Chapter 1

Introduction

1
1.1 BACKGROUND OF STUDY
Bachelor of Business Administration (BBA) is a professional undergraduate course. The
course is designed with an excellent combination of practical and theoretical aspects. After
completion of courses of BBA a certain time is kept for internship. As a student of BBA,
internship is an academic requirement. For internship every student is required to work in
selected institution to enhance ones practical knowledge and experiences. After completing
the internship prepared a report on the knowledge of internship. As a mandatory
requirement of BBA program, I was assigned to do my internship in SM group of
companies has been prepared to fulfil the partial requirement of BBA program as a man of
internship program. While preparing this report, I had a great opportunity to have an in
depth knowledge of al garments activities of SM group of companies.
1.2 SIGNIFICANCE OF THE STUDY
Internship report is required for fulfilment the BBA program. Which is contains 3 credits
of total academic course. A study can grater practical knowledge about the real job filed
like as financial institution. After complete the internship period a student must be make a
report on his/her experience about the job. He tries to reflect his internship experience on
report. By this internship program student can established contacts and networking.
Contacts may help to get a job in practical life. That is, student can train and prepare
themselves for the job market. Therefore, it is obvious that the significance of internship I
clearly justified as the crucial requirement of BBA student.
1.3 SCOPE OF THE REPORT
The report is mainly confined to the financial performance Evaluation of SM Group of
Companies. In order to conduct study on this main issue, the following aspects come within
the span of the study.
An overview of SM group of companies.
Evaluation of financial performance of SM Group of Companies through trend
analysis and financial ratios.

2
1.4 OBJECTIVES OF THE REPORT
General objective
The major objective of this report is to analyze the financial performance of SM group of companies.

Specific objective
There are some specific objective also. These are:

To analyze the liquidity position of SM group of companies.

To assess the efficiency in asset management position of SM group of companies.
To analyze the debt position of SM group of companies.
To assess the profitability of SM group of companies.

1.5 METHODOIOGY
The study requires a systematic procedure from selection of the topic to preparation of the final report. To
perform the study the data sources were to be identified and collected, to be classified, analyzed, interpreted
and presented in a systematic manner and key points were to be found out. The overall process of the
methodology has been given as below.

1.5.1 RESEARCH DESIGN

This report is descriptive in nature, which focusses on financial performance of SM group of
companies.
1.5.2 SORCE OF DATA
To prepare this report all the necessary information are collected from secondary sources. Annual
report of SM GROUP was the major sources of data for this regard. The data have been collected
for the period of 2010 to 2014. The data are also collected from:
Annual report of SM GROUP 2011 2015
Website of SM Group
Relevant books, newspaper, journals etc.
Periodicals published by the SM group of companies.

3
1.5.3 INSTRUMENTS USED FOR ANALYSIS
The ratio analysis is used to analyze the financial performance of SM Group. Different
software for data analysis and reporting such as Microsoft word, Microsoft Excel etc. have
also been used. The ratio analysis is conducted in from of trend analysis. These are:
Trend Analysis: Trend analysis is the analysis of firms performance over the time
using ratios. It is really important to analysis informs us whether a companys
financial condition improving or deteriorating.

1.6 LIMITATIONS OF THE STUDY

In my internship period, I have found some barriers to complete the work in a conductive
why within shorter period of time. These are mentioned below:
The time frame, 3month is insufficient to know all activities of the company and
prepare this report.
Another limitation of this report is companys policy of not disclosing some data
and information for confidential reason, which could be very much useful.
Because of the limitation of information same assumption were made. So there may
be some personnel mistake in the report.
Bankers were so must busy with their work and they did not have enough time to
provide.

4
 Chapter 2
Company Profile

5
 2.1 A Historical Overview of S M Group
SM Group of Companies established in the year 2002, the quality standards and is engaged in
manufacturing of all kinds of knitted garments. Under the profound guidance of our mentor Syed A.
K Anwaruzzaman, our company has gained an immense success and has earned goodwill with
fourteen years of experience in the garments industries. The Managing Director is guiding our team
with his wide experience and skill.

We came a long way, always try to keep of buyers from around the world. I think the boundless
efforts will always keep SM Group of Companies as a unique name in the Garments Sphere. The
Group has a team of dedicated professional workers who are earnestly sincere and careful about their
responsibility to produce quality Garments products.

As a Company, SM Group of Companies is 100% export oriented knit garments for achievement
manufacturing composite unit. The Group is in business since 2002. All the products undergo a
stringent quality inspection procedure at each level of production process. The fabrics are Oeko-
Tex certified. The company increase domestic production for local consumption as well as foreign

6
 exports. Particularly benefits to attract much emphasis for setting up 100% export oriented product.
This will contribute to earning/saving the foreign currency of the country. The Garments sector
occupies major portion in the economy of Bangladesh. SM Group of Companies in advantage
position having cheap & sufficient skill all our & mechanical personnel. The company has good
and wide markets in the country as well as worldwide.

Managing Director: Syed A. K Anwaruzzaman

Awards

Heartfelt congratulation to Mr. Syed A.K.Anwaruzzaman, Managing Director of SM Group of

Companies for achieving the award of Best Workers Friendly Knitwear Industry for
2008 selected by theMinistry of Labour and Employment.

Mr. Syed A.K.Anwaruzzaman, Managing Director of SM Group of Companies. Receiving the

crest from Mr. Anwarul Iqubal, Honorable Advisor of Ministry.

