0% found this document useful (0 votes)
66 views27 pages

North South University: "Financial Statement Analysis Techniques For Comparison" Group Name: 330

The document is a report submitted by a group of students to their course instructor at North South University analyzing the financial statements of Fu-Wang Ceramics and Monno Ceramics. The report includes a letter of transmittal, executive summary, overview of the two companies, discussion of their income statements and balance sheets, analysis of key financial ratios, and references. The group analyzed accounting information from the companies' annual reports and websites to compare their financial performance and positions.

Uploaded by

limon islam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
66 views27 pages

North South University: "Financial Statement Analysis Techniques For Comparison" Group Name: 330

The document is a report submitted by a group of students to their course instructor at North South University analyzing the financial statements of Fu-Wang Ceramics and Monno Ceramics. The report includes a letter of transmittal, executive summary, overview of the two companies, discussion of their income statements and balance sheets, analysis of key financial ratios, and references. The group analyzed accounting information from the companies' annual reports and websites to compare their financial performance and positions.

Uploaded by

limon islam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 27

North South University

“Financial Statement Analysis techniques for Comparison”

Group Name: 330

Submitted To:

Afrin Rifat

Course Instructor of ACT 330

Prepared By:

Abu BakarSiddik 1420683030

G. HasanMohymen 0930388030

Md. AponChowdhury 1411265030

Md. ShamimHasan 1221180030


Letter of Transmittal
December 13, 2018

Afrin Rifat

Department of Accounting & Financing

Lecturer

North South University,

Dhaka, Bangladesh.

Subject: Submission of the Report

Honorable Miss,

It is our great pleasure to submit the report titledFinancial Statement Analysis techniques for
Comparison to you. We have prepared this report as a part of the course Intermediate
Accounting (ACT 330). To make this report up to the standard, we tried our best to fulfill the
requirements by implementing the knowledge we have gathered from the course. Thank you very
much for providing us this type of opportunity and giving us the necessary guidance and
direction needed for preparing the report.

The report includes the financial ratiosof the companies during fiscal year 2016-2017 and
industry ratio.

Finally, we would like to thank you again for your supportive in preparing this report. We have
tried our level to make this report holistic and informative enough.

Sincerely yours,
Abu BakarSiddik (1420683030)
Md. ShamimHasan (1221180030
G. HasanMohymen (0930388030)
Md. AponChowdhury (1411265030)

Executive Summary

According to our project requirements we asked to do Accounting and Financial Analysis on Fu-
Wang Ceramics and Monno Ceramics. In our group we were four people and we first collected
the annual report of both of these companies. By using our knowledge from this course we
started to do Accounting analysis first. We visited the company websites and many other
websites like langkabangla.com, puredecisions.com to do accounting analysis over the
companies. In our report we thoroughly discussed the income statement, balance sheet, their
dividend policy and primary focuses of the companies.

In the Financial analysis part, we were asked to do ratio analysis over the companies and analyze
those ratios. And we tried our best to explain those ratios and find the companies deficiencies or
problems. All calculations can be found in the appendices.
Table of contents
No. Description Page No.

1 Brief overview of the 01


company
2 Primary Focus 02
3 Income Statement Analysis 03
4 Balance Sheet Discussion 04
5 Discussion of notes of 07
Financial Statement
6 Dividend policy 09
7 Current Ratio & Quick 09-10
Ratio
8 Cash Coverage 11
9 Receivables turnover & 12
inventory turnover
10 Asset turnover & profit 13-14
margin ratio
11 Return on equity and return
on assets
12 Earnings per share 15
13 Price earnings ratio & 16
payout ratio
14 Total debt ratio & time 16
interest earned ratio
15 Cash debt coverage ratio 17
16 Book value per share & free 19-20
cash flow
17 References 21
1

Brief Overview of the Companies


Overview of Fu-Wang Ceramics

Fu-Wang Ceramic Industry limited (company) is one of the pioneers in Ceramic industry in
Bangladesh. Company authorized capital Tk. 5 billion and their paid up capital Tk.

