1. Introduction of the Report

1.0 Introduction

Prepare a Report creates a unique opportunity for the student to apply their theoretical knowledge into practice and

gain valuable real world business experience. Student can also realize existing business condition apart from

having opportunities to solve the problem using various analytical tools.

Manufacturing Company is now an essential part of our economic development system. Modern manufacturing

company plays an important role in the economic development of a country. Manufacturing company provides

necessary goods for meet the various types of need as well as economic development. These types of

manufacturing company also provide necessary funds for social welfare and environmental development. Economy

of Bangladesh is in the group of world’s most underdeveloped economies. One of the reasons may be its

underdeveloped companying system. Government as well as different international organizations have also

identified that underdeveloped companying system causes some obstacles to the process of economic development.

So they have highly recommended for reforming industrial sector. Bangladesh Government must need to take

some immediate steps to develop the industrial and formulation and implementations of these reform activities has

also been participated by different international organization like World Bank, IMF etc.

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1.1 Background of the Study

As a requirement of the Managerial Finance course, we were assigned to do an assignment in National Tubes

Limited. From practical knowledge, we will be able to know real life situations and start a career with some

practical experience. National Tubes Limited is Tube Company incorporated in the People’s Republic of

Bangladesh with limited liability.

This report, “Performance Evaluation Of National Tubes Limited”, has been prepared to fulfill the partial

requirement of Managerial Finance course. While preparing this report, we had a great opportunity to have an in

depth knowledge of all the financial activities of National Tubes Limited.

1.2 Significance of the Report

Education will be the most effective when theory and practice blends. Theoretical knowledge gets its

perfection with practical application. We all know that there is no alternative of practical knowledge

which is more beneficial than theoretical aspects. The prime reason of this study is to become familiar

with the practical business world and to attain practical knowledge about the overall corporate world,

which is so much essential for each and every student to meet the extreme growing challenges in job

market.

1.3 Scope of the report

The presentation of the organizational structure and policy of National Tubes Limited and investigating the

strategies applies by it provide the scope of this report.

An infrastructure of the organization has been detailed and looks into the future. The scope of this report is limited

to the overall description of the company, its services, its position in the industry, its financial performance

analysis the practical progress of its operation. The scope of the study is limited to organizational setup, functions

and performances

Recent performance of NTL in terms of production, investment and export.

To analyze the company’s current financial flows performed by NTL.

To obtain practical experience about general tube company activities by NTL’S financial performance

analyses.

To build professional carrier in the corporate sectors as well as any manufacturing institution.

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1.4 Objectives of the Report

1.4.1. General Objective

The prime objective of the report is to analyze “Financial Performance of National Tubes Limited”

1.4.2. Specific Objective

The following aspects can be listed as the specific objectives for this practical orientation in National Tubes

Limited:

To identify and assess the present financial performance of National Tubes Limited

To calculate the financial ratios and identify the areas of concern.

To understand the implications in analyzing and interpreting the financial ratios.

To identify the findings and raise possible recommendations for improving the performance of National

Tubes Limited

1.5 Methodology:

1.5.1. Research Design

This report is a descriptive type of research, which briefly reveals the overall activities performed by

National Tubes Limited. It has also been administered by collecting secondary data. Annual reports of

National Tubes Limited were the major secondary data sources in this regard. Ratio analysis and trend

analysis have also been used as major tools for the financial performance analysis. The study is performed

based on the information extracted from different sources collected by using a specific methodology. This

report is analytical in nature.

1.5.2. Sources of data:

Secondary data:

A. Annual Report of National Tubes Limited.

B. Different text book and journals.

C. Various reports and articles related to study.

D. Some of my course elements as related to this report.

E. Web base support from the internet

1.5.3. Data Collection Procedure and Instruments:

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For the “Financial Performance Evaluation of National Tubes Limited” on the basis of time series analysis we

mainly used Secondary data.

1.5.4. Instruments Used For Analysis:

A. Ratio Analysis

B. Trend Analysis

Ratio Analysis:

The quantitative (such as ratio analysis) tools are used to analyze the gathered data and different types of computer

software are used for reporting the gathered information from the analysis such as- Microsoft Word, Microsoft

Excel etc. Ratio can be classified into four broad groups-

1) Liquidity Ratio.

2) Activity Ratio.

3) Debt Ratio.

4) Profitability Ratio.

Trend analysis:

It is really important to analysis trends in ratios as well as their absolute levels. This analysis informs us whether a

company’s financial condition improving or deteriorating.