Heartfelt congratulation to Mr. Syed A.K.Anwaruzzaman, Managing Director of SM Group of

Companies for achieving the award of Commercially Important Person (CIP) 2008 selected by
theInternal Resources Division, Ministry of Finance.

7
2.2 Mission
Customers: To offer a global touch, maintaining Bangladeshi culture in living and
workplace, with utmost uncompromising service to our clients and value for the money.
Business Growth: Business growth is driven largely by its ability to innovate and create new
systems, products and opportunities. To analysis and agree our strategies to ensure its remain
focused on its organizational goals.
People: Always committed to win the hearts and minds of its people by providing the best
possible work environment and opportunities for personal and professional growth.

2.3 Vision

SM Group of Companies will generate outstanding revenue, to be recognized as the fastest growing
and most profitable business unit in Bangladesh RMG Sector. SM Group of Companies will be
benchmarked for its product quality, business ethics, and state-of-art technology and recognized as
the preferred employer, in Bangladesh.

2.4 Company Profile

Company Name : SM Group of Companies

Organization Type : Private Limited Company
Business Type : 100 % Export oriented Knit Garments
Manufacturer and Exporter
Products/Service : All types of knit T-shirt, Polo shirt, Tops etc.
Establishment year : Year 2002
Export Items : All types of knit T-shirt, Polo shirt, Tops,
Tank Top etc.
Import Items : Raw Yarn, Garments Accessories, Chemical
etc.
Export Market : USA, UK, Canada, Italy, Germany, China, Japan.
Buyer Name : K-Mart, Bay City, Carrefour, NKD, LASHA,
Zara, AT BV etc.
Production Capacity: 5 million pieces per Month
8
 Corporate Head Office Factory:
S SM Group of Companies
SM Group of Companies
S M Tower, House # 14, Road # 02,
Shirirchala, Bhabanipur, Gazipur
Sector #3,
Tel : (88-02) 9289076, 9289438, 9289439
Uttara Model Town, Dhaka -1230
l :Tel : (88-02) 8812568,9886364,
Fax (88-02) 8819358, Email-
smgroup@dhaka.net

2.5 All sister concerns and upcoming project of the Company:

Sister Concerns

We are a large business conglomerate engaged in domestic and overseas business, started industrial
operation by setting up one joint venture Knit Composite industry under the umbrella of SM Knit
in Bangladesh in the year 2001. As a part of natural growth of business operation, we are now spread
over from retailing Fashion Wear to the Housing business. Details are enumerated below: Our
management policy is to establish business and industry those are Social & Buyers complied and
environmental friendly. Recently we achieved the award of Best Workers Friendly Knitwear
Industry for 2008 & 2009 from BGMEA and Ministry of Labor and Employment.

9
 SM Knitwears Limited.
We have completed BMRE program in the recent past in our Knit Composite industry and main
features are given below:

Production Capacity = 5 million pc knit garments

Export Value = USD 17.50 million/month
Man-Power= 7500 persons, Net Worth = TK 900 million, Major activities = Knitting, Dyeing,
Printing, Embroidery, Brushing, Washing, Garments, Carton Manufacturing

2. SM Knitting Industries Ltd.

3. SM Style Ltd.
Major activities = Retailers of Fashion Wear under the brand name - Smartex = Garments
making = Whole Sale Operation
Number of Showrooms = 7 (including 1 whole sale outlet)

4. SM Aabashon Ltd.
Housing project of 1000 acre land under the project name Dhaka Village. Location is very
nearer to the above Purbachal Central View City project. 30 bigha lands already procured and
now under development stage. Gradually more land will be procured and sales will start from
January 2009.

5. Marina Property (BD) Ltd.

A Real Estate company having vast landed area in Bhaluka, Mymensing to be developed for various
sites to facilitate amusement center as well as holiday resort as detailed below. It may undertake
different construction projects like making apartments, holiday homes etc. in Dhaka city and
adjoining areas.

10
 6. SM Agro
The Group management has decided to diversify its present business activities in the field of
agriculture to contribute to the national economy. At the beginning, we shall concentrate our
activities in 3 pieces of land of 25 bigha, 15 bigha and 7 bigha respectively in Gazipur district and
will be extended in near future in Hobiganj district or elsewhere in Bangladesh. We already
employed a good number of professional agriculturists to run the projects.

2.6 Upcoming Projects

Apart from the above current projects, the Group management has envisaged with maximizing the
group wealth as well as benefiting the economy of Bangladesh as a whole. Not necessarily all, but
the main up-coming projects are enumerated below:

1. SM Foundation Ltd.
The foundation will be a socio-economic organ of SM Group to formulate Contributions, grants,
scholarship and hospitalization facilities to the common mass to develop their life style and
livelihood.

2. SM Spinning Ltd.
Having 50,000 spindles and investment of TK 200 crore
Proposed site : Bhaluka/Ratanpur
Market : In House consumption for our knit composite industry and/or local outside sale.

11
 3. SM Home Textiles Ltd.
There exists a very bright prospect for marketing of Home Textile products in the European market.
Pakistan and India have no GSP facility in the European market for Home Textile products and as
such its yearly growth rate in the last financial year was 19%.

4. SM Amusement Centre*
Main features: Very unique project in Bangladesh like Amusement centre for family, Boat Club,
Holiday Resorts, Farm House, Swimming Pool, and Health Club & Gym etc. spread over a vast area
of land in the area of Bhaluka, Mymensing.

