1. INTRODUCTION This report consists of the results of the study on the trend analysis of ACI Ltd.

& Renata Ltd. from their annual reports of 2006, 2007 and 2008. 1.1. Origin of the Report Ms. Shanila Taneem, course instructor of Introduction of Financial Management at North South University, authorized to prepare a report on Analysis on the Financial Management of ACI Ltd. & Renata Ltd. based on a trend analysis from annual reports of 2006, 2007 & 2008.

ACI was established as the subsidiary of Imperial Chemical Industries (ICI) in the then East Pakistan in 1968. After independence, the company was incorporated in Bangladesh on the 24th of January 1973 as ICI Bangladesh Manufacturers Limited and also as Public Limited Company. This company also obtained listing with Dhaka Stock Exchange on 28 December, 1976 and its first trading of shares took place on 9 March, 1994. Later on 5 May, 1992, ICI divested 70% of its shareholding to local management. Subsequently, the company was registered in the name of Advanced Chemical Industries Limited.

Renata Ltd. started its journey as a subsidiary company for Pfizer Bangladesh Ltd. in 1972. By the late 1990s. Pfizer Corp. handed the shares to local shareholders, changing its name to Renata Ltd. Renata Ltd. specializes in both pharmaceuticals & animal health products. It distributes in more than 7 countries including UK. It has more than 2000 employees and operates on more than 25 acres of land. It is a well motivated & financed company. 1.2. Statement of the Purpose The purpose of this study was to collect data from the annual reports of ACI Ltd. & Renata Ltd. in order to evaluate their managements effectiveness to indicate which companys stock is preferable. Thus, to factually make the interpretation, figures were collected from the companies annual reports of 2006, 2007 and 2008. 1.3. Limitations The report's accuracy is minimized due to some limitations. The unavoidable limitations are as follows: o Time: The execution period of the report was quite short to carry out such intensive report. o Accuracy of Analysis: The quality of the information in this study is limited as the figures were collected from a delicate source. If the data acquired from the annual reports are authentic, the content of this report is considered to be accurate.

Analysis of Financial Management

1.4. Methodology: The methodology of this report is consisted of developing a financial analysis as covered by Ms. Shanila Taneem in the course of Introduction to Financial Management. Analysis was based on the topics that were covered in the class. Interpretation and recommendation were minutely based on secondary data from the internet.

2. DISCUSSION OF ANALYSIS 2.1. Liquidity Ratios Liquidity Ratios indicate the relationship of firm's cash and other current assets to its current liabilities. It measures the firms ability to meet its short term obligations. Generally, the higher the Current Ratio, the more liquid the firm is considered to be. Current Ratio = Current Assets / Current Liabilities This shows the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future. 2006 Tk.1755046647/Tk. 1741038501 =1.01X 2007 Tk.3120888791/Tk.313 3547474 =1.X 2008 Tk.4986884853/Tk.4400 784166 =1.13X Tk.1506070972/Tk.1313 392836 =1.15X

ACI Ltd.

Renata Ltd.

Tk.979254859/Tk.6 Tk.988092820/Tk.7170 5888169168650 =1.49X=1.38X

ACI Ltd. The Current Ratio for 2006 and 2007 is almost the same. This shows ACI's cost of expansion was rise in debt which occurred in almost equal percentages. However, that incensement in 2008 indicates the first sign of its success. Renata Ltd. Renata's current ratio is falling constantly from 2006 to 2007. Their target in achieving expansion is coming at the cost of a significant rise in their liabilities. This ratio shows their management's ineffectiveness in utilizing their loans.

Analysis of Financial Management

Current Ratio
ACI Ltd. 1.6 1.4 1.2 1 Times 0.8 0.6 0.4 0.2 0 2006 2007 Year 2008 1.01 1 1.49 1.38 1.151.13 Renata Ltd.