1.6 Limitation

Observing and analyzing the broad performance of a tube company is not that easy. Moreover due to obvious

reasons of scrutiny and confidentiality, the company personnel usually don’t want to disclose all the statistical

information about their organization. However the some of the limitations we have face while preparing this

Report are listed as follows:

Time Limitation: To complete the study, time was limited by one month. It was really very short time to

know details about an organization like National Tubes Limited.

Inadequate Data: Lack of available information about export and import business operations of National

Tubes Limited. Because of the unwillingness of the busy key persons, necessary data collection became

hard. The employees are extremely busy to perform their duty.

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Lack of Record: Large-scale research was not possible due to constrain and restrictions posed by the

organization. Unavailability of sufficient written documents as required making a comprehensive study. In

many cases up-to-date information was not available.

Lack of experiences: Lack of experiences has acted as constraints in the way of meticulous exploration on

the topic. Being outsider of the organization; it was not possible on our part to express some of the

sensitive issues. Lack of adequate knowledge about export and import business of any organization.

2. ORGANIZATION’S OVERVIEW

2.1 Overview of NTL

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National Tubes Limited was established in 1964 in the private sector. It was nationalized and placed under Bangladesh Steel & Engineering Corporation (BSEC) in 1972. It is the only Government owned steel pipe producer in Bangladesh. In 1989 the enterprise was transformed into a public limited company by off-loading 49 percent shares to the general public. Now a sovereign Board of Directors manages the company.

National Tubes produces three types (API, GI & MS) of steel pipes. Overall it produces 10,000 M.T API. GI and MS, pipe in every year. National Tubes has acquired ISO 9001:2008 Certificate for its quality system for MS, GI & API Line Pipe. General-purpose MS and GI pipes (1 /2 inch to 8 inch dia) are, produced according to the British Standard BS-1387 and Bangladesh Standard BDS-1031. Galvanizing is done according to the British Standard BS-729, which is equivalent to DIN-244 and IS-4736. GI pipes are used for water supply and irrigation.API pipes (3/4 to 8-5/8) produced under the license from American Petroleum Institute (API). These pipes produced strictly according to the requirements of API. Spec 5L which correspond to the Grade-A-53B of the ASTM (American Society for Testing and Materials), specification. API Pipes used for Transmission & distribution of Natural Gas & Oil. The Major Buyer to the entire quantity of API Pipes are gas Transmission & Distribution Companies of Petrobangla- i.e. Titas Gas, Bakhrabad Gas, Jalalabad Gas, Pashchimanchal Gas and BAPEX.

National Tubes Limited131-142, Tongi Industrial AreaGazipur-1710, Bangladesh.

Phone: 9802303, 9802737, 9801985

2.2 Corporate Mission

To contribute to the well being of the nation by producing high quality import-substitute Gas/Oil line pipes

according to the specifications (Spec QI & 5L) of American Petroleum Institute (API) and Water line pipes (GI)

according to British Standard (BS-1387 & BS-729) as an API Licensee and an ISO 9001:2008 certified company.

We place Quality above all. We are firmly committed to all our stakeholders such as: Our valued customers, our

employees, our business associates, our fellow citizens and our valued shareholders.

2.3 Corporate Vision

It visions for the future encompasses a presence in major market in Bangladesh. Building a unique enterprise

reflecting utmost integrity, transparency and accountability at all levels and marketing, value-added products

manufactured under an uncompromising quality program devoted to continuous improvements for customers

satisfaction with modern technology, innovative vision and motivated workforce developed through strategic

management of human resource and training. And achieve maximum satisfaction by providing customs with

products that meet according their quality recruitment.

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2.4 Human Resource Development

In order to improve productivity of human resources, the company continuously provides formal and informal

training to the employees at every level of operation and management. In the current fiscal year with the help of

“Central for Management Development” under Awareness of Internal Quality Audit 22 several levels officers

participated in the training session. Besides this, 34 numbers of officers, staff and workers were trained in different

trade in different training Institute of the country in a short course in the related profession. The people thus

trained, will ultimately make great contribution to the company’s overall growth by developing professional skill

in due course.

2.5 Strategies of NTL

NTL mainly follows top down approach to take necessary decisions for the company. Basically they follow the

centralize strategy where the Head Office of the company control and monitor all the activities.