2.7.1 Types of Products

a) knitwear division:
Men knitwear
Women knitwear
Children knitwear
Night wear
Infant knitwear
Sports knitwear Products

b) Woven division:
Woven T-shirts
Woven Jeans
c) Others :
Spring and fall Jacket,
Winter Coat,
Muffler
Cardigan
Cap
Jumper

12
2.7.2 Buyers Name:

C&A
Sainsburys, UK
MS Mode, Netherland
Lasha Sports inc. USA
V&D, Netherland
Next, UK
Sports World, UK
Best and Less PTY LTD. Australia
Lojas Renner SA, Brazil
NKD (Germany)
LIDL (Germany)

13
 2.8 Structure of Organization

Managing Director

Director Director Director Director

(Finance) (Admin & HR) (Project) (Purchase)
Director

Chief Manager Executive Manager

Accountant (Admin & HR) Director (Purchase)

Deputy Chief Project

Accountant Manager

Figure 01: Organizational Structure

2.9 Corporate Objective

Corporate objective is very important for a company .Good and perfect objective makes the company
best.
Top Management

Top management is very important part of corporate business. Top management for keeping the pace
of growth stable. SM Knitwears of Company got a team of dedicated management team who are
always seen to achieve the mission vision of the company. They are responsible for leading the
company, monitoring companies activities and maintain relationships with the business man and
agent team. The Top management provides a vision of the future.

14
 Executive Management
o The Managing Director heads the Executive Management, the MD who has been delegated necessary
and adequate authority by the Board of Directors. The Executive Management operates through
further delegations of authority at every sector of the line management.
o The Executive Management is responsible for preparation of segment plans/sub-segment plans for
every profit centers with budgetary targets for every item of goods & services and held accountable
for deficiencies with appreciation for exceptional performance.
Current Performance:
SM Knitwears use different types of strategies to perform better. For this it is doing business
successfully for 14 years. It always measures its performance in all areas from time to time and
takes measures to continually improve quality, work Environment and employee satisfaction.
So its recent performance is better. There are some reasons behind this better performance.
These are
1. It has bought some new machines.
2. It has got some new markets to sell its product.
3. It is providing training for its employee.
4. It has started to use modern technology

2.10.1 Corporate Governance Structure

Corporate Governance

Executive Committee Board of Directors

Figure No. 02: Corporate Governance Structure

15
2.10.2 Company Executive Committee

Syed A. K Anwaruzzaman
Managing Director

, ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Sawpan Kumar Gosh A K M Abu Ashraf Md. Mujibodr Rahman

Executive Director (Marketing & Executive Director (Finance) Executive Director
Operation) & Company Secretery (Construction)

Figure No. 03: Company Executive Committee

2.10.3 Board of Directors

Syed A. K Anwaruzzaman
Managing Director

Anawara Begum
Director

A K M Abu Ashraf
Executive Director (Fin.)

Sawpan Kumar Gosh

Executive Director (Mkt.)

Figure No. 04 Board of Directors

16
2.11 Brief Function of Different Department

Different general corporate functions are given bellow:

Human Resource Departments
To recruit the qualified employee, train up & develop them and providing their incentives, benefits
and other motivational activities.

Selection the employee according to their performance or select from the external
source.
Recruiting people for the par time and full time job.
Job analysis, job design, job description.
Create a good relation among the employee.

Marketing Department
The main functions of marketing department are the following:

Contact with buyers

Research on product pricing
Finding new market and prospective buyers
Quality checking
Develop marketing strategy
To prepare the daily statement of Marketing side
To collect and compare others Companies Marketing policy & design

Sales Department
The Sales department objective should be identifying the present market condition and sales
volume is increasing.
Monitoring, supervise and analysis of the competitors activities.
Receive sales order from company.
Ensure implementation of the products in coordination with the implementation
department.
17
 Accounts and commercial Department
The broad objective would be to maximize the profit and forecast the budget and deal with bank.
If necessary then finance department will borrow the money from different banks.
Maintains all the accounts like recording of transaction, preparation final accounting
reports, costing and budgeting, taxation, bookkeepings, providing funds to the projects
by using our own software.

Research and Development Department

The Research and Development department objective should be identifying the present market
condition and sales volume is increasing.
New product design and development

Research about the product, Market, Customer, or new product

Providing computer and other related accessories supports to the entire user.
Providing up to date technical and software support to all the sectors
Train up about the development of the software
We have to follow that marketing policy which is helpful to cross the border countries.
Exploration of new markets all over the world
Operating of export business in the different countries
Provide training to field forces in overseas countries.
After finalization of deal with the buyer, production of the ordered RMG starts at factory level.
To get a finished product, different operational stages are being undertaken in the factory.

18
2.12 Production Process from Contracting to Shipment
These stages are shown below in the flow chart form:

Merchandiser

Negotiation with buyer

Export order collect

Costing of accessories

Send to the buyer

If ok then sample Development

according to buyer requirement

Get approval

Go to production

Production continuing

Inspection of the produced

garments

Assembling with poly bag,

carton etc

Preparation of banking

Shipment/delivery

Figure no 5: Production Flow Chart

19
2.13 Source of Raw Materials

Actually they make their own raw materials for their production, Moreover the company needs to
import some specific primary raw materials, such as cotton, trees etc.