The ratio is mainly used to give an idea of the company's ability to pay back its shortterm liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. So both the companies are in a fairly safe position at present. But, Renata's aim of expansion is proving to be ineffective as their liabilities are rising significantly. Quick Ratio = (Current Assets - Inventories) / Current Liabilities The Quick Ratio or Acid Test Ratio is similar to the current ratio except that it excludes inventory, which is generally the least liquid current asset. The quick ratio provides a better measure of overall liquidity only when a firms inventory cannot be easily converted into cash. If inventory is liquid, the current ratio is an overall measure of overall liquidity. 2006 (Tk.1755046647Tk.736676165) /Tk.1741038501 =.58X (Tk.979254859Tk.638784952) /Tk.658881691 =.52X 2007 (Tk.3120888791Tk.1091397629) /Tk.3133547474 =.65X (Tk.988092820Tk.662012145) /Tk.717068650 =.45X 2008 (Tk4986884853Tk2085053250) / Tk.4400784166 =.66X (Tk.1506070972Tk.959414590) /Tk.1313392836 =.42X

ACI Ltd.

Renata Ltd.

Analysis of Financial Management

ACI Ltd. ACI has shown an increase in their quick ratio from 0.58X in 2006 to 0.66X in 2008. This means they have less cash tied up as work-in-progress & has become more liquid over the years. Renata Ltd. Renata's acid test has shown a constant decrease from 0.52X in 2006 to 0.42X in 2008. This may be because their money is tied up in their inventories which cannot be cashed easily since their product may not be in demand. This is not a good sign from the management perspective as most of their assets are not liquid.

Quick Ratio
ACI Ltd. 0.7 0.65 0.6 0.5 Times 0.4 0.3 0.2 0.1 0 2006 2007 Year 2008 0.58 0.52 0.45 0.42 Renata Ltd.

0.66

The acid test trend analysis for ACI shows a quick increase from the year 2006-2007 of 12%. But the rate of increase has slowed down in 2007-2008 period to only a 1.5%, stating more stock tied up in progress. These stocks may not be freed up quickly in the future, thus may lower liquidity for ACI. Reneta, although having lower quick ratio in 2006, has shown a decrease rate of 13% in 2006-07 period. The rate of decrease has slowed down to 6.6% in 2007-08, showing less tied up stock & a probable rise in liquidity in the future. The higher the quick ratio is, the better the position of the company. Here, ACI is in a more safe position than Renata. 2.2. Asset Management Ratios Asset Management Ratios indicate the effectiveness and efficiency in a firm's management of assets.

Analysis of Financial Management

Inventory Turnover Ratio = Sales / Inventories A measure of the number of times a company's inventory is sold during a given time period which, in this case, is annual. Sales are for a period of time whereas inventories are for point of time. 2006 Tk.3515862372 / Tk.736676165 =4.77X Tk.1927731885 / Tk.638784952 =3.02X 2007 Tk.4917304331 / Tk.1091397629 =4.51X Tk.2534174981 / Tk.662012145 =3.83X 2008 Tk.7365103541/Tk.2085 053250 =3.53X Tk.3089746417 / Tk.959414590 =3.22X

ACI Ltd.

Renata Ltd.

ACI Ltd. ACI has shown a constant decrease in 2006-08. This is mainly because of ACI's effort in increasing sales by increasing inventories is ineffective. Another reason might be that in an effort to keep the sales constant, in a market where they forced to keep their products cheap, to protect their demand, the cost is the decrease in inventory turnover. Renata Ltd. Renata has shown an increase from 3.02X in 2006 to 3.83X in 2007. But their inventory turnover has also fallen again in 2008. This may happen due to increased sales in the 2006-2007 period and more purchase of inventory in 2007-2008.

Inventory Turnover Ratio

ACI Ltd. 6 5 4 Times 3 2 1 0 2006 2007 Year 2008 4.77 Renata Ltd.

4.51 3.83 3.53 3.22

3.02

Analysis of Financial Management

ACI had a considerable edge over Renata in 2006 of 1.75X. ACI has gone down since decreasing at a rate of 5% in 2007 & 21% in 2008. Although showing a negative effect, ACI may have been anticipating greater sales in forthcoming years, thus stocking up at lower cost. Renata has shown an increase of 26% in 2007 from 2006. But the ratio has fallen in 2008. The overall market indicates a probable increase in sales in coming years for which the companies may have been stocking up beforehand. This may lower the inventory turnover. Days Sales Outstanding (DSO) = Receivables / (Annual Sales / 365) This shows the average length of time the firm must wait after making a sale before it receives cash. 2006 Tk.769172540 / ( Tk.3515862372 / 365) = 79.85 days Tk.198626085/ (Tk.1927731885 / 365) = 37.61days 2007 Tk. 1586873124 / (Tk.4917304331 / 365) = 117.79 days Tk.194727875/ (Tk.2534174981 / 365) = 28.05days 2008 Tk.2248479381 / (Tk.7365103541 / 365) = 111.43 days Tk.344226933/ (Tk.3089746417 / 365) = 40.66 days

ACI Ltd.