1,126,190,860. The company incorporated on 31 may 1995 as a private Company limited and by
shares and converted into a public limited company in1998. The company is now a public
limited company with foreign and local shareholders and listed in DSE and CSE .Fu-Wang now
producing European standard quality with affordable price for Bangladesh consumers for
comfortable, hygienic and fashion exotic house living. Fu-Wang created a revolution in respect
of tiles market and among the users in Bangladesh. Fu-Wang currently has 50 distributors all
over the country. It’s not so easy for a new company to establish such a wide distribution
network in a short period of time. Fu-Wang are extracting clay from their own mine. The
company owns and operates two industrial units for manufacturing of various types and size of
ceramic floor tiles and glazed will tiles and sales thereof. Fu-Wang have 418 employees. (P: 4,
12)

Products:
1. Glazed Floor Tiles
2. Glazed Wall Tiles

3. Design Glazed floor tiles

4. Homogeneous Floor tiles

5. Porcelain Floor tiles

6. Homogeneous Stair Tiles

7. Punch wall Tiles

8. Digital Printed Wall tiles


2

9.Rustic Wall Tiles

(Official website)

Overview of Monno Ceramics:


Monno Ceramic is a ceramic tableware manufacturing companies in Bangladesh, based
in Dhaka, the company was established in 1984 by the late Harunur Rashid Khan Monno.Monno
Ceramics authorized capital is 500000 and paid up capital 239280. 2016-17 is a successful year
for Munno Ceramic. There are five share holders Mr. Harunar Rashid khan 2.16 percent, Mrs.
Afroza khan 10.34 percent, Monno Welfare foundation 46.28 percent and Mrs, Huron
NaharRashhid 2.56 percent. (P: 5,17)

Products:
1. English Bone
2. Porcelain
3. Silk Porcelain
4. Monno Italia
5. Bespoke
(Official Website)

Management Focus in Current Year


Fu-Wang Ceramic
Product

Fu-Wang Ceramic launched 8 new design of floor and wall glaze tiles. They will producing
much better quality tiles in terms of size, less water absorption, thickness and hardness. Therefor
it’s become popular to the customers and demand is increasing.

(P: 8)
3

Dividend

This reporting year was not a good year for the company as all performance indicators show
down-ward trend. That’s why they offered 1 bonus share within per 10 share.

(P: 9)

Monno Ceramic
Theirobjectives are to conduct transparent business operation within the legal and social frame
work with aims to attain the mission with a quantitative target in business operation.

Their corporate focus is their vision mission and objectives are to emphasise on the continuous
development in making value addition to their products to producing the higher end products to
keep well prepared for competitive world market. (P: 03)

Income Statement Discussion

FU-WANG Ceramics:
 Fu-Wang ceramic did the comprehensive income statement for the year 2016-2017.
(Annual report analysis)
 They provided notes for each entry. ( Notes start form 2017, P: 32 and 2016: 32)
 They provided percentage of depreciation.
 They just provide a short-view of their balance sheet to their shareholders. (p: 28)
 There are no discontinued & extraordinary items in the income statement. (annual report)

MONNO Ceramics:
 Monno ceramic did the consolidatedincome statement for the year 2016-2017. (annual
report)
 The just provide a short-view of their balance sheet to their shareholders. (p: 33)
4

 There are no discontinued and extraordinary items in the income statement. (annual
report)

Balance Sheet Discussion


Fu-Wang Ceramics
The company was incorporated in 1995 as private limited company by-shares and in 1998 it was
converted into Public Limited Company. The financial statements have been prepared and
disclosures of information made in accordance with the requirements of the Company-Act 1994,
The Seccurities and Exchange Rules 1987 and International Accounting Standards (IASs). The
company uses Accrual basis of accounting following going concern assumption prepared under
the historical cost convention.

Does the stock have a par value?