Required Raw Materials are purchased from following Countries through agent:
a. Taiwan
b. Philippines
c. India
d. Germany
e. Brazil
f. Pakistan
g. South China

2.14 Different types of Machine used in Garments Production

Pressing Machines: Pressing machines are used in the final stages of the apparel
manufacturing process. There are different kinds of pressing machines with specific
pressing requirements due to the existence of numerous garment types.

20
 Sewing Machines: Garment manufacturing requires to invest in sewing machines, which
help to join various parts of a garment. There are different kinds of sewing machines,
depending on their specific applications.

Cutting Machines: Cutting machines can either be computerized or manually operated to

cut fabrics into different shapes. Computerized knives are the most accurate and the fastest,
whereas a straight knife suffices when the quantity of the fabrics is low. A band knife
provides a better cutting accuracy than a straight knife.

21
 Knitting Equipment: Knitting machines are used to manufacture knitted apparel. They
include single jersey machine, flat bed and double jersey knitting machine.
When selecting a knitting machine, consider its brand reputation, model number, diameter and
number of needles.

Printing Machines: At S M Knitwears, we have various printing machines available that

suit all printing needs including 9 color machines. Their range from screen prints to burnout
prints.
Digital Printing
Screen Printing
Hand block printing

22
 Embroidery equipment:
Lace Embroidery Designs
Clock Embroidery Designs
Floral Embroidery Designs
Animal Embroidery Designs

23
 Chapter 3
Theoretical Aspect

24
3.1 FINANCIAL PERFORMANCE ANALYSIS
Financial Performance is subjective measure of how well a firm can use assets from its primary
mood of business and generate revenues. This term is also used as a general measure of a firms
overall financial health over a green period of time, and can be used to compare 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 management may take decision.
Financial performance analysis is a vital to get a financial overview about a company. It generally
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 companys financial performance. An Analyst are the major tools for analyzing the
companys financial performance. An Analyst can compare a present condition with the past for
the company to determine whether there is an improvement or deterioration or on change.

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 companys 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 (P&L), earnings statement, operating
statement or statement of operations is a companys 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 ANALYSIS

A tool used by individuals to conduct a quantitative analysis of information in a companys
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the Industry, o event the economy to judge the performance of
the company. The basic inputs to ratio analysis are the firms income statement and balance sheet
for the period to be examined. Ratio analysis is predominately used by proponents of fundamental
analysis. In finance, a financial ratio or accounting ratio of two selected numerical values taken

25
from an enterprises financial statements. There are many standard ratio used to try to evaluate the
overall financial condition of a corporation or other organization. Financial ratio may be used by
managers within a firm, by current and potential shareholders (owners) of a firm, and by a firms
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 share
is used in certain financial ratios.
In short, ratio analysis is essentially concerned 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 intuition and establishes a basis for sound judgment.

3.5 SIGNIFICANCE OF USING RATIOS

The significance of a ratio can only truly be appreciated when:
It is compared with other ratio in the same set of financial statements.
It is compared with the same ratio in previous financial statements (trend analysis).
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 the business.

3.6 TYPES OF RATIO COMPAISONS

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? The types of ratio comparisons can be made:
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
processing as planned. Additionally, time series analysis is often helpful in checking the
reasonableness of a firms projected financial statements.
Cross-sectional Analysis: Cross-sectional analysis involves the comparison of different
firms financial ratio at the same point in time. The typical business in interested in how
well it has performed in relation to its competitors.

3.7 CAUTIONS ABOUT RATIO ANALYSIS

Before discussing specific ratios, we should conceder the following cautions:
A single ratio does not generally provide sufficient information from which to judge the
overall performances 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.

26
3.8 DIAGRAM OF FINANCIAL RATIOS:

Financial Ratio

Liquidity Debt Ratio Profitability Market Ratio

Ratio Ratio

Net Working Gross Profit Price

Capital Degree of The Ability to Margin Earnings
internes Service Ratio

Operating
Current Ratio
Debt Ratio Profit Margin

Net Profit
Quick Ratio
Debt Equity Margin
Ratio

Return on
Equity

Earning Per Return on

Share Asset

Figure: Financial Ratio

27
3.8.1 ANALYZING LIQUIDITY RATIOS
The liquidity of a business firm is measured by its ability of affirm to meet its short-term financial obligation
when and as they come due. It also refers to the solvency of the firms overall financial position. The three
basic measures of liquidity are:
(a) Current ratio: The current ratio expresses the relationship between the firms current assets and
its current liabilities. Organization use current ratio to measure the firms ability to meet short-term
obligations.

Current Ratio = Current Assets / Current Liabilities

(b) Quick Ratio: Quick ratio measures assets that are quickly converted into cash and they are
converted with current liabilities. This ratio realizes that some of current assets are not easily
convertible to cash like- inventories. The quick ratio, also referred to as acid test ratio, examines
the ability of the business to converts its short terms obligations from its quick assets only. The
quick ratio is calculated as follows:
Current Ratio = (Current Assets - Inventory) / Current Liabilities

(c) Net Working Capital: A measure of liquidity is calculated by subtracting total current
assets by current assets normally include cash, marketable securities, accounts receivable
and inventories. Current liabilities consist of accounts payable, short term loans current
maturities of long term debt, accrued income taxes and other accrued expenses wages.
Net working capital = Total current Assets Total Current Liabilities