Renata Ltd.

ACI Ltd. As sales are increasing, so are debtors at a higher rate. This indicates the management's ineffectiveness and might cost the company in their net cash flow. Lower the DSO, better the managerial performance. Renata Ltd. Renata is showing a reduced figure with a difference of 9 days in 2007 than 2006. It increased in 2008 to 40 days. Debtors are continuously rising in 2006-08, most significantly in 2008. Although, in 2006-07, the management was successful in facing the rise in debtors by decreasing their pay-back period, the significant increment in debtors of 2007-08 was failed to cope up with. So, DSO increased.

Analysis of Financial Management

Days Sales Outstanding

ACI Ltd. 140 120 100 80 Days 60 40 20 0 2006 2007 Year 2008 37.61 28.05 40.66 79.85 117.79 111.43 Renata Ltd.

The DSO trend analysis indicates that ACI increased at a rate of 48% of their credit sales in 2007 showing higher receivables. This may also indicate slack management as debtors do not pay in time. The number reduced 111 days in 2008 from 117 days in 2007, indicating strict credit policy. On the other hand, Renata has lower figures in 2007, but has increased 42% of their credit sales in 2008 indicating to achieve higher receivables figure. These may result in positive cash inflow for ACI & relatively lower inflow for Renata in future. Fixed Assets Turnover Ratio (FA Turnover) = Sales / Net Fixed Assets It measures how effectively the firm uses its plant and equipment. 2006 Tk.3515862372/Tk. 1160142171 = 3.03X 2007 Tk.4917304331/Tk.160 9924404 = 3.05X 2008 Tk.7365103541/Tk1928 219268 = 3.82X Tk.3089746417/Tk.1656 161962 = 1.87X

ACI Ltd.

Renata Ltd.

Tk.1927731885/Tk. Tk.2534174981/Tk.116 7972578826900571 = 2.42X= 2.17X

ACI Ltd. ACI has shown an increase in FA Turnover over the years from 3.03X in 2006 to 3.82X in 2008. However, this may not be sufficient for showing efficiency as ACI is comparatively an old company & previous asset valuation may be lower at cost.

Analysis of Financial Management

Renata Ltd. Renata has shown a decrease in FA Turnover from 2.42X in 2006 to 1.87X in 2008. Renata is a relatively a new company & lower turnover may have been caused by purchase of new fixed assets costing more.

Fixed Assets Turnover Ratio

ACI Ltd. 4.5 4 3.5 3 Times 2.5 2 1.5 1 0.5 0 2006 2007 Year 2008 3.03 2.42 3.05 2.17 1.87 3.82 Renata Ltd.

As mentioned above, ACI has shown an increase in FA turnover than Renata. This, however, may not justify a company's efficiency because ACI is relatively older than Renata. In due time, Renata will also be able to increase its FA turnover given its increasing sales. Same go for ACI, but they will always have more turnovers compared to Renata. Total Assets Turnover Ratio (TA Turnover) = Sales / Total Assets It measures how effectively the firm uses all of its assets. 2006 Tk.3515862372 / Tk.2915188818 = 1.21X Tk.1927731885 / Tk.1776512741 = 1.09X 2007 Tk.4917304331 / Tk.4730813195 = 1.04X Tk.2534174981 / Tk.2154993391 = 1.18X 2008 Tk.7365103541/Tk.6915 104121 = 1.07X Tk.3089746417/Tk.3162 232934 = .98X

ACI Ltd.

Renata Ltd.

Analysis of Financial Management

ACI Ltd. Here, ACI has shown a decrease in turnover in 2007. They have, however, increased it again in 2008. Again, total asset turnover does not fully justify a company's effectiveness similar to FA turnover. Thus, as years are passing by, ACI is expected to keep utilizing their assets effectively given that there are no manipulations in values of TA. Renata Ltd. Renata has shown an increase in2006-07. But its turnover has fallen in 2008. Although their sales are rising as they are expanding, ineffective use of assets has lead to their decrease in TA turnover.