Yes, the stock was a par value of Tk-10 (10.01 page 44). They have 500,000,000 authorized
share @ Tk 10 in the year 2017 and 300,000,000 in the year 2016. However, they have issued
102,380,988 ordinary shares in 2016 and 112,619,086 ordinary shares in 2017, which shows an
increase in ordinary share issued of 238,098 shares. So it as the authorized capital is 200,000,000
more than the previous year and they have issued 238,098 shares, they is room for more stock
issuance to raise money to fund continuing operations or implement strategic expansion plans.

Was there any unpaid income tax at the end of the current year?

Yes, we can see that in the balance sheet of the company where the deferred tax liability has
increased from Tk43,576,959 to Tk50,914,334 but it is for the long run. However, there are no
income tax payables for the current year which is considered current liability.

Does the company have any outstanding lease obligation?

No, they do not have any lease obligation as the own and operates two industrial units for
manufacturing of various types and sizes of tiles.

Does the company have any outstanding pension or post-retirement benefit obligation?
5

Yes, the company operates a contributory provident fund, gratuity and group insurance for its
permanent employees. Provident fund is administered by a Board of Trustees and is funded by
contributions partly from the employees and partly from the Company at pre-determined rates.
These contributions are invested separately from the company’s assets.

What is the breakdown of their investments in bond, investment in stock or other


marketplace securities, etc

There are no investments in bond, stock or other market place securities. However, there are
investments in property and some short-term deposits with a balance of Tk17,482,450 earning an
interest of Tk 572,823 in 2016 and Tk 720,154 in 2017 respectively. (9.02.01 pg-43).

Monno Ceramics
Monno Ceramic Industries Limited (The Company) was incorporated in Bangladesh on 21st April,
1981 as a Public Limited Company under The Companies Act, 1913. The Company went for public
issue of shares in 1985 and its sharesare listed with the Dhaka
StockExchangeLimited&ChittagongStockExchangeLimitedsince1983 and 1995 respectively. The
financial statements have been prepared based on Going concern, Consistency concept, Accrual
concept and such other convention as required by BAS-1 for fair presentation of financial
statements.
There was no revaluation of fixed assets in previous year and during the year under audit.
Therefore, there was no factor like the differences between historical cost depreciation and
depreciation on revalued amount, realization of revenue surplus on retirement or disposal of
assets, etc. Accordingly, no separate note of historical cost profit and loss has been presented.

Does the stock have a par value?

Yes, the stock was a par value of Tk-10 (10.01 page 44). They have 500,000,000 authorized
share @ Tk 10 in the year 2017. However, they have issued 23,928,020 ordinary shares. So it as
the authorized capital is 500,000,000 and they have issued 238,928,020 shares, they is room for
more stock issuance to raise money to fund continuing operations or implement strategic
expansion plans. (18.01 pg-45)
6

Was there any unpaid income tax at the end of the current year?

Yes, we can see that in the balance sheet of the company where the deferred tax liability has
increased from Tk700,000 to Tk900,000 but it is for the long run. However, there are no income
tax payables for the current year which is considered current liability. (pg-33)

Does the company have any outstanding lease obligation?

Yes, they do have lease obligation which is classified as finance cost under profit and loss
statement. (note 9.11, 34, and pg-34)

Does the company have any outstanding pension or post-retirement benefit obligation?

No, the company does not have any outstanding pension or post-retirement benefit obligation

What is the breakdown of their investments in bond, investment in stock or other


marketplace securities, etc

Yes there are investments in shares. However, there are investments in property and some short-
term deposits with a balance of Tk 113,195,959 (note 12 pg-42).

