So , the company is totaly equity based and they have mere long and short term interest bearing liabilities, which is a positive things for the company . Because,it will increase in the net profit. Relative change in interest expense is less than relative change in EBIT , thats why the ratio increased more in 2011.

Overall conclusion is, the company is in very good situation, because they have mere long and short term interest bearing liabilities.This will increase the net profit and if the company can not perform better, they can easily survive due to lower cost of capital.

4. Profitability ratio: Year Gross Profit Margine Operating Profit Margine Net Profit Margine Return on Assets Return on Equity 14.5% 13.57% 19.73% 16.38% 11.39% 21.04% 18.11% 11.91% 21.03% 14.55% 7.76% 12.96% 14.61% 10.02% 17% 2007 25.7% 21.1% 2008 26.5% 22.74% 2009 26.9% 24.2% 2010 21.5% 18.9% 2011 22.8% 21%

Gross profit margin: In the year 2011, for every $100 sales the company earned a gross profit of $22.8. The ratio as increased from the last year because the proportionate in crease in gross profit iss more than the proportionate increase in sales but it has been decreasing over the past 5 years.

Operating profit margin: In the year 2011, for every$100 sales the company earned an operating profit of $21. The companys ratio has increased compared to the previous year because the proportionate increase in operating profit is more than the proportionate increase in sales and over the past 5 years the companys operating profit margin is fluctuating a bit.

Net profit margin: In 2011, every $100 sales generated the company a profit of $14.61. compared to the previous year the companys performance improved slightly. This occurred as the proportionate increase in net profit is higher than the proportionate increase in sales and the ratio was fluctuating over the last 5 years.

Return on asset: In 2011, every $100 asset has generated the company a net profit of $10.02. compared to the previous year the performance of the company has improved due to relative change in net profit was more than the relative change in total asset and the ratio was fluctuating over the past 5 years.

Return on equity: In 2011, the common share holders have earned $17 for every $100 invested in the company. The performance improved from the last year as the relative change in net profit was more than the relative change in total equity from the previous year. The ratio has been fluctuating over the past 5 years. In conclusion, the profitability was not satisfactory as the ratios were fluctuating over the last 5 years and at the end some of the values decreased.

5. Stock market ratio Year 2007 2008 2009

Earnings Per Share Market to Book Value Ratio Price to earning ratio

14.10 1.4

17.72 3.3

20.69 4.51

2010 9.67 6.53

2011 14.25 3.31

7.07

15.68

22.10

50.35

19.43

Earnings per share: In 2011, the common shareholders have earned $14.25 for every 1 share invested in the company. Compared to the previous year the performance of the company has improved as net income available to common shareholder has increased by keeping the total number of common share outstanding same. The ratio has been fluctuating over the last 5 years.

Market-to-book value: In 2011, market value per share was 3.31 times higher than the book value. The ratio declined from the previous year and has been increasing over the last 5 years except 2011.

Price earning ratio: In 2011, the shareholders of this company were willing to pay $13.76 for every $1 of reported earnings.

Price to earningratio
60 50 40 30 20 10 0 2007 2008 2009 2010 2011 Price to earning ratio

In conclusion, the overall stock market ratio was not satisfactory over the past 5 years.

Du Pont equation: Return on Asset=Net Profit Margin*Total Asset Turnover Net Profit/Total Asset=(Net Profit/Sales)*(Sales/Total Asset) 2010= 7.76%=14.55%*0.5329 Times 2011=10.02%=14.61%*0.6862 Times We are utilizing our assets more efficiently from the previous year. Our net profit increased due to increase in revenue and decrease in financial expense. Extended Du Pont equation: Return on Equity=Net Profit Margin*Total Asset Turnover*Equity Multiplier Net Profit/Total Equity=(Net Profit/Sales)*(Sales/Total Asset)*(Total Asset/Total Equity) 2010= 12.96%=14.55%*0.5329 Times*1.67 Times 2011=17%%=14.61%*0.6862 Times*1.69 Times

CONCLUSION In conclusion, I wont recommend to invest in my company as majority ratios declined from the past years. For e.g people were willing to pay $50.35 for every $1 of reported earnings in 2010 but in 2011 they were willing to pay $19.43 for every $1 of reported earnings. Earnings per share was also fluctuating a lot, which does not guarantee us a safe return if we invest. Majority ratios declined in 2011 compare to previous years. So, it wont be a good decision to invest in our company. We can assume that liquidity ratio will decline in 2012, so it will be hard for us to meet our short term obligations in the upcoming years, which is not good for the country.

