Internship Report on

Financial Statement Analysis of

AKH Knitting & Dyeing Ltd. (AKH Group)

Submitted By:
Md. Mahmudul Hasan
Reg: 12206037, MBA
DBA, University of Asia Pacific

Submitted To:
Jesmin Sultana
Associate Professor, DBA
University of Asia Pacific

Date of Submission: 03.02.2016

An internship report submitted in partial fulfillment of the requirements for the degree of
Masters of Business Administration
Approval:
The internship report of AKH Knitting & Dyeing Ltd. has been approved by the following:

--------------------------------------------------------Supervisor

------------------------------------------------------Head of the Department

Declaration

I hereby declare that the project report entitled Financial Statement Analysis of AKH
Knitting & Dyeing Ltd. has been prepared by me in partial fulfillment of the degree of
Masters of Business Administration, University of Asia Pacific.
I also declare that the project work is the result of my own efforts and it hasnt been
submitted to any other university for the award of any degree.

--------------------Md. Mahmudul Hasan

Reg.no: 12206037
Program: MBA
Major in Finance
Department of Business Administration
University of Asia Pacific

LETTER OF TRANSMITTAL
To
Jesmin Sultana
Associate Professor
Department of Business Administration
The University of Asia Pacific
Dhanmondi, Dhaka
Subject: Submission of Internship Report.
Dear Madam,
It is a great pleasure for me to submit the report entitled Financial Statement Analysis of
AKH Knitting & Dyeing Ltd. This study is a combination of practical works and theoretical
knowledge. Obviously my emphasis on was on practice to comply with MBA course
requirement. I hope the report will satisfy the purpose.
I have tried my best under your supervision to prepare a quality report. Despite my attempt
there may appear some haziness in the report. I will be available for answering any question
on the report. I shall be glad if you kindly accept the report.
Thanking You

Md. Mahmudul Hasan

Reg.no: 12206037

Acknowledgement

At first I would like to express my gratitude to almighty Allah who has given me the
opportunity to go through the total process of internship and to write a report in this regard.
I would like to acknowledge my deepest gratitude to the honorable supervisor Jesmin
Sultana, Associate Professor, Department of Business Administration, The University of Asia
Pacific, who has given me suggestions regarding the writing of the report and to go through
the process, which has become an excellent way of understanding the topic of my internship.
I express my heartiest gratitude to my boss MR. Abed Hossain (Dy. Manager- Accounts), Mr.
Abul Bashar (AGM- Finance & Acc.-AKH Knitting & Dyeing), Mr Anarul Islam (Asst.
Manager- Acc.- AKH Knitting & Dyeing) . They extended their wholehearted cooperation
during my internship period. Without their appreciation I cant be able do this report.

Executive Summary
AKH was established in the year 1997. AKH has now successfully evolved into a highly
integrated leading group in apparel manufacturing and exporting from Bangladesh.
The entire operations of AKH are carried out from three of its own premises, each being
situated within a few minutes drive from any of the others. These premises are designed with
the most modern factory specifications. With 11 successful going concerns in the garment
and allied sectors like knitting, dyeing, printing, embroidering, sewing, accessory
manufacturing, packaging, C&F, and cargo carrying, it is now well ahead to have its own
textile unit to produce both solid-dyed and yarn-dyed woven fabrics. Just keeping aside
production of woven fabrics to start very soon, now it produces all other backward linkage
materials for readymade garment production and has every facility necessary to meet its
entire requirements for apparel exports.
On an aggregate floor space of 874,500 square feet in different production units, a few more
than 14,000 people are now working in AKH. Every month, they are producing about 2.4
million pieces of knit and knitted fleece garments in its vertical knit division, and about 1.2
million pieces of shirts and blouses in its woven division.

Through a thorough financial analysis, my aim to understand the financial factors is

influencing the company and its decision making. Later, I try and evaluate the various ratios
to appreciate their impact on companys performance over the last four years
The financial statements of last four years are identified, studied and interpreted in light of
companys performance. Critical decisions of distributing dividends, Issue of bonus
Debentures and other current news are analyzed and their impact on the bottom line of the
company is assessed.
Finally, I study ratio analysis of the company to analyzing the financial position of the
company in last Two years.

