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Recommendations for Reneta Limited (Last Part)
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Abu Zafour
NAME : Abu Zafour Fathers Name : M. Fazlur Rahman Mothers Name : Mrs. Kohinur Begum Date of Birth : 1st January, 1988 Nationality : Bangladeshi by birth Birth Place : Bauphal, Patuakhali Marital Status : Single Religion : Islam (Sunni) Weight : 60 Kg. Height : 5’ 4” Health : Fit  
By Abu Zafour
Published on 7 April 2012
 
Recommendations for Reneta Limited to take advantage of its strengths and correct any weakness.

Recommendations for Reneta Limited
RECOMMENDATIONS

Financial statements are most significant part of a company because financial statement analysis involves a comparison of a firm’s performance with that of other firms in the same line of business, which usually identified by the firm’s industry classification. The analysis is used to determine the firm’s financial position so as to identify its current strength and weakness and to suggest actions the firm might pursue to take advantage of the strengths and correct any weakness. Here is our recommendations about this company are as follows:

Renata Ltd. has liquidity ability 1.49 times to pay the short term debt for 1, which is higher than the probable ideal ratio 1.2 times. They have a little amounted of idle money which they opportunity to invest.

Our evaluations of the acid test ratio suggest that Renata’s liquidity position currently is poor. Renata’s acid test ratio seems inadequate.

The average selling time of inventories in 2005 is 168 days and in 2006 is 188 days. So their turn over rate is very high in the company, which is harmful for the country. So they should need to maintain the standard.

Our evaluations of the account receivables turnover suggest that Renata’s average days to collect its credit sale currently is lower than the industry average which is determines that companies account receivables turnover is  good.

Our examination of the return on assets suggests that Renata’s profitability on assets currently is higher than the industry average. We think the return on assets of this company is maintaining a good standard. So they should try to keep the stability.

Our assessment of the total assets turnover ratio suggests that Renata’s plant and equipment to help generate sales is higher than the industry average. We think the total assets turnover of this company is satisfactory.

Our valuation of the debt to total assets suggests that Renata’s debt to total assets currently is lower than the industry average. So they have the opportunity to expand their business by increasing their debt.

Our evaluations of the debt to total equity ratio suggest that Renata’s debt to total equity currently is higher than the previous year. So they should maintain this permanence.

Our opinion of the return on common shareholders’ equity suggests that Renata’s net income were earned for each taka invested by the owners is higher than the industry average. We think the return on common shareholders’ equity of this company is maintaining a good standard.  So they should maintain this immovability

Our evaluations of the net profit margin suggest that Renata’s net income were earned for each taka of sales is lower than the industry average. So they should increase their net profit volume.

The Earning per Share of Renata Ltd. in 2005 is 239.71 and in 2006 is 301.41 which is grater than the previous year which is good for the company and they should keep the steadiness of the increasing level of the earning per share.

Our consideration of the net price earning ratio that Renata’s price of each share of common stock to earning per share is lower than the industry average. So the company needs to increase its price earning ratio with the industry average.

Our evaluations of dividend yield ratio suggest that Renata’s dividend yield ratio is higher than previous year. So they should maintain this permanence.

Our assessment of the time interest earned ratio suggests that Renata’s annual interest payment is higher than the industry average. So we think the time interest earned ratio of this company is maintaining a goods standard and they should keep it on.

Our judgment of dividend per share suggests that Renata’s try to increase its dividend per share.

Our evaluations of the dividend payout ratio suggest that Renata’s earnings distributed in the form of cash dividends is higher than the industry average. So we think the time dividend payout ratio of this company is maintaining a goods standard.


Conclusion

The study of the financial statement is fascinating one for analyzing a firms liquidity, profitability and solvency. It provided us essential information to company’s relative performances with in the industry as well as determining the company’s competitive competence position. Financial statement analysis helps us to take appropriate financial decision in the business field at the right time.


Bibliography
 
01. Besley Scott and Brigham Eugene f. “ Essentials of Managerial finance,”  International student edition, Thirteen Edition, Thomson South-Western, 6April 2006, p. Al.

02. “Annual Report,” Renata Limited., Financial year 2005-2006, p. Al.