ACKNOWLEDGMENT

We made fundamental and technical analysis of-----------------,on its 5 th and 6th years financial records, and based on this we hope to fulfill our objectives for our objectives for this report. Through our analysis we hope investors and creditors will get a complete picture of 5th and 5th years short term li uidity, capital structure and solvency, return on invested capital, and financial mar!et measurement. Through this report we hope to achieve a better understanding of 5 th and 6th years financial performance difference based on different types of ratio analysis. "ur aim to find out the difference between these two years financial performance, and ma!e an arguable conclusion which will help user and -----------------to understand its present performance for further growth. "ur concern to ma!e a reasonable analysis between 5 th and 6th years financial record through analysis of short term li uidity ratio, capital structure and solvency, return on invested capital, assets turnover and operating performance, and profitability. This analysis will give a wide !nowledge to internal and e#ternal people who are related with ------------------particularly investors and creditors of-----------------.

CHAPTER-1

ANALYSIS AND INTERPRETATION

1.1 ANALYSIS OF BALANCE SHEET 2

The discrepancies between the mar!et value and boo! value generally arise from the overstating or understating of certain items in the balance sheet. $n an attempt to identify the sources of discrepancies and rationali%ing the price of the stoc!, a new figure for common e uity based on mar!et price has been first calculated and then items in the balance sheet has been adjusted.

5,683,495,66 &T"'( )"*+,-&. ,/0$T1 234st +ecember, 56447 &T"'( )"*+,-&. ,/0$T1 234st +ecember, 56467 T"T<* +,=$<T$"> <+?0&T@,>T A <'T0<* 4:9,::4,9 $>=,>T"-1 T,>B$C*, D$E,+ <&&,T& '<F$T<* W"-( $> F-"B,&& B""+W$** :8 465,665,5 68 58,345,; 68 6 W,$B)T 5 6 6 <+?0&T,+ T" 58:,;;3,: 8; 633,645,: 4: 495,;8:,; 5: ;55,9:9,4 96 1,6 <+?0&T,+ C1 4:9,::4,9: 8 55;,645,;: 5 4:6,598,6: 5 ;55,9:9,49 6 ,!80,809 6 :36,;8:,48 4 1,656,280,8 09

Shareholders Equity &hareholders , uity as on 34st +ecember 5644 was BDT "6,89 ,191 and boo! value per ".00 with :,955,666

share was BDT 92. 6. The adjusted balance sheet of that year comes with &hareholders , uity of BDT 2,!02,!02,09! using the mar!et price of BDT shares outstanding.

Tangible Fixed Assets *ong term leasehold assets, Cuildings on long term leasehold assets, Flant G @achinery, Durniture, fi#tures G e uipment, 'omputers G =ehicles are the components of Tangible

Di#ed <ssets of -ec!itt Cenc!iser 2Cangladesh7 *td which were stated at cost or revaluated amount less accumulated depreciation. The mar!et price of buildings, machineries, various e uipments and most importantly land has increased with the rise in the general level of prices which are not reflected on the balance sheet of the firm as that are represented at cost as fi#ed tangible assets cannot be showed at revaluated amount due to &tandard <ccounting Folicy. @oreover revaluation of fi#ed assets on the basis of open mar!et value was not done in recent times, which indicates the understatement of tangible fi#ed assets e#ists, which has been adjusted in the hypothetical balance sheet on the basis of subjective judgment. Capital Work-in-Progress Wor!-in-progress includes building and Flant G @achinery which are stated at cost of C+T 58,345,;68 does not reflect the authentic value and understated referred to change in the level of mar!et price. &o, balance sheet amount adjusted to C+T 495,;8:;5: on the basis of open mar!et value. In entory $nventories are the current asset category consists of finished products, -aw and pac!ing materials, Wor!-in-process, $tems-in-transit, &tores and spares. -ec!itt Cenc!iser 2C+7 *td values its finished products at the lower of costs or net reali%able value. 'ost is determined using the weighted average method. Cut weighted average cost method is best applicable when the inventory involved is homogenous in nature, but for -ec!itt Cenc!iser 2C+7 ltd. the inventories are not homogenous, therefore this method does not reflect actual cost of inventory. The company uses the lower of cost or net reali%able value to measure inventories on the balance sheet which understates the value of inventories to a significant e#tent as the balance sheet does not reflect the higher mar!et price of the inventories or inflation effect. The understatement of inventory value of the balance sheet has been multiplied by 5 times to its estimated value in the hypothetical balance. !ood"ill 0sually, the largest intangible asset that appears on a companys balance sheet is goodwill. Boodwill is the value of all the favorable attributes that relate to a business enterprise which

include strong brand value, good management, s!illed employees, high technological advances.