Chapter-1
Introduction

Objective of Study
To understand the information contained in financial statements with a view to know the
strength or weaknesses of the firm and to make forecast about the future prospects of the firm
and thereby enabling the financial analyst to take different decisions regarding the operations
of the firm.
1.

To study the present financial system at AKH Knitting &

Dyeing Ltd..

2.

To identify the financial strength & weakness of the

organization.

3.

To analyze the capital structure of the company with the help

of Leverage ratio.

4.

To offer appropriate suggestions for the better performance of

the organization

Research Methodology
Research is defined as a systematic, gathering recording and analysis of data about
problem relating to any particular field.
It determines strength reliability and accuracy of the project.
Method of Data Collection:

Primary Source: Direct Interview & Real Experience

Secondary Data: Through the internet, Annual Report, Audit Report & Book

Limitations of the Report

Although I have obtained wholehearted co-operations from employees of AKH Knitting &
Dyeing Limited, on the way of my study, I have faced problems also. The
limitations/shortcomings of the study are:
Insufficient Data: It is not easy to collects data about a huge organization. Data
wasnt sufficient for the report.
Confidential: Some informations are confidential which they dont reveal to Interns.
Old Information: AKHs website doesnt provide up-to-date information.
Busy Official: Employees of the organization are busy they cant give much time to
internee. Its hurt to get their attention.
Lack of Records: Sufficient books, publications, facts and figures are not available.
These constraints narrowed the scope of accurate analysis. If these limitations were not been
there, the report would have been more useful and attractive.
Scope of the report
The scope and period of the study is being restricted to the following:

Overall Idea about AKH Knitting & Dyeing Ltd.

The profit and loss, the balance sheet was on the last two years Ratio Analysis of SBL
Ratio Analysis of AKH Knitting & Dyeing Ltd.

This report enables me to make a bridge between my academic study and real life practices.

Chapter-2
THEORITICAL

FRAMEWORK

OF

FINANCIAL STATEMENT ANALYSIS

Introduction to Finance
Finance is one of the most primary requisites of a business and the modern management
obviously depends largely on the efficient management of the finance.
Financial statements are prepared primarily for decision making. They play a dominant role
in setting the frame work of managerial decisions. The finance manager has to adhere to the
five Rs with regard to money. This right quantity of money for liquidity consideration of
right quality. Whether owned or borrowed funds. At the right time to preserve solvency from
the right sources and at the right cost of capital.
The term financial analysis is also known as analysis and interpretation of financial
statements refers to the process of determining financial strength and weakness of the firm
by establishing strategic relationship between the items of the Balance Sheet, Profit and Loss
account and other operative data.
The purpose of financial analysis is to diagnose the information contained in financial
statements so as to judge the profitability and financial soundness of the firm.
Features of Finance
The main characteristics or features of finance are depicted below.

Financial statement:
A financial statement is an organized collection of data according to logical and consistent
accounting procedures. Its purpose is to convey an understanding of some financial aspects of
a business firm. It may show a position at a moment of time as in the case of a balance sheet,
or may reveal a series of activities over a given period of time, as in the case of an income
statement. Thus, the term financial statement generally refers to the basis statements;
i)
The income statement
An income statement is a summary of the revenues and expenses of business over a
period of time, usually one month, three months, or one year. It summarizes the results of
the firms operating and financing decisions during that time. Due to income statement
Operating decisions of the company apply to production and marketing such as
sales/revenues, cost of goods sold administrative and general expenses (advertising, office
salaries). It provides operating income/earnings before interest and taxes (EBIT)
ii)