2.6 Features of NTL

1. Installed production Capacity: 39,000 Metric Ton per year.2. Production Range: ½” to 8” nominal dia pipes3. Galvanizing Capacity: Maximum 8 Ton per hour.4. Production process: Electric Resistance Welding (ERW) process, employing high frequency

system is used for manufacturing the pipe. Pipes are galvanized by Hot Dip Galvanizing process.5. Length of pipe: Black pipes up to 3” nominal dia and all sizes of G.I. pipe are manufactured in 6.1

meter (20 ft) standard lengths with 10% of total supply in non-standard or short lengths. Black pipes of 4” to 8” nominal dia are manufactured in 12 meter (40ft) standard lengths with 10% of total supply in non-standard or short lengths.

6. End Finish: G.I. Pipes are taper threaded as per BS-21 Pipe thread. Black pipes are plain ended (beveled

2.7 Formation of Digital Bangladesh

1. Some of the officers/staffs have been trained up in computer. Total 15 nos. of computer have been

purchased for this organization. Besides, they have purchased one data flex software for accounts

department, which serve for salary accounts, final accounts, provident fund, store accounts, cash books etc.

There is a plan to incorporate all departments under a network with LAN.

2. With a view to building digital Bangladesh they have taken a 5 years work plan to computerize all official

works of this organization.

3. Now they have been open a new web-site for NTL to exhibit their product and activities through it.

4. To build-up digital Bangladesh they have a plan to develop a system through which they can introduce E-

Commerce and E-Tendering process.

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2.8 Corporate Social Responsibilities

National Tubes Ltd. is committed to behave in a responsible way towards both the environment and the

society. We also encourage our employees to act responsibility towards the environment and the society

at their individual capacities. We work in harmony with the society for mutual interest.

1. Scholarships for 69 children’s 2009-2010 financial year of all employees is to be given for

continuing education.

2. Hazard Allowance and regular milk provided among the employees to maintain good health.

3. One day’s total salary of all officers of the Company has been donated in the government fund

for the affected people of Nimtoli, Dhaka in the fiscal year 2009-2010

4. A forestation activity is still continuing in useless land of the factory.

2.9 ORGANIZATIONAL HIERARCHY:

Chairman

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Mohammad Abu Hafiz

Directors

Md. Khalilur Rahman Siddiqui

Engr. Shahidul Abedin P.E

Khizir Hayat

Jasimuddin Choudhury

Md.Mazibur Rahman Khan

Md. Saiful Islam

Pirjada Torab Hossain

Umma Kulsum

Company Secretary

Md. Rezaul Karim

At present there are 10 members in the Board of Directors. In Board of Directors 1.chairmen, 8.Directors and

1.Company Secretary are involved in Board of directors. According to the Companying Company Act, Chairmen

are not elected by the directors. They are selected by shareholders represents individual body that then looks after

the periodic issue with the management and tries to solve the problem.

2.10 Five Years of NTL at a Glance

(Taka in Lac)

Sl. No. Particulars 2005-06 2006-07 2007-08 2008-09 2009-10

01 Authorized Capital 700.00 2500.00 2500.00 2500.00 2500.00

02 Paid-up Capital 700.00 700.00 910.00 1365.00 1501.50

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03 Retained Earnings 2244.24 2291.03 2564.87 2839.59 2970.82

04 Shareholders’ Equity 2944.24 3201.03 3929.27 4341.09 4472.32

05 Total Assets 8151.42 7422.78 9931.80 8785.58 8964.97

06 Fixed Assets (W.D.V.) 543.09 537.70 545.82 535.88 511.36

07 Long-term Liabilities 1557.33 1172.40 892.00 805.13 702.29

08 Gross Sales 6977.26 8338.92 10546.98 9895.00 5954.85

09 Total Expenses 6201.77 7866.31 9262.14 8716.56 5252.67

10 Operating Profit 813.69 506.53 1479.08 1348.74 656.14

11 Net Profit Before Tax 775.49 472.61 1284.84 1178.44 702.18

12 Net Profit After Tax 542.84 330.83 931.51 854.34 509.08

13 Number of Shares 586850 700000 794932 1083274 1425958

14 Book Value per Share (Tk.) 100.00 100.00 100.00 100.00 100.00

15 Earnings per Share 92.50 47.26 117.18 78.87 35.70

16 Cash Dividend 60.00% 10.00% 25.00% 30.00% 25.00%

17 Bonus Share _ 30.00% 50.00% 10.00% _

18 Number of Employees 370 368 367 340 324

19 Number of Shareholders 2156 2556 3171 3642 5029.00

20 Net Asset Value per Share 480.60 467.30 456.85 348.03 322.85

Table-1: Five Years of NTL

3.0. Theoretical Aspect

3.1. Financial Performance Analysis

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Financial Performance is a subjective measure of how well a firm can use its assets from business and generate

revenues. Financial Performance term is also used as a general measure of a firm's overall financial situation over a

given period of time, and can be used to compare with similar firms across the same industry or to

compare industries or sectors in aggregation.

