Chapter One:

Introduction & Methodology

1

1.1 Introduction and Overview of Renata Limited

The purpose of this report is to analyze financial statements. This involves a thorough

understanding of all the ins and outs of financial statements. Analysis of financial statements

basically involves finding different significant ratios such as liquidity ratios, asset Utilization

ratios, Solvency ratios, profitability ratios, and market value ratios. To take financial decisions

analyzing financial statements is very important for a financial manager. Moreover, it is also

important to make reasoning for what makes book value differ from market value of shares.

In this report we have studied the financial statements of Renata Limited from 2009 to

2010. Based on these 2 years financial statements we have made analysis and interpreted our

findings.

Renata Ltd. - An Overview

Renata Limited is one of the top ten pharmaceutical manufacturers in Bangladesh. Renata is

engaged in the manufacture and marketing of human pharmaceutical and animal health products.

The company also manufactures animal therapeutics and nutrition products. Renata currently

employs about 2300 people in its head office in Mirpur, Dhaka and its two production facilities

in Mirpur, Dhaka and Rajendrapur, Dhaka. The company began its operations as Pfizer

(Bangladesh) Limited in 1972. For the next two decades it continued as a subsidiary of Pfizer

Corporation. However, by the late 1990s the focus of Pfizer had shifted from formulations to

research. In accordance with this transformation, Pfizer divested its interests in many countries,

including Bangladesh. At present, Renata manufactures about 300 generic pharmaceutical

products including hormones, contraceptives, anti-cancer drugs, oral preparations,

cephalosporins, parenteral preparations as well as other conventional drugs. In addition, they

also offer about 95 animal therapeutics and nutrition products. Renata is a publicly traded

company on the Dhaka Stock Exchange. In 2009, the company’s annual turnover was about US

$56 million, with an annual growth of about 35%.The company also operates four other

manufacturing units – the original Pfizer facility for general products, a UNICEF-approved SFF,

a Cephalosporin facility, and a Penicillin facility. As of the third quarter of 2010, Renata exports

its products to the UK, Afghanistan, Cambodia, Hong Kong, the Philippines, Jordan, Sri Lanka,

Vietnam, Myanmar, Kenya, Belize, Nepal, Malaysia, and Guyana, with registration ongoing in

23 other countries.

2

Renata Ltd. - Mission

“To provide maximum value to our customers, shareholders, colleagues, and communities

where we live and work.”

Renata Ltd. – Vision

“To establish Renata permanently among the best of innovative branded generic companies.”

Approach to Quality of Renata Ltd.

“The endurance of a company’s reputation depends upon the quality of work it does rather than

the quantity. Hence, the appreciation of quality must be instinctive, and our commitment

instinctive, and our commitment.”

1.2 Objective of the Report

o Forming an overall understating about the financial condition of the company over last

two years.

o Analyzing the ratios of the selected company based on financial statements.

o To make forecast on the basis of the trend in different ratios.

o To learn the methods of evaluating and rationalizing the financial aspects of the

company.

1.3 Methodology

I have initiated our research through the gathering information about Renata Ltd. I have

collected secondary data from the balance sheet and income statement of annual reports of 2009

to 2010. I have collected the company’s annual reports from its website.

As it is mentioned earlier, I have considered the last 2 year’s “Annual Reports” of Renata

Limited. The annual reports of 2009 and 2010 of Renata Ltd. were taken into consideration for

analysis.

1.4 Nature and Sources of Data

3

For the report we have only considered the secondary sources of data. Our secondary sources

mainly include the last 2 years “Annual Reports” of Renata Ltd. which had been collected from

the company’s website.

1.5 Nature of Analysis

For our analysis, we mainly focused relied on “Ratio Analysis”, which helped us to identify any

specific trends or fluctuations occurred during the periods taken into consideration for analysis.

1.6 Limitations of the Study

o As this was an individual project, it was very difficult to accomplish the report in a very

limited time.

o The paper focuses on analysis of only one single firm.

o In the financial statements some information was not present.

o Moreover many companies practice unethical accounting practices to get rid of tax that

may be different from the actual scenario. Also many times, these companies manipulate

financial statements to make their performance much more lucrative to the shareholders.

Such practice if had taken place might have diluted the findings which are based on the

information available in the “Annual Reports”.

