Internship Report 15303025 (Revised)

INTERNSHIP
REPORT
Financial Performance of Ship Breaking Industry in Bangladesh:

A Study on
TAHER & CO. LTD.

(SHIP BREAKER & RECYCLING)
Supervisor: Dr. Mohammed Shamim Uddin Khan

Professor
Department Of Finance
University Of Chittagong.
SUBMITTED BY: Mohammed Monirul Alam Sakib

ID No: 15303025
Session: 2014-2015
Department of Finance
University of Chittagong
Date of Submission: 22/09/2020

Letter of Transmittal
Mohammed Monirul Alam Sakib, ID: 15303025, a student of Department of Finance, University of
Chittagong, has completed internship report on “Financial performance of Ship Breaking Industry: A
study on Taher & Co. Ltd.” as requirement of BBA Program. I have studied the report and believe that it
meets the standard of BBA internship report. He has completed the report as per instruction under my
supervision.
I wish him all the best in his near future.
………………………………………….
Internship Supervisor
Professor Dr. Mohammed Shamim Uddin Khan
Chairman
Department of Finance
University of Chittagong.
ii
Acknowledgement:
The fruitful accomplishment of this report is the result of the contribution of a number of people, especially
those who have given the time & effort to share their thoughts and suggestion to improve the report. I
would like to express my gratitude to Almighty Allah for giving me the strength to complete the task
within the schedule time.
First of all, I want to show my respect to my honorable supervisor, Professor Dr. Mohammed Shamim
Uddin Khan, Chairman, Department of Finance, University of Chittagong for supporting me with lot of
information in his busy schedule. The suggestion & guidelines provided by him are proved to be highly
important while preparing my internship report.
I also want to show my gratitude to MD. Shaheen Alam, Director, Taher & Company Ltd. for giving me
an opportunity to work under him. I’m also thankful to all the employees and staffs of Taher & Company
Ltd, especially MD. Nazmus Sakib, Assistant Manager, Taher & Company Ltd. without whom, the report
would have been incomplete.
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Certificate from Firm’s Chief
iv
Table of Contents
Title…………………..………………………………………………………………. ……… I
Letter of Transmittal ……………………………………………………………………………… II
Acknowledgement…………………………………………………………………………… III
Certificate from Firm’s Chief……………………………………………………………………… IV
Table of Contents …………………………………………………………………………... V
List of Tables ……………………………………………………………………………….. VII
List of Figures………………………………………………………………………………. VII
Acronyms……………. ……………….……….…………………………………………… VIII
Executive Summary…………………………………………………………..………………. IX
Key Words……………………………………………………………………………………… IX
Chapter 01: Introduction
1.1 Prelude 01
1.2 Statement of the Problem 01
1.3 Rationale of the study 02
1.4 Objective of the study 02
1.5 Methodology of the study 02
1.6 Scope & Limitation of study 03
1.7 Organization of the study 03
Chapter 02: Ship breaking industry in Bangladesh with special reference to Taher & company:
A Bird’s Eye View
2.0: Introduction 04
2.1: Overview of Ship Breaking Industry 04
2.1.1: History of Ship Breaking Industry in Bangladesh 05
2.1.2: Ship- Breaking: Current Market Position of Bangladesh 05
2.1.3: Risk in Ship-Breaking: 07
2.1.4: Contributions of Ship Breaking in the Economy of Bangladesh 09
2.1.5: Ship Breaking Procedure 10
2.2: Characteristics of sample firm 11
2.2.1: Company Profile: 11
2.2.2: Parent Company: 12
2.2.3: Business Details: 13
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2.3: Authority and responsibility 14
2.3.1: Board of Directors 14
2.3.2: Management Organogram 15
2.4: Corporate Social Responsibility 16
2.5: Market Scenario 17
2.6: Objective of Internship: 17
2.7: Internship Work Experience 18
Chapter 03: Measuring Financial Performance: A Theoretical Framework
3.1: Common Size Analysis 19
3.2: Ratio Analysis 20
3.3: Trend Analysis 26
Chapter 04: Findings & Analysis
4.1: Common Size Analysis 27
4.1.1: Common Size Comparative Income statements 27
4.1.2: Common Size Comparative Statement of Financial Position 28
4.2: Ratio Analysis 30
4.2.1: Leverage Analysis 30
4.2.2: Profitability Analysis 32
4.2.3: Liquidity analysis 33
4.2.4: Rate of Return Analysis 35
4.2.5: Efficiency Analysis 36
4.3: Trend Analysis 37
4.3.1: YoY Analysis of Income statement 37
4.3.2: YoY Analysis of Balance Sheet 39
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Chapter 05: Summary, Recommendation & Conclusion
5.1: Summary of the Findings 41

5.2: Recommendation 42
5.3: Conclusion 43
References & Bibliography 44
Appendices 45
List of Tables
Table 2.1: Ship-Breaking industry in the world…………………………………………… 05
Table 2.2: Ship-Breaking in numbers of Taher & Company……………………………… 06
Table 2.2: Ship-Breaking in numbers of Taher & Company……………………………… 07
Table 2.4: Quality parameters of sea water from 15 ship recycling yards is shown……… 08
Table 2.5: Ship Breaking Procedure………………………………………………………. 10
Table 2.6: Sister concerns of Taher &Company Ltd. …………………………………….. 12
Table 2.7: Brief description of Taher & Company’s business. …………………………… 13
Table 2.8: Board of Directors of Taher & Company ……………………………………… 14
Table 2.9: Management Organogram……………………………………………………… 15
Table 2.10: External Analysis……………………………………………………………... 17
Table 4.1: Leverage Analysis……………………………………………………………… 30
Table 4.2: Profitability Analysis…………………………………………………………… 32
Table 4.3: Liquidity Analysis……………………………………………………………… 33
Table 4.4: Altman Z score Calculation……………………………………………………. 34
Table 4.5: Rate of return Analysis…………………………………………………………. 35
Table 4.6: Efficiency Analysis…………………………………………………………….. 36
List of Figures
Fig 2.1: Player of Ship-Breaking Industry in Bangladesh. ………………………………… 05
Fig 4.1: Common Size Comparative Income statements…………………………………… 28
Fig 4.2: Common Size Comparative Statement of Financial Position……………………... 29
Fig 4.3: Leverage Analysis…………………………………………………………………. 31
Fig 4.4: Profitability Analysis……………………………………………………………… 32
Fig 4.5: Liquidity Analysis………………………………………………………………… 34
Fig 4.6: Rate of return Analysis……………………………………………………………. 35
Fig 4.7: YoY Analysis of Income statement……………………………………………….. 37
Fig 4.8: YoY Analysis of Income statement……………………………………………….. 38
Fig 4.9: YoY Analysis of Balance sheet…………………………………………………… 39
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Acronyms:
SBRI= Ship Breaking & Recycling Industry.

BSBRA= Bangladesh Ship Breaking & Recycling Association.
GAAP= Generally Accepted Accounting Principles.
EBIT= Earnings Before Interest & Taxes.
ROA= Return on Asset.
ROE= Return on Equity.
YoY= Year over Year.
EBT= Earnings Before Taxes.
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Executive Summary
Taher & Company Ltd, a sister concern of Mostafa Hakim group, is one of the leading company of ship
breaking industry in Bangladesh. Its main activity is buying dead/expired vessel, scrap it and sell it into
pieces. Ship breaking is one of the progressive sector which generates huge revenue for the government
and offers number of job opportunities. Cheap labor and poor enforcement of environmental law helped
Bangladesh to secure leading position in the ship breaking industry of the world.
The study tries to analyze the performance of ship breaking industry taking Taher & Company Ltd. as a
case study. Financial performance analysis measures the effectiveness of a firm based on operating
activity. It also helps management in decision making. Here Common Size analysis, Ratio analysis, Trend
analysis have been used to evaluate the financial performance of the firm. Afterwards the history of ship
breaking industry in Bangladesh, the risk factor, current market scenario & procedure of ship breaking
and management & business overview of Taher & Company have also been described.
The study finds out the performance of Taher & Company during the period of analysis was up to the
mark. The company was very effective in dealing with administrative expenses. The debt oriented capital
structure helped the firm to generate more net income in last 3 years. A huge increase in sales by 144.2%
has helped the firm in overall performance. Reduction in administrative cost and tax expenses boosted the
net margin from 0.79% to 3.12%. The firm relies heavily on current asset & current liability and has
minimal investment in fixed asset. A relationship between aggressive financing and profitability has been
found. Though the financial performance was well enough there are still lots of room to develop.
Analysis of the collected data is presented in graphical & tabulated form, with proper description &
interpretation. Based on the findings some policy implication has been suggested.
Key Words: Ship Breaking, Taher & Co. Ltd. Financial Performance Analysis, Common Size Analysis,
Ratio Analysis, Trend Analysis.
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Chapter One
Introduction
1.1 Prelude
Internship report is a part of BBA program in University of Chittagong. Every student must meet specific
criteria & credit hours to gain those reserved credit points, under supervision of a faculty. Internship
program is designed to increase the ability of students to learn the practical implication of things they
learned theoretically in class. It also helps students to gain knowledge about corporate grooming. One of
the major benefits of internship is communication & networking. Throughout the internship period,
students can learn the way to communicate with professionals. It allows students to build a professional
network that will help them to succeed in their career. For internship, I had the opportunity to work in
Taher & Company Ltd.
Taher & Company Ltd, a concern of Mostafa-Hakim group is one of the major ship-breaking and recycling
company of the country. The company buyes dead vessel at a high price, scrap it into parts and sell it
directly or via auction. The company has a friendly & learning environment which helped me to adjust to
the work environment quickly.
Some important issues & problem i.e. the problem regarding ship-breaking, riskiness of ship breaking,
health hazard & environmental hazard of ship breaking etc, has been addressed in this report. Issue related
to capital structure & financial statement (ratio) has also been addressed. The study focused on the
financial performance of the sample firm. The report also contains some valuable recommendation.
1.2 Statement of the problem:

Finance is considered to be the blood of the business. In order to sustain in the highly competitive era of
business, we need to examine the financial health of the business. Financial performance analysis is an
efficient way to analyze the performance of the company.
Financial performance analysis is the process of determining the operating and financial characteristics of
a firm from accounting and financial statements. The goal of such analysis is to determine the efficiency
and performance of firm’s management, as reflected in the financial records and reports. The analyst
attempts to measure the firm’s liquidity, profitability and other indicators that the business is conducted
in a rational and normal way; ensuring enough returns to the shareholders to maintain at least its market
value.
By conducting financial performance analysis we can analyze the liquidity & profitability performance
of Taher & Co. Ltd. We can also recommend some policy in order to boost their performance. The
company can gain more financial efficiency from the recommended policy.
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1.3 Rationale of the study:
The major reason of the study is to evaluate the Ship-breaking & recycling industry (SBRI) of
Bangladesh by taking Taher & Co. Ltd as sample firm. Since Bangladesh is the global market leader of
SBRI and there is no in-depth study we find in this sector, the study is worthy for us.
The study will help us to understand the business of SBR industry. We will come to know about the
liquidity performance, profitability, cash management of the company. we will also know financing &
taxation policy of the industry. This study will help to reduce research gap in SBR industry.
1.4 Objective of the study

Main objective: The main objective of the study is to evaluate the financial performance of Taher &
company Ltd.
Specific Objective:
 To focus the present scenario of Financial Performance Measurement of Taher & Co. Ltd.
 To highlights the theoretical framework of Financial Performance Measurement in general and
company in particular.
 To evaluate the performance of Financial Performance Measurement of Taher & Co. Ltd
 To identify the problems related to Financial Performance Measurement of Taher & Co. Ltd.
 To suggest appropriate measures for overcoming those identified problems and to run the
company effectively.
1.5 Methodology of the study

Methodology is a system of methods used in a particular area of study or activity. In this study, both
primary & secondary date has been used. All the information regarding Taher & Company Ltd. has been
collected through face to face interview with employees. Financial statements of three years have also
been collected from original/unpublished source. Information regarding ship breaking industry has been
collected from published sources.
2
1.6 Scope & Limitation of the study
The scope of this report is confined to the financial performance of Taher & Company Ltd. financial
statements from July 2016-june 2018 has been used to analyze the performance. Capital structures and
Ratio analysis were in the main attention. This report also covered a brief overview of ship breaking
industry of Bangladesh.
The report faced so many obstacles while preparing. Some of those obstacles are huge enough to effect
the findings of the study. Some of those limitation are:
o There was shortage of data because of confidential matters. The unavailability of data made
the analysis difficult.
o The website of Taher & Company Ltd. is not rich enough to collect information from. So
I had to depend on face to face interview to know about the company. It consumed
considerable amount of time.
o As ‘Ship-breaking’ is not considered as Industry in Bangladesh, Information regarding
ship-breaking in Bangladesh is limited.
1.7 Organization of study

The chapter is divided into five chapters which are explained as follows.
Chapter 1 describe about general background, statement of the problem, rationale of the study, objective
of the study, methodology of the study, scope & limitation of the study and organization of the study.
Chapter 2 gives a short description about Ship-breaking industry in Bangladesh with special reference to
Taher & Co. ltd.
Chapter 3 gives us a theoretical framework of Financial performance analysis.
Chapter 4 explains the financial performance of Thaer & Co. Ltd with the help of common size analysis,
ratio analysis & trend analysis by analyzing financial data of Taher & Co. ltd of 3 years.
Chapter 5 deals with the summary, recommendation & conclusion of the study.
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Chapter two:
Ship breaking industry in Bangladesh
with special reference to Taher &
company Ltd:
A Bird’s Eye View
2.0: Introduction
Ship Breaking or ship recycling is the process of dismantling an obsolete vessel’s structure for scrapping
or disposal, conducted on a dismantling yard. It involves a wide range of activities from removing all the
gear and equipment that are on the ships to cutting down and recycling the ship’s infrastructure. Ship
breaking is a challenging process, due to the structural complexity of the ships and the environmental,
safety and health issues involved.
Currently, the global center of the ship breaking & recycling industry is located in South Asia, especially
Bangladesh, India and Pakistan. These three countries are accounted for 80% of the international market
for ship breaking. The ship breaking and recycling industry plays a significant role in the economy of
Bangladesh. The SBRI also has major social impact in the region. Though Bangladesh is the market leader
now, working condition of SBRI is still very poor. This profession possess dangerous environmental &
health risk. But the protection system is still not up to the mark.
Taher & Company ltd is one of the pioneer company in SBRI industry in Bangladesh. It started its
operation in 1984. Since then, the company is flourishing in this area. Taher & Company Ltd. is the sister
concern of Mostafa-Hakim Group, a family centered business group based on Chittagong. The group has
appreciable history in meeting corporate social responsibility.
2.1: Overview of Ship Breaking Industry

Ship-breaking or ship demolition is a type of ship disposal involving the breaking up of ships for either a
source of parts, which can be sold for re-use, or for the extraction of raw materials, chiefly scrap. It may
also be known as ship dismantling, ship cracking, or ship recycling. Modern ships have a lifespan of 25
to 30 years before corrosion, metal fatigue and a lack of parts render them uneconomical to operate. Ship-
breaking allows the materials from the ship, especially steel, to be recycled and made into new products.
This lowers the demand for mined iron ore and reduces energy use in the steelmaking process. Fixtures
and other equipment on board the vessels can also be reused. While ship-breaking is sustainable, there are
concerns about the use of poorer countries without stringent environmental legislation. It is also labour-
intensive, and considered one of the world's most dangerous industries.
Until the late 20th century, ship breaking took place in port cities of industrialized countries such as the
United Kingdom and the United States. Those dismantlers that still remain in the United States work
primarily on government surplus vessels. In the mid-20th century, low-cost East Asian countries began to
dominate ship breaking, with countries such as Japan, then Korea and Taiwan and then China increasing
their world share.
As the minimal wage rate increased in East Asian Countries and Tightening environmental regulations
resulted in increased costs of hazardous waste disposal in industrialized countries in the 1980s, causing
ships to be exported to lower income nations, chiefly South Asia. . In 2013, the world total of demolished
ships amounted to 29,052,000 tonnes, 92% of which were demolished in Asia. India, Bangladesh, China
and Pakistan have the highest market share and are global centers of ship breaking, with Chittagong Ship
4
Breaking Yard in Bangladesh, Alang in India and Gadani in Pakistan being the largest ships' graveyards
in the world.
2.1.1: History of Ship Breaking Industry in Bangladesh:

The shipbreaking industry started its operations in the 1960s when a Greek ship ‘MD Alpine’ was stranded
on the shores of Sitakund, Chittagong after a severe cyclone. The ship remained there for a long time
before the Chittagong Steel House brought the vessel and scrapped it.
During the Liberation War in 1971, a Pakistani ship ‘Al Abbas’ was damaged by bombing. It was later
salvaged and brought to the Fauzdarhat seashore. In 1974, Karnafully Metal Works Ltd bought it as scrap,
introducing commercial shipbreaking in Bangladesh. The industry flourished during the 1980s. Today it
has become large and profitable industry for Bangladesh.
2.1.2: Ship- Breaking: Current Market Position of Bangladesh:

Currently Bangladesh is the global market leader in ship breaking industry with dismantling around 47.2%
of world vessel. According to the report, in 2018, India dismantled 25.6% ocean-going vessels, Pakistan
21.5%, Turkey 2.3% and China 2%.
At present, the global center of the ship breaking and recycling industry is in South Asia, specifically
Bangladesh, India, and Pakistan. These three countries account for 70–80 percent of the international
recycling market for ocean-going vessels, with China and Turkey covering most of the remaining market.
Only about 5 percent of global volume is scrapped outside these five countries.
Fig 2.1: Player of Ship-Breaking Industry in Bangladesh.

(Source: Compiled by the Author)
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The five recycling countries share a common characteristic in having a large appetite for scrap steel.
Bangladesh, Pakistan and to a large extent India use the steel from recycled ships in mills where steel is
rerolled so that it can be used directly, for example in urban construction.
In Bangladesh, The industry supplies 60-70% raw materials to the re-rolling mills of the country,
generating revenue of Tk 1200-1500 every year.
Here is the details picture of ship-breaking industry in the world:
Table 2.1: Ship-Breaking industry in the world.

(Source: Internet)
Reason for securing top position:
Turkey held the position in ship breaking in 1980. In 1990, it shared the position with China & South
Korea. China & India held the position for last two decades. Bangladesh has grabbed it for the first time
in 2019. The reasons that played crucial rule here are:
 Tightening regulation in developed countries: For protecting the environment and the labors right,
more tightening regulation has imposed recently. Those regulations forced the developed countries
to step out. Specially the IMO Hong Kong International Convention for the safe and
environmentally sound recycling of ships of 2019, as well as a European Union regulation of 2018
played the major rules here.
 Foreign Currency: the ship-breaking sector is saving a huge amount of foreign currency in many
ways. Scrapping of ships provides the country’s significant source of steel and in doing so saves
substantial amount of money in foreign exchange by reducing the need to import steel materials.
Around 60% of raw materials of steel are provided from scraping ship.
 Cheap Labor: Bangladesh has become a top destination of scrap vessels due to cheap labour and
sloppy regulations. Due to the verge amount of population, Bangladesh offers cheapest labor in
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many sector. These labor comes from rural poor families. The workers are poor and they have no
other alternatives for supporting themselves and their families than to work in the ship breaking
yards. There are often no other job alternatives for them. The workers do not know much about
rules and regulations on basic occupational health standards and safety. The labourers or their
families are poorly compensated when injured or killed.
According to Bangladesh Ship Breakers and Recyclers Association (BSBRA), There are 160 ship-
breaking and recycling yards in Chittagong, though only 60-65 are now in operation. According to
BSBRA report, the number of ship broken in recent years are shown below:
Year Number of Ship Broken

2015 221
2016 250
2017 214
2018 221
Table 2.2: Ship-Breaking in numbers

(Source: BSBRA’s Website)
2.1.3: Risk in Ship-Breaking:

Ship breaking is considered to be the most dangerous job, with unacceptably high levels of fatalities,
injuries and work-related diseases. Shipbreaking is a difficult process due to the structural complexity of
the ships, and it generates many environmental and safety and health hazards. Thus it has become a major
occupational and environmental health problem in the world.
Health Risk:
Ship breaking creates a major health issue. Burns from explosion & fire, suffocation, mutilation from
falling metal are the reasons of the health issue. Most of the time, ships are carried ashore for cutting but
sandy beach cannot sufficiently support the heavy equipment, which is thus prone to collapse. Workers
usually lack personal protective equipment and have little training. Workers have very limited access to
health services and inadequate housing, welfare and sanitary facilities further exacerbate the plight of the
workers.
Our country, despite being market leader, is not developed in technology in scrapping ship. In addition,
the rules are not sufficient and the government has no honest intention to do something about it as it will
reduce the govt revenue. As a result, Bangladeshi workers posses more health risk than others. 20% of
Bangladeshi workers are under 15. According to a local NGO, 1 worker dies in every week and 1 got
injured per day. General health statistics show that the percentage of people with disabilities in the
Chittagong area is above average for the country as a whole, because many workers have lost limbs or got
other disabilities from working in the ship breaking yards.
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Perhaps, the table can draw a major health hazard risk of workers in Bangladesh.
Types of health hazards Frequency Percentage (%)
Loss and breaking of body organs 320 23.19

Spot death 240 17.39
Problem of eyesight and headache pain 122 8.84
Breathing difficulty, cold and Cough 104 7.54
Skin diseases 220 15.94
Physical weakness, Muscle and chest pain 148 10.72
Diarrhea and water deficiency 66 4.78
Gastric problem 160 11.59
Total 1380 100.0
Table 2.3: Health Hazards of Ship breaking in Bangladesh
(Source: BSBRA’s Website)
Environmental issue:
Ship breaking is a highly polluting industry. Large amounts of carcinogens and toxic substances (PCBs,
PVCs, PAHs, TBT, mercury, lead, isocyanates, sulfuric acid) not only intoxicate workers but are also
dumped into the soil and coastal waters. Many ship breaking yards operate in developing nations with lax
or no environmental law, enabling large quantities of highly toxic materials to escape into the general
environment and causing serious health problems among ship breakers, the local population, and wildlife.
In Bangladesh, ships containing dangerous materials are being cut up by hand, on open beaches, with no
consideration given to safe and environmentally friendly waste management practices.
Ship breaking has an impact in inter-tidal sediments and soils. The ship breaking work results in the beach
soil losing its binding properties and this accelerates the amount of shore erosion and increase the turbidity
of sea water and sediments in the area. Again it has impact on biodiversity too. Shipbreaking activities
contaminate the coastal soil and sea water environment mainly through the discharge of ammonia, burned
oil spillage, floatable grease balls, metal rust (iron) and various other disposable refuse materials together
with high turbidity of sea water which destroys biodiversity.
Ship breaking reduces the quality of sea water. Here, the quality parameters of sea water from 15 ship
recycling yards is shown.:
Table 2.4: Quality parameters of sea water from 15 ship recycling yards is shown
(Source: Internet)
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2.1.4: Contributions of Ship Breaking in the Economy of Bangladesh:
Despite of those environmental & health hazard, ship-breaking offers o lot of opportunities to our
economy. It generates a huge amount of revenue for government, it reduce the cost of importing, it offers
job opportunities. The benefit of ship breaking is stated below:
 Source of revenue for Government: It generates large amounts of revenue for various Government
authorities through the payment of taxes. Every year the Government collects 1000,00,00,000
Taka in revenue from the ship breaking industry through import duty, yards tax and other taxes.
 Source of raw materials for steel industry: Scrapping of ships provides the country’s significant
source of steel and in doing so saves substantial amount of money in foreign exchange by reducing
the need to import steel materials. At present Bangladesh has a demand for 50,0000 tons of metal
/ steels, but Bangladesh has no iron ore sources or mines, which make ship scrapping is the
inevitable and important source of raw materials. More than 350 re-rolling mills have been using
ship scraps as their raw materials. The industry is currently supplying more than 60 per cent of the
raw materials for local steel industry. Besides, local shipbuilding industry also largely depends on
this as raw material mostly are being used from scrap steel. A good number of local industries
including heavy and light engineering already been developed depending on ship breaking industry
 Employment Opportunity: Despite the conditions that the workers are employed under, this is an
industry that employs more than 50000 people directly while another 0.1 million people are
involved indirectly. It provides employment for some of the poorest people from the north of
Bangladesh who would otherwise have no employment.
 Green Industry: In some ways it can be considered a “green industry”. Almost everything on the
ship and the ship itself is recycled, reused and resold. The scrapping of ships supplies raw materials
to steel mills, steel plate re-manufacturing, asbestos re-manufacturing as well as providing
furniture, paint, electrical equipment and lubricants, oil to the number of businesses that have
sprouted up specifically as a result.
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2.1.5: Ship Breaking Procedure:
Ship breaking follows a complex procedure. All the procedures are not same. The procedure varies from
country to country. Even it varies within companies. Here I tried to present the ship breaking procedure
of Taher & Company Ltd. the data of which are collected through face to face interview.
Purchase Offering from shipping agent.
Procedure: Getting Proforma Invoice from shipping agent
Getting Memorandum of understanding (MOU)
Getting NOC from ministry of commerce & ministry of land.
Applying for L/C
Preparing charge documents
Payment of L/C commission
Getting Port NOC
Getting Environment certificate
Explosive test (before)
Rummage, NAVY modeling list
Payment of Tax, AT, VAT
Getting Beaching Permission
Beaching
Explosive test (after)
Remittance transfer order
Cutting Applying for cutting permission

Procedure:
Removing fuel barrels/electronic goods & taking them ashore
Cutting vessel by blow torch into large bits
Pulling large bits ashore by winch machine
Dissecting large bits into small bits on shore
Scrap stock in the yard
Weighing in scale
Selling Outfitting products (furniture, cables) are sold by auction

Procedure:
Metal items are sold at market price.
2.5: Ship Breaking Procedure

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2.2: Characteristics of sample firm
TAHER & CO. LTD.

(SHIP BREAKER & RECYCLING)
2.2.1: Company Profile:

Taher & company limited, a private company limited by share was incorporated on August 20, 1984 vide
registration No. C12686/253 of 1984 under Asstt. Register of Joint Stock Companies and Firms
Chittagong and its registered office situated at 255, Dewanhat, D. T. Road, Chittagong.
Taher Group is a dream of a family, The Mostafa-Hakim family of Chittagong. It started off as a
construction firm in the sixties by Late M A Hakim and his sons carried out his dream by making it a
million dollar empire. His son Mr. Taher, with the help of his brothers started of as a ship breaker in the
early eighties. Now the company deals in many different products and services. Taher Group has mainly
establishes its name an advanced building materials as the company dealing in bricks, deformed bars (rod)
and cement. Apart form this the Group deal in liquid oxygen, real estate, Recondition vehicles, Logistics,
spare parts and various kinds of general trading. However, all this success did not take their eyes away
form the society that made the success possible. The Group wanted to put back something to the society
that has given them so much. Thus the Group created Mostafa-Hakim Welfare Foundation and established
a lot of educational and religious institutions. Taher Group really proven social responsibility in the true
sense.
Vision: Quality in every step of the way.

Mission: We want to work with in society to create employment and contribute as much possible to the
GDP
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2.2.2: Parent Company:
Taher and company is sister concern of Mostafa-Hakim Group. Mostafa-Hakim Family of Chittagong
started the family business as construction firm in the sixties founded by late Hakim. His sons carried out
this dream and started of as a ship breaker in the early eighties. Now the company deals with diverse range
of product and services. The company has made his marks in areas like ship demolition & steel Product,
Manufacturing of Cements, Bricks, Oxygen. Textiles, Real-Estate, Importing and distribution. The
company has been founded on a commitment to quality, timeliness and value. Today the company has
2500 employees working in more than Eighteen operations
Some of the sister concerns are:
TAHER & COMPANY LIMITED

GOLDEN IRON WORKS LIMITED
GOLDEN STEEL ALLOY WORKS LIMITED
GOLDEN BRICKS WORKS LIMITED
GOLDEN OXYGEN LIMITED
ALHAJ MOSTAFA-HAKIM CEMENT INDUSTRIES LIMITED
ALHAJ MOSTAFA-HAKIM HOUSING & REAL ESTATE LIMITED
ALHAJ MOSTAFA-HAKIM TRADING CORPORATION
TAHER & BROTHERS
TR TRADING
RUSLAN CORPORATION
DIDARUL ALAM & BROTHERS
NIZAMUL ALAM & BROTHERS
RUSLAN MOTORS
MOSTAFA-HAKIM SHIPPING LINES LIMITED
GOLDEN AUTO WORKSHOP LIMITED
EAGLE STAR TEXTILE MILLS
T R FISHING LIMITED
T R SHIPBREAKERS LIMITED
2.6: Sister concerns of Taher &Company Ltd.
(Source: Annual Repot of Taher & Co. Ltd.)
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2.2.3: Business Details:
Taher & Company Ltd. is engaged in ship breaking business. Its main activity is buying dead/expired ship,
scrap it and sell it into pieces. The buying price and profit from ship largely depends on the size of the
ship. The company runs its activity from two wings. The Yard wing is responsible for cutting the ship and
selling those parts. The corporate wing is responsible for keeping the account and maintaining other
business formalities.
A brief picture of Taher & Company’s business is shown in the table
Number of Employee 7+15

Number of Direct Labors 100
Number of Indirect labors Depends on activity
Average Number of Ship Broken in a year 6 (depends on size)
Weight per Ship 1000 tons to 25000 tons
Price per ship $350-$450per ton
Time to broke a ship 3 to 12 months
Profit per ship 50 lakhs per ‘000 ton
(approximate)
Nature of financing Own capital, Retained
earnings, Borrowed capital.
Interest rate 12.5-13%
Tax rate 35%
Table 2.7: Brief description of Taher & Company’s business.
13
2.3: Authority and responsibility
2.3.1: Board of Directors:
Mr. M. A Taher Chairman
Mr. M. Manjur Alam Managing Director
Mr. M. Sirajul Islam Director- Administration
Mr. M.A. Kashem Director- Administration
Mr. M. Didarul Alam Director- Finance
Mr. M. Shahin Alam Tipu Director- Import, Sales & Distribution
Mr. M. Nizamul Alam Director- Administration
Mr. M. Sarwar Alam Director- Export, Sales & Distribution
Mr. M. Faruk Azam Director- Social Activities
2.8: Board of Directors of Taher & Company

14
2.3.2: Management Organogram:
Organogram is a diagram that shows the relation among the employees graphically. The Management
Organogram of Taher & company limited is showen below:
Board of Directors
General Manager
Corporate GM Yard GM
Assistant Audit
Manager Manager
Vat Vat Delivery Security

Officer Officer In-charge In-Charge
Cash Officer Junior

Officer officer
Officer Officer
Security staffs
Table 2.9: Management Organogram
15
2.4: Corporate Social Responsibility
Mostafa-Hakim Group is well known for its contribution in the society. The group contributes to the
society with variety of ways, especially in the religious institutions. The success in business did not take
their eyes away from the society that made the success possible. The Group wanted to put back something
to the society that has given them so much. Thus the Group created Mostafa-Hakim Welfare Foundation
and established a lot of educational and religious institutions. Taher Group really proven social
responsibility in the true sense. “Alhaj Mostafa-Hakim Welfare foundation” consisting of 65 units. Some
of them are stated below:
 Alhaj Mostafa-Hakim Degree College, North Kattali Chittagong.