Financial performance analysis refers to an assessment of the viability, stability and profitability of a business, sub-

business or project. It is performed by professionals who prepare reports using ratios that make use of information

taken from financial statements and other reports. These reports are usually presented to top level management as

one of their bases in making business decisions. Based on these reports, management may take decision. Financial

performance analysis is a vital to get a financial overview about a company. Generally it is consists of the

interpretation of balance sheet and income statement. Ratio analysis and trend analysis can be done by using these

two statements. These analyses are the major tools for analyzing the company’s financial performance.

3.2. Balance sheet

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of

a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a

specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's

financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to

a single point in time of a business' calendar year. A standard company balance sheet has three parts: assets,

liabilities and ownership equity.

3.3 Income Statement

Income statement also referred as profit and loss statement, earnings statement, operating statement or statement of

operations is a company's financial statement that indicates how the revenue is transformed into the net income. It

displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues,

including write-offs (e.g., depreciation and amortization of various assets) and taxes. The purpose of the income

statement is to show managers and investors whether the company made or lost money during the period being

reported.

3.4 Ratio Analyses

A tool used by individuals to conduct a quantitative analysis of information in a company’s financial

statements.Ratios are calculated from current year numbers and are then compared to previous years, other

companies,the Industry, or even the economy to judge the performance of the company.The basic inputs to ratio

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analysis are the firm’s income statement and balance sheet for the periods to be examined. Ratio analysis is

predominately used by proponents of fundamental analysis.

In finance, a financial ratio or accounting ratio is a ratio of two selected numerical values taken from an

enterprise’s financial statements. There are many standard ratios used to try to evaluate the overall financial

condition of a corporation or other organization. Financial ratios may be used by managers within a firm, by

current and potential shareholders (owners) of a firm, and by a firm’s creditors. Security analysts use financial

ratios to compare the strengths and weaknesses in various companies. If shares in a company are traded in a

financial market, the market price of the shares is used in certain financial ratios. In short, ratio analysis is

essentially concerened with the calculation of relationships which, after proper identification and interpretation

may provide information about the operations and state of affairs of a business enterprise.The analysis is used to

provide indicators of past performance in terms of critical success factors of a business.This assistance in decision-

making reduces reliance on guesswork and intution and establishes a basis for sound judgement.

3.5. Significance of using ratios

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial statements.

2. It is compared with the same ratio in previous financial statements (trend analysis).

3. It is compared with a standard of performance (industry average).Such a standard may be either the ratio

which represents the typical performance of the trade or industry, or the ratio which represents the target set

by management as desirable for the business.

3.6. Types of Ratio Comparisons

Ratio analysis is not merely the application of a formula to financial data to calculate a given ratio. More

important is the interpretation of the ratio value. To answer such questions as is it too high or too low? Is

it good or bad? Two types of ratio comparisons can be made: Cross-sectional and Time-series analysis.

Time-series Analysis:

Time-series analysis evaluates performance over time. Comparison of current to past performance, using ratios,

allows the firm to determine whether it is progressing as planned. Additionally, time-series analysis is often helpful

in checking the reasonableness of a firm’s projected financial statements.

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Cross-Sectional Analysis:

Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same point in time.

Combined Analysis:

The most informative approach to ratio analysis is one combines cross-sectional and time-series analysis. A

combined view permits assessment of the trend in the behavior of ratio in relation to the trend for the industry.

3.7 Cautions about Ratio Analysis

Before discussing specific ratios, we should consider the following cautions:

A single ratio does not generally provide sufficient information from which to judge the overall

performance of the firm.

Be sure that the dates of the financial statements being compared are the same.

It is preferable to use audited financial statements for ratio analysis.

Be certain that the data being compared have all been developed in the same way.

3.8 Groups of Financial Ratios

Financial ratios can be divided into four basic groups or categories:

i. Liquidity ratios

ii. Activity ratios

iii. Debt ratios and

iv. Profitability ratios

Liquidity, activity, and debt ratios primarily measure risk, profitability ratios measure return. In the near

term, the important categories are liquidity, activity, and profitability, because these provide the

information that is critical to the short-run operation of the firm. Debt ratios are useful primarily when the

analyst is sure that the firm will successfully weather the short run.

