Term Paper-

Course Title: Financial Management

Topic: A study on financial performance using the ratio analysis at Monno
Ceramic Vs Shinepukur Ceramics

Section: 02

Semester: SPRING’19

Submitted By:

Name ID
Feroz Mahmud 13104102
Md Inthesharul Islam chy 16304093
Sadab Rahaman Ridam 16204024
Saad Bin Akbar 16204093
Khadija Yasmin 17204081
Prima Acharjee 18301293

Submitted To: Mr. N.M.Baki Billah

Lecturer, BRAC Business School.

Date of Submission: 3/20/2019

Table of Contents:
CONTENT PAGE

Abstract 3

Introduction 4-5

Industry Overview 6-8

Company Overview 8-10

Empirical Results, Discussion & Recommendations 11-17

Bibliography 18

Appendix 19
 Abstract
This paper is about bringing together the performances of “Monno Ceramic Industries Limited”
and “Shinepukur Ceramics Limited”. While preparing this report, we have got to know more on
how the Ceramics Industry works in Bangladesh. For instance, in our economy sector, this
sector plays one of the important roles, also can be said that it’s growing manufacturing zone of
our country. Here, we have done a time series analysis as well as a cross sectional analysis, also
did in-depth measurement of the companies in the ratio analysis segment. Due to certain
limitations of data, as in, Monno ceramics year end is June 30th where as Shinepukur’s is 31st
December. We have tried to implement better logical ways for “Monno Ceramics” that seemed
to be appropriate and made a year wise comparison. We have found sufficient information about
“Shinepukur Ceramics” for our study. We have also added commendations on how the
companies can upgrade their performance as well as recommended which company would be
better to invest in. Lastly, we have the best of our creativity and insights, and used the term paper
guidelines extensively.
 INTRODUCTION

i. Origin of the report:

The report has its origin through relevant items found in the network. The essence of the

discussed items has been taken from variety of sources like internet, magazines, and editorials of

newspaper etc. And some issues how International relations affects us has contributed to the

making the origin of this report.

ii. Objective of the report:

Finance is a very large field of discussion which takes several other fields to its discussion. Here

we tried to give a overview of the topic A study on financial performance using the ratio analysis

at Monno Ceramic Vs Shinepukur Ceramics.

Broad objective:

Broadly this term paper will try to give an overview about the academic studies related to

financial performance of two different companies.

Specific objective:

The specific objective of this report is to analyze financial performance using the ratio analysis at

Monno Ceramic Vs Shinepukur Ceramics. We have discussed after laying a common

understanding of Finance. Also the ways and means how to find a better knowledge about ratio

analysis be talked. In the end, we will try to give a conclusion about financial performance using

the ratio analysis at Monno Ceramic Vs Shinepukur Ceramics.

iii. Methodology of the study

The report is basically designed on gathered information on A study on financial performance

using the ratio analysis at Monno Ceramics. We have conducted a primary survey for collecting
necessary data from an executive of Igloo ice cream unit, Abdul Monem Limited
Source of data:

• Data was collected from different sources e.g. websites, reports, prospectus, journals,

books, search engines etc. to organize this term paper.

iv. Scope of the study:

The term paper is presented in a descriptive way, to help the readers of this term paper with

better understanding on the topic. This term paper also representing an organization’s history,

mission and vision as well as planning and decision making procedure so that one can easily

know and understand about a specific organization and its marketing practices.

v. Limitation of the study

The major limitations that the study faced during the study period are spot lighted below:

• The major problem we have faced is lack of understanding.

• Because of Monno Ceramics Ltd is a big organization so that they are so busy, it is very

much tough for us to allocate time for collecting data.

• As most of the data is collected from secondary sources, there was very little opportunity

to analysis data.

• Time constraint is one of the problems, for which it has been difficult for us to gather

enough knowledge.

Intense Political instability is one of the prominent problems that we face while preparing the
term paper.
 INDUSTRY OVERVIEW

On the basics of the annual report of 2016, 2017 and 2018 Monno Ceramic Industries Ltd. and

Shinepukur Ceramic Ltd. industry overview present here. First of all, we are representing or

comparing these two companies with Porter’s five forces model (Porter 1980, Thompson et al.