Does the company have long-term debt maturing in the current year? Or Any major
refinancing)

The company has a long-term loan net of current maturity which reduced from 230,154,280 to
181,732,139 from 2016 to 2017. There are both short term and long term loans aswell. (note
22.00, 23.00, page- 47)
7

Notes to the Financial Statement Discussion

Fu-Wang Ceramics:
 The subject of the first note of the financial statement is about corportae information and

companys basic information and the principal activities of the company throughout the

period and number of employee. (P: 32)

 Appropriate Accounting Policies have been consistently applied in the preparation of

financial statements and the accounting estimates are based on reasonable and prudent

judgments.

 The raw materials have been valued at weighted average method.

 The finished goods have been valued under variable costing method following marginal

costing technique.

 The work-in-process has been valued at cost of materials with proportion of electricity &

gas and factory overhead absorbed in production.

 Depreciation charged on fixed assets for full year. No, depreciation is charged on land

and land development. Depreciation on all other fixed assets is computed using the

reducing balance method in amount sufficient to write off depreciable assets over their

estimated useful life. Expenditure for maintenance and repairs are expenses; major

replacements, renewals and betterment are capitalized. The cost and accumulated

depreciation of depreciable assets retired or otherwise disposed of are eliminated from the

asset and accumulated depreciation and any gain or loss or such disposal is reflected in

operations for the year.

 There are no footnotes that are unusual or distinctive to this company.


8

Monno Ceramic.

 The subject of the first note of the financial statement is about incorporated date,
structure and objects which explain the companys basic information and the stock
activities of the company throughout the period.

 Inventories are measured at the lower of cost and net realizable value. The cost of
inventories is based on the weighted average cost principle, and includes expenditure
incurred in acquiring the inventories, production or conversion costs, and other costs
incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate share of
production overheads based on normal operating capacity.
 Raw materials in transit are valued at cost. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated costs necessary to make the
sale.
 Depreciation on property, plant and equipment Items of property, plant and equipment
are depreciated on a straight-line basis in profit or loss over the estimated useful lives of
each component. Capital work-in-progress and land are not depreciated. Depreciation on
addition to fixed assets is charged from the day of their acquisition and charging of
depreciation on property, plant and equipment ceases from the day on which the deletion
thereof takes place. Depreciation continues to be charged on each item of property, plant
and equipment until written down value of such fixed asset is reduced to Taka one. Rates
of depreciation on various classes of property, plant and equipment are as under:
Category of property, plant and equipment Rate (%).
 There are no footnotes that are unusual or distinctive to this company.
9

Dividend Policy
Fu-Wang Ceramic
Fu-Wang ceramic have net profit about 97,795,247 taka excluding capital loss on sale of car
956,438 taka in the year ended 30 June 2017 which has decreased around 11 percent compare to
immediate preceding year’s net profit before tax amounting to taka 110,383,123. In this
situation, the Board of Directors has recommended cash dividend from this year's profit @ 10%
on face value of share for all the shareholders.

Monno Ceramics

It would be evident from cash flow statement that during the year under review, Fu-Wang paid
Tk.23.35 million as instalment of the long term loan, Tk.160.62 million for acquisition of fixed
assets and Tk.3.76 million for payment of dividend for the year 2016-2017. Aggregating the
above payments we find that the company does not at present have the desired level of liquidity
to offer as much dividend.

FINANCIAL CALCULATIONS

LIQUIDITY RATIO

Current Ratio:
Formula= Current assets/Current liabilities.

Fu-Wang Ceramics:
2016: 717,973,645 /223,211,618 = 3.22
10

2017: 930,358,603 / 428,105,205= 2.17

Fu-Wang Ceramics was well of in terms of paying their short term obligations in 2016 than
2017. In 2017 the ratio dropped by a slight margin.

Monno Ceramics:
2016: 887,939,747/ 708,812,397= 1.25

2017: 852,835,853/ 759,964,902= 1.12

Monno Ceramics’ both the years have ratios almost equal. However, 2016 was the better one
indicating efficiency in paying debt with current assets.

Cross Sectional:

Fu-Wang Ceramics has outnumbered Standard in both the years with a greater than 2
ratio.Monno needs to make sure more of their assets are tied to most current assets, not their
property, plant, equipment.