Total Assets Turnover Ratio

ACI Ltd. 1.4 1.2 1 Times 0.8 0.6 0.4 0.2 0 2006 2007 Year 2008 1.21 1.09 1.18 1.04 1.07 0.98 Renata Ltd.

Trend analysis of TA turnover shows both ACI & Renata has been closely packed. This may has happened due to purchasing inventory or reduction in receivables. Like FA, in TA turnover, ACI may have the upper hand, as long as it continues to uphold its sales. Renata may also show positive outcome if it is able to increase its inventory turnover & reduce receivables. 2.3. Debt Management Ratios Indicates the extent to which a firm uses its borrowed funds to finance its operations. Debt Ratio = Total Debt / Total Assets This shows the percentage of firm's fund provided by creditors.

Analysis of Financial Management

ACI Ltd.

2006 Tk.1928037152 / Tk.2915188818 = 66.14% 794199946 / Tk.1776512741 = 44.71%

2007 Tk.3475778492 / Tk.4730813195 = 73.47% Tk.877387885 / Tk.2154993391 = 40.71%

2008 Tk.4710448147/Tk.6915 104121 = 68.12% Tk.1500159577/Tk.3162 232934 = 47.44%

Renata Ltd.

ACI Ltd. Although debts and assets have increased over 2006-08, the significant rise in debts lead to their highest debt ratio in 2007. However, the ratio's significant fall in 2008 is good in indication of its future credibility Renata Ltd. Although debts and assets have increased over 2006-08, the significant rise in debts lead to their highest debt ratio in 2008. This is not a good in indication of its future credibility.

Debt Ratio
ACI Ltd. 80 70 60 Percentage 50 40 30 20 10 0 2006 2007 Year 2008 44.71 47.44 40.71 73.47 66.14 68.12 Renata Ltd.

In terms of debt ratio throughout 2006-07, Renata has shown better debt ratios. However, the ratio is rising, whereas ACI's ratio is falling. Thus, for future credibility, ACI could have a better debt ratio even though it has comparatively a higher one, at present. Times Interest Earned (TIE) = Earnings before Interest and Tax (EBIT) / Interest This shows the firm's ability to meet its annual interest payments. Not sufficient information available to interpret the TIE ratio. Difficulty was faced during figuring out Interest.

Analysis of Financial Management 10

2.4. Profitability Ratios Shows the combined effects of liquidity, asset management and debt on opening results. Profit Margin on Sales (PM) = Net Income / Sales This shows the net income per unit of currency (in this case Taka) of sales. 2006 Tk.153825615 / Tk.3515862372 = 4.38% Tk.242131637 / Tk.1927731885 = 12.56% 2007 Tk.307769386 / Tk.4917304331 = 6.26% Tk.335923107 / Tk.2534174981 = 13.26% 2008 Tk.1075666883/Tk.73651 03541 = 14.6% Tk.433145804/Tk.308974 6417 = 14.02%

ACI Ltd.

Renata Ltd.

ACI Ltd. ACI has successfully shown a continuous growth from 4.38% in 2006 to 14.6% in 2008. Their Net Income is significantly rising with their relatively low increase in sales. This is mainly due to management's cost of effectiveness in carrying out operations. Renata Ltd. Renata has also shown a positive increase but lower than ACI. Their Net Income is significantly rising with their relatively low increase in sales in 2007-08. This is mainly due to management's cost of effectiveness in carrying out operations in 2008.

Profit Margin
ACI Ltd. 16 14 12 Percentage 10 8 6 4 2 0 2006 2007 Year 2008 4.38 6.26 12.56 13.26 14.6 14.02 Renata Ltd.

Analysis of Financial Management 11

Renata had a head start in 2006. In 2007-08, ACI has shown an increase in PM of 133%, and Renata has shown an increase of 5%. At present, ACI has the advantage of the higher market over Renata. If taxation remains same & Renata achieves the higher end of the market with new product, they will gain a further increase, given sales to increase consecutively. Return on Total Assets (ROA) = Net Income / Total Assets This shows the firm's effectiveness in creating profits. 2006 Tk.153825615 / Tk.2915188818 = 5.28% Tk.242131637 / Tk.1776512741 = 13.63% 2007 Tk.307769386 / Tk.4730813195 = 6.51% Tk.335923107 / Tk.2154993391 = 15.59% 2008 Tk.1075666883/Tk.29 15188818 = 15.56% Tk.433145804/Tk.316 2232934 = 13.7%

ACI Ltd.

