Industrialtour Report on Usmania Glass Sheet Factory Ltd

2 February 2017

We went to the various departments of Usmania Glass Sheet Factory Limited and make a discussion with the accounts and management officials and to collect their annual report and other necessary documents needed to prepare the report on the basis of the main view point of the report “Managerial Performance Evaluation through Ratio Analysis of UGSFL”. Limitation of the Study To accomplish the industrial tour report in a decent way, it needs to prevail harmonious relation and close contract between the officials of the organization.

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All the officials and high officials were extremely busy with their own task. So they are not in a position to provide adequate time to us though there were no question or suspicion about their cordiality. The present study has been conducted only for a short period of one month. This shorter period is not sufficient for empirical research work. If sufficient time could have been availed, the study would have been more informative and useful. Another limitation is that, the present study emphasis only on the “Performance Evaluation through Ratio Analysis of Usmania Glass Sheet Factory Ltd. it covers the performance analysis of the company. However it is an overview of findings. All efforts have been made to arrange all the collected data and information in the present form of the report. The main limitations are: 1. Shortage of adequate time. 2. Lack of sufficient data and information. 3. Lack of harmonious relationship and close contract between the officials of the organization. 4. Lack of financial support. 5. The study requires experience to be fruitful but it was completely absent to me .

Despite of numerous problems with limitation & bottlenecks, I tried my best to make the report more informative with recent data, so as to arouse high satisfaction to my respectable teacher as per his expectation . Introduction Users of financial statements can get further in sight about financial strengths and weakness of the firm if they properly analyze information reported in these statements. Management should be particularly interested in knowing financial strengths of the form to make their best use and to be able to spot out financial weakness of the firm to take suitable corrective actions.

The future plans of the firm should be laid down in view of the firm financial strengths and weakness. Thus, financial analysis is the starting point for making plans, before using any sophisticated forecasting and planning procedures. Understanding the past is a prerequisite for anticipating the future. Users of financial analysis Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationships between the items of the balance sheet and the profit and loss Account.

Financial analysis can be undertaken by management of the firm, or by parties outside the firm. viz owners, creditors, investors and others. The nature of analysis will differ depending of the purpose of the analyst. a. Trade Creditors: Trade Creditors are interested in firm’s ability to meet their claims over a very short period of time. Their analysis will, therefore, confine to the evaluation of the firm’s liquidity position. b. Suppliers of long debt, on the other hand, are concerned with the firm’s long-term solvency and survival.

They analyze the firm’s profitability over time, its ability to generate cash to be able to pay interest and repay principal and the relationship between various sources of funds (capital structure relationships). Long term creditors do analyze the historical financial statements, but they place ore emphasis on the firm’s projected or pro forma, financial statements to make analysis about its future solvency and profitability. c. Investors, who have invested their money in the firm’s shares, are most concerned about the firm’s earnings. They restore ore onfidence in those firms that show steady growth in earnings. As such they concentrate on the analysis of the firm’s present and future profitability. They are also interested in the firm’s financial structure to the extent it influences the firm’s earnings ability and risk. d. Management, of the firm would be interested in every aspect of the financial analysis. It is their overall responsibility to see that the resources of the firm are used most effectively and efficiently and that the firm’s financial condition is sound. Nature of ratios Ratio analysis is a powerful tool of financial analysis.

A ratio defined as “the indicated quotient of two mathematical expressions” and “the relationship between two or more things. ” In financial analysis a ratio is used as a firm. the absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial position of a firm. An accounting figure conveys meaning when it is related to some other relevant information. For example, a Tk. 5 crore net profit may look impressive, but the firm’s performance can be said to be good or bad only when the net profit figure is related to the firm’s investment.

The relationship between two accounting figures, expressed mathematically, is known as a financial ratio(or simply as a ratio. ) ratios help to summarize large qualities of financial data and to make qualitative judgement about the firm’s financial performance. For example consider current ratio. It is calculated by dividing current assets by current liabilities; the ratio indicates a relationship quantified relationship between assets and current liabilities. This relationship is an index or yardstick, which permits a qualitative judgement to be formed about the firm’s ability to meet its current obligation.

It measures the firm’s liquidity. The greater the ratio, the greater the firm’s liquidity and vice versa. The point to note is that a ratio reflecting a qualitative relationship helps to form a qualitative judgement. Such is the nature of all ratios. Standard of Comparison The ratio analysis involved comparison for a useful interpretation of the financial statements. A single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with some standard. Standards of comparison may consist of. a. Past ratios: i. e. atios calculated from the past financial statement of the same firm. b. Competitors’ ratios: i. e. ratios of some selected firms, especially the most progressive and successful competitor, at the same point in time c. Industry ratio: i. e. ratios of the industry to which the firm belongs; and d. Projected ratios: i. e. ratios developed using the projected or Performs, financial statements of the same firm. Classification of Accounting Ratios We can classify the accounting ratios in two ways. 1. According to financial statement 2. According to function.

According to financial statement accounting ratios are three types as follows: 1. Balance sheet Ratios: Ratios computed on the basis of figures in the balance sheet are known as balance sheet rations. Such as Current Ratio, Liquid Ratio, Equity Ratio, Debt Ratio etc. 2. Income Statement Ratio: Ratios calculated on the basis of figures in the income statement are known as income statement ratios. Such as Gross Profit Ratio, Net Profit Ratio, Operating Ratio etc. 3. Composite/Mixed Ratios: Ratios calculated by taking figures from income statement and balance sheet is known as composite/Mixed Ratios.

Such as Return on shareholders’ fund/equity, debtor’s turnover ratio, creditors turnover ratio, working capital turnover ratio etc. According to function accounting ratios are seven in types as follows: 1. Liquidity Ratios: Liquidity ratios are used to indicate a firm’s debt paying ability. Thus, these ratios are designed to show the firm’s general capacity to meet maturing current liabilities and its ability to generate cash to pay these liabilities. Such as cash to pay these liabilities. 2. Solvency Ratios: Equity or solvency ratios indicate they financial structure of the firm.

Equity ratios show the relation of debt and equity financing. Such as debt to equity ratio, owner’s equity to total assets creditors equity to total assets, creditor equity to total assets etc. 3. Asset utilization ratios/activities/turnover ratio: With assets utilization ratios we measure the speed at which the firm is turning over account receivable, inventory and linger term assets. In other words asset utilization ratio measures how many times per. Year company sells it inventories or collects its account receivables. For tong term assets, the utilization ratio tells us how productive the fixed assets are in terms of sales generation.

Asset utilization ratio also termed as “Activity ratios” “Turn over ratios”. Note that the asset utilization ratios relate the income statement to the various assets on the balance sheet. Such as stock turnover ratio, debtors turnover ratio, creditors turnover ratio, fixed assets turnover ratio, current assets turnover ratio etc. 4. Profitability Ratio: Profitability is a very important measure of a firm’s operating success. Generally thee ate two areas of concern when judging profitability: i. Relationships on the income statement, which indicate a company’s ability to recover, cost and expenses. ii.

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