Quick Ratio:
Formula= Current assets-Inventory/Current liabilities.

Fu-Wang Ceramics:
2016: (717,973,645-487,372,462) /223,211,618=1.03

2017: (930,358,603-645,653,045) / 428,105,205=.67

In both 2016 & 2017, Fu-Wang found themselves in a better position in terms of meeting their
obligations with current asset less inventory.

Monno Ceramics:
2016: (887,939,747-348,365,177)/ 708,812,397= .76

2017: (852,835,853-354,041,573)/ 759,964,902= .66

2016 quick ratio is better than 2017, so it’s not good for 2017.

Cross Sectional: Fu-Wang Ceramic has an advantage over Standard in both 2016 & 2017. This
clearly indicates Fu-Wang has an edge over Standard in terms of paying of their liabilities with
11

the most liquid form of assets in the form cash in hand, cash to be received soon and short term
investments.

Current Cash Debt Coverage Ratio:


Formula= Net cash provided by operating activities/AverageCurrent liabilities.

Fu-Wang Ceramics:
2016: 13,098,240/ (223,211,618+295,939,430)/2=0.05

2017: 19,218,381/ (223211618+428105205)/2=0.06

It shows 2017(0.06) was the year when Fu-Wang could cover their debt with cash inflow more
than 2016(0.05). This ratio is an indicator of how a company’s cash flow is generating enough or
not.

Monno Ceramics:
2016: 18,329,734/ (708,812,397+762,967,425)/2 =0.02

2017: 15,756,081/(759,964,902+708,812,397)/2 =0.02

Both year are same.

Cross Sectional:

Fu-Wang ceramics is having a more positive effect in terms of meeting its current liabilities with
the cash flowing to the bank’s account in both the year 2016 and 20177. The reason for lesser
ratio might be Monno are more involved in investing rather than in operations.

ACTIVITY RATIOS

Receivables Turnover:
12

Formula= Net sales/Averagetrade receivables

Fu-Wang Ceramics:
2016: 836,889,015/ (87876934+86560370)/2 = 9.60 Days.

2017: 472,605,400/(124,857,872+87876934)/2 = 4.44 Days

In 2016, it took Fu-wang more time to collect on their on credit sales, but in 2017 they were able
to improve the situation.

Monno Ceramics:
2016:819,055,956/(174,351,319+142,648,497)/2 =5.17 Days

2017: 859,492,844/(116,081,721+174,351,319)/2 = 5.92 Days

Due to a similar revenue in both 2016 and 2017, also because of following the strategy of using
same trade receivables amount their turnover ratio is similar.

Cross Sectional:

In 2017, Monno had a higher turnover ratio indicating that it takes more than Fu-Wang to get the
money that they sold on credit. So it leaves Fu-Wang in a better position.

Inventory Turnover:
Formula= Cost of goods sold/Average inventory

Fu-Wang Ceramics:
2016: 594,204,332/(487,372,462+426,979.967)/2 =1.30

2017: 286,182,155/ (645,653,045+487,372,462)/2 = .51

Stated calculations show that in 2017 Fu-Wang was not able to sell their inventory more than
they did in 2016.

Monno Ceramics:
2016: 667546472/ (348,365,177+333,780,837)/2 = 1.96
13

2017: 700,209,653/(354,041,573+348,365,177)/2 = 2.0

Though both year all most equal but in 2017 Monno Ceramics saw an increase in the inventory
turnover ratio and their inventory is being sold more than last year.

Cross Sectional: In 2016, Monnoceramicshad the advantage over Fu-Wang Ceramics. For 2017,
Monno also in favorable position compared to Fu-Wang is not able to make their sale efficiently.

Asset Turnover:
Formula= Net sales/Total assets.