Renata Ltd.

ACI Ltd. ACI has shown an increase, comparatively lower in 2007 but higher in 2008. This indicates greater return against the assets the company uses. Again, the complexity of PM & asset valuation must be under consideration, as ACI has experienced more years in the market. Renata Ltd. Renata has shown a rise in 2007 but failed again in 2008. This may be related with the asset values. Renata aims to expand its FA which results in a higher TA in 2008 and decreasing ROA.

Return On Asset
ACI Ltd. 18 16 14 12 Percentage 10 8 6 4 2 0 2006 2007 Year 2008 5.28 6.51 13.63 15.59 15.56 13.7 Renata Ltd.

Analysis of Financial Management 12

In the period of 2006, Renata had an advantage. Their ROA was 13.63% whereas, ACIs was 5.28%. During 2007, Renata showed an increase of 14% but fell again in 2008 by 12% gaining an overall of 2% increase. ACI increased to 23% in 2006-07 & had another 139% increase in 2007-08. These figures may not be always justifiable because the variables of asset valuation & profit margin come in to play. Return on Common Equity (ROE) = Net Income / Common Equity This shows a firm's profitability by revealing how much profit a company generates with the money the shareholders have invested. This is the most important ratio amongst the investors as it measures the return on their investment. 2006 Tk.153825615 / Tk.987151666 = 15.58% Tk.242131637 / Tk.982312795 = 24.65% 2007 Tk.307769386 / Tk.987151666 = 24.52% Tk.335923107 / Tk.982312795 = 26.29% 2008 Tk.1075666883/Tk.22 04655974 = 48.79% Tk.433145804 / Tk.1662073357 = 26.06%

ACI Ltd.

Renata Ltd.

ACT Ltd. ACI has shown amazing growth in ROE which results in big constant increments every year. Higher ROE means lower total common equity and higher net income. Investment will be more since the returns have increased. Renata Ltd. Renata's ROE initially rose in 2006-2007, due to its significant rise in NI. However, the growth in NI from 2007-08 was not enough to overcome the rise in CE resulting a very slight decrease in their ROE.

Return On Equity
ACI Ltd. 60 50 40 Percentage 30 24.65 20 15.58 10 0 2006 2007 Year 2008 26.29 24.52 26.06 48.79 Renata Ltd.

Analysis of Financial Management 13

Trend analysis of ROE states a boom of ACI, increasing from 15.58% in 2006 to 48.79% in 2008- a 213% increment in 2 years. Renata had almost a steady decrease over these 3 years. Again, ROE only shows book values. Actual market price may vary. Both companies may return positively if they can hold their PM. More income generates larger ROE. 2.5. Market Value Ratios A set of ratios that relate the firms stock price to its earnings, cash flow and book value per share. Price / Earnings (P/E) Ratio = Price Per Share / Earnings Per Shares (EPS)* This shows the price investors will pay for $1 (in this case Taka) of current earnings. *EPS calculation shown in Per Share Ratios, Section 2.6. 2006 2007 Tk.70.2 / Tk.181.7 / Tk.9.51302504638219 Tk.19.033357204700 = 7.38X 1 = 9.55X Tk.3099.25/Tk.328.812 Tk.7491.25/Tk.348.4 9881134971929658948 = 9.43X= 21.5X 2008 Tk.521.3/Tk.66.52237 99010513 = 7.84X Tk7789.25/Tk374.438 68577361 = 20.8X

ACI Ltd.

Renata Ltd.

ACI Ltd. The ratio has increased in 2007 but decreased in 2008. Not a very good indication to their stock's value as it reveals instability. Renata Ltd. The ratio for Renata has increased greatly in 2007 and stays close to it over the years. So it suggests that investors are expecting higher earnings in the future.

Analysis of Financial Management 14

Price / Earnings Ratio

ACI Ltd. 25 20 15 10 5 0 2006 2007 Year 2008 21.5 20.8 Renata Ltd.