The balance sheet

Balance sheets provide the observant with a clear picture of the financial condition of the
company as a whole. It lists in detail the tangible and the intangible goods that the
company owns or owes. These good can be broken further down into three main
categories; the assets, the liabilities and the shareholders equity.
iii)
The Cash Flow Statement
In financial accounting, a cash flow statement, also known as statement of cash flows, is a
financial statement that shows how changes in balance sheet accounts and income affect

cash and cash equivalents, and breaks the analysis down to operating, investing and
financing activities. Essentially, the cash flow statement is concerned with the flow of
cash in and out of the business.
Financial statement analysis:
It is the process of identifying the financial strength and weakness of a firm from the
available accounting data and financial statement. The analysis is done by properly
establishing the relationship between the items of balance sheet and profit and loss account
the first task of financial analyst is to determine the information relevant to the decision under
consideration from the total information contained in the financial statement. The second step
is to arrange information in a way to highlight significant relationship. The final step is
interpretation and drawing of inferences and conclusion. Thus financial analysis is the
process of selection relating and evaluation of the accounting data/information.
Types of Analysis:
1) Comparative analysis statement
2) Common-size analysis statement
3) Trend analysis
4) Ratio analysis.

4) Ratio Analysis:
Ratio analysis is a widely used tool of financial analysis. The term ratio in it refers to the
relationship expressed in mathematical terms between two individual figures or group of
figures connected with each other in some logical manner and are selected from financial
statements of the concern. The ratio analysis is based on the fact that a single accounting
figure by itself may not communicate any meaningful information but when expressed as a
relative to some other figure, it may definitely provide some significant information the
relationship between two or more accounting figure/groups is called a financial ratio helps to
express the relationship between two accounting figures in such a way that users can draw
conclusions about the performance, strengths and weakness of a firm.
Classification of ratios:
A) Liquidity ratios
B) Leverage ratios
C) Activity ratios
D) Profitability ratios
A) Liquidity Ratios:
These ratios portray the capacity of the business unit to meet its short term obligation from its
short-term resources (e.g.) current ratio, quick ratio.
i) Current ratio:

Current ratio may be defined as the relationship between current assets and current liabilities
it is the most common ratio for measuring liquidity. It is calculated by dividing current assets
and current liabilities. Current assets are those, the amount of which can be realized with in a
period of one year. Current liabilities are those amounts which are payable with in a period of
one year.
Current assets
-----------------------Current liabilities

Current ratio =

ii) Liquid Ratio:

The term liquidity refers to the ability of a firm to pay its short-term obligation as and when
they become due. The term quick assets or liquid assets refers current assets which can be
converted into cash immediately it comprises all current assets except stock and prepaid
expenses it is determined by dividing quick assets by quick liabilities.

Liquid ratio =

Liquid assets
------------------------Liquid liabilities

iii). Absolute Liquidity Ratio:

Absolute liquid assets include cash, bank, and marketable securities. This ratio is obtained by
dividing cash and bank and marketable securities by current liabilities.
Cash + bank +marketable securities
Absolute liquidity ratio = ----------------------------------------------------Current liabilities

B) Solvency Ratios:
Solvency ratios are used to measure longterm risk and are of interest to longterm creditors
and stockholders. Debt to assets (D/A) & Debt to Equity (D/E) are used to measure solvency.
i) Debt to assets: Debt to asset means the quantity of debt for every 1 taka asset, as higher the
ratio higher the liabilities. The debt to total assets ratio calculates the percent of assets
provided by creditors.

Debt to Assets=

Total Liabilities
Total Assets

ii) Debt to Equity (D/E): Debt to equity means the quantity of debt for every 1 taka equity.
The debt to total equity ratio calculates the percent of equity provided by creditors.

Debt to Equity(D/E)=

Total Liabilities
Total Equity

C) Activity Ratios:
These ratios evaluate the use of the total resources of the business concern along with the use
of the components of total assets. They are intended to measure the effectiveness of the assets
management the efficiency with which the assts are used would be reflected in the speed and
rapidity with which the assets are converted into sales. The greater the rate of turnover, the
more efficient the management would be (E.g.) stock turnover ratio, fixed assets turnover
ratios etc.
i) Fixed assets turnover ratio:
The ratio indicates the extent to which the investments in fixed assets contribute towards
sales. If compared with a previous year. It indicates whether the investment in fixed assets
has been judious or not the ratio is calculated as follows.
Net sales
Fixed assets turnover ratio =
---------------------------------Fixed assets
ii) Working capital turnover ratio:
Working capital turnover ratio indicates the velocity of the utilization of net working capital.
This ratio indicates the number of times the working capital is turned over in the course of a
year. It is a good measure over trading and under-trading.