2007). Here, we are supporting Monno Ceramic Industries Ltd. and the competitor company is

Shinepukur Ceramic Ltd. If we consider Porter’s five factors firstly its represent about buyers

how much net income we get every year or how much company’s revenue increase from the

market. Revenue comes from sales so if we see the yearly report where Monno Ceramic sales are

TK. 859.50 million (2017) against Tk.819.06 million during the previous year and we achieved

profit from operations of Tk.84.53 millionDuring the year under review, we earned a net profit

before tax of the Company is Tk.4.02 million against Tk.3.28 million of the previous year. The

net profit after tax of the Company is Tk.2.71 million as against Tk.2.18 million during the

previous year. It is to be noted that the Finance Cost has been increased from Tk.61.16 million to

Tk.80.31 million during the year under review. As a result we could not earn more profit. While

any pretext is neither enough nor desirable to justify this achievement, we however feel that it is

our responsibility to keep you posted with the real situation. On the other hand, if we compare

with Shinepukur Ceramic there sale are lower than supporting company. Secondly, suppliers as

Monno ceramic maintain a good relationship with their suppliers so that supporting company get

a benefit from this point. Thirdly, substitutes already we have 60 ceramic companies in the

market 20 new companies are ready to hit the market so it’s become strong compaction for

ceramic companies. But Monno ceramics maintain a quality for their products they strongly

believe on product quality. Than it’s about potential new entrants as we say 20 new companies

enter last year therefore we can see it’s a good business market for Bangladesh. The chances of

involving new competitors are high here. Last one is existing rivals there are several existing

company now in Bangladesh but our company is always maintain new technology to sustain in
the long run.

We can determine the opportunities and threats of our company’s by PESTAL analysis. Firstly,

political issue because of change in government might give an effect on ceramic business but it’s

not give that much affect in ceramic sector. Secondly, economical factors is very vital for any

company, if the tax for ceramic companies goes high they face a digester situation. Currently

annually the domestic market pays 3 billion and a taka of 1 billion for utilities and gas. Thirdly,

social factors are not that much influence on ceramic market. Than comes technological factor its

gives a big shift on a company recently Monno ceramic include new technology and machines

for their company and every year they try to improve their products with new design. Than

environment factors the raw element of ceramic is soil but not all the soil are good for ceramic

products. Though, our company maintains quality raw materials for our products. But how the

weather changing every year because of this we can face struggle in future that why Monno

ceramic try to develop eco-friendly product for their customers. Last of all, legal because of a

small change in law there are huge change in every business. For example, reducing air pollution

ceramics companies maintain 60 feet pipe for smoke pipe.

Please also note that the shares of the Company are listed in the Dhaka Stock Exchange Limited

and Chittagong Stock Exchange Limited and the Company’s shares of a nominal value of

Tk.10.00 were traded at Tk.38.80 on the Dhaka Stock Exchange Limited and Tk.37.90 on the

Chittagong Stock Exchange Limited as on 30th June 2017. The Board of Directors is always

candid about its concern for your interest and it is evident from its activities over the years. After

due consideration of liquidity, available surplus, fund needed to meet unforeseen circumstances

and to maintain a consistency in the rate of dividend payable to shareholders, the Board of

Directors has recommended a dividend of Tk.0.50 per ordinary share of Tk.10.00 and 5% stock

dividend to the shareholders for the year under review, which requires your approval. We are
confident that you will stand by this decision in the interest of long term prospects of the

Company. It is to be noted that the total dividend Tk.11,964,010 for the year 2015-2016 was

approved and declared by the shareholders. Among the amount we have paid Tk. 37.57,625 to

the general shareholders including Tk.18,51,870 as TDS. The TDS amount was deposited to

Govt. through treasury challan. The Sponsors-Directors of the Company did not want to receive

their portion due to purchase of capital machineries. So the amount of dividend of the Sponsors-

Directors remains unpaid. From the last report the industry growth rate is 4.94%.

COMPANY OVERVIEW

‘Monno ceramics’ is one of the largest & well renowned ceramic company in Bangladesh.
Monno

Group has grown all over the years through their relentless hard work and perseverance with

operations and investments across a wide range of industries inventing different kinds of

products & service in different sectors like Porcelain & Bone China Tableware, Jute,
Textile,

Ready Made Garments, Trading, Power Generation, Printing & Packaging, Healthcare,

Educational Institutions and Retail. In last couple of years, their business increases highly with

earning a vast amount of revenue.

For their high growth they have taken some major strategic decisions in last few years where

quality maintained & well designed are two most important decisions. For the last 10-15
year’s

ceramic industry boomed highly in our country assisting a strong hand in our economy, which

means obviously Monno has a lot of competitors like well-known Shinepukur and RAK

ceramics etc but they have gained a sustainable place in the market because in the last three years

they have focused more on their quality rather than quantity. People buying their products

becomes much satisfied as they are able to use it for a longer period of time. The major products
of the Company are- Dinner Set, Coffee Set, Tea Set, Soup Set, Tea Cup & Saucer, Coffee
Cup

& Saucer, Tea Pot, Sugar Pot, Milk Pot, Flower Vase, Coffee Mug, Soup Spoon, Salt Pot,

Casserole, Salad Bowl, Oval Platter, Tray, Tiles etc. They have almost every kinds of products

that every household needs in their daily life. Besides quality they have also successful to give

suitable design to their customer which properly matches customer taste & preference. So,
we

can say Monno has strategically provides their customer quality products with well designed.