3.8.2 ANALLYZING ACTIVITY RATIO

If a business does not use its assets effectively, investors in the business would rather take their money
and place it somewhere else. In order for the assets to be used effectively, the business needs a high
turnover. Unless the business continues to generate high turnover, assets will be idle as it is impossible to
buy and sell fixed assets continuously as turnover changes. Activity ratios are therefore used to assets
how active various assets are in the business. Activity ratios are discussed below:

(a) Total Asset Turnover: Total asset turnover is the relationship between sales and assets. The
total asset turnover indicates the efficiency with which the firm is able to use all its assets to
generate sales.
Total Asset Turnover=Revenue/Total Asset

(b) Inventory turnover: Ratio measures the stock in relation to turnover in order to determine
hoe often the stock turns over the business. It indicates the efficiency of the firm in
selling its product. It is calculated by dividing the cost of goods sold by the average
inventory
Inventory Turnover = Cost of Goods Sold For the Year/Average Inventory

28
 (c) Average Collection Period: The average collection period is useful in evaluating credit and
collection policies.
Average Collection Period = A/C receivable/ (Annual Sales/360)

(d) Average Payment Period: The average payment period is calculated in the same manner as the
collection period.
Average Payment Period = A/C Payable / (Annual Purchases/360)

3.8.3 ANALYZING DEBT RATIO

The debt position of the firm indicates the amount of other peoples 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 used to describe the magnification of risk and return introduced through the use of fixed-
cost financing such as debt and preferred stock.

(a) Debt Ratio: This is the measure of financial strength that proportion of capital which has
been funded by debt, including preference shares. A debt ratio greater than 1.0 means the
company has negative net worth and is technically bankrupt. This ratio is calculated as
follows:

Debt Ratio = Total liabilities/ Total assets

(b) Debt-Equity Ratio: This ratio indicates the extent to which debt is covered by shareholders
funds. It reflects the relative position of the equity holders and the lenders and indicates the
companys policy on the mix of capital funds the debt to equity ratio tis calculated as follows:
Debt equity Ratio = Long term debt/stockholders equity

(c) Time Interest Earned Ratio: This ratio measure the extent to which earnings can decline
without causing financial losses to the firm and creating an inability to meet the interest cost.
Time Interest Earned Ratio = EBIT/Interest

3.8.4 ANALYZING PROFITABILITY RATIO

Profitability is the ability of a business to earn profit over a period of time. Although the profit figure is
the starting point for any calculation of crush flow as already pointed out profitable companies can still
fail for lack of cash.

(a) OPERATING PROFIT MARGIN: The operating profit margin represents what are
often called the pure profits earned on each sales dollar. A higher operating profit margin
is preferred. The operating profit margin is calculated as follows:
Operating Profit Margin=Operating Profit/Sales

29
(b) GROSS PROFIT MARGIN: Gross profit margin is a profitability ratio shows the
relationship between gross profit and total sales revenue.
Gross Profit Margin= (Sales-COGS)/Sales=gross profit/sales

(c) NET PROFIT MARGIN: It measures the percentage of each sales dollar remaining
after all costs and expenses, including interest, taxes, and preferred stocks dividend have
been deducted. Net profit margin is calculated as follows:
Net Profit Margin=Net profit after Tax/Sales
(d) RETURN ON ASSET (RAO); which is called the firms return on assets; it measures
the overall effectiveness of management in generating profits wits its available asset. The
higher ratio is batter.
Return on Asset (RAO) = Net Profit after Taxes/Total Assets

(e) RETURN ON EQUITY: The return on equity measures the return earned on the
owners (both preferred. Generally, the higher this return, the better off the owners.
Return on Equity= Net Profit after taxes/ Stockholders equity

30
 Chapter 4
Financial
Performance Analysis of
SM Group

31
4.1 ANALYZING LIQUIDITY RATIOS

4.1.1 CURRENT RATIO

The current ratio, one of the most commonly cited financial ratio, measure the firms ability to meet its
short term obligations. The higher the current ratio, the better the liquidity position of the firm. Current ratio
is calculated as follows:

Current Ratio = Total Current Assets/Total Current Liabilities

Table 4.1: Current Ratio (Amount in Millions)

Year 2011 2012 2013 2014 2015

Current Assets 671.36 737.70 680.82 678.02 1262.93
Current Liabilities 1020.81 1103.38 1069.88 1098.24 1156.20
Current Ratio 0.65 0.66 0.63 0.61 1.09
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

CURRENT RATIO
1.20

1.09
1.00

0.80

0.65 0.66
0.60 0.63 0.61

0.40

0.20

0.00
2011 2012 2013 2014 2015

Figure 4.1: Current Ratio

Interpretation:
The graph shows that Current Ratio of the company has fluctuated over years. The Current Ratio
of SM Group has increased from 0.65 in 2011 to 1.09 in 2015.

32
4.1.2 QUICK RATIO

Quick Ratio is a measure of how well a company can meet its short term financial liabilities.
Acid Test Ratio is also known as Quick Ratio. Quick Ratio is calculated as follows:
Quick Ratio = (Total Current Assets Inventories) / Total Current Liabilities

Table 4.2: Quick Ratio (Amount in Millions)

Year 2011 2012 2013 2014 2015

Current Assets 671.36 737.70 680.82 678.02 1262.93
Inventories 7.64 9.46 9.46 12.45 14.84
Current Liabilities 1020.81 1103.38 1069.88 1098.24 1156.20
Quick Ratio 0.65 0.66 0.62 0.60 1.07
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Quick Ratio
1.2

1.07
1

0.8

0.65 0.66
0.6 0.62 0.6

0.4

0.2

0
2011 2012 2013 2014 2015

Figure 4.2: Quick Ratio

Interpretation:
The graph shows that Quick Ratio of the company has fluctuated over years. However the Quick
Ratio of SM Group has increased from0.65 in 2011 to 1.07 in 2015.