uality products,

-ec!itt Cenc!iser is a multinational company which has a number of renowned brands li!e @ortein, )arpic, +ettol and =eet which has high perceived value in the mar!et. $n the circumstance of our economy and nature of the target group, people li!e to perceive high value in multinational products. "n the other hand, product line of the company has strong positive image beyond the country boundary which is !nown to the customers. <s a result, the company is enjoying a good amount of positive goodwill in the mar!et. To justify and !eep consistent this goodwill, -ec!itt Cenc!iser is using a celebrity endorsement promotion also. <s well as, for the other brands, integrated mar!eting communication for the product line is used as li!e the international campaign with a very little local customi%ation which leads to generate a positive brand image at the international level. @oreover the product line has a very few product defect which can be ignored easily. $t means, it the feature of consistence, the company is carrying a very fair amount of goodwill. )owever, -ec!itt Cenc!iser 2C+7 *td. has no goodwill and no intangible asset category on its balance sheet as of +ecember 34, 5644. &ince -ec!itt Cenc!iser 2C+7 *td. is subsidiary of a well-!nown multinational company H-ec!itt Cenc!iser that has well-established reputation, future earning power in 5644 is better than previous years, the company incorporated state-of-the-art technology and machineriesI and the increasing trend in mar!et price reflect increasing confidence of investors, hence it can be presumed that if the company was sold out today, the firm would at least obtain an e#cess of C+T ;55,9:9,496 over the mar!et value of its net assets. )ence that amount is allocated to goodwill in the adjusted balance sheet.

R#$%&'' B#($%&)#* +BD, L'-. B./.($# S0##' A) 12 D#$#34#* "1, 2011

2Digures in Ta!a7 A$'5./ 'urrent <sset Boodwill Tangibles Di#ed <sset 'apital Wor! in Frogress +eferred ta# assets *ong term deposits and prepayments *ong term loans and advances ;86,;::,356 465,665,568 58,345,;68 :,934,666 46,:5;,966 :,88;,98: #$%&'$()#$)* Total Asset 'urrent *iabilities *ong Term liabilities Total *iabilities , uity * 589,583,46; 53,:33,8;8 654,659,689 :36,;8:,484 #$%&'$()#$)* Total Equity + ,iabilities * )$'#-$)%)$%(' )$'%)$'%)$%(' 589,583,46; 53,:33,8;8 654,659,689 5,683,495,666 A-65)'#1,044,286,0 99 822,747,170 633,615,414 175,894,854 :,934,666 46,:5;,966 :,88;,98:

1.2 C.)0 2/17 .(./8)&)

The statement of cash flows is generally prepared using Jcash and cash e uivalentsK as its basis. The primary aspect of the statement of cash flows is to provide information about an entitys cash receipts and payments during a period. The other aspect is to provide information about its operating, investing, and financing activities throughout the year

comparing the last year.

$t is conducted to evaluate how the firms operations have

affected its cash position by e#amining the investment 2use of cash7 and financing decisions 2sources of cash7 of the firm. $t helps us to identify whether the firm is able to produce available cash to purchase more fi#ed assets for productivity, whether the firm has generates cash flows to meet debt obligation or to invest in new innovative products. This published data is essential for both mid level managers and investors. &o we designed the cash flow statement of -ec!itt Cenc!iser 2C+7 *imited for five consecutive years and interpret on basic items of the statement which affects in net cash flow of the firm.

Cash Flow From Operations

Net Income Add Back Depreciation

2007
38,293,8 23 20,232,7 76

2008
70,876,35 9 30,034,21 4

2009
109,592,33 5 16,629,31 9

2010
139,398,89 9 22,343,53 5

2011
165,622,01 0 26,595,41 7

Increase/ Decrease in Current Assets Inventories "#ort term prepa$ments "#ort term %oans, advances and ot#er receiva&%es Accr(ed interest on &ank deposit 23,133,662! 5,321,0 00! 20,7 27 3,216,449! 4,571,392! 2,434,02 4 ' 583,445 13,847,250! 535,56 2 ' 2,864,339! 48,218,045! 5,298,80 9! 15,744,59 0! 23,910! 1,382,704! 3,480,04 0 16,145,26 5 4,827,661!