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Liquidity Ratio

Activity Ratio

Debt Ratio Profitability Ratio

Quick (Acid-Test) Ratio

Inventory Turnover Gross

Profit Margin

Market Ratio

Financial Ratios

Figure -1: Groups of Financial Ratios

3.8.1 Analyzing liquidity:

The liquidity of a business firm is measured by its ability to satisfy its short term obligations as they come

due. Liquidity refers to the solvency of the firm’s overall financial position. The three basic measures of

liquidity are:

Current ratio = Current Assets / Current Liability

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Current Ratio

Earnings Per Share

AverageCollection Period

Average Payment Period

Total Asset Turnover

Degree of Indebtedness

The Ability to Service

Operating Profit Margin

Net Profit Margin

Returns on Investment

Return on Equity

Price/Earnings Ratio

Debt Ratio Time

Interest Earned

Quick Ratio = Cash + Government Securities + Receivable / Total Current Liabilities

3.8.1. a. Current Ratio:

One of the most general and frequently used of these liquidity ratios is the current ratio. Organizations

use current ratio to measure the firm’s ability to meet short-term obligations. It shows the company’s

ability to cover its current liabilities with its current assets.

Current Ratio = Current Asset/Current Liabilities

Standard ratio: 2:1

3.8.1. b. Quick Ratio:

The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to

meet current liabilities with its most liquid assets.

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Standard ratio: 1:1

3.8.2 Analyzing Activity:

Activity ratios measure the speed with which accounts are converted into sale or cash. With regard to current

accounts measures of liquidity are generally inadequate because differences in the composition of a firm’s current

accounts can significantly affects its true liquidity.

A number of ratios are available for measuring the activity of the important current accounts, which includes

inventory, accounts receivable, and account payable. The activity (efficiency of utilization) of total assets can also

be assessed.

3.8.2. a. Inventory turnover:

A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover= Cost of goods sold/ Average Inventory

The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell

the inventory on hand or "inventory turnover days". This ratio should be compared against industry averages. A

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low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or

ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return

of zero. It also opens the company up to trouble should prices begin to fall.

3.8.2. b. Average Collection Period:

Average collection period is useful in evaluating credit and collection policies. This ratio also measures the quality

of debtors. It is arrived at by dividing the average daily sales into the accounts receivable balance:

Average Collection Period=Accounts receivable/ (Credit sales/365)

A short collection period implies prompt payment by debtors. It reduces the chances of bad debts. Similarly, a

longer collection period implies too liberal and inefficient credit collection performance. It is difficult to provide a

standard collection period of debtors.

3.8.2. c. Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it represents

the number of days by the firm to pay its creditors. A high creditor’s turnover ratio or a lower credit period ratio

signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company.

However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit

facilities allowed by the creditors. It can be calculated using the following formula:

Average Payment Period=Accounts payable/ Average purchase per day

3.8.2. d. Total Asset Turnover:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover = Sales/ Total Asset

3.8.3. Analyzing Debt:

The debt position of that indicates the amount of other people’s money being used in attempting to generate profits.

In general, the more debt a firm uses in relation to its total assets, the greater its financial leverage, a term use to

describe the magnification of risk and return introduced through the use of fixed-cost financing such as debt and

preferred stock.

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3.8.3. a. Debt Ratio:

The debt ratio measures the proportion of total assets provided by the firm’s creditors.

Debt Ratio = Total Liabilities / Total Assets

3.8.3. b. Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the company able to pay

interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

3.8.4. Analyzing profitability:

These measures evaluate the company’s earnings with respect to a given level of sales, a certain level of assets, the

owner’s investment, or share value. Without profits, a firm could not attract outside capital. Moreover, present

owners and creditors would become concerned about the company’s future and attempt to recover their funds.

Owners, creditors, and management pay close attention to boosting profits due to the great importance placed on

earnings in the marketplace.

3.8.4. a. Gross Profit Margin:

The Gross Profit Margin measures the percentage of each sales dollar remaining after the firm has paid

for its goods. Higher the gross profit margin, the better. The gross profit margin is calculated as follows:

Operating Profit Margin = Gross Profit / Sales

3.8.4. b. Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar. A high

operating profit margin is preferred. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales

3.8.4. c. Net profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes,

have deducted. The higher the net profit margin is better. The net profit margin is calculated as follows:

Net profit Margin = Net profit after Taxes / Sales

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3. 8.4. d. Earnings per share (EPS):

Earnings per share (EPS) are the earnings returned on the initial investment amount.

EPS= Net income/no. of share outstanding

3.8.4. e. Return on Total Assets (ROA):

Return on total assets (ROA), which is often called the firms return on total assets, measures the overall

effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Total Assets (ROA) = Net profit after Taxes / Total Assets

3.8.4. f. Return on Common Equity (ROE):

The Return on Common Equity (ROE) measures the return earned on the owners (both preferred and common

stockholders) investment. Generally, the higher this return, the better off the owners.