Fu-Wang Ceramics:
2016: 836,889,015/ 1,573,319,745= 0.53=53%

2017: 472,605,400/ 1,903,075,167 = 0.25 =25%

In 2017, Fu-Wang experienced a fall in their asset turnover ratio. Meaning they were less
efficient in 2017 in effectively using its assets.

Monno Ceramics:
2016: 819,055,956 / 3,214,882,621 = 0.25=25%

2017:859,492,844/3,208,032,072 = 0.27 = 27%

The stats show Monno ceramicswere efficient in using their assets, and their slope is upward
from 2016-2017.

Cross Sectional: In 2017 Lower ratios indicate that Fu-Wang has sales decreasing and might
have production problems. This is why their assets are not generating enough sales as it should
have been.

Profitability Ratios

Profit Margin on Sales:


14

Formula= Net income/Net sales

Fu-Wang Ceramics:
2016: 132,240,173/ 836889015= 0.16= 16%

2017: 72,209,702 /472,605,400= 0.15= 15%

Profit margin shows how much a company earns on every $1 of sale. According to that Fu-Wang
had less profit on 2017 than in 2016. Reasons are obvious in the form of less net income
generated by more Sales.

Monno Ceramics:
2016: 2,181,483/819,055,956=.002=27%

2017: 2,719,889 / 859,492,844= 0.003= 32%

Monno ceramics have been facing a poor profit margin on sales consistently.

Cross Sectional: Fu-Wang ceramics proves to have a better profit margin on sales which shows
the huge difference. Monno Ceramics needs to be more cost effective so that their sales generate
more profit for the company.

Rate of Return on Assets:


Formula= Net income/Average total assets.

Fu-Wang Ceramics:
2016: 132,240,173/ (1,573,319,745+1,532,673,986)/2 = 0.0852

2017: 72,629,108/ (1,903,075,167+1,573,319,745)/2 = 0.0418

This ratio measures the overall effectiveness of management in generating profits with its
available assets.Their assets are quite effective in generating income however, it has decreased in
2017.

Monno Ceramics:
2016: 2,181,483/ (3,214,882,621+3,050,663,530)/2 = 0.0007

2017: 2,716,889/ (3,208,032,072+3,214,882,621)/2 = 0.0008


15

According to the ratio Monno Ceramics have performed better in 2017 than in 2016. However,
they need to increase the ratio. May be they need to get rid of the assets that are not proving to be
income generating.

Cross Sectional:Monno Ceramics have been experiencing a bad run compared to Fu-Wang
Ceramics. As suggested they need to get rid of the ineffective assets.

Rate of Return on Common Stock:


Formula= Net income-preferred dividends/Average common stockholder’s equity.

Fu-Wnag Ceramics:
2016: (132,240,173-42,915,749)/ (1,248,044,722+1,149,804,549)/2 = 0.0186

2017: (72,629,108-97,795,247)/ (1,354,673,830+1,282,044,722)/2 = 0.0048

In 2017, a decrease in net income as well as more dividend(in %) were reasons why ratio
dropped.

Monno Ceramics:
2016:(2,181,483-9,834,563)/ (2,266,050,250+2,275,832,775)/2 = 0.0008

2017: (2,716,889-1,964,010)/ (2,256,803,129+2,266,050,250)/2 = 0.00008

Cross Sectional analysis:

Fu-Wang Ceramics are gaining more than Monno Ceramics in both the years.Higher return
might influence the trust of the stockholders and other corresponding entities. Monno might shift
in issuing more common stocks than preferred.

Earnings Per Share:


Since EPS is clearly stated for both the companies, no calculations have been shown.

Fu-Wang Ceramics:
2016: 1.17

2017: 0.64
16

Due to sluggish performance in 2017, many sectors saw a decrease; in the same way earning per
share has also decreased. (In terms of Par value 10 taka)

Monno Ceramics:
2016: .09

2017: .11

After having a return in 2011 which is less than 1, in 2012 Standard Ceramics was able to earn
more than 1(1.07 in 2012) (In terms of Par value 10 taka)

Cross Sectional: A betterEPS in both the years shows the strong position of Fu-Wang Ceramics.
A strong financial representation in this section makes way for more future investment.