Increase/ Decrease in Current Liabilities )reditors and accr(a%s *rovision +or ta,ation -nc%aimed dividend et cash pro!i"e" b# operations 50,887,649 2,446,439 2,417,525 82,627,828 20,765,147 17,669,712 139,975 137,931,484 120,589,796 4,964,431 59,247! 235,540,607 158,261,828 12,331,908 883,251 263,934,067 95,465,379 13,654,150 202,269! 314,549,627

Cash Flow From In!estment Acti!ities .an/i&%e +i,ed asset )apita% 0ork in *ro/ress De+erred .a, Assets 1on/ term deposit and prepa$ments 1on/ term %oans and advances et cash pro!i"e" b# in!estment 18,533, 117 500,000 ' ' ' 19,033,117 25,534,80 2 2,999,622! 9,303,833! 168,646! ' 13,062,701 16,785,02 9! 232,259 2,900,833 2,686,914 3,191,294! 14,156,317! 28,728,96 0! 2,418,617 3,890,000 606,688 255,428 21,558,227! 9,579,77 9 28,967,063! 2,218,000! 1,527,912 2,062,928! 22,140,300!

Cash Flow From Financin$ Acti!ities

*rovision +or emp%o$ees2 /rat(it$ *a$ment o+ dividend et cash pro!i"e" b# %inancin$ 582,109! 15,548,030! 16,130,139! 3,154,408 17,983,420! 14,829,012! 808,674! 19,862,587! 20,671,261! 1,332,331! 93,616,749! 94,949,080! 5,349,064 104,004,471! 98,655,407!

et chan$e in Cash &'lus( Cash at the be$innin$ o% the #ear

85,530,806 97,354,5 08 182,885,314

136,165,173 160,009,31 8 296,174,491

200,713,029 265,932,447 466,645,476

147,426,760 425,754,86 5 573,181,625

193,753,920 549,954,875 743,708,795

Cash at the en" o% the #ear

C.)0 2/17 2*13 19#*.'&(: .$'&;&'8

The operating cash flows are dependent on the income of the in calculation of usage of cash in current assets and current liabilities. $n the case of R#$%&' B#($%&)#*, the current asset items are inventories, short term prepayments 2-ental, other e#penses7, short term loans to others, advances, receivables 2account receivables7 and accrued interest on ban! deposit. $f any of the figure of the mentioned figure goes up then it is an indication of usage of cash means cash outflow and reverse scenario represents cash inflow.

Cash Flow %rom Operations

400000000 300000000 200000000 100000000 0 3ear Amo(nt 3ear Amo(nt

1 2007 82627828

2 2008 137931484

3 2009 235540607

4 2010 263934067

5 2011 314549627

The graph shows the increasing trend in net cash flow from operating activities. Drom 5669 to 5644 net cash increased proportionately. This means the company is having positive cash flow with an increasing rate wish is an indication of cash inflow in a better manner. $n the D1 5644, net cash flow from operation is greater than the last year by an amount of 56645566.

)hort *erm 'repa#ments

20000000 15000000 10000000 Amo(nt 5000000 0 1 2007 2 2008 3 2009 4 2010 5 2011 3ear

Amo(nt 14634767 12200743 11665181 16963990 13483950 3ear

$n the part of short term prepayments, the overall scenario presents a fluctuating state. Cut in the last year, it has been decreased in comparison with D1 5646 and which has generated a cash inflow by an amount of 3:;66:6.

In!entor#
150000000

100000000 3ear Amo(nt

50000000

0 3ear

2007 2007

2008 2008

2009 2009

2010 2010

2011 2011

Amo(nt 79422358 83993750 97841000 146059045 147441749

The graph shows an increasing amount of inventory from the year 5669 to year 5644 where it has dropped down in the year 5644. This means a increase in sales which demands more inventory. 'ash is also being used to !eep this inventory. $n the D1 5644, as it went down, a positive cash flow which is cash inflow has incurred. Cut overall, the graph represents the increment of sales which is the output of inventory.