Return on Common Equity (ROE) = Net profit after Taxes / Stockholders Equity

3.8.5 Analyzing Market ratio:

3.8.5. a. Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the

income or profit earned by the firm per share.

P/E ratio - Price per share / earnings per share

4.0 Quantitative Analysis of National Tubes Limited:

4.1 Ratio Analysis:

4.1.1 Liquidity Ratio:

a. Current ratio

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The current ratio, one of the most commonly cited financial ratios, measures the firm’s ability to meet

its short term obligations. The higher the current ratio, the better the liquidity position of the firm. It is

expressed as:

Current Ratio=Current Asset/Current Liabilities

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Current

Ratio

2.52 2.49 1.97 2.64 2.55

Table-2: Current Ratio

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-2: Current RatioInterpretation:

That is the higher the current ratio; the more liquid the firm is considered to be. Current ratio of NTL is good

because it maintains average 2.434 tk current assets against 1tk current liabilities where as normally manufacturing

Company maintains 2: 1 current ratio. But this graph shows that, this company maintains the average 2.43:1

current ratio per year except year 2007-2008.

b. Quick (Acid-Test) Ratio:

The quick ratio is a much more exacting measure than current ratio. This ratio shows a firm’s ability to

meet current liabilities with its most liquid assets. It is calculated by:

Quick (Acid-Test) Ratio=Current Asset-Inventory-Prepaid Insurance/Current Liabilities

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Year 2005-06 2006-07 2007-08 2008-09 2009-10

Quick (Acid-

Test) Ratio

1.98 1.46 1.41 1.89 1.79

Table-3: Quick (Acid-Test) Ratio

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-3: Quick (Acid-Test) Ratio

Interpretation:

In this figure we see that the overall quick ratio trend line slowly decreasing. Quick ratio of NTL is good because it

maintains average 1.706 tk quick assets against 1tk current liabilities where as normally manufacturing

Company maintains 1: 1 quick ratio. But this graph shows that, this company maintains the average 1.706:1

current ratio per year.

4.1.2 Activity Ratio:

a. Inventory Turnover Ratio:

A ratio showing how many times a company's inventory is sold and replaced over a period. It is expressed as:

Inventory Turnover =Cost of Goods Sold/Inventory

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Year 2005-06 2006-07 2007-08 2008-09 2009-10

Inventory

Turnover

3.02 2.21 2.74 2.75 1.58

Table-4: Inventory Turnover

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-4: Inventory Turnover

Interpretation:

The average sales period varies company to company. But NTL turn their inventory slowly that means

average turnover is 2.46 times per year or average sales period 148 days. But the standard is 4times per

year or average sales period 90 days.

b. Average Collection Period:

Average collection period is useful in evaluating credit and collection policies. This ratio also measures the quality

of debtors. It is arrived at by dividing the average daily sales into the accounts receivable balance:

Average Collection Period =Accounts Receivable/Average Sales per Day

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Year 2005-06 2006-07 2007-08 2008-09 2009-10

Average Collection

Period

76.19 47.31 124.52 45.65 81.78

Table-5: Average Collection Period

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-5: Average Collection PeriodInterpretation:

Average collection period varies company to company. But most of the manufacturing concern gives the customers

30 days credit facilities. But NTL average collection period is 75 days may indicate poorly managed credit.

c. Total Asset Turnover Ratio:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate

sales.

Total Asset Turnover= Sales/Total Asset

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Year 2005-06 2006-07 2007-08 2008-09 2009-10

Total Asset

Turnover

0.74 0.98 0.92 0.98 0.58

Table-6: Total Asset Turnover

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-6: Total Asset Turnover

Interpretation:

Generally total asset turnover of the company is higher this means that its asset have been used

efficiently. But this graph shows that its average asset turnover rate is 0.84 times per year. But year 2009-

10 shows it is sloping down word, this means that the management performance is poor in compare to

previous year.

4.1.3 Analyzing Debt Ratio:

a. Debt Ratio:

The debt ratio measures the preparation of total assets provided by the firm’s creditors.

Debt ratio= Total Liabilities/Total Assets

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Year 2005-06 2006-06 2007-08 2008-09 2009-10

Debt Ratio 44.49% 44.40% 56.37% 53.55% 56.64%

Table-7: Debt ratio

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-7: Debt ratio

Interpretation:

This graph shows that, the debt ratio was increasing year by year. That’s average is 51.09. This value indicates that

the company has financed closed to half of its assets with debt. The higher this ratio the greater the company’s

degree of indebtness. In this case increase debt comes with greater risk as well as higher potential return.

b. Time Interest Earned Ratio:

The times interest earned ratio, sometimes called the interest coverage ratio, measures the firm’s ability to

make contractual interest payments.