Working capital turnover ratio =

Net sales
--------------------------------------Net working capital

iii) Return on total assets:

Profitability can be measured in terms of relationship between net profit and total assets. It
measures the profitability of investment. The overall profitability can be known by applying
this ratio.
Net profit
Return on total assets = ---------------------------------- x100
Total assets

iv) Total Assets Turnover Ratio:

This ratio is an indicator of how the resources of the organization utilized for increasing the
turnover. It shows the ratio between the total assets and the net sales of the company. From
this ratio one can understand how the assets are performing and being utilized in achieving
the objectives of the company.

Total assets turnover ratio =

Total assets
----------------------Net assets

v) Capital Turnover Ratio:

This is a ratio which shows how much sales are entertained from the capital. It shows how the
sales are attracted from the Proprietor's Fund.

Capital turnover ratio =

Sales
---------------------------------Proprietors fund

D) Profitability Ratios:
The profitability ratios of a business concern can be measured by the profitability ratios.
These ratios highlight the end result of business activities by which alone the overall
efficiency of a business unit can be judged, (E.g.) gross ratios, Net profit ratio.

i) Gross profit ratio:

This ratio expresses the relationship between Gross profit and sales. It indicated the
efficiency of production or trading operation. A high gross profit ratio is a good management
as it implies that cost of production is relatively low.

Gross profit ratio =

Gross profit
----------------------------------- x 100
Net sales

ii) Net profit ratio:

Net profit ratio establishes a relationship between net profit (after taxes) and sales. It is
determined by dividing the net income after tax to the net sales for the period and measures
the profit per rupee of sales.

Net profit sales =

Net profit
----------------- x 100
Net sales

iii) Return on Shareholders Fund

In case it is desired to work out the productivity of the company from the shareholders point
of view, it should be computed as follows:
Net profit after Interest and Tax
Return on shareholders fund = ------------------------------------------ X 100
Shareholders fund
The term profit here means Net Income after the deduction of interest and tax. It is different
from the Net operating profit which is used for computing the Return on total capital
employed in the business. This is because the shareholders are interested in Total Income
after tax including Net non-operating Income (i.e. Non- Operating Income - Non-Operating
expenses).
iii) EXPENSES RATIO:
There are two main ratios
1) Indirect Expense ratio
2) Direct Expense Ratio
1) Indirect Expense Ratios
This ratio establishes the relationship between various indirect expenses to net sales.

a) Administration Expense Ratio:

Administrative expenses
Administrative expenses ratio = --------------------------------------------------- x 100
Sales
b) Selling and Distribution Expense Ratio
Selling & distribution expenses ratio =
Selling &distribution expenses
-------------------------------------------------------------------- x 100
Sales
2) Direct Expense ratio
This ratio establishes the relationship between various direct expenses to net sales

a) Cost of energy ratio

Expenses ratio =

Cost of energy
-----------------------------------------Sales

b) Cost of Fuel Ratio

Expenses ratio =

Cost of Fuel
-----------------------------------Sales

x 100

Cost of Tax
-----------------------------------Sales

x 100

c) Cost of tax Ratio

Expenses ratio =

d) Expenditure on EPC ratio

Expenses ratio =

Expenditure on EPC
-----------------------------------Sales

Chapter- 3
Company Profile

Sister concern of AKH Group:

x 100

x 100

AKH Knitting & Dyeing Ltd.: The knit wing of AKH produces all of the knit fabrics it needs to meet its entire
export demand. Using the worlds latest and most dependable Europe-origin brand machinery like Mayer & C,
Origio and Bigoni etc, AKH manufactures numerous varieties of knit fabrics including single and double jersey,
ribs, any elastane, drop ribs, interlock, PKs, engineered stripe, terry brush back fleece, sweat, using any kind of
blends like cotton, polyester, cotton-poly, modal, viscose, poly viscose, tensil, coolmax, and any fine fabric
weighing 70-80 grams per square meter, etc. At present, it is producing about 15 tons of knit fabrics every
month. AKH has very intensive experience, expertise and the most modern machinery to result dying perfection
and achieving uniformity in quality requirements from buyer. It uses Scholl, Sclavos and other globally renown
brand machines that are capable of dyeing perfectly and at high temperatures. It uses Tube-Tex Compactor from
USA and Santex Dryers as well as Squeezers from Switzerland in the finishing line. Every month, AKH can
process about 15 tons of knit fabrics.
At a Glance:
1

Name of Factory

: AKH KNITTING & DYEING LTD.,

(A 100% Export Oriented Composite Knit Factory)

Estimated Project Value

: 9.0 Million US $

Factory Location

: 92, Phulbaria, Tetuljhora, Savar, Dhaka. Bangladesh

Head Office

: 133-134, Hamayetpur, Savar, Dhaka. Bangladesh.

Fax: (880-2) 8155640 41.
Phone : 880-2-7744001-8, 880-2-7741830-31.

Telephone Fact.

: 00 88 02 7741727-8

Fax

: 00 88 02 7710788

E-mail

: hossain@akhfashions.com
alam@akhfashions.com
kashem@akhfashions.com

Management

: Md. Delwar Hossain Chairman

Md. Shamsul Alam Managing Director
Md. Abul Kashem Dy. Managing Director

Management Contact

: Mr.Delwar Hossain, Mr. Shamsul Alam and Mr. Abul Kashem

1
0

Legal Status

: Private Limited Company

Bonded Warehouse No. 106/CUS-SBW/2001
E.R.C No. RA 53894

11 BGMEA Reg. No.

: 3890 (AKDL)

1
2

Bank

: Export Import Bank of Bangladesh

Gulshan Branch, 75, Gulahsn Avenue,
Dhaka 1212, Bangladesh.
Phone: 9886296, 9862262, 8819711.
Telex: 632125 EXN GL BJ. Fax: 880-2-8818703.
E-mail: eximgul@bttb.net.bd. Swift # EXBKBDDH 007.

1
3

Company Established

: 2004

1
4

Annual Turnover

: 45.00 Million US $

1
5

Factory Type

: 100% Export Oriented

1
6

Total Land Area

: Around 3.72 Acre (1,62043 sqft./15,054sqm.)

Factory Size

: 2,45,200 Sft.(22,780 sqm)

Knitting Fabric
Dyeing & Finishing
Cutting
Printing & Embroidery
Sewing & Readymade Garments

7
1
8

Manufacturing Area

: 2,05,000 Sft.

1
9

Warehouse Area

: 34,000 Sft./3,158 sqm

2
0

Office Area

: 6,000 Sft.

2
1

Canteen & Dining

: 7,000 Sft.

2
2

Total Nos. of workers

: 3,888 Persons (Incl. Knitting & Dyeing)

2
3

Nos. of male workers

: 2,422 Persons

2
4

Nos. female workers

: 1,466 Persons

2
5

Lead time

: 60-90 days

2
6

Main Product

: T- Shirt, Polo Shirt, Sweat Shirt, Tank Top, Boxer Shorts, Jogging
Suit, Pajama Sets & Brief (Mens & Ladies) etc.

2
7

Production Capacity

: 16,00,000 Pcs. per month.

2
8

Major Customer :

: G.Gueldenpfennig GmbH (Germany), Centerline (Germany), Western

Store (Germany), Tchibo (Germany), ALDI (Germany), Gustav
Daiber (Germany), Ernstings Family GmbH (Germany), C&A
(Germany), LIDL ( Germany )
Mackays Store (UK), Gus / Shop Direct (UK), Surgent Major (UK),
Sainsburrys (UK), CDF, Kappa, Marcopolo (Spain) B&C (Belgium),
Tex-Ebo (Singapore), ZXY, Li & Fung (HK), Rafa,
Wal Mart (USA/ Canada), K-Mart (USA), JC Penney (USA), Target
(USA), Macys (USA), Kohls (USA) Etc.