4

Chapter Two:

Analysis and

Interpretation

Of Different Ratios

5

2. Ratio Analysis

To evaluate a firm’s financial condition and performance, the financial analyst usually performs

analyses on various aspects to find out the financial health of the firm; among which ratio

analysis is one of the most important and commonly used methods. Ratio analysis is a tool

frequently used during the analysis to relate two pieces of financial data by dividing one quality

by the other. In this study various ratio analyses will be done to understand the financial

condition of the company get a clear picture. The analysis of financial ratios involves two types

of comparison:

o First, the analyst compares a present ratio with past and expected future ratios for the

same company. The current ratio (the ratio of current assets to current liabilities) for the

present year could be compared with the current ratio for the previous year-end. When

financial ratios are arranged over a period of years, the analyst can study the composition

of change and determine whether there has been an improvement or deterioration in the

firm’s financial condition and performance over time.

o The second method of comparison involves comparing the ratios of one with those of

similar rivalry firms or with industry averages at the same point in time. Such a

comparison gives insight into the relative financial condition and performance of the

firm. It also helps us identify any significant deviation from any applicable industry

average (or standard).

Here we will discuss and calculate different types of ratios of Renata Pharmaceuticals Ltd.

6

2.1 Liquidity Ratio:

Ratios that show the relationship of a firm’s cash and other current assets to its current liabilities

are known as liquidity ratios. Different types of liquidity ratios are discussed below.

2.1.1 Current Ratio:

The ratio that relates current assets to current liabilities is the current ratio. The current ratio

indicates the ability of a company to pay its current liabilities from current assets and shows the

strength of the company’s working capital position. . Current ratio of 2:1 is considered to be a

healthy condition for most business organization. The ratio is calculated as follows:

Current Ratio = Current Assets / Current Liabilities

Table: Current Ratios of Renata of the years 2009 to 2010

2009 2010

1.081.091.1

1.111.121.131.141.151.16

Current Ratio

Inventory

7

Company 2009 2010

Renata 1.16 1.11

According to Benchmark analysis the current ratio of 2:1 is considered to be ideal for a

company. So according to the benchmark analysis Renata Limited’s performance is poor to meet

the current obligation. These decreasing current ratio indicate that either Renata Ltd. using more

their current asset for larger production or they took more short term debt.

2.1.2 Quick Ratio:

Inventories typically are the least liquid of a firm’s current assets – they are the assets on which

losses are most likely to occur in the event of liquidation. Therefore, it is important to measure

the firm’s ability to pay off short term obligations without having to rely on the sale of

inventories. This is why quick ratio is used. Quick ratio of 1:1 is considered to be a healthy

condition for most businesses.

Quick ratio= (Current Assets- Inventories)/ Current Liabilities

Table: Quick Ratios of Renata of the years 2009 to 2010

2009 2010

0.3940.3960.398

0.40.4020.4040.4060.4080.41

Quick Ratio

Inventory

From the above chart we can see that, Renata went for huge production at 2010 because of the

increasing demand of their products. So their cash balance gone down and their Inventory also

increased than compare to past few years. At the same time to make these huge production they

had buy Supplies with Credit from supplier much more than previous years. So all these factors

forced to make their Quick Ratio weaker but future they will actually get their benefit.

8

Company 2009 2010

Renata .40 .41

Overall comment:

Overall, both renata’s current ratio was decreasing and quick ratio was slightly increasing from

year 2009 to 2010. This indicates less cash holdings of the company. Also there may be

increased current liability and inventory. These will ultimately result in further investment and

higher degree of output. That may contribute for higher profit. Although the benchmark analysis

suggests that the firm is conveniently placed but time series analysis says that liquidity

performance is not so good. Though Renata looks for the better opportunity and they use their

current asset more for higher production but they should maintain sufficient current asset to

meet the current obligation. This happen because either Renata’s sales department’s

performance is poor or their products quality was not good.

2.2 Asset Utilization Ratio:

The Asset utilization ratios the way in which a company uses its assets to generate revenue and

profit. A set of ratios that measure how effectively a firm manages its assets compared to its

sales. These ratios are designed to find out whether the total amount of each type of asset as

reported on the balance sheet appear reasonable, too high, or too low considering current and

projected sales levels. Asset Management Ratio is done based on inventory turnover ratio, days

sales outstanding and fixed asset and total asset turnover ratio.