 Alhaj Mostafa-Hakim Kinder Garten & High Schhol,North Kattali, Chittagong.
 Alhaj Mostafa-Hakim Kinder Garten School, New Monsurabad, Chittagong.
 Alhaj Mostafa-Hakim Furkania Madrasa, North Kattali, Chittagong.
 Noorani Jame Mosjid, North Kattali, Chittagong.
 Tayebia Jame Mosjid, North Kattali, Chittagong.
 Alhaj Mostafa-Hakim Primary School, South Sonaichari, Chittagong.
 Mosjid-E-Guachulazam, Sonaichari, Chittagong.
 Alhaj Mostafa-Hakim Furkania Madrasa, Colege Road, North Kattali, Chittagong.
 Alhaj Mostafa-Hakim City Corporation Maternity Hospital, North Kattali, Chhittagong.
 Alhaj Abdul Jalil Jame Mosjid, Doublemooring, Chittagong
 Alhaj Mostafa-Hakim Charitable Hospital, Mansurabad, Chittagong.
 Taheria Hafizia Madrasa, North Kattali, Chittagong.
 Alhaj Mostafa-Hakim Orphanage, North Kattali, Chittagong.
 Ambia Khatun Furkania Madrasa, Munsurabad, Chittagong.
 Hajrat-Dal-Chal Miah Furkania Madrasa,Kumira, Chittagong.
 Alhaj Shamdu Mia Abadathkhana and Hafezia Madrasa, Dewanhat, Chittagong.
 Baitul Aman Nurani Madrasa, CDA Charanpar, Chittagong.
 Water Supply Project for Bastibashi, North Kattali, Chittagong.
 Mostafa-Hakim Employment Project, North Kattali, Chittagong.
 Bangabhandu Bangla School, 13 no Ward, Chittagong.
 Siddique Akbar Mosque, North Kattali, Chittagong.
 Hajrat Omar Faruk Jame Mosque, North Kattali, Chittagong.
 Alhaj Mostafa-Hakim Orphannage, Alhaj Mostafa-Hakim College road, North Kattali,
Chittagong.
 Alhaj Mostafa-Hakim Dustha-O-Boyaskha Cikitsha Bhata Prokolpa, North Kattali, Chittagong.
 Mosjid A Belal, Juldha , Dangaarchar, Chittagong.
 Sebakhola Kali Mondir, North Kattali, Chittagong.
 Baitul Mamur jame Mosjid, Dunat, Ghoshaibari, Bogra.
 Champa Yousuf Forkania Madrasa, Dangaarchar, Julda, Karnafully, Chittagong.
 Alhaj Akkel Ali Showdagar Forkania Madrasha, Dewanhat, Chittagong.
 Arefin Nagor Hazrat Omar Faruk Jame Mosjid, Jangal Salimpur, Chittagong.
 Nobinagar Alhaj Mostafa Hakim Jame Mosjid, Manikchari, Khagrachari
16
2.5: Market Scenario:
Market scenario of ship breaking industry in Bangladesh is very prospering. Bangladesh is already the
market leader in this sector, and yet, there is a huge area of opportunity for further development. The
market scenario of any industry can be pictured by external analysis. As Taher & Company a major player
in the ship breaking industry in our country, I tried to catch the market scenario from the view point of
Taher & Company Ltd.
Opportunities Threat
 Expanding to ship-building business.  Environmental Policy

 Re-rolling Business.  Labor Risk
 Exporting materials like Rod, Billet,  International standard Compliance.
Angle etc.
2.10: External Analysis
2.6: Objective of Internship

Experience is becoming a crucial factor for employers when deciding who gets their foot in the door. It’s
strongly advised that students and graduates take the opportunity to complete a period of work experience
to ensure they have a competitive advantage over their peers; and that’s where an internship can make all
the difference.
Internships can be as short as a week or as long as 12 months. They can be paid or voluntary; however,
before you start an internship it’s important to know your rights with regards to getting paid.
The objectives of internship are:
 Learning real world implication of concept & theories that was covered as business students.
 Learning application of business concept & theories in to real world decision making.
 Developing & improving business skills in communication technology, quantitative reasoning and
team work.
 Expanding network of professional relationship and contacts.
 Developing a solid work ethic as well as commitment to ethical conduct and social responsibility.
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2.7: Internship Work Experience
I have done my internship in Taher & Company Ltd. Here my work activity was limited, but fruitful. Here
the intern is not usually offered with too many work opportunities as most of the activity are software
based and many of them are confidential. Though I had some great time there, learning corporate
experience and understanding the concept of ship breaking industry.
The work experience I gathered in my internship period are:
1. Sorting out Challan: Every day, I have to sort out the delivery challan of the items sold according
to their ship name and gate pass.
2. Registering those Challan: After sorting out challan, I have to put those transactions in to their
respective Challan register book which are kept according to ship name.
3. Writing Sales Statement: I’ve learned how to write sales statement of daily transaction.
4. Tally ERP.9: One of the very lucrative things about my internship period is that I’ve learned how
to put transaction in Tally ERP.9
18
Chapter Three:
Measuring Financial Performance: A
Theoretical Framework
3.0 Introduction
Financial performance analysis is the process of determining the operating and financial characteristics of
a firm from accounting and financial statements. The goal of such analysis is to determine the efficiency
and performance of firm’s management, as reflected in the financial records and reports. The analyst
attempts to measure the firm’s liquidity, profitability and other indicators that the business is conducted
in a rational and normal way; ensuring enough returns to the shareholders to maintain at least its market
value.
Financial performance analysis includes analysis and interpretation of financial statement in such a way
that it undertakes full diagnosis of the profitability and financial soundness of the business.
Financial performance analysis helps the decision makers to take efficient decision based on their findings.
A major part of financial performance analysis is financial statement analysis. Different aspect of financial
statement gives the decision maker to find out how business is operating, the problem related to
performance and formulate some policies.
Financial statement analysis can be done in many ways. Here throughout the study the Common size
analysis, ratio analysis and trend analysis of Taher and company has been done. In a theoretical
framework of those analysis is drawn.
3.1 Common Size Analysis:

Common size, or vertical analysis, is a method of evaluating financial information by expressing each
item in a financial statement as a percentage of a base amount for the same time period. A company can
use this analysis on its balance sheet or its income statement.
In other word Common size analysis, also referred as vertical analysis, is a tool that financial managers
use to analyze financial statements. It evaluates financial statements by expressing each line item as a
percentage of the base amount for that period. The analysis helps to understand the impact of each item in
the financial statement and its contribution to the resulting figure.
A balance sheet summarizes the company's assets, which are things that it owns that have value; its
liabilities, which are the amounts it owes to others; and its equity, which is an owner's investment in the
business. An income statement shows the company's revenues, which is the amount of money it made by
selling its goods and services, and its expenses, which is the amount of money it spent to earn its revenues.
Common Size Amount = (Analysis Amount / Base Amount) x 100%
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3.1.1 Common Size Comparative Income statements:
A common size income statement is an income statement in which each line item is expressed as a
percentage of the value of revenue or sales. It is used for vertical analysis, in which each line item in a
financial statement is represented as a percentage of a base figure within the statement. The base figure of
Common Size Comparative Income statements is Sales.
The analysis tells investors and finance managers how the company is doing in terms of revenues, and
they can make predictions of future revenues. Companies can also use this tool to analyze competitors to
know the proportion of revenues that goes to advertising, research and development, and other essential
expenses.
3.1.2: Common Size Comparative Income statements:

A common size balance sheet is a balance sheet that displays both the numeric value and relative
percentage for total assets, total liabilities, and equity accounts. Common size balance sheets are used by
internal and external analysts and are not a reporting requirement of generally accepted accounting
principles (GAAP).
The balance sheet common size analysis mostly uses the total assets value as the base value. On the balance
sheet, the total assets value equals the value of total liabilities and shareholders’ equity. A financial
manager or investor uses the common size analysis to see how a firm’s capital structure compares to rivals.
They can make important observations by analyzing specific line items in relation to the total assets.
3.2 Ratio Analysis
Ratio analysis is the comparison of line items in the financial statements of a business. Ratio analysis is
used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and
profitability. This type of analysis is particularly useful to analysts outside of a business, since their
primary source of information about an organization is its financial statements. Ratio analysis is less useful
to corporate insiders, who have better access to more detailed operational information about the
organization.
There are many types of ratio analysis. All the related ratios can be categorized into some specific category
like leverage analysis, profitability analysis, liquidity analysis and so on. A brief discussion of all the ratios
is given below.
3.2.1 Leverage Analysis:

Leverage ratios are one of the most common methods analysts use to evaluate company performance. A
single financial metric, like total debt, may not be that insightful on its own, so it’s helpful to compare it
to a company’s total equity to get a full picture of the capital structure. Leverage Ratios are:
20
Debt/Equity Ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion
of shareholders' equity and debt used to finance a company's assets. The two components are often taken
from the firm's balance sheet or statement of financial position, but the ratio may also be calculated using
market values for both, if the company's debt and equity are publicly traded, or using a combination of
book value for debt and market value for equity financially. A high debt/equity ratio generally means that
a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a
result of the additional interest expense. This can result in volatile earnings as a result of the additional
interest expense. A low debt/equity ratio usually means that a company has been friendly in financing its
growth with debt and more aggressive in financing its growth with equity.
𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
Times Interest Earned: A ratio used to determine how easily a company can pay interest on outstanding
debt. The interest coverage ratio is calculated by dividing a company's Earnings Before Interest and Taxes
(EBIT) of one period by the company's interest expenses of the same period. The lower the ratio, the more
the company is burdened by debt expense. When a company's interest coverage ratio is lower, its ability
to meet interest expenses may be questionable and it indicates that the company is not generating sufficient
revenues to satisfy interest expenses.
The interest coverage ratio is a measure of the number of times a company could make the interest
payments on its debt with its earnings before interest and taxes, also known as EBIT. The lower the interest
coverage ratio, the higher is the company's debt burden and the greater the possibility of bankruptcy or
default.
𝐸𝐵𝐼𝑇
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Equity Multiplier: The equity multiplier is a financial leverage ratio that measures the amount of a
firm's assets that are financed by its shareholders by comparing total assets with total shareholder's equity.
In other words, the equity multiplier shows the percentage of assets that are financed or owed by the
shareholders.
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
3.2.2: Profitability Analysis:
Profitability is a type of income statement analysis where an analyst assesses how attractive the economics
of a business are. Every firm is most concerned with its profitability. One of the most frequently used
tools of financial ratio analysis is profitability ratios, which are used to determine the company's bottom
line and its return to its investors. Profitability measures are important to company managers and owners
alike. If a small business has outside investors who have put their own money into the company, the
primary owner certainly has to show profitability to those equity investors. Profitability ratios show a
company's overall efficiency and performance. Profitability margin are:
Gross Margin: The Gross Margin Ratio, also known as the gross profit margin ratio, is a profitability
ratio that compares the gross margin of a company to its revenue. It shows how much profit a company
makes after paying off its Cost of Goods Sold (COGS). The ratio indicates the percentage of each dollar
21
of revenue that the company retains as gross profit. This ratio looks at how well a company controls the
cost of its inventory and the manufacturing of its products and subsequently pass on the costs to its
customers. The larger the gross profit margin, the better for the company.
𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛
𝑆𝑎𝑙𝑒𝑠
EBIT Margin: EBIT stands for Earnings Before Interest and Taxes and is one of the last subtotals in the
income statement before net income. EBIT is also sometimes referred to as operating income and is called
this because it’s found by deducting all operating expenses (production and non-production costs) from
sales revenue. Dividing EBIT by sales revenue shows you the operating margin, expressed as a percentage.
𝐸𝐵𝐼𝑇
Net Profit Margin: Net Profit Margin (also known as “Profit Margin” or “Net Profit Margin Ratio”) is a
financial ratio used to calculate the percentage of profit a company produces from its total revenue. It
measures the amount of net profit a company obtains per dollar of revenue gained. The net profit margin
is equal to net profit (also known as net income) divided by total revenue, expressed as a percentage.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
3.2.3 Liquidity analysis:
This is a type of financial analysis that focuses on the balance sheet, particularly, a company’s ability to
meet short-term obligations (those due in less than a year).
3.2.3.1: Liquidity Ratios:
Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to pay off
current debt obligations without raising external capital. Liquidity ratios measure a company's ability to
pay debt obligations and its margin of safety through the calculation of metrics including the current ratio,
quick ratio, and operating cash flow ratio. Current liabilities are analyzed in relation to liquid assets to
evaluate the coverage of short-term debts in an emergency.
Current Ratio: The current ratio, also known as the working capital ratio, measures the capability of a
business to meet its short-term obligations that are due within a year. The ratio considers the weight of
total current assets versus total current liabilities. It indicates the financial health of a company and how
it can maximize the liquidity of its current assets to settle debt and payables. The Current Ratio formula
(below) can be used to easily measure a company’s liquidity.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
22
Acid test ratio: Acid test measures the short term bill paying ability without relying on inventory. The
Acid-Test Ratio, also known as the quick ratio, is a liquidity ratio that measures how sufficient a
company’s short-term assets are to cover its current liabilities. In other words, the acid-test ratio is a
measure of how well a company can satisfy its short-term (current) financial obligations. This guide will
break down how to calculate the ratio step by step, and discuss its implications.
𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠 + 𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠 + 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑅𝑒𝑐𝑖𝑣𝑎𝑏𝑙𝑒𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
Cash Ratio: The cash ratio, sometimes referred to as the cash asset ratio, is a liquidity metric that indicates
a company’s capacity to pay off short-term debt obligations with its cash and cash equivalents. Compared
to other liquidity ratios such as the current ratio and quick ratio, the cash ratio is a stricter, more
conservative measure because only cash and cash equivalents – a company’s most liquid assets – are used
in the calculation.
𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠

𝐶𝑢𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Net Working Capital: Working Capital measures the ability of the firm to pay liability with current asset.
Simply put, Net Working Capital (NWC) is the difference between a company’s current assets and current
liabilities on its balance sheet. It is a measure of a company’s liquidity and its ability to meet short-term
obligations, as well as fund operations of the business. The ideal position is to have more current assets
than current liabilities, and thus have a positive net working capital balance.
(𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦)
3.2.3.2: Altman Z Score:
The Altman Z-score is the output of a credit-strength test that gauges a publicly-traded manufacturing
company's likelihood of bankruptcy. The Altman Z-score is based on five financial ratios that can calculate
from data found on a company's annual 10-K report. It uses profitability, leverage, liquidity, solvency,
and activity to predict whether a company has a high probability of becoming insolvent.
In other words, Altman’s Z-Score model is a numerical measurement that is used to predict the chances
of a business going bankrupt in the next two years. The model was developed by American finance
professor Edward Altman in 1968 as a measure of the financial stability of companies.
The revised model, which can be applied for both publicly traded company and non-publicly traded
company is:
𝒁𝒊 = 0.717𝑿𝟏+0.847𝑿𝟐+3.107𝑿𝟑+0.420𝑿𝟒+0.998𝑿𝟓
23
Here,
(𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔−𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔)

𝑿𝟏 = 𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔
𝑹𝒆𝒕𝒂𝒊𝒏𝒆𝒅 𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔
𝑿𝟐 = 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
𝑬𝑩𝑰𝑻
𝑿𝟑= 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝑬𝒒𝒖𝒊𝒕𝒚

𝑿𝟒 = 𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑺𝒂𝒍𝒆𝒔
𝑿𝟓= 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
Decision rules: Usually, the lower the Z-score, the higher the odds that a company is heading for
bankruptcy. A Z-score that is lower than 1.2 means that the company is in financial distress and with a
high probability of going bankrupt. On the other hand, a score of 2.90 and above means that the company
is in a safe zone and is unlikely to file for bankruptcy. A score of between 1.8 and 2.90 means that the
company is in a grey area and with a moderate chance of filing for bankruptcy. A gray area refers to Z
score zone where misclassification of firm arise.
3.2.4 Rate of Return Analysis:

At the end of the day, investors, lenders, and finance professionals, in general, are focused on what type
of risk-adjusted rate of return they can earn on their money. As such, assessing rates of return on
investment (ROI) is critical in the industry.
Return on Equity: Return on equity look to profit relative to value of stock holders’ equity. Return on
equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders'
equity. Because shareholders' equity is equal to a company’s assets minus its debt, ROE is considered the
return on net assets. ROE is considered a measure of how effectively management is using a company’s
assets to create profits.
A good rule of thumb is to target an ROE that is equal to or just above the average for the peer group.
Relatively high or low ROE ratios will vary significantly from one industry group or sector to another.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆ℎ𝑎𝑟𝑒 ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
Return on Asset: Return on asset measures how well asset have been employed by the management. A
tax adjusted ROA helps managers to decide draw a more meaningful comparison.
Return on assets (ROA), in basic terms, tells us what earnings were generated from invested capital
(assets). ROA for public companies can vary substantially and will be highly dependent on the industry.
24
This is why when using ROA as a comparative measure, it is best to compare it against a company's
previous ROA numbers or against a similar company's ROA.
The ROA figure gives investors an idea of how effective the company is in converting the money it invests
into net income. The higher the ROA number, the better, because the company is earning more money on
less investment.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒(1 − 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒)

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡
3.2.5: Efficiency Analysis:
Efficiency ratios are an essential part of any robust financial analysis. These ratios look at how well a
company manages its assets and uses them to generate revenue and cash flow.
Total Asset Turnover: The asset turnover ratio, also known as the total asset turnover ratio, measures the
efficiency with which a company uses its assets to produce sales. The asset turnover ratio formula is equal
to net sales divided by the total or average assets of a company. A company with a high asset turnover
ratio operates more efficiently as compared to competitors with a lower ratio.
A company’s goal is to increase total asset turnover ratio, by increasing sales or by reducing asset. It
measures how efficiently a company’s asset are being used to generate sales.
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Fixed Asset turnover: Fixed Asset Turnover (FAT) is an efficiency ratio that indicates how well or
efficiently a business uses fixed assets to generate sales. This ratio divides net sales by net fixed assets,
calculated over an annual period. The net fixed assets include the amount of property, plant, and
equipment, less the accumulated depreciation. Generally, a higher fixed asset ratio implies more effective
utilization of investments in fixed assets to generate revenue. This ratio is often analyzed alongside
leverage and profitability ratios.
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
25
3.3: Trend Analysis
Trend analysis is a technique used in technical analysis that attempts to predict the future stock price
movements based on recently observed trend data. Trend analysis is based on the idea that what has
happened in the past gives traders an idea of what will happen in the future.
Trend of business can be analyzed in so many ways. Here, YoY approach has been used. YoY stands for
Year over Year and is a type of financial analysis that’s useful when comparing time series data. Analysts
are able to deduce changes in the quantity or quality of certain business aspects with YoY analysis. In
finance, investors usually compare the performance of financial instruments on a year-over-year basis to
gauge whether or not an instrument is performing expected. This analysis is also very useful when
analyzing growth patterns and trends.
YOY measurements facilitate the cross-comparison of sets of data. For a company's first-quarter revenue
using YOY data, a financial analyst or investor can compare years of first-quarter revenue data and quickly
ascertain whether a company’s revenue is increasing or decreasing. This YOY comparison is also valuable
for investment portfolios. Investors like to examine YOY performance to see how performance changes
across time.
YOY comparisons are popular when analyzing a company's performance because they help mitigate
seasonality, a factor that can influence most businesses. Sales, profits, and other financial metrics change
during different periods of the year because most lines of business have a peak season and a low demand
season.
By YoY analysis of income statement, we can figure out the improvements of figures throughout the
years. This analysis shows us the change of every items. Again, YoY analysis of balance sheet shows the
how different components of assets and liabilities has been increased or decreased throughout the year.
26
Chapter Four:
Findings & Analysis
4.0 Introduction
Financial performance analysis is the process of determining the operating and financial characteristics
of a firm from accounting and financial statements. The goal of such analysis is to determine the
efficiency and performance of firm’s management, as reflected in the financial records and reports. The
analyst attempts to measure the firm’s liquidity, profitability and other indicators that the business is
conducted in a rational and normal way; ensuring enough returns to the shareholders to maintain at least
its market value.
Common size analysis shows the percentage of all components of financial statements in terms of sales
and total asset. Ratio analysis is used to measure the performance of the firm from different
perspectives. Trend Analysis tells the improvements of components over the years.
Here throughout the study, common size analysis, ratio analysis and YoY analysis is used to analyze the
performance of firm.
4.1 Common-size Analysis