9.43 7.38

9.55

7.84

In general, a high P/E ratio suggests that investors are expecting higher earnings in the future compared to the companies with a lower P/E ratio. Between these companies, Renata has higher P/E ratio. However, the number of common shares outstanding for Renata is fairly low and rising. In future the EPS can be expected to fall if Renata struggles to increase their NI as well as their common shares. Thus, the comparison in P/E ratios to assess their position is biased. Market / Book (M/B) Ratio = Market Price Per Share / Book Value Per Share (BVPS)* This shows how much investors are willing to pay for $1 (in this case Taka) of book value equity. *BVPS calculation shown in Per Share Ratios, Section 2.6. 2006 2007 Tk.70.2 / Tk.181.7 / Tk.61.0483405071119 Tk.77.615009461966 = 1.15X 6 = 2.34X Tk3099.25/Tk1333.973 Tk.7491.25/Tk.1325. 5748206433203802118 = 2.32X= 5.65X 2008 Tk.521.3/Tk.136.3423 60791589 = 3.82X Tk.7789.25/Tk.136.34 23607915 = 57.13X

ACI Ltd.

Renata Ltd.

ACI Ltd. ACI's M/B ratio is rising which is a very good indication of their rise in value to the investors. The market is at present overvaluing their stocks. Renata Ltd. The M/B for Renata is increasing and there is a significant growth in 2008. It means that the stock is highly overvalued.

Analysis of Financial Management 15

Market / Book Ratio

ACI Ltd. 60 50 40 30 20 10 0 2.32 1.15 2006 5.65 2.34 2007 Year 3.82 2008 Renata Ltd.

57.13

M/B ratio attempts to identify undervalued or overvalued securities. Here, the market price for Renata has been overvalued a lot compared to ACI, particularly during 2007-08. 2.6. Per Share Ratios Earnings Per Share (EPS) = Net Income / Common Shares Outstanding This shows the portion of a company's profit allocated to each outstanding share of common stock. 2006 Tk.153825615 / 16170000 = Tk. 9.51 Tk.242131637 / 736381 = Tk. 328.81 2007 Tk.307769386 / 16170000 = Tk. 19.03 Tk.335923107 / 963989 = Tk. 348.47 2008 Tk.1075666883/ 16170000 = Tk. 66.52 Tk.433145804 / 1156787 = Tk. 374.44

ACI Ltd.

Renata Ltd.

ACI Ltd. EPS is generally considered to be the single most important variable in determining a share's price. The EPS for ACI has increased by Tk. 9.52 from 2006 to 2007 and it has increased by Tk. 47.09 from 2007 to 2008. ACI did not dilute their ownership by not issuing any common stocks throughout the 3 years. This shows that ACI's increase in Net Income is the major reason for increase in EPS from 2006-07 and a significant rise in Net Income lead to its significant success in EPS from 2007-08.

Analysis of Financial Management 16

Renata ltd. The EPS for Renata has increased from 2006 to 2008. Their intention which is attracting investors is clearly revealed from their rise in Common Shares Outstanding. Besides, their success throughout the 3 years is reflected from their rise in NI. As a result, there is a gradual growth in their EPS from 2006-08.

Earnings Per Share

ACI Ltd. 400 350 300 250 Taka 200 150 100 50 0 9.51 2006 19.03 2007 Year 2008 66.52 328.81 348.47 Renata Ltd.

374.44

Both the companies are having increasing EPS but Renata has higher EPS now. It should be biased to conclude that Renata's EPS is better as they have significantly lower number of Common Shares Outstanding though it is rising. Thus, in future, if Renata fails to keep up their growth in NI, it would be the incorrect decision to choose Renata as a better company. Dividends Per Share (DPS) = Dividends paid to Common Stockholders / Common Shares Outstanding This shows the sum of declared dividends for every common share issued. 2006 Tk.72765000 / 16170000 = Tk. 4.5 Tk.46860550 / 736381 = Tk.63.636 2007 Tk.97020000 / 16170000 = Tk. 6 Tk.56232700 / 963989 = Tk. 58.33 2008 Tk.137445000 16170000 = Tk. 8.5 Tk.67479250 / 1156787 = Tk. 58.33

ACI Ltd.

Renata Ltd.