33
4.1.3 NET WORKING CAPITAL
Working Capital is a financial measurement of the operating liquidity available to a business. It
is also known as net working capital or working ratio. It is calculated as follows:
Net Working Capital = Total Current Asset Total Current Liabilities
Table 4.3: Net Working Capital (Amount in Millions)
Year 2011 2012 2013 2014 2015
Current Assets 671.36 737.70 680.82 678.02 1262.93
Current Liabilities 1020.81 1103.38 1069.88 1098.24 1156.20
Net Working Capital 0.65 0.66 0.63 0.61 1.09
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Net Working Capital

200

100 106

0
2011 2012 2013 2014 2015

-100

-200

-300
-349
-365
-400 -389
-420

-500

Figure 4.3: Net Working Capital

Interpretation:
The graph shows that Net Working Capital of the company has fluctuated over the years. The
working capital position of SM Group was not in good position from 2011 to 2015; however it
was significantly improved in the year of 2015. The company management should be concerned
about to manage the capital properly.

34
4.2 ANALYZING ACTIVITY RATIOS
4.2.1 TOTAL ASSET TURNOVER
Total asset turnover evaluates the efficiency of managing all of the companys assets. It is
calculated as follows:
Total Asset Turnover = Sales/Total Asset
Table 4.4: Total Asset Turnover (Amount in Millions)
Year 2011 2012 2013 2014 2015
Sales 424.14 455.84 501.53 461.01 465.21
Total Assets 1956.77 2031.03 2031.03 2045.82 2176.85
Total Asset Turnover 0.22 0.22 0.24 0.22 0.21
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Total Asset Turnover

0.3

0.25
0.24
0.22 0.22 0.22
0.2

0.15

0.12
0.1

0.05

0
2011 2012 2013 2014 2015

Figure 4.4: Total Asset Turnover

Interpretation:
The graph shows that, total asset turnover of the company has fluctuated over years. However
the Total asset turnover of SM Group has increased from 0.22 in 2011 to 0.24 in 2013 after that
it was decreased to 0.21 which is a bad sign of companys performance.

35
4.2.2 INENTORY TURNOVER RATIO
Inventory turnover is a measure of the number of times inventory is sold or used in a time period
such as year. Low inventory turnover ratios indicate a company is carrying too much inventory,
which could suggest poor inventory management or low sales. High inventory turnover ratios may
indicates a company is enjoying strong sales or practicing just in time inventory methods.
Inventory Turnover Ratio = Cost Of goods sold/Current Liabilities
Table 4.5: Inventory Turnover Ratio (Amount in Millions)
Year 2011 2012 2013 2014 2015
Cost of Goods Sold 145.76 154.45 159.91 159.06 181.13
Current Liabilities 1020.81 1103.38 1069.88 1098.24 1156.20
Inventory Turnover Ratio 0.14 0.13 0.14 0.14 0.15
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Inventory Turnover Rario

0.155

0.15 0.15

0.145

0.14 0.14 0.14 0.14

0.135

0.13 0.13

0.125

0.12
2011 2012 2013 2014 2015

Figure 4.5: Inventory Turnover Ratio

Interpretation:
The graph shows that, inventory turnover of the company was fluctuated over years of analysis.
The Inventory turnover of SM Group has decreased from 0.14 times in 2011 to 0.13 times in
2013 after that it was increased to 0.15 in 2015.

36
4.2.3 AVERAGE COLLECTOIN PERIOD
The means the average amount of time needed to collect accounts receivable. The average
collection period is useful in evaluating credit and collection policies
Average collection period = A/C receivable / Average sales per day

Table 4.6: Average Collection Period (Amount in Millions)

Year 2011 2012 2013 2014 2015

A/C Receivable 37.13 39.39 39.39 47.11 53.30
Average Sales Per Day 1.16 1.24 1.37 1.26 1.27
Average Collection Period 32 31.7 28.7 37.3 41.90
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Average Collection Period

45
41.9
40
37.3
35
32 31.7
30
28.7
25

20

15

10

0
2011 2012 2013 2014 2015

Figure 4.6: Average Collection Period

Interpretation:
The graph shows that, average collection period of the company was fluctuated over years.
However, the average collection period of SM group was decreased from 32 days in 2011 to 28.7
days in 2013 after that it was increased to 41.90 days which is a bad sign of companys
performance.

37
4.3 ANALYZING DEBIT RATIOS
4.3.1 DEBT RATIO
The debt ratio measure the preparation of total assets provided by the firms creditors. Debt ratio
is calculated as follows:
Debt ratio = (Total Liabilities/Total Assets) x 100
Table 4.7: Debt Ratio (Amount in Millions)
Year 2011 2012 2013 2014 2015
Total Liabilities 1468.11 1469.39 1469.39 1329.16 1389.23
Total Asset 1956.77 2031.03 2031.03 2045.82 2176.85
Debt Ratio 75% 72.34% 72.34% 64.96% 63.81%
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Debt Ratio
76%
75%
74% 74.34%

72% 72%

70%

68%

66%
64.96%
64% 63.81%

62%

60%

58%
2011 2012 2013 2014 2015

Figure 4.7: Debt Ratio

Interpretation:
The graph shows that debt ratio of the company was decreased from 75% in 2010 to 63.81% in
2014 which indicates a lower degree of indebtedness of SM Group.