10

The major ingredients contributing the increasing cash inflow from operation activities are 'reditors and <ccruals which are current liability. Drom the starting D1 5669-5644, we find an increasing positive rate in the net figure and it means the company is paying less each year in part of its current liability. &o, fewer outflows are occurring year by year and earn positive cash inflow.

Creitors an" Accruals

600000000 500000000 400000000 300000000 200000000 100000000 0 3ear 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 3ear Amo(nt

Amo(nt 144105789 164870936 285460732 443722560 539187939

The graph shows that its current liabilities in payable to creditors have been piled up means less payment. &ame case goes for Frovision for ta#ation. The ta# amount is increasing throughout the calculated financial years. <nd, it is meaning more dues in ta# amount which is have been saved results cash inflow for R#$%&' B#($%&)#*.

'ro!ision o% *a+ation
60000000 40000000 20000000 0 3ear 3ear Amo(nt 1 2007 2 2008 3 2009 4 2010 5 2011

Amo(nt 8909228 26578940 31543371 43875279 57529429

11

C.)0 2/17 2*13 &(;#)'3#(' .$'&;&'8

$nvestment activities of R#$%&' B#($%&)#* are in tangible fi#ed assets, capital wor!ing progress 2>ew plant, building for new product7, deferred ta# assets, long term deposit and prepayments 2Di#ed deposit, rental etc7 and long term loans and advances 2within any unit of the company7. <ny increase in the mentioned items resembles usage of cash or in other word, it is an investment. &o, increase in the figure comparing the last year means cash outflow and decrease means cash inflow.

et Cash Flow %rom In!estment

30000000 20000000 10000000 0 '10000000 '20000000 '30000000 3ear 1 2007 2 2008 3 2009 4 2010 5 2011 3ear Amo(nt

Amo(nt 19033117 13062701 '14156317 '21558227 '22140300

Drom the graph, we see the investment is becoming more year after year. 'ash is being used for purchasing tangible fi#ed assets, capital wor! in process and long term deposit. &o, the net cash flow from investment is a outflow. This is a good sign that it is investing more to e#pand and also to manufacture more.

12

*an$ible %i+e" asset

120000000 100000000 80000000 60000000 40000000 20000000 0 3ear 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 3ear Amo(nt

Amo(nt 95203161 69668359 86453388 115182348 105602569

$n the tangible fi#ed asset part, R#$%&' B#($%&)#* includes building, plant G machineries, furniture, e uipments etc. the graph show a fluctuating state where from the D1 566;-5646, it is increasing and went down in the year 5644. <s a result, it has produced a cash inflow in the year 5644 comparing the year 5646. <t 5644, the company increased its capital wor! in progress amounted to C+T 55,869,663 than previous year. This change affects the most in cash flow for investment. <t 5644 they also remove some of their old parts and need not go for new investment as they ma!e investment in 5646.

13

C.)0 2/17 2*13 2&(.($&(: .$'&;&'8

Dor R#$%&' B#($%&)#*, there is no long term debt from the ban!. &o, its financial activities only include the dividend payment in each year plus the changes in provision of employees gratuity. We find a negative cash flow year to year.

et Cash %low %rom Financin$

20000000 0 '20000000 '40000000 '60000000 '80000000 '100000000 '120000000 3ear Amo(nt 1 2007 16,130,139 2 2008 14,829,012 3 2009 20,671,261 4 2010 94,949,080 5 2011 98,655,407 3ear Amo(nt

Drom the above graph, we find an increasing rate from the year 566; to year 5644 which is ma!ing net cash flow from financing negative. $t means, the dividend payment by the company has been increased which is major contributor for impacting cash flow of financing outcome. "n the other hand, provision of employees gratuity is fluctuating throughout the analysis and last it has been increased which is a good sign.