ACI Ltd. The DPS for ACI has increased for the last 3 years, an effort to attract investors and gain competitive advantage, so the stockholders can expect to get more dividends in future.

Analysis of Financial Management 17

Renata Ltd. The DPS for Renata has decreased in 2007 and remained constant in the later years. The company's effort to expand, both their dividends and common share had increased. As a result, their DPS was fairly constant in 2007-08. However, the cost of attracting investors was the cause of a decreasing DPS as revealed in 2006-07.

Dividends Per Share

ACI Ltd. 70 60 50 40 Taka 30 20 10 0 4.5 2006 6 2007 Year 8.5 63.64 58.33 58.33 Renata Ltd.

2008

ACI has an increasing DPS, showing a sign that the company's management believes that the growth can be sustained. However, the same reason as mentioned in EPS, the DPS values should not be compared among companies, as it will show a biased relationship. Book Value Per Share (BVPS) = Total Common Equity / Common Shares Outstanding This shows the dollar value remaining for common shareholders after all assets are liquidated and all debtors are paid. This measure is used by owners of common shares to determine the level of safety associated with each individual share after all debts are paid accordingly. 2006 Tk.987151666 / 16170000 = Tk. 61.05 Tk.982312795 / 736381 = Tk. 1333.97 2007 Tk.1255034703 / 16170000 = Tk. 77.62 Tk.1277605506 / 963989 = Tk. 1325.33 2008 Tk.2204655974 16170000 = Tk. 136.34 Tk.1662073357 / 1156787 = Tk. 1436.80

ACI Ltd.

Renata Ltd.

ACI Ltd. The BVPS for ACI has increased- Tk. 16.57 in 2007 and Tk. 58.72 in 2008. BVPS is growing due to the rise in Total Common Equity.

Analysis of Financial Management 18

Renata Ltd. BVPS has decreased throughout 2006-08. Renata's common equity is rising and they are trying to issue more common stocks.

Book Value Per Share

ACI Ltd. 1600 1400 1200 1000 Taka 800 600 400 200 0 61.05 2006 77.62 2007 Year 136.34 2008 1333.97 1436.8 1325.33 Renata Ltd.

Due to the significant difference between their common shares outstanding and the fact that Renata is increasing their number of common shares, the BVPS will be biased to compare. Cash Flow Per Share (CFPS) = Net Cash Flow (NFC)* / Common Shares Outstanding This is frequently used in valuing a firm's stock by analysts who believe the amount of net cash a firm produces is a more valid measure. * NFC = Net Income + Depreciation + Amortization Calculation to find NFC2006 Tk. 153825615 + Tk. 399870467 + Tk. 0 = Tk. 553696082 Tk. 244268890 + Tk. 242131637 + Tk. 0 = Tk. 486400527 2007 Tk. 307769386 + Tk. 467726369 + Tk. 0 = Tk. 775495755 Tk. 335923107 + Tk. 290384399 + Tk. 0 = Tk. 626307506 2008 Tk. 1075666883 + Tk. 552340225 + Tk. 0 = Tk. 1628007108 Tk. 433145804 + Tk. 357477233 + Tk. 0 = Tk. 790623037

ACI Ltd.

Renata Ltd.

Analysis of Financial Management 19

Thus, 2006 Tk.553696082 / 16170000 = Tk. 34.24 Tk.486400527 / 736381 = Tk. 660.53 2007 Tk.775495755 / 16170000 = Tk. 47.96 Tk.626307506 / 963989 = Tk. 649.70 2008 Tk.1628007108 16170000 = Tk. 100.68 Tk.790623037 1156787 = Tk. 683.46

ACI Ltd.

Renata Ltd.

ACI Ltd. CFPS is increasing throughout 2006-08 as NFC is rising. This is a very good indication to ACI's success and for their shareholders. Renata Ltd. CFPS is increasing throughout 2006-08 as NFC is rising. This is a very good indication to Renata's success and for their shareholders.

Cash Flow Per Share

ACI Ltd. 800 700 600 500 Taka 400 300 200 100 0 34.24 2006 47.96 2007 Year 100.68 660.53 649.7 683.46 Renata Ltd.