Appendix
Ratio Formula 2007 2008 2009 2010 2011

Current Ratio

Current Assets/Current Liabilities

326,937,44 9/116,222, 326 249761272 /11622232 6 288,242,85 3/7717617 7

530,993,7 15/270,70 3,774 44720457 8/2707037 74 318,045,5 00/837891 37 432,740,6 42/622,18 5,388 43274064 2/2133677 3

493,432,3 61/285,70 5,213 39390088 3/2857052 13

539,012,0 09/278,97 7,658 40054584 8/2789776 58

60624301 5/322352 2857 44143826 4/322352 857 45209231 3/164804 751 58557807 0/853383 860 58557807 0/122658 145 17378494 1/ (5855780 70/365) 26853875 0/ (4520923 13/365)

Quick Ratio

(Current AssetsInventories)/Cu rrent Liabilities COGS/Inventori es

Inventor y Turnove r Ratio Total Asset Turnove r Ratio Fixed Asset Turnove r Ratio Avg. Collectio n Period Avg. Payment Period

334,094,9 31310862 34/99531 478

457,099,5 29/694,84 3,646 45709952 9/1240563 85 14446497 6/ (45709952 9/365) 23611235 8/ (33409493 4/365) 6/1384661 61 39877741 8/7482538 86 39877741 8/1228041 77 15192253 7/ (39877741 8/365) 24214279 2/ (31310862 6/365)

Sales/Total Asset

388,117,79 2/4158534 84

Sales/Fixed Asset

388117792 /19061135

Accounts Receivable/ (Sales/365) Accounts Payable/ (Purchase or COGS/365)

104652413 / (38811779 2/365) 82192945/ (28824285 3/365)

15417316 2/ (43274064 2/365) 22930800 0/ (31804550 0/365)

Debt to Asset Ratio Time Interest Earned Gross Profit Margin Operatin g Profit Margin Net Profit Margin Return On Asset Return On Equity Earnings Per Share

(Total Debt/Total Asset)*100 EBIT/Interest Expense

(82192945/ 415853484 )*100 77862200/ 52636

(22930800 0/6221853 88)*100 93537748/ 61251

(23611235 8/6948436 46)*100 10504581 8/58013

(24214279 2/7482538 86)*100 71783357/ 182794

(2685387 50/85338 3860)*10 0 11693450 0/58266

(Gross Profit/Sales)*10 0 (EBIT/Sales)*10 0

(99874939/ 388117792 )*100 (81904804/ 388117792 )*100

(11469514 2/4327406 24)*100 (98396313 /43274064 2)*100 (70870983 /43274064 2)*100 (70870983 /62218538 8)*100 (70870983 /33681369 8)*100 70870983/ 4000000

(12300459 5/4570995 29)*100 (11051347 9/4570995 29)*100 (82788281 /45709952 9)*100 (82788281 /69484364 6)*100 (82788281 /39360197 9)*100 82788281/ 4000000

(85668792 /39877741 8)*100 (75369014 /39877741 8)*100 (58031369 /39877741 8)*100 (58031369 /74825388 6)*100 (58031369 /44763334 8)*100 58031369/ 6000000

(1334857 57/58557 8070)*10 0 (1230276 15/58557 8070)*10 0 (8554056 9/585578 070)*100 (8554056 9/853383 860)*100 (8554056 9/503173 917)*100 85540569 /6000000

(Net Profit/Sales)*10 0 (Net Profit/Total Asset)*100

(56411900/ 388117792 )*100 (56411900/ 415853484 )*100

(Net Profit/Total Common Equity)*100 Net Income Available To Common Shareholders/T otal Number of Common Share Outstanding

(56411900/ 285942715 )*100 56411900/ 4000000

Market to Book Value Price to Earnings Ratio

Market Price Per Share/Book Value Per Share Market Price Per Share/Earnings Per Share

99.70/71.3 4

278/84.2

443.60/98. 9

486.9/74.6 1

277.2/83. 83

99.70/14.1 0

278/17.72

443.60/20. 07

486.9/9.67

277.2/14. 26