Export

Increased by a little over 25 times of its inaugural export made in the year 1997, AKH
exported apparels both woven and knits worth about US$160 million in the fiscal year 201213. By the end of 2013-14, this export is expected to reach about US$170 million. The trend
has been projected to continue for several years to come yet. Mission & Vision Statement:
Mission
AKH is committed to venture out into the changing and challenging global market as a
leading enterprise in the world apparel industry by satisfying its valued customers.
Vision

To operate as one of the best sources of apparel in the global market;

To satisfy the valued customers, meeting their expectation by providing quality

products & services on time, and offering them the best value in terms of quality, price,
environmental and other ethical practices;

To meet compliance standards to assure an ideal work environment and obtain

optimum level of productivity;

To maintain the technology-led command in the industry;

To promote development ensuring unprejudiced and equal opportunities for all; and

To continue growing nurturing competence in professionalism seeking win-win terms.

Chapter-4
Data Analysis & Interpretation

1] Current Ratio:
Formula:

Current ratio =

YEAR

2013-2014

Current assets
Current liabilities

2012-2013

2011-2012

Current assets

Current liabilities

1,445,981,815.5

1,363,916,764.4

78,28,800

78,28,800

1,164,109694

1,306,157,58
7

Current ratio

184.7:1

174.22:1

0.89:1

400
350
300
250

2014

200

2013
2012

150
100
50
0
2012

2013

2014

It tells us the short term solvency of the firm and the ability of the firm to repay its short term
obligations. In AKDL the company has 184 ability to repay against the 1 tk loan in the year 2014; in
2013 it was 174 and 0.89 in the year 2012.

2) Absolute Liquidity Ratio:

Cash + bank +marketable securities
Absolute liquidity ratio = ----------------------------------------------------Current liabilities
YEAR
Cash+Bank+
Secuirities

2014
Marketable 797286085.80

2013

2012

566949207.3

467623936.24

78,28,800

Current liabilities
Liquid ratio

78,28,800

13061575877

72.42

0.03

101.84

180
160
140
120
2014

100

2013

80

2012

60
40
20
0
2012

2013

2014

Therefore, absolute liquidity ratio relates cash, bank and marketable securities to the current
liabilities. Since absolute liquidity ratio lays down very strict and exacting standard of liquidity,
therefore, acceptable norm of this ratio is 50 percent. Absolute ratio of AKDL too good in the year
2013 & 2014 but it was in an alarming position in 2012.

3) Debt to Equity Ratio:

Formula:

Debt to Equity =

YEAR

2014

Total Liabilities
Total Equities

2013

2012

150,53,47,212

Total Liabilities

133,35,35,141

133,61,60,34
8

Total Equities
Ratio

123,08,58,582.8

88,81,05,704.8

1.22

1.50

62,74,61,274

2.12

5
4.5
4
3.5
3

2014

2.5

2013
2012

2
1.5
1
0.5
0
2012

2013

2014

From the debt to equity ratio we can see that in the year 2012 this ratio was higher than the
year 2013 & 2014. The higher value of debt to equity ratio indicates our company was at high
risk in the year 2012 however it decreases gradually in the year 2013 & 2014. This means our
company minimizing its risk gradually.
4) Debt to Assets Ratio:
Formula:

Debt to Assets =

Total Liabilities
Total Assets

YEAR

2014
150,53,47,212

Total Liabilities

2013
133,35,35,141

2012
133,61,60,348

273,62,25,795.0 222,86,86,846.0 1933621621.7

Total Assets
Ratio

0.55

0.60

0.69

2
1.8
1.6
1.4
1.2
2012

2013

0.8

2014

0.6
0.4
0.2
0
2012

2013

2014

The debt to assets ratio shows a company's ability to pay off its liabilities with its assets. The
above graph shows that in 2012 it was 69 % which is little higher than the year of 2013 &
2014. After 2012 it decreases to 60% in 2013 and 55% in 2014 accordingly. Our organization
is able to payback its loan and will not face any problem to get approval of loan.
5) Return on Assets:
Formula:

R O A=

Net Profit
Total Assets

X100

YEAR

2014

Net Profit
Total Assets
Ratio

2013

2012

342752878

290933101.90

133,61,60,348

2736225795.0

222,86,86,846.0

1933621621.7

12.5%

13.05%

10.47%

ROA
ROA
100%
80%
60%

12.50%

40%

13.05%

10.47%

20%
0%
2014

2013

2012

ROA measures how efficiently a company can manage its assets to produce profits during a
period. In 2012 ROA was 10.47% and next year it increase more than 2.5%. Although in the
year 2014 it decreases little however AKDL overall return looks healthy and managing its
assets very well.
6) Gross Profit Ratio:
Formula:

Gross Profit =

YEAR

2014

Gross Profit
Net Sales

2013

X100

2012

Gross Profit
Net Sales
Ratio

593057760

459538651.50

446324168

4942148000

3829488762.5

3736034731.6

12%

11.95%

12%

40%
35%
30%
25%

2012

20%

2013
2014

15%
10%
5%
0%
2014

2103

2012

According to the graph AKDL Gross profit ratio is almost same in three consecutive years
(2012-2014). Graph shows after pays off inventory cost AKDL has almost 12% sales revenue
in this three consecutive years. This seems a low ratio in the apparel industry.
7) Proprietary Ratio:
Formula:

Proprietor Ratio =

YEAR

2014

Proprietors fund
Total Assets

2013

2012

Proprietors fund
Total Assets
Ratio

1230858582.89

888105704.89

380323215.20

2736225795.05

2228686846.0

1933621621.7

0.40

0.20

0.45

1.2
1
0.8
2012
2013

0.6

2014

0.4
0.2
0
2014

2013

2012

According to the graph proprietary ratio represents in 2012 shareholders have contributed
20% of all funds used in the business, which is 40% & 45% accordingly in the year 2013 &
2014 respectively. Rests are contributed by creditors.
8) Cost of Goods Sold Ratio:
Formula:

COGS Ratio =

YEAR

2014

COGS
Net Sales

2013

X100

2012

COGS
Net Sales
Ratio

3644521576.75

2937348021

2855600768

4942148000

3829488762.50

3736034731.66

73.74%

76.70%

76.43%

250

200

2012

150

2013
2014

100

50

0
2014

2013

2012

Above graph shows the COGS ratio is almost same in the year 2012 & 2013 which more than
76%. However in 2014 it decreases to 73.74%. It is good sign for AKDL that their COGS
decreasing and expecting to decrease in this year as well as upcoming years.
9) Capital Turnover Ratio:
Formula:

Capital Turnover Ratio =

YEAR
Net Sales
Proprietors fund
Ratio

Net Sales
Proprietors Fund

2014

2013

2012

4942148000

3829488762.50

3736034731.66

1230858582.89

888105704.89

380323215.20

4.3

10

20
18
16
14
12

2012

10

2013
2014

8
6
4
2
0
2014

2013

2012

The working capital turnover ratio of AKDL is 10 in 2012 and 4 in next two years. This
means AKDL has turned over its working 10 times in 2012 and 4 times in the year 2013 &
2014 accordingly. In 2012 AKDL generated a lot of sales compared to the money it uses to
fund the sales, which is good for the organization.

Conclusion &
Recommendation

Ratios are just one number divided by another and as such really dont mean much. The trick
is in the way ratios are analyzed and used by the decision maker. A good strategy is to
compare the ratios to some sort of benchmark, such as industry averages or to what a
company has done in the past, or both. Once ratios are calculated, an analyst needs some
benchmarks to find out where the company stands at that particular point. Useful benchmarks
are industry comparison and company trends.
It may be useful to compare a company to certain industry averages to get a feel for how the
company is performing. In that case it is necessary to obtain industry performance measures.
One of the ways in which financial statements can be put to work is through ratio analysis.
Ratios are simply one number divided by another; as such they may or not be meaningful. In
finance, ratios are usually two financial statement items that may be related to one another
and may provide the prudent user a good deal of information. Of the myriad of ratios that
could be generated, some will be more meaningful than others. Generally ratios are divided
into four areas of classification that provide different kinds of information: liquidity, turnover,
profitability and debt.

