Chapter-1

Introduction

1
1.1 Introduction
Sonargaon Textiles Ltd. (STL), established in the year 1985, is basically a spinning project in textile
sector. It is the biggest textile concern in entire South Bengal. STL is 100% export oriented
spinning industry. It has generated employment opportunity for more than 2,000 workers including
the officials of different desks. It is a public limited company listed with Dhaka & Chittagong Stock
Exchange in the year 1995. It has been offering dividend regularly. It produces cotton yarn of
different counts for knitting & weaving. It is financed by different banks (both Nationalized &
Private).

1.2 Background of the Study

This report is originated as the academic requirement of the MBA program under Dhaka University.
As the practical orientation is an integral part of the MBA degree requirement, the main purpose of
internship is to get the students exposed to the job world and slowly get them acquainted with the
organizational setting and corporate culture.
The study has following purposes:
 To get and organize detail knowledge on the job responsibility.
 To experience the real business world.
 To compare the real scenario with the lessons learned in MBA program.
 To fulfill the requirement of MBA Program.

1.3 Objectives of the Study

Broad Objective:
The main objective is to calculate Performance Analysis of STL.
Specific objectives of the study are as follows:
 To find out the total debt to equity ratio of STL
 To find out total debt to total asset ratio of STL
 To find out total equity to total asset ratio of STL
 To find out the net profit margin of STL
 To return on equity (ROE) of STL

2
1.4 Methodology
In this report the qualitative research procedure is used to collect the information of the report. The
direct approach is utilized to gather the information. Here the employees of the STL are asked
different type of questions relating to the report to helping the making of this report. The direct
approach, the depth interview which is the method of research procedure, is applied. Here the
Assistant General Manager of marketing department is asked different questions and to explain
different issues in an unstructured, direct and in a personal manner to give his opinion about the
topic of the report.
Primary Sources:
 Face to Face conversation with the respective client, officers and staffs.
 Structured Survey on customers
 Interviewing officers and staffs
 In-depth study of selected cases.
 Sharing practical knowledge of officials.
 Related files, books study provided by the officers concerned.
 Practical Desk work
 Direct observation

Secondary Sources:
 Annual Report, Audit Reports of STL Ltd.
 Relevant books, Research papers, Newspapers and Journals.
 Website of STL.
 Vouchers, Instruments, Forms & Circulars

1.5 Limitation of the Study

When I was running my term paper I faced some problems, which have been considered as
limitation of the study. The limitations are:
 Due to time limitation several information about STL cannot be provided.
 Even due to shortage of time, several distributors and retail stores have not been visited.
 The study is mostly based on secondary data. Primary information has been collected only
through depth interview method.
 No questionnaire interview has been conducted for this study.
3
 Chapter-2
Organizational Overview

4
2.1 Company Overview
If we look at The Commercial Map of Bangladesh, we find a bunch of well reputed business houses
& we will immediately notice there a Group of Companies in name & style 'Khansons Group'.

Khansons Group, established in 1974, is having a strong footing in international business of

different dimensions. Besides, Khansons Group is listed as one of the Leading Industrial
Establishments where they have made significant cumulative contributions to the economy of
Bangladesh, helping implement huge employment by running successfully 02(two) Textiles,
01(one) Jute & 01(one) Cement Industry in South Bengal at Barisal over a decade.

All the concerns of the Group, under one umbrella, operate independently & individually their
business activities/make transactions.

Besides the group business activities, it has a strong & wide participation in Insurance Industry,
where the Group is the Founder Shareholder Director of 03(three) Insurance Companies. 02(two) of
them are General Insurance & 01(one) is Life in name & style 'Continental Insurance Ltd.', 'Central
Insurance Company Ltd.', 'Golden Life Insurance Ltd.' respectively.

'Khanson Group' is a conglomerate evolved in different dimensions with variety of business

activities. A number of sister concerns circling together rounded up the Group by representing their
individual get-up & excel as a business entity. The Group is nourishing commendable reputation &
status both in home & abroad.

5
2.2 Mission
To be true, success of any event in life whether in business or in private service is strongly dependent on
its ethical values. Our motive is to remain true to our philosophy of high ethical standard & the pursuit
of excellence in all our efforts. We will look at each challenge & opportunity with sincerity, honesty,
dedication & devotion. Our mission is to achieve different dimensions of success both in business & in
social life which will illustrate our innovation, motivation, synchronization & improvisation in all our
working attitudes/walks of life.

