2. 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.
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3. 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
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.
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4. 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”.
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6. 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.
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7. 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
Company 2009 2010
Renata 1.16 1.11
Current Ratio
1.16
1.14
2009
1.12
2010
1.1
1.08
2009 2010
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.
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8. 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
Company 2009 2010
Renata .40 .41
Quick Ratio
0.41
0.405 2009
0.4 2010
0.395
2009 2010
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.
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
8
9. 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
Company 2009 2010
Renata 1.69 1.86
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10. Inventory Turnover Ratio
1.9
1.85
1.8 2009
1.75
1.7 2010
1.65
1.6
2009 2010
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
Company 2009 2010
Renata 11.34 10.64
10
11. Accounts Receivable Ratio
11.4
11.2
11 2009
10.8
10.6 2010
10.4
10.2
2009 2010
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
Company 2009 2010
Renata 32.19 34.30
11
12. Average Collection Period Ratio
35
34
2009
33
2010
32
31
2009 2010
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
Company 2009 2010
Renata 1.01 1.11
12
13. Total Asset Turnover Ratio
1.15
1.1
2009
1.05
2010
1
0.95
2009 2010
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.
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14. 2.3.1 Debt or Leverage Ratio:
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
Company 2009 2010
Renata .06 .05
Total Debt Ratio
0.06
0.04 2009
0.02 2010
0
2009 2010
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.
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15. 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.
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
Company 2009 2010
Renata 9.74 11.17
Time Interest Earned Ratio
11.5
11
10.5 2009
10 2010
9.5
9
2009 2010
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
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16. 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.
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
Company 2009 2010
Renata 53.33% 52.75%
Gross Profit Margin Ratio
53.40%
53.20%
53.00% 2009
52.80% 2010
52.60%
52.40%
2009 2010
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.
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17. 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
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%
Net Profit Margin Ratio
17.00%
16.50%
16.00% 2009
15.50% 2010
15.00%
14.50%
2009 2010
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:
17
18. 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%
Return on Total Asset Ratio
17.00%
16.50%
2009
16.00%
2010
15.50%
15.00%
2009 2010
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:
18
19. 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%
Return on Equity Ratio
29.00%
28.50%
28.00% 2009
27.50% 2010
27.00%
26.50%
2009 2010
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
19
20. 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,
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
P/E Ratio
40
30
2009
20
2010
10
0
2009 2010
20
21. 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:
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
Market/Book Value Per Share
Ratio
2000
1500
2009
1000
2010
500
0
2009 2010
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.
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22. 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
Table: Earning per share Ratio for Renata for the years 2009 to 2010
Company 2009 2010
Renata 333.90 471.06
Earning Per Share Ratio
500
400
300 2009
200 2010
100
0
2009 2010
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
23. Dividend Yield
5000
4800
2009
4600
2010
4400
4200
2009 2010
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.
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25. 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.
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26. 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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