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Sreepur Textile Mills Limited: Current Ratio

Sreepur Textile Mills Limited operates cotton yarn production facilities in Bangladesh. Several financial ratios from 2001-2003 are analyzed in the document. Current ratio, inventory turnover, average collection period, total asset turnover, and debt ratio decreased over this period, indicating liquidity and profitability concerns. Gross profit margin was negative in 2001 but increased in 2002 before decreasing in 2003. Return on equity also fluctuated significantly over these years.

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Zidan Zaif
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69 views11 pages

Sreepur Textile Mills Limited: Current Ratio

Sreepur Textile Mills Limited operates cotton yarn production facilities in Bangladesh. Several financial ratios from 2001-2003 are analyzed in the document. Current ratio, inventory turnover, average collection period, total asset turnover, and debt ratio decreased over this period, indicating liquidity and profitability concerns. Gross profit margin was negative in 2001 but increased in 2002 before decreasing in 2003. Return on equity also fluctuated significantly over these years.

Uploaded by

Zidan Zaif
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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SREEPUR TEXTILE MILLS LIMITED

Introduction
Sreepur Textile Mills Limited operates as a textile mill and they own and
operate a modern textile factory, which produces cotton yarn. The company
was founded in 1989 and is based in Dhaka, Bangladesh. Their factories
are situated in Gazipur, Sreepur & Kewa. The company was incorporated
as a public company with limited liability, on 20th December 1989.

Current Ratio: The current ratio (also known as the working capital
ratio) measures a company's ability to pay short-term and long-term obligations.
From the graph we can see in 2001 Shreepur Textile Mills has a Current Ratio of
0.36 ,in 2002 this ratio 0.34 and in 2003 this ratio become 0.33 which indicates
that the current liabilities of 2001 ,2002 and 2003 cannot be covered by current
assets of 2001,2002 and 2003. That mean it could not be able pay its current
obligations
0.37

0.36

0.36

0.35

0.35

0.34

0.34

0.33

0.33

0.32

0.32
Current Ratio

Inventory Turnover: Inventory turnover shows how many


times a company’s inventory is sold and replaced over a period of time. A low
turnover implies poor sales and excess inventory. As well a high ratio implies
strong sales.Shreepur Textile Mills sold their inventories 2.72 times in 2001, 2.8
times in 2002, 2.17 times in 2003 it was increasing in 2002 than 2001 but in 2003
it was again decreasing .On the other hand cost of goods sold are decreasing .In
first year it was good then it decrease in 2nd year and 3rd year. They might
increase their cost of goods solds then ratio would be higher which would be
good for the company.
Inventory Turnover
3

2.5

1.5

0.5

0
Inventory Turnover

Average Collection Period: In the Below we can see in the


graph average collection period in 2001 it was 3.89 days and in 2002 it became .
38 days and in last year it was .0063 days which means it was less than 1 day
.That’s why we can say that it liquidity was so good that’s why it’s average
Collection of period is less than one year.
4.5

3.5

2.5

Axis Title
2

1.5

0.5

0
Avarage Collection Period

Total Assert Turnover: Asset turnover ratio is where the


value of a company’s sales or revenues generated relative to the value of its
assets. Companies with low profit margins tend to have high asset turnover, while
those with high profit margins have low asset turnover. From the chart we can
see that in 2001, Shreepur Textile Mills had asset turnover ratio of 0.37 and in
2002 it was 0.31 and in 2003 assert turnover was 0.26 . which means it was
decreasing year by year that is not good for any kind of company. If they
increased their sales then this ratio can be higher .

If company sales is good then total asset turnover ratio


stay in a balance position.
0.4

0.35

0.3

0.25

Axis Title 0.2

0.15

0.1

0.05

0
Total Asset Turnover

Debt Ratio:
In shreepur Textile Mills we can see the debt ratio of 2001 was 94.41% and 107.05
in 2002 and in 2003 it was 113.94 that’s mean it’s ratio increasing which is not
good for any company .when debt ratio increasing that’s mean company’s
liabilities also increasing that is not a good sign . their liabilities was greater than
their asserts that’s why this ratio parcentage was increasing .
120

100

80

Axis Title 60

40

20

0
Debt Ratio

Gross Profit Margin:

A company's cost of sales, or cost of goods sold, represents the expense related to
labor, raw materials and manufacturing overhead involved in its production
process. Thus the gross profit margin is used to analyze how efficiently a company
is using its raw materials, labor and manufacturing-related fixed assets to generate
profits. A higher margin percentage is a favorable profit indicator. In these Textile
Mills gross profit was -4.06% in 2001 and 20.54% in 2002 and 15.08 in 2003
which means it was decreasing in their past years that means this company gross
profit is not good. As their sell was not increasing that’s why they could not got
proper profit margin.That’s why this ratio was negative their was huge loss .

0
Gross Profit Margin

-5

-10

Axis Title

-15

-20

-25

Net Profit Margin:


Net profit margin , is a profitability ratio that measures the amount of net income
earned with each dollar of sales generated by comparing the net income and net
sales of a company.Their net profit was 21.34% in 2001,41.16% in 2002 and 27.01
in 2003.Which is not good that mean their efficiency and productivity should be
increasing and lowering their costs and increasing sales with a strong management.
45

40

35

30

25
Axis Title
20

15

10

0
Net Profit Margin

Return On Total Assets:


Shreepur Textile Mills their return on total assets was 7.84% ,12.94% in 2002 and
6.97% in 2003.Their return on total assets was increasing in the second year then
it again decreasing in the third year .That mean their earnings available for
common stockholders is not enough if they increased it then could be good.
14

12

10

8
Axis Title
6

0
Return On Total Asset

Return On Equity :
It measures a corporation’s profitability by revealing how much profit a company
generates with the money shareholders have invested. Shreepur textile mills
return on equity was 125.05%2001 in ,204.69% in 2002 and 52.75% in 2003 that
means they did not investment in a proper way if they investment their capital in
a good way then it came out a good value.
250

200

150

Axis Title
100

50

0
Return On Equity

Price Earnings Ratio:


price earnings ratio shows what the market is willing to pay for a stock based on
its current earnings.This Company price earning was 2.8 in 2001, 1.79 in 2002 and
3.28 in 2003. Their market price per share of common stock was 100 but the
investors was willing to pay 2.8tk in 2001,1.79tk in 2002 and 3.28 tk in 2003
.cause their market share value is not so well and even their company was risky
that’s why investors was not willing to buy their share.
3.5

2.5

2
Axis Title
1.5

0.5

0
Price Earning Ratio

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