Price-Earnings Ratio:
Formula= Market price of stock/Earning per share.

Fu-Wang Ceramics:
2016: 8.55

2017: 15.63

Fu-Wang Ceramics had not same amount of P/E ratio in both the years showing what their
investors expect. A consistent output is necessary so that investors feel a secured return.

Monno Ceramics:
2016: 111.11

2017: 90.91

In 2016 Monno Ceramics had a huge P/E ratio showing a positive sentiment of the investors.
However in 2017 it fell to 90.91 which is pretty much the same as the industry.

Cross Sectional: As said earlier in 2016 Monno ceramics had a huge ratio, compared to Fu-
wang Ceramics; Fu-Wang had a lower P/E ratio.

Payout Ratio:
Formula= Cash dividend/Net income

Fu-Wang Ceramics:
17

2016: 105,344,090/132,240,173=80

2017: 65,715,483/72,629,108= 0.90

The calculations show that Fu-Wang has increased their dividend payout from 2016 to 2017
which indicates shareholders are getting money on what they have invested.

Munno Ceramics:
2016: 988,349/2,181,483 =.45

2017: 1,824,320/2,716,889=.67

In 2016, Monno ceramics only paid a little amount of dividend, since they reinvested more of the
earnings, the ratio is smaller. In 2017, they paid 67% of their earnings.

Cross Sectional: Fu-Wang Ceramics have a higher payout ratio than Monno Ceramics in both
years which is an indication of strong financial position and lucrative one for the investors.

Coverage Ratios

Debt to Total Assets:


Formula= Total Debts/Total assets

Fu-Wang Ceramics:
2016: 291,275,023/ 1,573,319,745=0.19=19%

2017: 548,401,338/1,903,075,167=.29=29%

Compared to 2016, in 2017 more of the total assets were financed by debt rather than equity for
Fu-Wang.

Monno Ceramics:
2016: 948,832,371/ 3,214,882,621= 0.30= 30%

2017: 951,228,943/ 3,208,032,072 = 0.30= 30%


18

Both year are same

Cross Sectional:Monno Ceramics is more leveraged company than Fu-Wang ceramics. A higher
debt percentage might be a probable reason for default, though Monno was able to reduce their
debt in both year.

Times Interest Earned:


Formula= Income before interest and taxes/Interest expenses

Fu-Wang Ceramics:
2016: 161,908,835/29,668,662=6.47

2017: 96,838,810/24,207,702=4.00

This means in 2016, company’s interest expenses were 7.47 times covered by income. The
overall scenario didn’t change significantly in 2017 but a slight decrease.

Monno Ceramics:
2016: 3,248,804/1,103,321=2.94

2017: 4,023,295/1,306406=3.08

In2017 the overall scenario a slight increase.

Cash Debt Coverage Ratio:


Formula= Net cash provided by operating activities/Average total liabilities.

Fu-Wang Ceramics:
2016: 398,507,378/ (2245083086+1933404376)/2 =0.19= 19%

2017: 650,172,663/ (2595972148+2245083086)/2 = 0.26 = 26%


19

This ratio discusses how a company’s cash flow from operations can cover their total liabilities.
In 2016, Fu-Wang could cover 19% of their debt, it experienced positive result in 2017 where the
ratio increased up to 26%

Monno Ceramics:
2016: 24,063,674/ (125856278+142234392)/2=0.179= 0.18= 18%

2017: 23,127,542/ (125856278+113,424,661)/2=0.193 =19.3%

For Monno Ceramics, their ability to cover debt with operating income increased over the years

Cross Sectional:

Fu-Wang Ceramics was better off in terms paying their liabilities with operating income better
than Monno. Though both the companies were able to increase their ratio in 2017, Fu-Wang had
performed better than Monno with a strong statement.