2.3 Vision
We have a singular vision towards a significant development of different industrial scheme at a target of
increased volume of production & improved market share including more employment opportunities in
industrial establishments & equally the transactions in International business on a regular basis.

2.4 Achievements
Relentless pursuit to make the vision & mission a reality, the Group, over their long stride in road to
achieve something substantial, as a business icon & industrialist of the country, has attained an
undivided success, optimum reputation & global pride & prestige. In recognition to the achievement
of the Group in the area of Exports, the Government of Peoples Republic of Bangladesh has twice
selected the Chairman Managing Director of the Group as the Commercially Important Person
(CIP). He was awarded Gold Medal in the year 1993-94 for extensive industrialization
program/establishment of the country. He was also awarded with the C.R. Das Gold Medal in the
1995-96 as a notable industrialist of the country.

6
 Chapter-3
Analysis of Sonargaon Textile Ltd.

7
In this Chapter the performances of Sonargaon Textile has been analyzed by
calculating Activity, Liquidity, Solvency and Profitability ratios by collecting
information from their annual report(2010-2012).

 Activity Ratios: Activity ratios the relationship between the firm’s level of
operations (usually defined as sales) and the assets needed to sustain operating
activities. The higher the ratio, the more efficient the firm’s operations, as
relatively fewer assets are required to support a given level of operations
(sales).
1. Inventory Turnover Ratio

Table1: Inventory Turnover

Year 2010 2011 2012

Cost Of Goods Sold 614271454 661298258 714569029
Inventories 486266658 759871855 807615858
Inventory Turnover Ratio 1.26 0.87 0.88
Growth Rate (%) -4.48 -31.11 1.67
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
Inventory Turnover Ratio =
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠

Inventory Turnover Ratio

1.4 1.26
1.2
1 0.87 0.88
0.8
Ratio 0.6
0.4
0.2
0
2010 2011 2012 Year

Inventory turnover Ratio measures the number of times inventory has been over in a
year. As we can see from the table, the three years dada of inventory turnover ratio of
Sonargaon Textile Ltd. In the year 2010 it has been 1.26x and it hits the lowest 0.87
in 2011. The trend shows, the year 2010 has been increasing that inventory turned in
stock for longer hitting the lowest in 2011.
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 2. Receivable Turnover Ratio

Table 2: Receivable Turnover

Year 2010 2011 2012

Sales 724013901 781963868 821574671
A/C Receivable 70761406 26161824 30523807
Receivable Turnover Ratio 10.23 29.89 26.92
Growth Rate (%) -5.42 192.12 -9.95
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝑆𝑎𝑙𝑒𝑠
Receivable Turnover Ratio =
𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

Receivable Turnover Ratio

50

40
29.89
30 26.92

Ratio
20
10.23
10

0
2010 2011 2012 Year

The receivable turnover ratio is same as the inventory turnover ratio. Higher this
ratio, the better it is. Higher ratio indicated the cash collection will be faster. The
graph of receivable turnover ratio shows that it has been highest in the year 2011, but
over the years it remains low. The receivable turnover rates over 3 year data indicate
that cash collection process of the company is not good. So the company should be
efficient in maintaining good cash collection process.

9
 3. Payable Turnover Ratio

Table 3: Payable Turnover Ratio

Year 2010 2011 2012

Purchase 614271454 661298258 714569029
Payable 190139987 288030993 212613525
Payable Turnover Ratio 3.42 3.25 3.59
Growth Rate (%) -17.66 -5.00 10.46
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝑇𝑜𝑡𝑎𝑙 𝐶𝑟𝑒𝑑𝑖𝑡 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒
Payable Turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑃𝑎𝑦𝑎𝑏𝑙𝑒

Payable Turnover Ratio

4 3.59
3.42 3.25
3

Ratio
2

0
2010 2011 2012
Year

Like the inventory turnover ratio, payable turnover ratio measures how frequently the
payables are turned over in a year. Lower the ratio better it is the firm. In 3 years
scenario, in 2011 the firm has lower long term debt. Which indicates the firm’s
solvency regarding conduct the firm’s operation. But in 2012 the company has the
highest payable turnover ratio which is 3.59.
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 4. Total Assets Turnover ratio

Table 4: Total Assets Turnover ratio

Year 2010 2011 2012

Sales 724013901 781963868 821574671
Total Assets 1625967136 1959751944 1901689919
Total Assets Turnover Ratio 0.45 0.40 0.43
Growth Rate (%) -33.36 -10.39 8.27
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠
Total Assets Turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

Total Assets Turnover ratio

0.80
0.70
0.60
0.50 0.45 0.43
0.40
0.40
Ratio
0.30
0.20
0.10
0.00
2010 2011 2012
Year

The total asset turnover has hit the lowest 0.40x in 2011 and highest 0.45x in 2010.
The ratio indicates firm generates highest sales in 2010, in next year 2011 it
decreased and it shows in 2012 that sale is increasing. So it indicates that firm is
managing the asset efficiently.