38
4.3.2 DEBT EQUTY RATIO
The debt equity ratio indicates the relationship between the long term funds provided by the
creditors and these by the firms owners. A high ratio shows a large share of financing by the
creditors of the firm: a low ratio implies a smaller claim of creditors. Concord Entertainment
Company Ltd. Debt Equity Ratio is calculated as follows:
Debt to Equity Ratio= Long Term Debt/Total Equityx100
Table 4.8: Debt-Equity Ratio (Amount in Millions)
Year 2011 2012 2013 2014 2015
Long Term Debt 447.30 366.01 366.01 230.928 233.02
Total Equity 488.66 561.63 561.63 716.65 817.56
Debt to Equity Ratio 91.54% 65.16% 65.16% 32.22% 28.50%
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Debt-Equity Ratio
100.00%
90.00% 91.54%

80.00%
70.00%
65.16% 65.16%
60.00%
50.00%
40.00%
30.00% 32.22%
28.50%
20.00%
10.00%
0.00%
2011 2012 2013 2014 2015

Figure 4.8: Debt Ratio

Interpretation:
The graph shows that, debt to equity ratio of the company has fluctuated over year of analysis.
However the debt-equity ratio of SM Group has decreased from 92.54% in 2011 to 28.505 in
2015. A lower degree of debt to equity ratio indicates that lower creditor financing was used for
business purposes then investor financing.

39
4.4 PROFITABILITY RATIOS
4.4.1 GROSS PROFIT MARGIN
Gross profit is the difference between sales and the manufacturing cost of goods sold. And gross
profit compared with the sales. Gross profit margin ratio reflects the efficiency with which
management produces each unit of product. Gross profit margin is calculated as follows:
Gross Profit Margin = (Gross Profit/Sales) x100
Table 49: Gross Profit Margin (Amount in Millions)
Year 2011 2012 2013 2014 2015
Gross Profit Margin 64.94% 65.55% 67.51% 65.09% 59.95%
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Gross Profit Margin

70.00%

68.00%
67.51%

66.00%
65.55%
64.94% 65.09%
64.00%

62.00%

60.00% 59.95%

58.00%

56.00%
2011 2012 2013 2014 2015

Figure 4.9: Gross Profit Margin

Interpretation:
The graph shows that, gross profit margin of the company has fluctuated over years. Gross profit
margin of SM Group was increased from 64.94% in 2011 to 65.71 in 2013 and after that it was
decreased to 59.95% in 2015.

40
4.4.2 NET PROFIT MARGIN
This ratio is also known as net margin. This measure the relationship between net profit and sales
of a firm. Depending on the concept of net profit employed, it is calculated as follows:
Net Profit Margin = (Net income/Net Sales) x100
Table 49: Net Profit Margin (Amount in Millions)
Year 2011 2012 2013 2014 2015
Net Income 48.28 72.97 88.73 66.27 34.92
Net Sales 424.14 455.84 501.53 461.01 465.21
Net Profit Margin 11.38% 16.00% 17.69% 14.37% 7.51%
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Net Profit Margin

20.00%

18.00% 17.69%
16.00% 16.00%
14.00% 14.37%

12.00%
11.38%
10.00%

8.00%
7.51%
6.00%

4.00%

2.00%

0.00%
2011 2012 2013 2014 2015

Figure 4.9: Net Profit Margin

Interpretation:
The graph shows that, Net profit margin of the company was fluctuated over years. The Net profit
margin of SM Group was increased from 11.38%in 2011 to 17.69% in 2013 and after that it was
decreasing operating profit remaining after deducting all the costs and expenses.

41
4.4.3 RETURN ON ASSETS (RAO)
Which is called the firms return on assets; it measures the overall effectiveness of management in
generating profits with its available asset. The higher ratio is better.
Return on Asset (RAO) = Net Profit after Taxes/Total Assets x100
Table 4.10: Return on Asset (Amount in Millions)
Year 2011 2012 2013 2014 2015
Net Profit After Tax 48.28 72.97 88.73 66.27 34.92
Total Assets 1956.77 2031.03 2031.03 2045.82 2176.85
Return on Asset 2.46% 3.59% 4.36% 3.23% 1.60%
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Return on Asset
5.00%

4.50%
4.36%
4.00%

3.50% 3.59%
3.23%
3.00%

2.50% 2.46%
2.00%

1.50% 1.60%

1.00%

0.50%

0.00%
2011 2012 2013 2014 2015

Figure 4.10: Return on Asset

Interpretation:
The graph shows that, Return on Assets of the company was fluctuated over years. However the
Return on Assets of SM Group was increased from 2.46% in 2011 to 4.36% in 2013 and after that
it was decreased to 1.60% in 2015 which indicates that the SM Group management is not effective
enough in generating profits by using its owner investment properly.