Book value per share:


Formula= Common stockholder’s equity/ Outstanding shares

Fu-Wang Ceramics:
2016: 5,322,635,087 / 253,080,850= 21.03

2017:5,551,136,969/ 253,080,850 = 21.9=22

Book value is just one of the methods for a company to know for the investors how they are
getting one each share. It was already a strong return in 2016; it had an increase in 2017.

Monno Ceramics:
2016: 104,122,040 / 6,460,650 =16.11

2017: 107,801,334/6,460,650 = 16.68

Monno Ceramics have a consistent Book value per share from the year 2016-2017. However
their value per share has increased.
20

Cross Sectional: Though both the companies have good numbers in this category, but their
differences in number has put Fu-Wang in a better position than Standard. Based on the current
market price, Fu-Wang has a good position. A lower return here indicates Monno might struggle
than its competitor(s)

Cash Flow:
Formula= Net cash provided by operating activities – Capital expenditures - Dividends

Fu-Wang Ceramics:
2016: 398,507,378 -222,433,377-345,110,250 = (169036249)

2017: 650,172,663- 638,513,274 -371,732,823= (361237354)

In the statements no capital expenditure wasn’t mentioned; so we took the cost of acquisition of
fixed assets. Due to huge expenditure 2017 saw a negative margin which was even bigger than
2016 negative margin.

Monno Ceramics:
2016: 24,063,674-6,315,600-262,638= 17465436

2017: 23,127,542-9,562,468-2,808,725= 10756349

Both the years saw a positive amount in the cash flow section. However, in 2017 the value was
less since they incurred more in acquisition.

Cross Sectional:

In both the years, Monno ceramics had an upper hand over Fu-Wang. Fu-Wang needs to think
about controlling their acquisition cost.

REFERENCE
21

http://www.assignmentpoint.com/business/finance/annual-report-2016-fu-wang-foods-
limited.html

http://www.assignmentpoint.com/business/finance/annual-report-2017-fu-wang-foods-
limited.html

https://monno-group.com/wp-content/uploads/2018/01/MCIL-Annual-Report-2016-
2017.pdf

APPENDIX

Ratios Fu-Wang Ceramic Monno Ceramics Industry Average


2016 2017 2016 2017 2016 2017
Liquidity:
Current ratio 3.29 2.17 1.25 1.112 2.27 1.64
Quick or acid-test 1.03 .67 0.76 .66 .895 .665
ratio
Current cash debt 0.05 0.06 0.02 0.02 0.035 0.04
coverage ratio
Activity:
Receivables 9.60 Days 4.44 Days 5.17 Days 5.92 Days 7.385 Days 5.18 Days
turnover
Inventory turnover 1.30Times .51 Times 1.96 Times 2.0 Times 1.63 Times 1.26 Times
Asset turnover 0.53 Times 0.25 Times 0.25 Times 0.27 .39 Times .26 Times
Times
Profitability:
Profit margin on 16% 15% 27% 32% 21.5% 23.5%
sales
Rate of return on 0.0852 0.0418 0.0007 0.0008 0.043 0.0213
assets
Rate of return on 0.0186 0.0048 0.0008 .00008 .0097 0.0075
common stock
22

equity
Earnings per share 1.17 .64 .09 .11 .63 .375
Price-earnings 8.55 15.63 111.11 90.91 59.83 26.64
ratio
Payout ratio .80 .90 .45 .67 .625 .785
Coverage:
Debt to total assets 19% 29% 30% 30% 24.5% 29.5%
Time interest 6.47 4.0 2.94 3.08 4.705 3.54
earned
Cash debt 19% 26% 18% 19.3% 18.5% 22.65%
coverage ratio
Book value per 21.03 22 16.11 16.68 18.57 19.34
share
Free cash flow (124,958,085) 254,507,257 214,501,6 (29,058,7 (75785406) (18008086
Tk. Tk. 26Tk 08)Tk Tk 0) Tk

You might also like