14

C.)0 .' '0# #(- 12 '0# 8#.*

Cash ,alance at -!er# .ear 800000000 600000000 400000000 200000000 0 3ear 1 2007 2 2008 3 2009 4 2010 5 2011 3ear Amo(nt

Amo(nt 183467423293020083467454150574513956738359731

<ctually, a company is most concern with the cash balance of each year. Cecause, depending on this figure, company ta!es most of the important decisions li!e e#pansion, dividend payment, long term loan etc. ,nding cash balance is the sum of net change in cash considering operating, investment and financing activities plus the opening cash balance of the opening year. the balance. <fter the calculation of cash flow of D1 5669 to D1 5644, we find a increasing positive growth in the cash balance of each year. Drom the graph, the line showing that the company is improving it cash balance year after year and has a positive slope. The situation arrived because of well management in operational, investment and financial activities which were stated above. R#$%&' B#($%&)#* considers cash and cash e uivalents to understand

15

O;#*.// C133#(')
The above circumstances illustrated that, though R#$%&' B#($%&)#*<) net cash flow in investment of year 5668 to year 5644, it is good news for the company. 'ause, it is doing much better in operating activities which is increasing positively and also contributing to the net cash flow of each year significantly. The company was able to increase the cash flows of trade creditors which had no interest and at the same time they improved their credit collection which provided cash inflow. $t can increase amount of inventory which will give them competitive advantage in ne#t year because of lower cost of raw materials, if there is inflation. <nother reason for increase in inventory refers higher sales. "n the other hand, in finance activities, its dividend payment is increasing. &o, it is going to attract the mar!et. This is also an indication of companys better status as it pays dividend without ta!ing any long term loan. This actually adding values to goodwill of the company. The good thing is the payment of provisions for employees gratuity creates opportunity for the e#pansion of the productive capacity. <s the cash balance of each year is positive and increasing, it symboli%es itself solvent and doing well in the mar!et. Drom the ualitative analysis, we can say that the firm enjoying fair goodwill and enrichment of brand loyalty is happened. $t has better chance to go for e#pansion or product innovation, investment in research and development, offering more dividends or increase its total sale through e#tensive promotion without ta!ing any long term liabilities. "n the hand, with the healthy amount of cash balance, it can fi# it up its company bottlenec!s. &o, the cash flow activities of the firm illustrate good news of the company which stated at the beginning of the discussion.

16

1." R.'&1 A(./8)&)

Dinancial ratios are designed to help evaluate financial statements. -atio <nalysis facilitates us to ma!e comments on financial performanceLcondition of a company. $t addresses some critical financial concerns that a firm might face. These may include what should be the ideal percentage of debt vis-M-vis assets of a particular firm, for e#ampleN What level of inventory should a firm maintainN -e the fi#ed assets being utili%ed properlyN etc. Time &eries analysis has been used for analy%ing financial statements for the last si# years 25669-56447 of -ec!itt Cenc!iser 2C+7 *td. $n Dinancial analysis, -atio analysis plays a very important role to understand the inherent status of a company, which apparently appears to be performing good in the eyes of the investors but not doing well in reality. &o it gives us cues and clues to get into those hidden side of a firm. We have learned from our course material that there are five broad categories that we can divide the -atio <nalysis into. They are as followsA 4. L&=5&-&'8 R.'&1A $t provides us information about a firms ability and also stability to meet its short term financial obligations. 5. A))#' M.(.:#3#(' R.'&1)> $t indicates how efficiently the firm utili%es its assets. 3. D#4' M.(.:#3#(' R.'&1)> $t gives information whether there are right mi# of debt and e uity. :. P*12&'.4&/&'8 R.'&1)> $t offers several different measures of success of the firm at generating profits. 5. M.*%#' ;./5# R.'&1)> $t shows the companys standing in capital mar!et. L&=5&-&'8 R.'&1) &hort term solvency or li uidity measures the firms ability to pay its bills and current liabilities on time. $t indicates the ease with which non-cash assets can be converted to cash, and also the ratio of non-cash assets to current liabilities

17

Figure 1: Current Ratio for RECKITT The very basic uestion that the current ratios answer is can a firm ma!e its re uired

payments on timeN &o it shows the short term solvency of a firm. The graph tells us that -ec!itts current ratios are slightly below the benchmar! of 5.This does not mean the li uidity position of -ec!itt Cenc!iser is poor, because it has a considerable amount of receivables which if collected on time can easily meet the short term obligations. "n the other hand too much li uidity may sometimes spell trouble because it indicates the firm is not ma!ing the wise use of its money thereby not investing properly. &o li uidity is not an absolute indicator of a firms financial position in the mar!et.

18

?5&$% R.'&1 /uic! ratio e#presses a companys ability to repay its current liabilities out of its most li uid assets.