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 5. Fixed Assets Turnover Ratio

Table 5: Fixed Assets Turnover Ratio

Year 2010 2011 2012

Sales 724013901 781963868 821574671
Fixed Assets 1059223650 1052438559 994632471
Fixed Assets Turnover Ratio 0.68 0.74 0.83
Growth Rate (%) -52.64 8.70 11.17
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝑇𝑜𝑡𝑎𝑙 𝑆𝑎𝑙𝑒𝑠
Fixed Assets Turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠

Fixed Assets Turnover Ratio

2.00

1.50

1.00 0.83
Ratio 0.74
0.68

0.50

0.00
2010 2011 2012
Year

The ratio measures the efficiency of capital investment. The higher the ratio, the
better it is. According to the graph the fixed asset turnover ratio increased from 0.68
to 0.74 in 2011 and 0.74 to 0.83 in 2012. This means in 2012, for taka 1 change in
fixed asset sales generated in taka 0.83. The highest in 3 years was the 0.83 in 2012
and the lowest fixed asset turnover ratio of 0.68 in 2010. Since then the trend shows,
the ratio have been increasing slowly from 2011.

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  Liquidity ratios: Liquidity means the ability of the firm to use its current
assets to pay its short term obligations. Short-term creditors are more concern
about the liquidity analysis of a firm, because they want to know that whether a
firm has ability to pay its short term obligation in-time or not.
1. Current ratio

Table 6: Current Ratio

Year 2010 2011 2012

Current Asset 566743486 907313385 907057348
Current Liabilities 461064136 654799985 469014594
Current Ratio 1.23 1.39 1.93
Growth Ratio (%) 19.61 12.73 39.57
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
Fixed Assets Turnover Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Current Ratio

1.93
2.00

1.50 1.39
1.23

1.00
Ratio

0.50

0.00
2010 2011 2012
Year

The current ratio measures ability of the company to pay its current liability using its
current assets. The higher the ratio the better is the firm’s liquidity position.
Throughout the three years the firm’s current ratio was increasing from 1.23 to 1.93.
This means for every taka current liability the company more current asset compare
to the previous year. But in the year 2012 Sonargaon has faced the highest current
ratio.
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 2. Cash ratio:

Table 7: Cash ratio

Year 2010 2011 2012

Cash 632577 3129830 519340
Current Liabilities 461064136 654799985 469014594
Cash Ratio 0.001 0.005 0.001
Growth Rate (%) -58.58 248.39 -76.83
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝐶𝑎𝑠ℎ
Fixed Assets Turnover Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Cash ratio

0.006
0.005
0.005

0.004

0.003
Ratio
0.002
0.001 0.001
0.001

0.000
2010 2011 2012
Year

In case of quick ratio we depend on accounts receivable. Here after including only
cash and cash equivalents the ratio has further gone down compared to quick ratio,
hitting the lowest in 2010 and 2012 with 0.001x and highest in 2011 with 0.005. This
means in 2011, for every taka of current ability there was 0.005 taka of cash
equivalents available. This raises a huge question as the firm’s liquidity position
because Sonargaon textile is in a volatile position.

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  Solvency Ratio: The analysis of firm capital structure is necessary to
understand long term risk and return prospect.

1. Debt to Capital Ratio

Table 8: Debt To Capital Ratio

Year 2010 2011 2012

Total Debt 845546137 999127489 988482821
Total Capital 162967136 1959751945 1901689919
Debt To Capital 0.52 0.51 0.52
Ratio
Growth Rate (%) -0.97 -1.96 1.96
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
Fixed Assets Turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙

Debt To Capital Ratio

1.00

0.80

0.60 0.52 0.51 0.52

Ratio
0.40

0.20

0.00
2010 2011 2012
Year

This ratio measures the proportion of the capital supplied by the creditors and
dependence of the firm on external borrowing. This ratio has been decreasing at
2011. Over the three years the firm has a decreased ratio, it means the company they
have tried to manage solvency of the firm. Moreover the firm’s dependency on
external borrowing lies between 50% over the last three years.
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 2. Debt To Equity Ratio

Table 9: Debt To Equity Ratio

Year 2010 2011 2012

Total Debt 845546137 999127489 988482821
Total Equity 780420999 960624456 913207098
Debt To Equity Ratio 1.08 1.04 1.08
Growth Ratio -80.67 -4.00 4.07
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
Fixed Assets Turnover Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

Debt To Equity Ratio

1.50

1.08 1.04 1.08

1.00

Ratio
0.50

0.00
2010 2011 2012
Year

The ratio measures for every 1 taka of equity how much liability the shareholders
bear. This ratio has been quite stable from 2010-2012. In 2012 for every taka equity
shareholders bear 1.08 taka as liability. This means the risk bearing by shareholders
decreased in 2012. That means shareholders have to bear less liability.