Furthermore, three years ago they only do their businesses in Asia but now they are doing their

businesses in more than 16countries all over the world. For the help of export their net sales have

increased far beyond once they have imagined. In 2014-15, their revenue was 757.39 million

taka which turned in 2016-2017 to 840.86 million taka. Quality maintain, well designed and

further investment are the reason for that.

As I said, last three years they have increased their investment in more than 16countries so their

major future outlook in upcoming 5years is to increase their investment in more than 40

countries across the globe which boost sales revenue up to 1.5 billion taka. Besides that, another

important future outlook of there is to represent local handicrafts industry to the world by

bringing Bangladeshi culture to their design. Bangladesh is very rich in their culture. Rural

people are really capable of portraying local symbol in their product which took Bangladeshi

handicrafts in higher stage. Monno is trying to capture these advantage in their products which

will give them a very high comparative advantage from its competitors especially from

shinepukur ceramics as well as high sales in both local and foreign markets. On this situation,

they are following the steps of china as giving priority to their culture in every sector china has

become the global powerhouse where every small/large business are contributing and also

keeping in mind Monno doesn’t need to go for Beyond offshoring as BD already has the
advantage of low labor cost.

Furthermore, ceramic industry basically is a branch of high-temperature chemistry dealing with

silicate materials as a major constituent, combined literally with hundreds of raw materials for

the manufacture of countless end products. These chemical dealings pollute our environment

hugely especially Air. One of famous researcher of Bangladesh states that last ten year’s ceramic

industry has contribute a larger hand in air pollution. For making, Manufacturers fire materials at

temperatures in excess of 1,000oC (1,832oF) & traditional ceramic tiles are fired in tunnel
kilns

that operate at 1,300oC (2,372oF). Which kills a lot of energy that could be harnessed to power.

So, Monno’s one of another future outlook is to reduce carbon footprint, render kilns obsolete as

much as they can & they made some plan’s like changing their production process, engineer

structure which help them to make it environment friendly.

 Ratio Analysis

Monno Ceramics VS Shinepukur Ceramics

LIQUIDITY RATIOS

MAJOR FINDINS 2015 2016 2017

MONNO CERAMICS
Current Ratio 1.027 1.026 1.252
Quick Ratio 0.589 0.761 0.616
Cash Ratio 0.038 0.012 0.026
Defensive Interval Ratio 0.227 0.199 0.272

SHINEPUKUR
CURRENT RATIO 0.581 0.671 0.563
QUICK RATIO 0.208 0.21 0.070
CASH RATIO 0.0120 0.0106 0.0103
DEFENSIVE INTERVAL 0.099 0.0773 0.070
RATIO

Here, we can see the fact that MONNO ceramics ratio is more impressive than SHINEPUKUR
ceramics. MONNO ceramics keeping a minimum required amount of liquid asset to meet its
current obligation. Comparing to their past 3 years liquid ratio to SHINEPUKUR is not doing
well as their liquid ratio says they are not able to pay current liability if they had to pay. Their
cash ratio and defensive interval ratio is very low compare to MONNO ceramics. MONNO is
able to improve their liquidity ratios in last 3 year where SHINEPUKER not able to do so. Their
cash ratio and defensive interval ratio tells the story how they are poor in managing cash to pay
their liability. As inventory is a perishable item so considering it as good defensive resource to
pay liability is not a good option. Hence, we can say that MONNO ceramics is managing their all
current asset successfully such as cash , account receivables and inventories as well. Also, they
are maintaining a safe Margie of ratio where SHINPUKUR is failed to do so. Hence, we can say
MONNO is safe company to invest as they will be always ready to pay their short tearm
obligations.
ACTIVITY RATIOS

MAJOR FINDINGS 2014 2015 2016

MONNO CERAMICS

INVENTORY TURNOVER 1.694 1.809 1.901

DAYS ON INV ON HAND 215.46 190.48 192.004
RECIEVEABLE TURNOVER 4.341 5.246 5.168
DAYS SALES OUTSTANDING 84.08 69.58 70.63

PAYABLE TURNOVER 3.186 2.696 4.271

NUMBER OF DAYS OF 114.56 135.39 85.46
PAYABLE
FIXED ASSET TURN OVER 0.319 0.351 0.382
TOTAL ASSET TURN OVER 0.25 0.25 0.26