Common size, or vertical analysis, is a method of evaluating financial information by expressing each
item in a financial statement as a percentage of a base amount for the same time period. A company can
use this analysis on its balance sheet or its income statement.
4.1.1 Common Size Comparative Income statements:

A common size income statement is an income statement in which each line item is expressed as a
percentage of the value of revenue or sales. It is used for vertical analysis, in which each line item in a
financial statement is represented as a percentage of a base figure within the statement.
27
TAHER & COMPANY LIMITED, CHITTAGONG.
Common Size Comparative Income Statement
FOR THE YEAR ENDED JUNE 30, 2018, 2017, 2016
PARTICULARS 2018 2017 2016
Sales (Scrap & Outfittings): 100% 100% 100%

Less: Cost of goods sold: 83.0% 82.5% 82.5%
Gross Profit 17.0% 17.5% 17.5%
Less: Administrative Expenses 12.3% 12.0% 14.0%
Net Profit Before Interest 4.7% 5.5% 3.5%
Add: Interest Income 0.3% 0.4% 0.0%
Net Profit Before Tax 5.0% 5.9% 3.5%
Provision for income tax 1.9% 2.4% 2.8%
Net Profit after Tax for the year 3.1% 3.5% 0.8%
Fig 4.1: Common Size Comparative Income statements

From the common size Income statements of Taher & Co. Ltd. of last 3 years we can observe that the
company was able to reduce it’s administrative cost from 14% to 12.3%. which, in turn, boost their EBT
by 1.5% ( from 3.5% to 5.0%), Though interest expense remained same (4.3% in 2016, 4.1% in 2018).
This implies that the company was very effective in handling other administrative procedure.
Another thing to mention, there is a significant decrease in the provision for income tax from 2.8% to
1.9%, which increased their net profit from 0.8% to 3.1%. the reduction in cost may due to advance
payment of tax in previous year, which has boosted their net revenue in huge margin.
4.1.2 Common Size Comparative Statement of Financial Position:

A common size balance sheet is a balance sheet that displays both the numeric value and relative
percentage for total assets, total liabilities, and equity accounts. Common size balance sheets are used by
internal and external analysts and are not a reporting requirement of generally accepted accounting
principles (GAAP).
28
COMMON SIZE STATEMENT OF FINANCIAL POSITION
AS OF JUNE 30, 2018, 2017, 2016
ASSETS
Non-current Assets:
Property, Plant & Equipment -at
cost
less Accumulated Depreciation 1.68% 0.96% 1.95%
Current assets:
Cash and Cash Equivalents 0.43% 0.15% 0.05%
Advance, Deposits &
Prepayments 1.99% 2.86% 4.34%
Inter Company Balances 5.59% 0.95% 2.14%
Trade Receivables 72.85% 87.81% 81.97%
L/C Margin (In the form of
FDR) 17.46% 7.27% 9.55%
Total Current Assets 98.32% 99.04% 98.05%
Total Assets 100.00% 100.00% 100.00%
EQUITY & SHARE

CAPITAL
Share Capital 0.64% 0.75% 1.38%
Retained Earnings 14.32% 12.71% 18.31%
14.96% 13.46% 19.69%
Current liabilities:
Bank Loan 15.49% 35.43% 77.66%
L/C Liability (Deferred) 67.44% 49.16% 0.00%
Liabilities for Expenses 0.02% 0.02% 0.04%
Provision For Income Tax 2.08% 1.93% 2.61%
Inter Company Balances 0.00% 0.00% 0.00%
Total Current Liabilities 85.04% 86.54% 80.31%
Total Equity & Liability 100.00% 100.00% 100.00%
Fig 4.2: Common Size Comparative Statement of Financial Position

29
By analyzing balance sheet for the last 3 years we can see that there is a slight drop of fixed asset in last
three years. 98% of total asset are in the form of current asset, which means Taher & CO. Ltd. is a highly
liquid firm and vulnerable to market condition.
In current asset portion, there is a significant decline in the trade receivables, from 81.9% to 72.85%. the
company was very effective in receiving payment. The company gained more business order throughout
the years, an increase in L/C margin shows that.
In current liability portion, it is noticeable that, there is significant deduction in bank loan (long term debt)
which was balanced by deferred L/C liability (short term debt). Restructuring the debt resulted in an
increased net profit.
4.2 Ratio Analysis
Ratio analysis is the comparison of line items in the financial statements of a business. Ratio analysis is
used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and
profitability. This type of analysis is particularly useful to analysts outside of a business, since their
primary source of information about an organization is its financial statements. Ratio analysis is less useful
to corporate insiders, who have better access to more detailed operational information about the
organization.
There are many types of ratio analysis. All the related ratios can be categorized into some specific category
like leverage analysis, profitability analysis, liquidity analysis and so on. Here I tried to categorize
different ratios of Taher & CO. Ltd. derived from the financial statements of the company.
4.2.1 Leverage Analysis:

Leverage ratios are one of the most common methods analysts use to evaluate company performance. A single
financial metric, like total debt, may not be that insightful on its own, so it’s helpful to compare it to a company’s
total equity to get a full picture of the capital structure. The leverage analysis of Taher & Co. Ltd. is given below.
leverage Analysis
Ratios 2018 2017 2016
mean SD
Debt/Equity 5.684284 6.4288479 4.078809892 5.39731415 0.98062352
Times interest earned 2.33266270 0.46991138
2.22 2.96 1.82
Equity Multiplier 7.00912 6.3890837 5.078809892 6.15900600 0.80466569
Table 4.1: Leverage Analysis
Debt/Equity Ratio: from the debt/equity ratio we can see that the company’s debt/equity ration
remained very high throughout 3 years, with a mean of 5.3973. This implies that, the company is use
30
aggressive financing and totally dependent on debt capital which ensure the firms less financial risk.
High debt/Equity ratio may cause high volatility in earnings but A standard deviation of 0.9806 indicates
lower vulnerability of debt/equity ratio of Taher & Co. Ltd.
Times Interest Earned: Times interest earned ratio measures the company’s ability to pay interest
payment. With an average of 2.3326, Taher & Co. Ltd has a strong position to pay its interest expenses
in due time. The 0.469 standard deviation shows that the firm was consistent throughout the years.
Equity Multiplier: Equity multiplier measures the portion of company’s asset funded by equity. An
average of 6.159 indicates that the equity portion is very low. High equity multiplier implies that the
company use high financial leverage in their business.
Leverege Analysis
Debt/Equity Times interest earned Equity Multiplier
8
7
6
5
4
3
2
1
0
2018 2017 2016
Fig 4.3: Leverage Analysis

To sum up, as the figure says, Taher & Co. Ltd has huge amount of debt in their capital structure, has
modertly strong ability to pay interest expense in due time and has high equity multiplier ratio. The
company was able to reduce its financial risk by using high financial leverage.
31
4.2.2 Profitability Analysis:
Profitability is a type of income statement analysis where an analyst assesses how attractive the economics of a
business are. The profitability analysis of Taher & Co. Ltd. is given below.
Profitability Analysis
2018 2017 2016
Ratios Mean SD
Gross Margin 17.03% 17.50% 17.50% 17.34% 0.22%
EBIT Margin 9.19% 8.92% 7.83% 8.65% 0.59%
Net Margin 3.12% 3.48% 0.79% 2.46% 1.20%
Table 4.2: Profitability Analysis
Gross Margin: Gross Margin is the percentage of gross profit of sales. Here, Taher & Co. Ltd was able
to gain a consistent gross margin throughout the given years with an average of 17.34%. a standard
deviation of 0.22% confirms the stability in gross margin.
EBIT Margin: An increase in EBIT margin from 7.83% to 9.19% with a consistent gross margin
implies that the company was able to reduce some of their administrative expense in these years. The
reduction in administrative cost resulted in an increase in the EBIT Margin with an average of 8.65%.
Net Profit Margin: we can also picture out the significant improvement in net profit margin, from
0.79% to 3.12%in three years. With an improvement in EBIT margin and reduction in tax cost helped
the company to gain a significant portion of net profit margin.
PROFITABILITY ANALYSIS
Gross Margin EBIT Margin Net Margin
20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2018 2017 2016
Fig 4.4: Profitability Analysis

32
The figure proves our analysis. As we see closely, we may see gross margin remained consistent. So, as
the EBIT margin improves slightly because of the administrative efficiency, net margin enjoyed a better
improvement.
4.2.3 Liquidity analysis:

This is a type of financial analysis that focuses on the balance sheet, particularly, a company’s ability to
meet short-term obligations (those due in less than a year). The liquidity analysis of Taher & Co. Ltd. is
given below.
Liquidity Analysis
2018 2017 2016
Ratios Mean SD
Current Ratio 1.156155281 1.144472717 1.220895023 1.173841007 0.03361231
Acid test 0.861638278 1.016414922 1.021306865 0.966453355 0.07414235
Cash Ratio 0.005021134 0.001726583 0.000646229 0.002464649 0.00186074
Net working 211666769 171413448 131952627 171677614.7 32543698.3
Capital
Table 4.3: Liquidity Analysis
Current Ratio: Current Ratio measures the short-term debt paying ability of a firm. A general rule of
thumb calls for current ration of at least 2.00. But Taher & Co. Ltd has current ratio below 2.00. Though
current ratio is increasing year by year with an average of 1.17. The reason of lower current ratio may be
a significant amount of short-term bank loan & deferred L/C liability.
Acid test ratio: Acid test measures the short term bill paying ability without relying on inventory.
Generally ideal acid test ratio is 1.0 but it can differ by company policy. Even 0.3 ratio is good enough.
Taher & Co. Ltd has an average ratio of 0.966, declining from 1.02 to 0.86 in three years. The decline is
due to increase in the current liability portion.
Cash Ratio: The cash ratio show how well a company can pay off its current liability with only cash &
cash equivalent. Taher & Co. Ltd. has a very poor cash ratio with an average of 0.0024. though the ratio
is improving year by year, but not sufficient. This implies the company rely on other current asset rather
than cash to pay the liability.
Net Working Capital: Working Capital measures the ability of the firm to pay liability with current asset.
The efficient amount of working capital depends on company policy. Here, we see that net working capital
is rising year by year with an average of 171677615.
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Liquidity Analysis
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2018 2017 2016
Current Ratio Acid test Cash Ratio
Fig 4.5: Liquidity Analysis

Figure speaks and proves our statement. Here, we can see that the company has a moderate current ratio,
but it’s acid test ratio is fair enough, proving that the firm has really has the ability to pay it’s liability
without relying on inventory. Though the small cash ratio tells us that the firm depends on other current
asset rather than cash.
Altman Z Score: Altman Z Score describe the financial soundness of a firm. It measures if the firm is
going to bankrupt or not. With respect to a slight improvement in Altman Z score of Taher & Co. Ltd. in
three years (1.56-1.28-1.68) but still the company is in gray area. That means financial solvency is not
strong enough to minimize the possibility of bankruptcy.
The reason behind consistently holding the grey area are: Huge amount of current liability, Insufficient
EBIT margin, excess use of debt and most importantly, the amount of market value of equity.
Altman Z score Calculation
2018 2017 2016
x1 0.132794 0.125025 0.177402
x2 0.143155 0.127112 0.183076
x3 0.10 0.07 0.07
x4 0.175924 0.155549 0.24517
x5 1.08 0.80 0.95
Z Score 1.68 1.28 1.56

Table 4.4: Altman Z Score Calculation
34
4.2.4 Rate of Return Analysis:
At the end of the day, investors, lenders, and finance professionals, in general, are focused on what type
of risk-adjusted rate of return they can earn on their money. As such, assessing rates of return on
investment (ROI) is critical in the industry. The rate of return analysis of Taher & Co. Ltd. is given below.
Rate of return Analysis
2018 2017 2016
Ratios Mean SD
ROE 25.49% 23.02% 3.79% 17.4% 10%
ROA 6.77% 5.63% 3.40% 5.3% 1%
Table 4.5: Rate of return Analysis
Return on Equity: Return on equity look to profit relative to value of stock holders’ equity. It also
measures for or against equity.
In the analysis ROE of Taher & Company ltd. is very fluctuating, a standard deviation of 10% proves that.
The reason of this fluctuating ROE is due to the lower net income in the initial year of analysis. A drastic
improvement of ROE, from 3.79% to 25.49%, with almost fixed amount of equity proves that Taher &
Company Ltd. was able to generate more returns in recent years.
Return on Asset: Return on asset measures how well asset have been employed by the management. A
tax adjusted ROA helps managers to decide draw a more meaningful comparison.
An increasing ROA with an average of 5.3% shows that the management is employing the asset more
efficiently.
Rate of Return
ROE ROA
2018
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2016 2017
Fig 4.6: Rate of return Analysis

35
Now if we look at the figure, we can say that Taher & Company has a good and much improved ROE.
Though ROA is relatively small, but efficient enough. The reason behind the magnificent ROE is debt
dependent capital structure.
4.2.5: Efficiency Analysis:

Efficiency ratios are an essential part of any robust financial analysis. These ratios look at how well a
company manages its assets and uses them to generate revenue and cash flow. The Efficiency analysis
of Taher & Co. Ltd. is given below.
Efficiency Analysis
2018 2017 2016
Ratios Mean SD
Asset turnover ratio 1.04965081 0.0880551
1.16 1.03 0.95
fixed asset turnover 71.4401746 16.322297
ratio 86.44 79.13 48.75
Table 4.6: Efficiency Analysis
Total Asset Turnover: A company’s goal is to increase total asset turnover ratio, by increasing sales or
by reducing asset. It measures how efficiently a company’s asset are being used to generate sales. Taher
& Company has a slowly increasing total asset turnover ratio with an average of 1.049. though the ratio
is improving, there is a lot of room to develop.
Fixed Asset turnover: It measures how efficiently a company’s fixed asset are held to generate sales.
From the analysis we see that, fixed asset turnover ratio for Taher & Company is huge with an average of
71.45. it points out that The company has very low investment in fixed asset.
36
4.3 Trend Analysis
Trend analysis is a technique used in technical analysis that attempts to predict the future stock price
movements based on recently observed trend data. Trend analysis is based on the idea that what has
happened in the past gives traders an idea of what will happen in the future. Here, YoY approach has been
used.
4.3.1 YoY Analysis of Income statement

By the YoY Analysis of Income statement, we can figure out the improvements of figures throughout the
years. This analysis shows us the change of every items.

YoY Analysis of Income Statement
Sales (Scrap & Outfittings): 244.2% 154.7% 100%

Less: Cost of goods sold: 245.6% 154.7% 100%
Gross Profit 237.6% 154.7% 100%
Less: Administrative Expenses 215.6% 133.0% 100%
Net Profit Before Interest 324.4% 240.6% 100%
Add: Interest Income
Net Profit Before Tax 348.5% 258.2% 100%
Provision for income tax 170.8% 136.1% 100%
Net Profit after Tax for the year 970.5% 686.0% 100%
Fig 4.7: YoY Analysis of Income statement

Taking 2016 as base, we can see improvements in every items. Here sales increased by 144.2% over three
years. This massive increased in sales helped the business to gain a significant improvement in net profit.
As the administrative cost only increased by 115.6% and tax expense was also increased by only 70.8%,
which resulted in net profit increased by 870.5% throughout the year.
37
The journey of a massive increased in net profit is pictured in this figure.
Fig 4.8: YoY Analysis of Income statement

38
4.3.2: YoY Analysis of Balance Sheet:
YoY analysis of balance sheet shows the how different components of assets and liabilities has been
increased or decreased throughout the year.

YoY Analysis of Balance Sheet
ASSETS
Non-current Assets:
Property, Plant & Equipment -at cost
less Accumulated Depreciation 184.8% 90.6% 100%
Current assets:
Cash and Cash Equivalents 1763.1% 530.7% 100%
Advance, Deposits & Prepayments 98.3% 121.7% 100%
Inter Company Balances 560.4% 82.1% 100%
Trade Receivables 190.4% 197.5% 100%
L/C Margin (In the form of FDR) 391.8% 140.2% 100%
Total Current Assets 214.9% 186.2% 100%
Total Assets 214.3% 184.3% 100%
EQUITY & SHARE CAPITAL

Share Capital 100.0% 100.0% 100%
Retained Earnings 167.6% 128.0% 100%
162.8% 126.0% 100%
Current liabilities:
Bank Loan 42.7% 84.1% 100%
L/C Liability (Deferred) 159.5% 100%
Liabilities for Expenses 105.3% 98.3% 100%
Provision For Income Tax 170.8% 136.1% 100%
Inter Company Balances
Total Current Liabilities 226.9% 198.6% 100%
Total Equity & Liability 214.3% 184.3% 100%
Fig 4.9: YoY Analysis of Balance sheet