Figure 2: Qui ! Ratio for Re !itt $nventories are typically the least li uid of a firms current assets. )ence, they are the assets on which losses are most li!ely to occur. Therefore, a measure of a firms ability to pay off its short term obligations without selling its inventory is important. The benchmar! as we !now for this ratio is 4, where -ec!itt has consistently maintained this ratio above this standard over the years. &o we can conclude here that the position of -ec!itt is pretty good in terms of this uic! ratio. "n the other hand, the position of the comparing firm has not been tat stable compared to the standard and also compared to that of -ec!itt. ,specially in the last for years it was awfully low, which could have spelled lots of trouble but fortunately last year in 5644 their situation has improved and the ratio has jumped over 4.

19

O;#*.// C133#(' 12 S01*'-'#*3 S1/;#($8 Coth time series and the benchmar! analysis suggest that -ec!itts financial position in terms of the li uidity ratio is satisfactory A))#' M.(.:#3#(' R.'&1) <sset @anagement ratios measure how effectively a firm manages its assets. These ratios are designed to answer this and the projected sales levelsN uestionA does the total amount of each type of asset as reported on the balance sheet seem reasonable, too high or too low in view of the current

7.2 7 6.8 6.6 6.4 6.2 6 5.8 5.6

InventoryT urnover

2010

2011

Figure: In"entor# Turno"er of Re !itt $t shows each item of -ec!itts inventory is sold out and restoc!ed or Jturned overK 9.63 times in 5644 and this trend has been almost consistent over the years ranging from : to the highest 9. $t indicates that -ec!itt has very efficiently managed its inventory and never held e#cessive amount of it. $t is also consistent with its increasing demand for its products and increasing sales turnover.

20

F&@#- A))#') T5*(1;#* R.'&1 The fi#ed assets turnover ratio measures how effectively the firm uses its plant and e uipment to help generate sales.

Figure: Fi$e% &''et Turn o"er for RECKITT $n 5644, -ec!itts Di#ed <ssets turnover ratio is 46.5: times which indicates that -ec!itt is using its assets very efficiently and this ratio has steadily increased over the period as we can see from the graph

21

T1'./ A))#') T5*(1;#* R.'&1 $t measures the turnover of all the firms assets.

Figure: Tota( &''et Turn o"er for RECKITT -ec!itts total asset turnover has been pretty consistent over the years which indicates that -ec!itt is generating sufficient volume of business given its investment in total assets. The gradual increase in sales volume over the period justifies it. O;#*.// C133#(' 1( A))#' M.(.:#3#(' -ec!itts managing its assets very efficiently as the business or the sales figure suggests which has increased steadily over the years and also its in part attributable to the efficient inventory management.

22

D#4' M.(.:#3#(' R.'&1) +ebt management ratios address very important concerns as in firms with relatively high debt ratios have higher e#pected returns when the business is good or normal, but they are at the same time e#posed to higher level of ris! when the business is poor. "n the other hand, firms with low debt ratios are less ris!y but they also forgo the opportunity to leverage up their return on e uity. D#4' R.'&1 $t measures percentage of the firms assets financed by the creditors.

Figure: )e*t Ratio for RECKITT They dont have any long term debt and as a result they are not subject to any fi#ed interest charges. &o here current liabilities constitute the total debt. <s we have seen earlier that their li uidity is maintained pretty efficiently, enough to meet up the short term liabilities, they are not going to face any trouble in case of li uidation and as a result their scope of financing is not constrained, they can raise funds, borrow from the creditors if its re uired and theres no reason for the creditors to be unwilling to lend them the funds.

23

O;#*.// C133#(' 1( D#4' M.(.:#3#(' &ince -ec!itt has been gradually generating more sales revenue this debt ratio is justified. P*12&'.4&/&'8 R.'&1) Frofitability is the net result of a number of policies and decisions. The ratios e#amined thus far provide some information about the way the firm is operating, but the 9*12&'.4&/&'8 *.'&1) show the combined effects of li uidity, asset management, and debt on operating results. a7 N#' 9*12&' 3.*:&( 1( S./#)> $t gives the profit per dollar sales.

Figure: +rofit ,argin on -a(e' for RECKITT The graph shows profit margin on sales for -,'($TT is has been pretty consistent over the years and highest in the year 5644. &o we can say that the sales figures are pretty satisfactory.

24

4, R#'5*( 1( A))#' +ROA, $t gives idea about the overall return on investment earned by the firm, it is the after ta# earnings generated by total asset.