ACTIVITY RATIO
MAJOR FINDINGS 2014 2015 2016

SHINE PUKUR

INVENTORY TURNOVER 1.87 1.67 2.548

DAYS ON INV ON HAND 195.18 222.2 143.25
RECIEVEABLE TURNOVER 4.02 14.03 21.03

DAYS SALES OUTSTANDING 90.796 26.015 17.356

PAYABLE TURNOVER 0.723 0.891 0.9937
NUMBER OF DAYS OF 504.8 409.6 367.31
PAYABLE
FIXED ASSET TURN OVER 0.395 0.417 0.498
TOTAL ASSET TURN OVER 0.25 0.21 0.317

Activity ratio indicating that SHINEPUKUR is slightly better than MONNO ceramics. Frist of
all in the inventory turnover ratio SHINEPUKUR is efficient than MONNO as they manage to
sold of their inventories quickly. As we know that inventories are perishable and contain goods
which might face other risks that is why is it is wise to sell it of as early as possible in a time
periods. As a matter of fact due to SHINEPUKUR impressive inventory turnover rate their
number of inventory on hand also reduced which is good for activity. Secondly in receivable
turnover ratio one must collect the mony as fast as possible from receivable parties. Here
turnover ratio is higher is consider to be better. MONNO ceramics is spending more time to
collecting cash from their receivable where their competitor is doing much better. On the other
hand in the pay able turnover ratio where the lowest rate of the ratio is consider to be idea for the
business. Because the more u able to keep the money of creditors the more company able to do
free financing. SHINE PUKUR is keeping a low rate of payable ratio where he enjoying to keep
its creditors money in hand. Hence he is enjoying free financing benefits. The last remaining two
ratio are perform both of these company very well enough. As both of these company maintain
in fixed asset and total asset turnover ratio for last 3 years.

SOLVENCY RATIOS

MAJOR FINDINGS 2014 2015 2016

MONNO ceramics
DEBT TO EQUITY 1.347 1.340 1.418
DEBT TO CAPITAL 57.39% 57.27% 58.66%
DEBT TO ASSET 25% 30% 31%
FINANCIAL LEVERAGE 34% 34% 41%
INTEREST COVERAGE 0.098 0.055 1.084
SHINEPUKUR ceramics
DEBT TO EQITY 1.569 1.571 1.570
DEBT TO CAPITAL 36.24% 35.01% 36.10%
DEBT TO ASSET 36% 36% 37%
FINANCIAL LEVERAGE 56.8% 57.1% 57.05%
INTEREST COVERAGE 0.088 0.082 0.079

In solvency ratio is only done for debt management purposes. MONNO ceramics is less risky
compare to SHINE PUKUR as they managing their debt perfectly. If we consider debt to equity
ratio which is calculate to find out total debt against total equity. Therefore the lower the ratio is
the better for the company. MONNO ceramics maintain a ideal rate here against their total
equity. On the other hand debt to capital is very high rate for MONNO which is risky. But their
debt to asset ratio is suitable which will help them to cover that risk. Debt to asset is calculated to
find the portion of total debt against total asset. Lower rate is consider to be better for the
organization. Yet SHINEPUKUR have greater investment risk as their financial leverage ratio is
very high Around 56 to 57 % which is not preferable. Financial leverage of a firm helps to
identify potential investment risk. A high ratio mean more risk. So investor would obviously pick
MONNO ceramics for investment as their leverage ratio is low which indicate less risk. And
lastly interest coverage ratio done to measure required EBIT to pay interest. Normally we pay
interest to avoid tax. But if we not able to generate significant EBIT to pay interest than that’s a
problematic. MONNO is doing better here compare to their competitor.

PROFITIBILITY RATIO

MAJOR FINDINGS 2014 2015 2016

MONNO

PROFIT MARGINE 0.41% 0.27% 0.26%

RETURN ON ASSET 0.10% 0.07% 0.06%
RETURN ON EQUITY 13.49% 9.63% 9.61%

SHINEPUKUR

PROFIT MARGINE 12.9% 18.5% 15.68%

RETURN ON ASSET 0.097% 0.091% 0.127%
RETURN ON EQUITY 0.35% 0.16% 0.2%

MONNO ceramics is more profitable than the SHINEPUKUR ceramics. At a glance looking at
the profitability table we can assume that MONNO is much better in every component of
profitability. Their profit margin is significantly high for 3 consecutive years. But its competitor
arefaceing problem. As they are not able to generate profit from operating expenses hence they
are not efficient. SHINEPUKUR sales revenue is impressive but their operating expenses
management is not efficient. As a result they are losing. Their return on equity also lower which
tells everything.