2008

Due to the significant difference between their common shares outstanding and the fact that Renata is increasing their number of shares, the CFPS will be biased to compare. However, there was a 110% rise in ACIs CFPS in 2007-08 whereas rise in Renata's CFPS is comparatively constant. This is a very good indication for ACI's stockholder as this shows that their company is utilizing their assets more effectively and efficiently.

Analysis of Financial Management 20

3. CONCLUSION This intensive study indicates that ACI Ltd. is in a much better financial position than Renata Ltd. Overall analysis is given below: Liquidity Position: Both current & quick ratio reveal that ACIs liquidity is improving over the years, whereas, Renata Ltd.s liquidity is deteriorating mainly due to increase in its liabilities in the aim for expansion as well as its struggle to create demand for its product in market. Besides, Renatas values are relatively smaller than those of ACIs. Thus, it is justified to predict that Renatas liquidity ratios will degrade, whereas ACIs liquidity ratios will improve in the future, as clarified from the trend analysis. In conclusion, at present, ACI is in a better liquidity position than Renata. Asset Management Position: None of Renatas asset management ratios is improving in 2008, whereas, with the exception of inventory turnover ratio, all the other asset management ratios have improved for ACI. Although, Renatas DSO in 2006-08 is much better; ACIs other ratios deduce that ACI is in a better asset management position than Renata, at present. However, their future predictability is inconclusive due to regular fluctuations in both the companys trend analysis. Debt Management Position: Debt ratio indicates that Renata is in a better debt position than ACI, at present. However, as ACIs debt ratio is falling and Renatas is rising, ACI has an upper-hand in future, predicted from the trend analysis. Profitability Position: Although, all the 2006 profitability ratios denote that Renata had a superior profitability. However, ACIs dramatic improvement made them go beyond Renata in every ratio by 2008. Thus, ACI is in better profitability position than Renata, at present and it is fair to conclude that it will improve. Market Position: The market value ratio disguises Renata as better than ACI in the market hiding its low number of common shares outstanding. However, ACI has got the upper-hand in M/B ratios trend analysis, whereas, Renata has the upper-hand in P/E ratios trend analysis. Thus, it is inconclusive, from Market Value Ratios, to interpret who promises to be advantageous.

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Share Position: Almost all the ratios have improved for both ACI and Renata, except Renatas DPS which rose and stayed constant in 2007-08. However, Renata has better values in its ratios compared to ACI. Thus, Renata is in a better share position than ACI, at present. Conversely, Renata has significantly lower number of common shares outstanding which is gradually rising. Thus, in future, if Renata fails to keep up their growth, it would be an incorrect decision to choose Renata as a better company.

4. RECOMMENDATIONS Although there is inconsistency in the favorability of interpreting the financial position of each firm, the trend analysis convincingly suggests that ACI Ltd. will be in stronger position in future, comparatively to Renata Ltd. Domination of Renata Ltd. in Per Share Ratios is a misguidance to its quality of performance in the pharmaceutical industry. Although their performance is not superior to ACI Ltd., the market suggests that Renata Ltd. is the healthier firm. Thus, the market related ratios create an overvaluation of Renatas stock. Most of the performance related ratios like Liquidity, Asset Management and Profitability Ratios favor ACI. Moreover, Debt Management Ratio gives a better trend analysis for ACI which makes it safe to conclude that ACI Ltd.s stock are more reliable and thus favorable to acquire rather than those of Renata Ltd.

5. BIBLIOGRAPHY o Brigham & Houstom, T 1997, Financial Statements, Cash Flow, and Taxes, Fundamentals of Financial Management, 10th edition. o Brigham & Houstom, T 1997, Financial Statements, Analysis of Financial Statements, Fundamentals of Financial Management, 10th edition. o ACI Ltd. 2006, Annual Report 2005-2006, Dhaka Stock Exchange. o ACI Ltd. 2007, Annual Report 2006-2007, Dhaka Stock Exchange. o ACI Ltd. 2008, Annual Report 2008-2009, Dhaka Stock Exchange. o Renata Ltd. 2006, Annual Report 2006-2007, Dhaka Stock Exchange. o Renata Ltd. 2007, Annual Report 2007-2008, Dhaka Stock Exchange. o Renata Ltd. 2008, Annual Report 2008-2009, Dhaka Stock Exchange. o ACI logo retrieved from http://www.aci-bd.com/corporate.php

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