42
4.4.4 RETURN ON EQUTY (ROE)
Return on equity is a ratio that measures a corporations profitable by revealing how much profit
a company generates with the money shareholders have invested. The ratio shows the profit
earning capacity of the company in equity share capital. It is calculated as follows:
Return on Equity = (Net income/Shareholders Equity) x100
Table 4.11: Return on Equity (Amount in Millions)
Year 2011 2012 2013 2014 2015
Net Income 48.28 72.97 88.73 66.27 34.92
Shareholders Equity 488.66 561.63 561.63 716.65 817.56
Return on Equity 9.76% 12.69% 13.04% 9.25% 3.94
Source: SM Group, Annual Report 2011-2015
Graphical Presentation:

Return on Equity
18.00%

16.00% 15.80%

14.00%
12.99%
12.00%

10.00% 9.88%
9.25%
8.00%

6.00%

4.00% 4.27%

2.00%

0.00%
2011 2012 2013 2014 2015

Figure 4.11: Return on Equity

Interpretation:
The graph shows that, Return on Equity of the company was fluctuated over years. However the
Return on Equity of SM Group was increased from 9.88% in 2011 to 15.80% in 2013 and after
that it was decreased to 4.27% in 2015 which indicates that the SM Group management is not
effective enough in generating profits by using its owner investment properly.

43
 Chapter 5
Finding,
Recommendations
&
Conclusion

44
5.1 MAJOR FINDINGS
The liquidity position of the company has fluctuated over years. SM Groups
liquidity position was not in good position for the year 2010 to 2013. But it
has increased for the year 2014 then the previous years which indicates that
the firm has increased its ability to meet its short term obligation or short
term financial liabilities. The Net Working Capital was also improved
significantly in the same year.

The efficiency of SM Group in managing its assets was not good enough for
over the year of 2010 to 2014. Total assets turnover ratio was decreased and
average collection period was increased over the years which are not a good
sing of SM Groups efficient performance.

The debt ratios of SM Groups were decreased from 2010to 2014 signifies a
lower degree of indebtedness. A lower degree of debt-equity ratio indicates
that lower creditor financing was used for business purposes then investor
financing.

The profit margin of the company has fluctuated over years. All the
profitability ratios were increased from 2010 to 2012 but after that it was
decreased in 2014 which indicates that SM Group management was not
efficient enough in increasing its profit by using its assets and owner
investment properly.

45
5.2 RECOMMENDATIONS
The following recommendations can be made to improve the financial
performance of SM Group-
SM Group should increase its liquidity position by using long-term
financing rather than cash on hand to acquire inventory or selling
unnecessary assets. The management should also try to improve the working
capital position of the campany by properly forecasting the cash flows.

The companys management should be more efficient in utilizing the

companys all kinds of assets to generate more sales and speeding up the
process of converting of inventory and acconts receivablie into cash.

SM Group should try to maintain a lower debt position in the capital

structure because this signifies less degree of indebtedness. Less interest
payments and more outstanding operational profit.

SM Groups management should try to increase its profitability by

minimizing its operating cost and expenses, increasing turnover (sales) by
giving discount on rides, arrange concerts, offering different lucrative
packages and using its assets and owner investment properly.

46
5.3 CONCLUSION
Financial analysis is helpful in assessing the financial position and profitability of
years; or for one concern against another; or for one concern against the industry as
a whole; or for one concern against the predetermined standards; or for one
department of a concern against the other departments of the same concern.
Accounting ratios calculated for a number of years show the trend of the change of
position. The trend is upward or downward or static. The ascertainment of trend
helps us in making estimates for the future. Thus we can say that there is lots of
application of financial analysis in the modern days of business. To assess any
business condition financial analysis gives a clear financial picture of any business
organization. This helps to evaluate the trend and condition of organization. From
small to big business organization financial analysis helps a great deal in decision-
making process. As it helps to give idea about the financial condition, thus it helps
in future financial projection and decision making process of any business house.
Eventually one can assess how important is financial analysis in the modern days
of business. It gives the exact picture of the financial condition and helps future
projection of any organization. SM Group is leading Garments Company in
Bangladesh. It is gradually expanding its asset base and able to proper utilize
assets. No business stays at the top if it doesnt maintain its performance. Thus it is
very important to fulfill the demand of the consumer through competitive
advantage.

47
References:

1. Website:www.smknitwear.com.

2. Rose.Peter., and Hudgins.M., (2003). Bank Management and Financial Service .7th .New

Delhi: McGraw Hill.

3. Cooper.D. and Schindle.p., (2003). Business Research Methods .8th .India: Tata McGraw-Hill

4. Gitman.L, (2012). Principles of Managerial Financial .12th .New York:McGraw Hill.

5. Mian.Mohammad., and Miyan.M., (2014). Introduction to Statistics .5th .38/2

kaBanglabazar, Dhaka-1100:Md. AyubAli, M.A.

6. None (1998).slideshare.[Online] Available From:http://www.slideshare.net/snehsagar/a-

project-report-on-export-process-and-documentation. [Accessed:10 December]

7. None (1998).export policy. [Online] Available From: http. [Accessed:10 November]

8. None (1998). Ratio analysis. [Online] Available

From:http://www.investopedia.com/terms/c/currentliabilities.asp. [Accessed:23 November]

9. None (1990). Merchandising activities. [Online] Available

From:http://www.assignmentpoint.com/science/internship-report-on-merchandising-

activities-of-lyric-garments-ltd.html. [Accessed:30 November]

10. Ahmed.Farhad and vinn.Aunkor(Indial)., (2013). Introductionaryformate and Ratio analysis

.report on ANC ltd and report on garments .1 (Introductionaryformate and Ratio analysis),p1-

12 & p87-110

11. Sayeef Ahmed and Monirul Bari Chowdhury (2015). export .[Interview] 23th March 2015

48
Appendix

49