MARKET RATIO
MAJOR FINDINGS 2014 2015 2016
MONNO ceramics
Price earning ratio 90.90 76.92 111.11

SHINEPUKUR
ceramics
Price earning ratio 500 250 41.67

Price earning ratio is for valuing a company that measure its share price relative to its per share
earnings. It is also know as price multiplyer. Normally investor use this method to determine the
relative value of a company. Higher (PE) is not good for the company. Here we can analysis that
MONNO is much better compare to their competitor.

NOPAT ( NET OPERATING INCOME AFTER TAX)

Formula = NOPAT*(1- TAX RATE)

Company name Amount

MONNO
CERAMICS
2014 38125617.2
2015 30655538.1
2016 35534238.3
SHINEPUKUR
2014 15497044.3
2015 13508702.9
2016 12308458.7
Here, we can see that MONNO ceramics is maintain a operating income even after paying taxes
and efficiently managing a healthy operating income. If u look at last 3 year performance. We
can find that MONNO crameics generating more cash out of their operational activity.

OCF ( OPERATING CASH FLOW)

FORMULA= EBIT *(1- TAX RATE)+ DEPRICIATION AMORTIZATION

COMPANY AMMOUNT
NAME
MONNO
2014 11067808.1
2015 9794936.45
2016 20345768.2
SHINEPUKUR
2014 9259342.4
2015 3070764.05
2016 9132224.1

Operating cash flow mean the cash which is being generated after meeting its operating expenses
and obligations. Here MONNO ceramics is efficient in managing its operating activity compare
to SHINEPUKUR.

FCF ( FREE CASH FLOW)

FROMULA =EBIT*(1-TAX RATE)+ DEPRICIATION –( NET WORKING

CAPITAL – CAPEX)

COMPANY AMOUNT
NAME
MONNO
2014 56053902.1
2015 33312946.45
2016 49375962.2
SHINEPUKUR
2014 32511232.4
2015 5204641.05
2016 42212413.1
Cash flow is the life blood of an organization. Without proper cash in hand an organization cant
sustain long. Also in order to run operation cash is necessary for every organization. In free cash
flow we can figure out MONNO is better as their both operating cash flow and NOPAT is higher
compare to their competitor.

Conclusion

Ratio analysis is used to evaluate various aspects of a company's operating and financial

performance such as its efficiency, liquidity, profitability and solvency. In our analysis and

we can say, the overall performance of Monno Ceramic is better compared to

Shinepukur Ceramic. In many cases Shinepukur Ceramic has traded off between liquidity and

opportunity gains. In terms of profitability and debt ratios, Monno

ceramics industries limited has proved to be consistent. For profitability ratios, in the case of
EPS and DPS, Shinepukur was not close to Monno ceramic industries limited. MCL had better
profitability which the ratio reflects and hence better returns for investors. The ratios are used to
identify trends over time for one company or to compare among the companies at one point in
time. The overall analysis shows that Monno ceramic industries limited is in a better financial
position than Shinepukur Ceramic. That’s why, Monno Ceramic Industries Limited would be a
better decision as it is likely to provide higher return in the form of capital gain than Shinepukur
ceramic limited.
 Bibliography

i. A,WAHAB . (2014). Annual report 2014 of MONNO ceramics industries limited.

Retrieved from://www.assingementpoint.com/Business/finance/annual report
ii. ATIUR , R.( 2018). About MONNO group of Industry. Retrieved from://www.
Monno-group.com, 2019
iii. A, WAHAB. (2015). Annual report 2015 of MONNO ceramics industries limited.
Retrieved from: // www.assingementpoint.com/Business/Finance/annual report
iv. MOHHAMAD, A, U.(2016) Anuual report 2016 of SHINEPUKUR ceramics
industries limited. Retrieved from://
www.assingementpoint.com/Business/Finance/Annual report
v. MOHHAMAD, A, U.(2014). Annual report 2014 of SHINEPUKUR ceramics
industries limited. Retrieved from://www.shinepukur.com/index
 Appendix

During report to complete Ratio Analysis we have used some parts of formula from Liquidity

ratio to meet short term obligations, Asset management ratio to see is company efficient enough

in managing their asset, Debt-financing ratio to see company is creditworthiness enough to cover

its debt, Profitability ratio to see company is generating profit or not & Market value ratio to

capture company’s performance. This analysis has been done on behalf of Monno ceramics

comparing its competitors Shinepukur ceramics with using secondary sources- Financial

statement, income statement & cash flow of both the companies in last three years