Questionnaire

1. What do you mean by Financial Analysis? What kind of analysis it includes.

Ans: Types of Analysis:
1) Comparative analysis statement
2) Common-size analysis statement
3) Trend analysis
4) Ratio analysis
2. Why do we do ratio analysis? Or why you have chosen to do ratio analysis instead
of doing any other kind of problem solving analysis?
Ans: Ratio analysis is a widely used tool of financial analysis. The term ratio in it refers to the
relationship expressed in mathematical terms between two individual figures or group of
figures connected with each other in some logical manner and are selected from financial
statements of the concern. The ratio analysis is based on the fact that a single accounting
figure by itself may not communicate any meaningful information but when expressed as a
relative to some other figure, it may definitely provide some significant information the
relationship between two or more accounting figure/groups is called a financial ratio helps to
express the relationship between two accounting figures in such a way that users can draw
conclusions about the performance, strengths and weakness of a firm.
Classification of ratios:
A) Liquidity ratios
B) Leverage ratios
C) Activity ratios
D) Profitability ratios
3. What Liquidity Ratio means?
The term liquidity is defined as the ability of a company to meet its financial obligations as
they come due. The liquidity ratio, then, is a computation that is used to measure a company's
ability to pay its short-term debts.
4. How do you interpret the liquidity position of this organization?
Investors often take a close look at liquidity ratios when performing fundamental analysis on
a firm. Since a company that is consistently having trouble meeting its short-term debt is at a
higher risk of bankruptcy, liquidity ratios are a good measure of whether a company will be
able to comfortably continue as a going concern. In this sense AKH Knitting Dying is in a
good position.
5. What is the product mix of this organization? Have you analyzed how its product
mix contributes in the financial position?
Product mix is the full range of offerings that a business sells. This is critical to the ability of
an organization to generate sales. Product mix can refer to both physical products and

services of all types. It can also refer to the mix of features and functions that are available to
customers. The product mix of an entity can be evaluated in terms of the following factors:
Width. This is the number of product lines being offered to customers.
Length. This is the total number of products being offered to customers.
Depth. This is the number of variations in which products are offered.
Consistency. This is the extent to which the product lines being offered relate to each other.
A business can generally achieve a higher sales level on a per-unit basis if it offers a broad
product mix. By doing so, it can cross-sell customers on more than one item. For example, a
customer that wants to buy a software package might also be interested in add-on software
that extends the usability of the basic package. For this reason, companies tend to increase
their product mix over time, to bolster their growth.
Product Mix of AKH Knitting & Dying: Various types of mens womens & kids T- Shirt.
Polo shirts etc.
6. According to your observation what are the weakness areas of this organization?
Ans: I have found below weakness of the organization
The accounts section doesnt follow IFRS for financial reporting.
Too much worker migration.
There is no product development section only depending on buyers development.
7. What are the reasons of this weakness?

No professional accountant.
Missing Values of Information.
They depend on customers only.

8. How they may overcome these weaknesses?

Recruit professional accountant.
Introducing online based reporting system.
Recruit fashion designers.
9. According to your observation what are the strongest areas of this organization?

Authorized capital is too more than debt capital.

It is a composite factory so that no dependence for fabric on suppliers.
Well equipped by latest machinery.
Owners have a strong reputation in market.

Bibliography
1.

Stephen A. Ross , Randolph W. Westerfield, Bradford D Jordan, 2010-2011,

Fundamentals of corporate finance, Special Indian Edition (9th Edition).Page no:57-70

2. http://www.akhfashions.com
3. http://kalyan-city.blogspot.com, Nov 11th 2014
4.
5.
6.
7.

www.wikipedia.com March 20th, 2014

Annual Report 2014 of AKH Group
Auditors Report 2013 of AKDL
Auditors Report 2014 of AKDL