Time Interest Earned Ratio =Earnings before interest and Taxes/Interest

Year 2005-06 2006-07 2007-08 2008-09 2009-10

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Time Interest Earned Ratio

42.26 11.74 11.09 11.79 23.84

Table-8: Time Interest Earned Ratio

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-8: Times Interest Earned Ratio

Interpretation:

In this graph we see that the company would still be able to pay their interest against their long term debt.

Because their average EBIT is 20.144 per year that considered sufficient to protect long term creditors.

4.1.4 Analyzing Profitability Ratio:

a. Gross Profit Margin:

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The Gross Profit Margin measures the percentage of each sales dollar remaining after the firm has paid

for its goods. Higher the gross profit margin, the better. The gross profit margin is calculated as follows:

Gross Profit Margin Ratio=Gross Profit/Sales

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Gross Profit

Margin

20.61% 13.72% 21.53% 21.57% 23.36%

Table-9: Gross Profit Margin

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-9: Gross Profit Margin

Interpretation:

The company gross profit margin in 2005-06 to 2009-10 that is 20.61%-23.36% which indicates that profit margin

is increasing day by day and its good situation. But in 2006-07 NTL’s gross profit margin is very low in compare

to other years.

b. Operating Profit Margin:

The Operating Profit Margin represents what are often called the pure profits earned on each sales dollar. A high

operating profit margin is preferred. The operating profit margin is calculated as follows:

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Operating Profit Margin Ratio=Operating Profit/Sales

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Operating

Profit Margin

13.42% 6.99% 16.13% 15.67% 12.67%

Table-10: Operating Profit Margin

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-10: Operating Profit Margin

Interpretation:

In this figure it has seen that the operating profit margin of the company is decreasing from 13.42%-12.67

in the preceding 5 years. In 2007-08 it was increased but they do not able to keep their position after

2007-08 operating profit margin is decreasing day by day. It is not a good sign for NTL.

c. Net Profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including

taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a

commonly cited measure of the company’s success with respect to earnings on sales

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Net Profit Margin=Net profit after tax/operating income

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Net Profit

Margin

8.95% 4.56% 10.16% 9.93% 9.83%

Table-11: Net Profit Margin

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure - 11: Net Profit Margin

Interpretation:

The Company net profit margin is often to a stable position from 2006-07-2009-10 in compare to previous two

years. But ultimately it is decreasing now. It is not a good situation for the company.

d. Earnings per Share:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including

taxes, have deducted. The higher the firm’s net profit margin is better. The net profit margin is a

commonly cited measure of the company’s success with respect to earnings on sales

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Earnings per Share=Net Profit after Tax/No. of Common Shareholder

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Earnings per

Share

92.50 47.26 117.18 78.87 35.70

Table-12: Earnings per Share

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure - 12 : Earnings per Share

Interpretation:

The graph shows that the company received their highest earnings per share in 2007-08 and lowest in

2009-10, it means that the NTL’s earnings per share is decreasing day by day after 2007-08. So the

management should work hard to reduce the fluctuation of earnings per share.

5. Return on Total Asset (ROA):

The return on total asset (ROA), which is often called the firm’s return on total assets, measures the

overall effectiveness of management in generating profits with its available assets. The higher the ratio is

better.

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Return on Asset (ROA) =Net Profit after tax/Total Asset

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Return on Asset

6.66% 4.46% 9.38% 9.72% 5.67%

Table-13: Return on Asset

Source: Annual Report of National Tubes Limited

Graphical Presentation:

Figure-13: Return on Total Asset

Interpretation:

From the figure it has seen that the company’s return on total asset decreased in 2006-07 in compare to the

following year 2005-06 but it increased in 2007-08. In the year 2009-10 it also decreased. So the NTL earns less

profit from the assets. This is not a good sign for the company.

6. Return on Common Equity (ROE):

The return on common equity measures the return earned on the owner’s (both preferred and common

stockholders’) investment. Generally the higher the return is the better off the owner’s.