2.2.1 Inventory Turnover Ratio:

Inventory Turnover Ratio tells how often a business's inventory turns over during the course of

the year. Inventories are the least liquid form of asset and a high inventory turnover ratio is

generally positive. The ratio is calculated as follows:

Inventory Turnover ratio= Sales /Average Inventories

Table: Inventory Turnover Ratios for Renata of the years 2009 to 2010

9

Company 2009 2010

Renata 1.69 1.86

2009 20101.6

1.651.7

1.751.8

1.851.9

Inventory Turnover Ra-tio

Inventory

From the above chart we can see that, Renata’s inventory turnover ratio is slightly increased

from 2009 to 2010. Indicates deterioration in asset utilization and more capital tied up in liquid

capital, thus increasing cost of short term financing and company is getting new buyers every

year and as a result they have to produce more and keep it to the inventory till buyer take their

product.

2.2.2 Accounts Receivable Turnover:

This ratio gives us the number of times accounts receivables are collected in the year.

It is calculated as follows:

Accounts Receivable Turnover = Net credit sales /Average Accounts Receivable

Table: Accounts Receivable Turnover Ratios for Renata of the years 2009 to 2010

10

Company 2009 2010

Renata 11.34 10.64

2009 201010.210.410.610.811

11.211.4

Accounts Receivable Ra-tio

Inventory

From the above chart we can see that, Rnata’s accounts receivable ratio dicreased from year

2009 to 2010. This ratio quantifies the firm's effectiveness in extending credit as well as

collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a

firm uses its assets.

2.2.3 Average collection period Ratio / Days Sales Uncollected:

Average collection period ratio or DSO is used to evaluate the firm’s ability to collect its credit

sales in timely manner. The DSO represents the average length of time the firm must wait after

making sales before receiving cash, which is the average collection period. The DSO ratio is

calculated by dividing accounts receivable by average sales per day which indicates the average

length of time it takes the firm to collect its credit sales. It is calculated as:

Average collection period Ratio =365/Accounts Receivable Turnover

Table: Average collection period Ratio for Renata of the years 2009 to 2010

11

Company 2009 2010

Renata 32.19 34.30

2009 2010

3131.532

32.533

33.534

34.5

Average Collection Period Ratio

Inventory

From the above chart we can see that, Rnata’s DSO ratio increased from year 2009 to year 2010.

Renata’s DSO is good in the previous year and they are doing very good in consistently. If they

can keep producing qualitative product that has good demand in the market, and in future they

will have higher profit.

2.2.4 Total Asset Turnover Ratio:

The Total Asset Turnover ratio measures the amount of sales generated for every dollar's worth

of total assets. The total asset turnover ratio is calculated by dividing sale by total assets. The

total asset turnover ratio tells us whether the company or how well the company is utilization its

total assets to generate sales. The total asset turnover ratio is calculated by dividing sale by total

assets. The total assets turnover ratio measures the turnover of all the firm’s assets. It is

calculated as follows:

Total Assets Turnover Ratio = Total sales/ Total assets

Table: Total Asset Turnover Ratios for Renata of the years 2009 to 2010

12

Company 2009 2010

Renata 1.01 1.11

2009 20100.95

1

1.05

1.1

1.15

Total Asset Turnover Ratio

Inventory

From the above chart we can see that, Renata’s total asset turnover ratio same as year 2009 and

year 2010. This indicates no improvement in total asset utilization.We compute the average total

assets by averaging the asset totals at the beginning and at the end of the year.

Overall Comment:

Overall, Renata’s Asset Utilization Ratios indicate that, analyzing the asset management ratios

we found out that increasing trend in inventory piling, but it will ultimately result in higher

amount of production in future. Then again, Renata invested heavily in fixed asset. It also tells a

higher future output. Another fact is Renata maintains flexible credit terms. These are mainly

due to the tendency of maintaining good relationship in corporate channels. So that it will

contribute to the future growth of the company

2.3 Solvency Ratios:

This ratio measures how effectively a firm is managing its debts. This ratio helps the analyst to:

o Check balance sheet ratios to determine the extent to which borrowed funds have been used

to finance assets.

o Review income statement ratios to determine how well operating profits can cover fixed

charges such as interest.

Debt Management ratios include analysis of two types of ratio: Debt ratio and Times interest

earned ratio.