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 3. Interest Coverage Ratio:

Table 10: Interest Coverage Ratio

Year 2010 2011 2012

EBIT 85977016 99895568 95470059
Interest Expenses 66439636 78348972 85611306
Interest Coverage Ratio 1.29 1.28 1.12
Growth rate (%) -98.71 -98.72 -98.88
Source: Annual Report of Sonargaon Textile Limited (2010-2012).
𝐸𝐵𝐼𝑇
Fixed Assets Turnover Ratio =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠

Note: EBIT (Earnings Before Interest and Taxes)

Interest Coverage Ratio

1.40 1.29 1.28

1.20 1.12

1.00
0.80
Ratio
0.60
0.40
0.20
0.00
2010 2011 2012
Year
This ratio, often referred to as the Times interest earned ratio, measures the protection
available as creditors as the extent to which earnings available for interest cover
interest expenses. In 2012 Sonargaon Textile had the lowest coverage ratio 1.12 and
in 2010 the company has the highest interest coverage ratio of value 1.29.

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 Chapter-4
Recommendation

18
4.1Recommendations

Bangladesh is one of the leading exports of ready-made garments in the world and
earning nearly 76% of its foreign currency through exporting textile and ready-made
garments. Sonargaon Textile Limited is one of the leading and prolific industries in
Bangladesh. But the major problem of the company, it can’t work for better Research
and Development. The company is not focusing to improve its technology and
expand its market share. So the company should be aware of its inefficiency and try
to keep vital contribution for the company and the country.

After analysis of performance of Sonargaon Textile Limited the following aspects are
recommended:-

i. The company needs to analysis its financial condition time to time and need to
hold the solvency of them;
ii. The company also need to provide its best and transparent financial
information to its shareholders because it will help the shareholders to invest in
right and preferred company for further expansion of the company;
iii. The liquidity assets are in limit in satisfaction and should try to more
efficiency;
iv. Fixed assets and Equity are in positive measure and the company should be
more serious about it;
v. To maximize profit the company should reduce waste and production cost;
vi. The company can increase productivity by improving process performances
and product quality;
vii. New product, market and business ideas can be investigated for its expansion;
viii. Tax revenue due to maximizing of profit;
ix. Monitor and control must be needed at national level;
x. The company is growing up day by day. But the political unrest condition and
environmental calamities are hampering its growth;

19
Chapter-5
Conclusion

20
Sonargaon Textiles Ltd. is one of the renowned composite textiles industries in the country. In its
latest yearly performance declarations, the company reported its revenue and profit after tax of BDT
1,430 mn and BDT 158.34 mn which is 16% & 28% higher respectively from the same period of
the previous year. This was because of increased production from the expanded capacities,
decreased administrative expenses and increased other income in the said period. Considering the
expanded capacity and existing capacity utilization ratio, the company is expected to perform better
in the forthcoming years.

Sonargaon Textiles Ltd. (STL), is a 100% export oriented composite knit manufacturing company,
was incorporated on 19 April 1995. The company is engaged in the business of knitting, high end
dying, designing, finishing (tubular & open width), printing, pigment dying & garment washing and
embroidery. The fabric base includes 100% cotton, Viscose, Viscose/Lycra, Modal and Bamboo
with weights ranging from 90 to 250 gsm (grams per square meter). The product includes T-Shirt,
Tank Top, Jacket, Pajama, Jogger and Hoody Jacket. The company also offer garments which are
manufactured from organically grown cotton, i.e., without the use of harmful chemicals. The
demand for the company’s products goes high in January-March as par the latest three years
financial statements.

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References

1. (2010). Annual Report of Sonargaon Textiles Ltd.

2. (2011). Annual Report of Sonargaon Textiles Ltd.
3. (2012). Annual Report of Sonargaon Textiles Ltd.
4. http://www.khansonsgroupbd.com/sonargaontextiles.html

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