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Return on Common Equity=Net Profit after Tax/ Shareholders equity

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Return on

Equity

18.44% 10.33% 23.70% 19.68% 11.38%

Table-14: Return on Common Equity

Source: Annual Report of NTL

Graphical Presentation:

Figure -14: Returns on Common Equity

Interpretation:

The company’s return on equity deviates from 18.44% to 11.38% in the preceding 5 years and the highest value

can be observed in 2007-08 and the lowest value can be observed during the 2006-07, which is not desirable. So

the management should work hard to increase the return associated with equity.

5.1. Major Finding:

From the current ratio Analysis we have seen that NTL has enough current assets to pay their

short term obligations.

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From the quick ratio Analysis we have seen that the company maintains average 1.706 tk. to pay 1

tk current liability.

From the inventory turnover Analysis we have seen that it is decreasing day by day.

NTL average collection period is 75 days may indicate poorly managed credit.

From the total asset turnover is increasing from year 2005-06 to 2008-09. But at year 2009-10 the

turnover rate is decreasing.

Debt Ratio of NTL is not in satisfactory range because its year by Year increasing.

From the times interest earned ratio it has seen that the average EBIT is 20.144 per year that

considered sufficient to protect long term creditors.

Gross profit margin of the company is increasing in 2005-06 to 2009-10 but in 2006-07 NTL’s gross profit

margin is decreasing which indicates that the company’s profit is decreasing.

Operating profit margin of the company is downward sloping day by day.

The Company net profit margin is in a stable position from 2006-07-2009-10 in compare to previous two

years.

The graph shows that, in 2007-08 earnings per share of NTL is higher than 2005-06 and 2006-07

and it decreasing day by day after year 2007-08.

The company’s return on asset overall decreasing day by day except year 2007-08 to 2008-09.

The return on common equity is decreasing day by day.

5.2. Conclusion:

National Tubes Limited (NTL) setting new standards in the companying arena in the time of turbulent economic

conditions. As part of the long-term financial reform and modernization plan of the government, the enterprise was

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transformed into a public limited company in1989 by –loading 49 percent shares to the general public. Though it

has a wide range of network and confidence from the customers but it has some problems those problems reduce it

income .It is PLC but the authority is not that flexible and it takes time to take decision.

From our point of view we can declare boldly that we really have enjoyed our assignment of this company from

the very first day. Moreover, this type of assignment is very important for managerial Finance course. We have

tried our soul to incorporate the research report with necessary relevant information in our report.

Although National Tubes Limited is achieve maximum good well by satisfying customers with products that

meet according their quality requirement. It is the sole objective of the Company. Customer satisfaction should

be increased to give appropriate service to them. And treat them as an asset of the company. Despite of these

problems National Tubes Limited trying to improve this condition and take some necessary measure to improve its

condition.

5.3. Some Recommendation for National Tubes Limited:

It is not unexpected to have problems in any organization. There must be problems to operate an organization. But

there must be remedies to follow. The following commendations can be suggested to solve the above-mentioned

problems:

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As we have seen that Current Ratio of NTL is satisfactory range so first it is recommended that, NTL

should invest their idle current asset to increase their profit.

As we have seen that the company maintains higher quick ratio. So they should try to maintain 1:1 quick

ratio.

The company should try to increase their inventory turnover because their efficiency of inventory turnover

is poor.

NTL should reduce their average collection period because their collection process of A/R is not efficient.

NTL should try to hold increasing flow of total asset turnover.

NTL must reduce their Debt ratio because their debt position is increasing day by day.

NTL should try to increase their operating profit margin.

The company should try to hold their current net profit position and try to increase it.

NTL should try to increase their earning per share and also try to reduce their fluctuation

The company should try to increase return on asset. From the trend analysis we have seen ROA of NTL is

fluctuating. So they should try improving this and should take necessary steps to increase ROA.

The company should try to increase return on common equity.

BIBLIOGRAPHY:

Books

2. Khan, AR 2008, “Bank Management: A Fund Emphasis (1/e)”, Ruby Publications, Nilket-Dhaka.

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3. Gitman, LJ 2003, “Principles of Managerial Finance (10/e)”, Person Education (Singapore) Pte.

Ltd. Indian Branch.

4. Garrison, RH, Noreen, EW & Brewer, PC 2006, “Managerial Accounting (11/e)”, McGraw-Hill

International Edition, United States of America.

5. Garrison, Ray, H, CPA & D.B.A., 2009-10, “Managerial Accounting”, International Edition,

McGRAK Hill.

Publications

Booklets published by National Tubes Ltd

Annual Report of National Tubes Ltd of 2005-06 to 2009-10

Chowdhury, T.A., Modes of Payment in International Trade, Reading Materials on International

Trade & Finance (E-102), BIBM, 2000.

Internet

Web Site: nationaltubes.bd.com

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