2.3.1 Debt or Leverage Ratio:

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Total debt includes both current liabilities and long term debts. Creditors prefer low debt ratios,

because the lower the ratio, the greater the cushion against creditor’s losses in the event of

liquidation. This ratio reflects how effectively a firm is managing its debts. It helps the analyst to

determine the extent to which borrowed funds have been used to finance assets and review how

well operating profits can cover fixed charges such as interest. The owners on the other hand can

benefit from leverage because it magnifies earnings, and thus the return to stockholder. It

measures the percentage of the firm’s assets financed by creditors. It is computed as follows:

Debt ratio= Total long term Liabilities / total assets

Table: Debt Ratios for Renata of the years 2009 to 2010

2009 20100.0440.0460.0480.05

0.0520.0540.0560.0580.06

Total Debt Ratio

Inventory

From the above chart we can see that, Renata’s total debt ratio is slightly decreased from year

2009 to 2010. A low leverage ratio may make the company more solvent, normally debt ratio is

lower better, because high debt increases the risk as interest is compulsory obligation. Their debt

ratio is low because they are taking fewer amount of loan from the bank.

2.3.2 Time Interest Earned (TIE) Ratio:

The TIE ratio measures the extent to which earnings before interest and taxes (EBIT), also

called operating income, can decline before the firm is unable to meet its annual interest cost. 14

Company 2009 2010

Renata .06 .05

Failure to meet this obligation can bring legal action by the firm’s creditor, possibly resulting in

bankruptcy. The TIE ratio is computed by dividing earnings before interest and taxes (EBIT) by

interest charges. It measures the ability of the firm to meet its annual interest payments. The TIE

ratio is defined as follows:

Times Interest Earned = (Income before interest and taxes) / Interest expense

Table: TIE Ratios for Renata of the years 2009 to 2010

2009 2010

9

9.5

10

10.5

11

11.5

Time Interest Earned Ratio

Inventory

From the above chart we can see that, Renata’s the TIE ratio increased from year 2009 to year

2010. Renata is not taking any long term debt; as a result they are not facing any difficulties or

benefits regarding this ratio. Generally the ratio is considered as safe from the lenders point of

view. Renata Ltd. has pretty high ratios than benchmark, so the shareholders will be satisfied

with the company.

Overall Comment:

Renata’s debt management ratios indicate that Renata is in a better position. In fact, Renata

might have great facilities borrowing additional funds. Compare with the EPS, Renata is giving

very higher rate of EPS but they are not taking debt, which is good news for the company. It is

creating trust on shareholders mind regarding the company. Though they are not taking any long

term loan, as a result they don’t have any chance for the bankruptcy in near future.

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Company 2009 2010

Renata 9.74 11.17

2.4 Profitability Ratios:

A group of ratios that are showing the effect of liquidity, asset management, and debt

management on operating results are the basic of profitability ratio. Profitability is the net result

of a number of policies and decisions. Profitability ratios are of three types- Net profit margin on

sales, Return on Asset (ROA) and Return on Equity (ROE).

2.4.1 Gross Profit Margin Ratio:

The gross profit margin is the percentage of each Taka in sales remaining with the company

once the costs of goods are paid off. It is calculated by dividing gross profit by sales. It is

defined as follows:

Gross Profit Margin Ratio = Gross profit / Net sales

Table: Gross Profit Margin Ratio for Renata of the years 2009 to 2010

2009 201052.40%

52.60%

52.80%

53.00%

53.20%

53.40%

Gross Profit Margin Ra-tio

Inventory

In 2010 the ratio goes down. The reduction looks serious and will cause concern for the owners

and lenders even if it may be explained to some extent by industry wide downturn.

2.4.2 Net profit margin Ratio:

Net profit margin ratio is the ratio measures net income per dollar of sales and is calculated as

net income divided by revenues, or net profits divided by sales. It measures how much out of

every dollar of sales a company actually keeps in earnings. A higher profit margin indicates a

more profitable company that has better control over its costs compared to its competitors. The 16

Company 2009 2010

Renata 53.33% 52.75%

total asset turnover ratio is calculated by dividing sale by total assets. The total assets turnover

ratio measures the turnover of all the firm’s assets. It is calculated as follows:

Net profit margin Ratio = Net profit / Net sales

Table: Net profit margin Ratios for Renata for the years 2009 to 2010

Company 2009 2010

Renata 15.47% 16.73%

2009 201014.80%15.00%15.20%15.40%15.60%15.80%16.00%16.20%16.40%16.60%16.80%

Net Profit Margin Ratio

Inventory

Renata Ltd’s profit margin in the year 2009 to 2010 was slightly increased, it indicates that its

sales were higher, its costs were lower. And a higher profit margin also indicates that Renata is

more profitable company that has better control over its costs compared to its competitors.

2.4.3 Return on Total Asset (ROA):

Return on Asset (ROA) is an indicator of a company which deals with profit relative to its total

assets. It gives an idea as to how efficient management is at using its assets to generate earnings.

It is calculated by dividing a company's annual earnings by its total assets, ROA is displayed as

a percentage. It provides an idea of the overall return on investment earned by the firm. The

ROA after interest and taxes are computed as follows:

Return on Total Assets (ROA) = Net Profit / Total Assets

Table: ROA ratios for Renata for the years 2009 to 2010

Company 2009 2010

Renata 15.67% 16.65%

17

2009 2010

15.00%

15.50%

16.00%

16.50%

17.00%

Return on Total Asset Ratio

Inventory

Return on Assets is a stable indicator of how profitable a company is before leverage. It is also a

measure of the productivity of an enterprise’s total resources, and is used to assess managerial

performance as it measures a manager’s ability and efficiency in creating wealth. The table

shows that the ROA for Renata Pharmaceuticals Ltd. is increasing rapidly from 2009 to 2010 On

the other hand net income also increases but equivalently tax also decreases a lot so the net

income ultimately increases. From 2010 Renata did very well and ROA position is much higher

in the year 2009.

2.4.4 Return on common shares:

This is the ratio of net income to shareholders’ equity. It measures the rate of return on

stockholder’s investment. The ROE is perhaps the most important ratio of all. It is the

percentage of return on funds invested in the business by its owners. In short, this ratio tells the

owner whether or not all the effort put into the business has been worthwhile. If the ROE is less

than the rate of return on an alternative, risk-free investment such as a bank savings account, the

owner may be wiser to sell the company, put the money in such a savings instrument, and avoid

the daily struggles of small business management. The return on equity (ROE) or the rate of

return on stockholder’s return is measured as follows:

Return on common shares Ratio = Net income available to common shares / Average

shareholders Equity.

Table: Return on common shares Ratio for Renata for the years 2009 to 2010 (%)

Company 2009 2010

Renata 27.34% 28.65%

18

2009 201026.50%

27.00%

27.50%

28.00%

28.50%

29.00%

Return on Equity Ratio

Inventory

The amount of net income returned as a percentage of shareholders equity. Return on equity

measures a corporation's profitability by revealing how much profit a company generates with

the money shareholders have invested.

Renata proved much profitable in 2009 than 2010. The sharp increase in Net Income to

Shareholder and Common Equity was the reason. By relating these earnings to the shareholder

equity, an investor can quickly see how much cash comes from existing assets. In 2009 Renata

paying higher EPS so the common equity or the shareholders investment rate goes up then the

Net income. That indirectly shows that investors trust is high for these company and the Renata

Limited can get credit more investors any time.

As we know that investors usually look for companies with returns on equity that are high and

growing, and for Renata they fulfill both of the features for ROE, so Renata Limited will

influence a large number of investors.

Overall Comments:

All the profitabilty ratio shows a positive trends for the renata it is becasuse of the good

inventory management system, higher net income, good asset management and the total equity

of the Renata Limited. That basically tells that it is a very profitable company. The figure of the

EPS also shows that because of their profitability in nature they also provide higher EPS. It is a

very good company for investment and the shareholders also have the trust for the company.

2.5 Market Value Measures:

The market value ratios represent a group of ratios that relates the firm’s stock price to its

earnings and book value per share. These ratios give management an indication of what

investors think of the company’s past performance and future prospect. If the firm’s liquidity,

19

asset management, debt management, and profitability ratios are all good then market value

ratios will be high which will lead to an increase in the stock price of the company.

Market value ratio is of two types- Price/Earnings Ratio and Market/Book value Ratio.

2.5.1 Price/Earning (P/E) Ratio:

This is the ratio of the price per share to earnings per share. It shows the dollar amount investors

will pay for $1 of current earnings. It is computed by market price per share and earnings per

share (EPS).

P/E ratio = Market price per share/ Earnings per share

Price/Earnings ratio is higher for firms with high growth potentials and low for riskier firms.

The investors consider the firm with high leverage more risky than firm with low leverage.

However if the ratio of the firms is increasing it means that it is gaining trust of the investors.

Table: Price/Earnings Ratios of Renata for the years 2009 to 2010

Company 2009 2010

Renata 35.94 27.47

2009 201005

10152025303540

P/E Ratio

Inventory

Price/Earnings ratio is higher for firms with high growth potentials and low for riskier firms.

The investors consider the firm with high leverage more risky than firm with low leverage. From

the above chart we can see that, Renata’s P/E ratio decreased from year 2010. For Renata, this

indicates that, the earning has become a lot less attractive in 2010 and a stock with a low PE

ratio is a cheap stock.

2.5.2 Market/Book value per share:

20

The ratio of a stock’s market price to its book value gives another suggestion of how investors

regard the company. Companies with relatively high rates of return on equity generally sell at

higher multiples of book value than those with low returns. The formula for Market/Book Value

is given below:

Market / Book value per share ratio = Total common shareholders equity / common shares

outstanding.

Table: Market Value per share Ratio for Renata for the years 2009 to 2010

Company 2009 2010

Renata 1221.19 1643.99

2009 2010

0

500

1000

1500

2000

Market/Book Value Per Share Ratio

Inventory

From the above chart we can see that, Renata’s M/B value ratio increased in year 2009 to year

2010. For this large increase of Market value per share ratio indicates that it succeeded to gain

more investor’s trust and the investors are very much confident about the prospect.

2.5.3Earning per share:

Earnings per Share (EPS) are the portion of a company's profit allocated to each outstanding

share of common stock. It serves as an indicator of a company's profitability. It is generally

considered to be the single most important variable in determining a share's price. It is calculated

as follows:

Earnings per share = Net income available to common shares / outstanding common

shares

21

Table: Earning per share Ratio for Renata for the years 2009 to 2010

Company 2009 2010

Renata 333.90 471.06

2009 20100

100

200

300

400

500

Earning Per Share Ratio

Inventory

EPS of Renata Ltd. has been increasing. If they can continue it they have a bright future. This

should attract new investors to invest on their company through share market.

2.5.4Dividend Yield:

Dividend Yield Ratio is calculated as follows:

Dividend Yield = Dividend per share / Market price per share

Table: Dividend Yield Ratio for Renata for the years 2009 to 2010

Company 2009 2010

Renata 4819.54 4468.77

22

2009 201042004300440045004600470048004900

Dividend Yield

Inventory

Renata Ltd. was pay less dividend in 2010. This may be an indication that less earn to pay to the

shareholders. Investor may interpret that, the company did not have enough money to pay

dividend.

Overall Comments:

One of the most important ratios to evaluate the performances of the firm is the price-earnings

ratio, through the period, Renata’s risk got reduced in the market. Also, it succeeded to gain

more investor’s trust which will help Renata to look for further sources of investments.

23

CHAPTER – 03

Findings and

Conclusion

24

3.1 Overall Findings on Renata Limited

Analyzing the liquidity ratios we can see that Renata Limited is holding less cash in

hand. Both the current ratio and the quick ratio are lower than the benchmark. Though it

indicates increase in liability and higher inventory holding but it will ultimately contribute to

future investment and higher output.

Analyzing the asset management ratios we found out that increasing trend in inventory

piling, but it will ultimately result in higher amount of production in future. Then again, Renata

invested heavily in fixed asset. It also tells a higher future output. Another fact is Renata

maintains flexible credit terms. These are mainly due to the tendency of maintaining good

relationship in corporate channels. So that it will contribute to the future growth of the company.

Analyzing the debt management ratios we can summarize that the company has decrease

its debt capital but it was also successful in utilizing the advantage of debt financing as dividend

and EPS shows increasing trends largely. Then again, this increased debt will help to make

further investment.

Analyzing the profitability ratios we can summarize that profit margin sale increase,

which means a handsome amount of net income in every year in comparison to sales. From the

ROA we can tell that their investing heavily on fixed asset and company also getting higher

output over the years. After that, ROE shows increasing trend that means the company is

generating higher profit with the money shareholders have invested.

Analyzing the market ratios, we can summarize that for P/E and M/B value ratio

Renata’s risk got reduced in the market. That indicates Renata have gained more trust among the

investors. This will help Renata to look for further sources of investment.

25

3.2 Conclusion:

From the overall analysis we see that the market value of Renata Limited is much higher than

the book value. It is a very good sign for a company. But it is better for Renata Limited because

of the trends, for last five years the data shows the market value is three to five times higher than

the book value. They also provide a good portion of their net income as dividend to the

shareholders. Moreover, we all know that a company’s overall condition can measure by the

market price of the share. Finally, the main thing is that they are a lot of giant competitor in the

market. So for make a stable and increasing growth of their market price of share Renata

Limited can look more on their liquidity position because they hold less cash which might be

very risky for Renata Limited and the field of inventory management issue they can be more

efficient. Despite of that few facts they are doing very good in the market as the market value is

higher than the book value which shows their business activity and trends is gaining more and

more investors trust.

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