Figure: Return on &''et for RECKITT Dor the : years, -,'($TTs -"< has been consistently around 45O and the ratio is showing an increasing trend in -"< from 566: till 5644 which is on the other hand attributable to increased net income and sales over these 6 year period. $t has also been possible because the firm does not have any long term debt and is thereby e#empted from any fi#ed interest charges. "n the contrary,

25

$, R#'5*( 1( E=5&'8 +ROE, 0ltimately, the more important, or Jbottom lineK accounting ratio is the ratio of net income to common e uity, which measure the return on common e uity. This net income is different from the preceding ones in that its the net income available to the common stoc! holders.

DigureA -eturn on , uity for -,'($TT -,'($TT is showing an increasing trend in -",, which has steadily increased over the years. $n the last two years its been more than 39O up from the 45 O in 5663.This is evidential because they are not using any long term debt and thus no pressure from fi#ed interest charges and also this is indicative of good business generation through gradual increase in sales. O;#*.// C133#(' 12 P*12&'.4&/&'8 -,'($,, has been performing better than (eya +etergent *td. from year to year which is attributable to the good profit margin and good inventory management as we !now that good inventory management reduces the operating e#penses which eventually contributes to the net income.

26

M.*%#' A./5# R.'&1) The mar!et value ratios represent a group of ratios that relates the firms stoc! price to its earnings and boo! value per share. These ratios give management an indication of what investors thin! of the companys past performance and future prospects. $f a firms li uidity, asset management, debt management and profitability ratios are all good, then its mar!et value ratios will be high and its stoc! price will be as high as e#pected. The opposite is also true in that it gives us the direction as to whether a company is headed toward ban!ruptcy. P*&$#BE.*(&(:) R.'&1 This FL, ratio shows how much investors are willing to pay per dollar of reported profits. "ther things remaining constant the FL, ratio is higher for firms with high growth prospects and lower for ris!ier firms.

Figure: +ri e.Earning' ratio for RECKITT FL, ratio has doubled for -ec!itt in the last two years from the year 5666. -ec!itts FL, ratio is more consistent e#cept for the last year. The ,F& for -ec!itt has mar!ed a steady growth over the years, T( 35 against the boo! value which of T! 46 in the year 5644, for e#ample, which is 3.5 times higher than the boo! value.

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M.*%#'BB11% R.'&1 The ratio of a stoc!s mar!et price to its boo! value gives another indication of how investors regard the company. 'ompanies with relatively high rates of return on e uityLassets generally sell at higher multiples of boo! value than those with low returns.

Figure: ,ar!et./oo! "a(ue ratio for RECKITT We !now that the higher the rate of return on assets, more the price a firm can charge for its share. -ec!itt through consistent increase in these ratios over the period has not only bolstered its financial foothold in the mar!et, but also it has achieved more investors trust in terms of the investment consideration. O;#*.// C133#(' 12 M.*%#' R.'&1)

Our examination of market value ratio of Reckitt indicates that investors are excited about the future ros ects of Reckitt!s common stock as investment.

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CHAPTER-2

FINDINGS C CONCLDSION

Drom the start of this report we have found and learned many important financial things about the company. Celow is the summary of the financial measures and mechanisms and their implications that we have thus far come across in light of -ec!ittA 4. <n increasing trend in &ales Turnover and Frofitability over last si# years.

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5. -eturn on asset is stable but increased trend in -", and profit margin on sales figure has steadily increased over the years. 3. < significant increasing trend in dividend payment from the year 5665. :. $mmense growth potential in the future with increasing ,F&. 5. &ome assets such as inventories, fi#ed assets are understated. 6. $ntangible asset of goodwill is not incorporated on the balance sheet which rationali%es the high mar!et value of the firm and increasing stoc! price 9. &trong li uidity position with increasing cash flows from the operating activities for the last five years and holds a very sound financial position. ;. "verall cash balance of each year is positive and shows an increasing trend also substantiates the aforementioned strong li uidity position. Dinally, the report is based on the last five years information that we have obtained from the annual reports of the firm. <s such the most recent information available to us was of the financial year 5646-5644. $f we could avail more recent information, our analysis would have been more precise and accurate. <ny further study related can be more productive by giving emphasis on analy%ing most recent data, collecting relevant primary data, using statistical tools and techni ues and ade uate time.

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APPENDIX

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