39
If we analyze the current asset portion, we can see there is a huge improvement in cash holdings. Though
recalling from cash ratio, the firm’s cash ratio is not well enough. But this trend analysis says that things
are improving year by year. Intercompany balance is also increased by 460.4%. The 7.1% less trade
receivables tells that the company was effective in receiving collection, but not that much effective
compared to base year. A 114.3% increase in total asset says that the business is going well.
Share capital remained exactly same and retained earnings increased by 67.6%, which is a good sign for
business. Long term debt has been reduced by 57.3% by the help of newly huge amount of short term
borrowing. This caused current liabilities to increased by 126.9% throughout the given years.
40
Chapter Five:
Summary, Conclusion &
Recommendation
5.1 Summary of Findings
Throughout the ‘Findings & Analysis’ section we have analyzed the financial statement of Taher &
Company Ltd. using tools like ratio analysis, common-size analysis, YoY analysis to determine the
financial performance of the firm. Here, the findings from those analyses have been summarized below:
1. The company was very effective dealing with administrative procedure, thus administrative
expenses reduced from 14% (in respect to sales) to 12.3% in last 3 years.
2. The company is highly liquid firm and thus is vulnerable to market condition
3. It is a highly leveraged firm. 79.8%-86.2% of the capital structure is financed with debts.
4. Due to reduction in administrative & tax expenses net profit margin in increased from 0.79% to
3.12%
5. Though Acid test ratio is well above standard, currently ratio is moderately poor. The reason is the
huge portion of current liability.
6. Altman Z Score remained in gray area throughout three years. The reason behind this, are Huge
amount of current liability, Insufficient EBIT margin, excess use of debt and most importantly, the
amount of market value of equity.
7. ROE was very much fluctuating but ROA was less fluctuating. The performance of ROE & ROA
was well enough. The fluctuation in net income caused fluctuation in ROE.
8. The company has very low investment in Fixed asset & total asset turnover is in average position.
9. A 144.2% increase in sales lead to 870.5% increase in net profit taking 2016 as base year.
10. Cash holdings of the firm has been increased, in other hand short-term liability has also been
increased.
41
5.2 Recommendation
Though the firm is doing very well, there are still so many rooms for development. As the industry is
highly competitive, the firm needs to be more careful with its steps. Here are some recommendation based
on the information I’ve collective from financial statement & through personal observation.
1. The firm should increase its investment in fixed asset to gain financial sustainability.
2. In order to improve financial solvency, it should improve its EBIT margin, reduce the portion of
debt etc. An improvement in share capital will also improve financial solvency.
3. Though the cash ratio is improving, it needs to be improved further more.
4. Though the firm was effective in collecting payments, still trade receivables poses a large portion
in balance sheet. So the firm needs to be more effective in collecting payments.
5. As Ship breaking industry is prone to labor risk & environmental risk, Taher & Company Ltd. can
arrange insurance policy to reduce the labor risk and can organize & sponsor different
environmental program to compensate the environmental hazard.
42
5.3 Conclusion
Financial performance Analysis shows the efficiency of financial & operating activity of the firm. It
indicates the efficiency of the firm’s management. Through such analysis, internal & external parties can
make decisions.
Despite environmental hazard & labors health hazard, ship-breaking sector is one of the progressive sector
of Bangladesh. Taher & Company Ltd, established in 1984, is one of the major player in ship-breaking
industry of our country. Throughout the report the performance of ship-breaking industry of last 3 years
have been evaluated.
As shown in the analysis, Taher & Company’s performance in last three years is well up to the mark. In
spite of being debt oriented firm, profit generation is highly progressive. Increase in sales by 144.2%
helped the firm in overall performance. Though Thaer & Company Ltd. has performed very well, there is
still lots of room to develop. Besides the unique challenges of ship-breaking industry, this industry is
highly competitive and poses lots of challenges. So the firm needs to continue its development and be
more efficient I operating activities.
43
Reference & Bibliography
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https://www.fool.com/knowledge-center/how-to-interpret-the-vertical-analysis-of-a-balanc.aspx
 Bangladesh secures top position in ship breaking (2019). Retrieved from
https://www.dhakatribune.com/bangladesh/2019/11/14/bangladesh-secures-top-position-in-ship-
breaking
 Bhunia, Amalendu. Roy, Gautam. Mukhuti, Somnath (2011, May) Financial Performance
Analysis-A Case Study. Current Research Journal of Social Sciences, Vol 3(3) PP 269-275.
Retrieved from
https://www.researchgate.net/publication/215869189_Financial_Performance_Analysis-
A_Case_Study/link/582d3f2508ae138f1bfe3f50/download
 Common Size Analysis – Overview, Example, How to perform. Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/common-size-analysis/
 Financial Analysis – Overview, Guide, Types of Financial Analysis (2020). Retrieved from
https://corporatefinanceinstitute.com/resources/knowledge/finance/types-of-financial-analysis/
 Foster, George (2007), Distress Analysis and Financial Information. In 2 nd Edition, Financial
Statement analysis (PP: 551-553)
 Garrison, Ray H. Noreen, Eric W. Brewer, Peter C. (2015), Statement of Cash Flows, In 15th
edition, Managerial Accounting (PP:676-693)
 Muhibbullah, Muhammad (2013, November) Health hazards and risks vulnerability of ship
breaking workers: A case study on Sitakunda ship breaking industrial area of Bangladesh. Global
Advanced Research Journal of Geography and Regional Planning, Vol. 2(8) PP. 172-184.
Retrieved from https://www.shipbreakingplatform.org/wp-content/uploads/2018/08/Health-
hazards-and-risks-vulnerability-of-ship-breaking-works-Muhibbullah-Nov-2013.pdf
 Overview of Ship Breaking in Bangladesh - Ship Breaking in Bangladesh (2020). Retrieved from
https://shipbreakingbd.info/overview-of-ship-breaking/
 Ship Breaking – Wikipedia (2020). Retrieved from https://en.wikipedia.org/wiki/Ship_breaking
 Ship Breaking around the world - Ship Breaking in Bangladesh (2020). Retrieved from
https://shipbreakingbd.info/ship-breaking-around-the-world/
 Ship-breaking: a hazardous work (n:d). Retrieved from
https://www.ilo.org/safework/areasofwork/hazardous-work/WCMS_110335/lang--en/index.htm
 Taher & Company Limited (2013). Retrieved from
http://www.tahergroup.net/index.php?cPath=TAHER%20&%20COMPANY%20LIMITED&dP
ath=196
44
Appendices
STATEMENT OF FINANCIAL POSITION

AS OF JUNE 30, 2018, 2017, 2016
30-06-2018 30-06-2017 30-06-2016

PARTICULARS NOTES
TAKA TAKA TAKA
ASSETS
Non-current
Assets:
Property, Plant &
Equipment -at cost
less Accumulated
Depreciation 4 26,795,783 13,141,586 14,500,499
Current
assets:
Cash and Cash
Equivalents 5 6,806,092 2,048,550 386,028
Advance, Deposits &
Prepayments 6 31,717,710 39,271,377 32,281,462
Inter Company
Balances 7 89,140,872 13,053,264 15,906,414
Trade
Receivables 1,161,135,135 1,203,903,615 609,696,182
L/C Margin (In the form
of FDR) 8 278,355,982 99,612,892 71,037,000
Total Current
Assets 1,567,155,791 1,357,889,698 729,307,086
Total Assets 1,593,951,574 1,371,031,284 743,807,585
EQUITY & SHARE

CAPITAL
Share Capital 9 10,280,000 10,280,000 10,280,000
Retained
Earnings 228,182,552 174,275,034 136,173,126
238,462,552 184,555,034 146,453,126
Current
liabilities:
Bank Loan 10 246,928,615 485,783,826 577,615,360
L/C Liability
(Deferred) 1,075,034,107 673,946,658 -
Liabilities for
Expenses 11 307,049 286,464 291,515
Provision For
Income Tax 12 33,219,251 26,459,302 19,447,584
45
Inter Company
Balances 13 - - -
Total Current
Liabilities 1,355,489,022 1,186,476,250 597,354,459
Total Equity &
Liability 1,593,951,574 1,371,031,284 743,807,585

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
30-06-2018 30-06-2017 30-06-2016

PARTICULARS NOTES
TAKA TAKA TAKA
Sales (Scrap &

Outfittings): 1,726,135,625.00 1,093,691,678.00 706,841,862.00
Less:Cost of goods sold: 15 1,432,205,890.00 902,295,632.00 583,144,534.00
Gross Profit 293,929,735.00 191,396,046.00 123,697,328.00
Less: Administrative Expenses 14 212,832,523.00 131,243,001 98,695,276
Net Profit Before Interest 81,097,212.00 60,153,045.00 25,002,052.00
Add: Interest Income 6,029,556.42 4,408,165 -
Net Profit Before Tax 87,126,768.42 64,561,210 25,002,052
Provision for income tax 12 33,219,251.44 26,459,302 19,447,584
Net Profit after Tax for the

year 53,907,516.98 38,101,908 5,554,468
46
STATEMENT OF CASH FLOWS
30.06.2018 30.06.2017 30.06.2016

PARTICULARS
Taka Taka Taka
A. CASH FLOW FROM OPERATING

ACTIVITIES:
Cash collection from customers & others 1,774,933,660 503,892,412 400,743,253
Cash payment for cost and expenses (1,479,658,334) (1,057,885,712) (225,649,283)
Tax paid (33,219,251) (26,459,302) (19,447,584)
Net cash provided by Operating Activities 262,056,075 (580,452,602) 155,646,386

. . .
B. CASH FLOW FROM INVESTING ACTIVITIES:
Acquisition of Property, Plant & Equipment (18,443,321) - -
Net cash provided by Investing Activities (18,443,321) - -
C. CASH FLOW FROM FINANCING ACTIVITIES:
Loan (238,855,211) 582,115,124 (157,347,969)
Net cash provided by Financing Activities (238,855,211) 582,115,124 (157,347,969)
Net Cash Increase/(Decrease) 4,757,542 1,662,522 (1,701,583)

(A+B+C)
Cash and Cash Equivalents at the Beginning 2,048,550 386,028 2,087,611
Cash and Cash Equivalents at the End of the

year 6,806,092 2,048,550 386,028
47

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INTERNSHIP

Financial Performance of Ship Breaking Industry in Bangladesh:

TAHER & CO. LTD.

Supervisor: Dr. Mohammed Shamim Uddin Khan

SUBMITTED BY: Mohammed Monirul Alam Sakib

Date of Submission: 22/09/2020

Chapter 01: Introduction

Chapter 03: Measuring Financial Performance: A Theoretical Framework

Chapter 04: Findings & Analysis

5.1: Summary of the Findings 41

SBRI= Ship Breaking & Recycling Industry.

1.2 Statement of the problem:

1.4 Objective of the study

1.5 Methodology of the study

1.7 Organization of study

2.1: Overview of Ship Breaking Industry

2.1.1: History of Ship Breaking Industry in Bangladesh:

2.1.2: Ship- Breaking: Current Market Position of Bangladesh:

Fig 2.1: Player of Ship-Breaking Industry in Bangladesh.

Table 2.1: Ship-Breaking industry in the world.

Year Number of Ship Broken

Table 2.2: Ship-Breaking in numbers

2.1.3: Risk in Ship-Breaking:

Loss and breaking of body organs 320 23.19

Cutting Applying for cutting permission

Selling Outfitting products (furniture, cables) are sold by auction

2.5: Ship Breaking Procedure

TAHER & CO. LTD.

2.2.1: Company Profile:

Vision: Quality in every step of the way.

Some of the sister concerns are:

TAHER & COMPANY LIMITED

Number of Employee 7+15

Mr. M. Manjur Alam Managing Director

Mr. M. Sirajul Islam Director- Administration

Mr. M.A. Kashem Director- Administration

Mr. M. Didarul Alam Director- Finance

Mr. M. Shahin Alam Tipu Director- Import, Sales & Distribution

Mr. M. Nizamul Alam Director- Administration

Mr. M. Sarwar Alam Director- Export, Sales & Distribution

Mr. M. Faruk Azam Director- Social Activities

2.8: Board of Directors of Taher & Company

Vat Vat Delivery Security

Cash Officer Junior

 Alhaj Mostafa-Hakim Degree College, North Kattali Chittagong.

 Expanding to ship-building business.  Environmental Policy

2.6: Objective of Internship

3.1 Common Size Analysis:

3.1.2: Common Size Comparative Income statements:

3.2 Ratio Analysis

3.2.1 Leverage Analysis:

3.2.2: Profitability Analysis:

3.2.3 Liquidity analysis:

3.2.3.1: Liquidity Ratios:

𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠 + 𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠 + 𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑅𝑒𝑐𝑖𝑣𝑎𝑏𝑙𝑒𝑠

𝐶𝑎𝑠ℎ & 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡𝑠

(𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦)

3.2.3.2: Altman Z Score: