ARMY INSTITUTE OF BUSINESS ADMINISTRATION

Course Name: Project Work

Course Code: PRO 8509

A Consultancy Report on

ALIM INDUSTRIES LIMITED - Finance

Submitted by:

Mr. Sakib Mohammed Malik

Group Member of MBA10
Program: MBA Batch: 10
ID: 201019003

Submitted to:

Mr. Golam Morshed Shahriar Tanim

Course Supervisor

Submission Date:
12th March 2021
 Letter of Transmittal
12th March 2021

Mr. Golam Morshed Shahriar Tanim

Lecturer
Army Institute of Business Administration
Jalalabad Cantonment, Sylhet.

Subject: Submission of Consultancy Report on Alim Industries Limited.

Respected Sir,
With enormous inclination, I am submitting my individual assessment report about “Consultancy
Report on Alim Industries Limited: Finance” which I had selected after the discussion with my
group members.
The report contains about financial performance of Alim Industries Limited from 2016 to 2018.
Due to some constraints, I could not manage all financial activities of Alim Industries Limited. To
fulfill the requirement of a report, I had to conduct both primary researches along with my learning
materials that I have been taught during my MBA period.
Due to time constraints, I have tried as much as possible to avoid giving any vague information. If
such arises, I am prepared to clarify them.
I would like to thank you for giving me such an opportunity to prepare this report which helps me
to increase my theoretical knowledge that will be a treasure for forthcoming.
Sincerely yours,

………………..
Mr. Sakib Mohammed Malik
ID: 201019003
Group: MBA10
Program: MBA
Army Institute of Business Administration

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 Acknowledgement
All praise goes to the Almighty Allah for giving me the strength and patience in order to complete
this project report.
At the beginning, I would like to honor my sincere gratitude to my supervisors Mr. Golam Morshed
Shahriar Tanim, Mr. Md. Ali Ashraf and Mr. Chinmoy Das Gupta who have supported me
throughout this project work with their patience and knowledge whilst allowing me the opportunity
to work in.
I express my greatest honor to Mr. Alimul Ahsan Chowdhury, Managing Director of Alim
Industries Limited, for his kind permission to allow me for preparing a consultancy report on their
organization.
I would like to thank Mr. Shahriar Hasan Sourov, Executive in Human Resource Department of
Alim Industries Limited, for providing information of Alim Industries Limited.
I am very thankful to the whole team member of Alim Industries Limited for their cooperation and
guidance. Without this, I could not have successfully conduct this project work.

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 Declaration
I am Sakib Mohammed Malik, ID: 201019003 the student of MBA Program of Army Institution
of Business Administration, Sylhet hereby I declare that the project work titled “Consultancy
Report on Alim Industries Limited - Finance” is prepared under the intensive supervision and
guidance of Mr. Golam Morshed Shahriar Tanim, Lecturer of Army Institute of Business
Administration.
I also declare that the project report is prepared for academic purpose only. This repost is not
submitted by others.

Sincerely yours,

---------------------------
Sakib Mohammed Malik
ID: 201019003
MBA 10
Army Institute of Business Administration, Sylhet

iii
 Executive Summary
Finance is considered as the life blood of an organization. To make the financial performance of
an organization better, efficient, effective, finance department plays crucial role on this.
This project is the part of our MBA program in which a student tries to utilize his theoretical
knowledge in practical field. Therefore, in this report, I have analyzed the financial performance
of Alim Industries Limited from 2016 to 2018.
In chapter one, there is an introduction part that consists background, objective, sources of data,
data analysis and limitation of the study. In chapter two, I have discussed the financial situation of
Alim Industries Limited by using some methods that I have learnt during my MBA program. After
that, I have tried to find the problems regarding financial activities and provided some suggestion
on that.

iv
 Table of Content
Chapter Particular Page
1.1 Background of the Study 1
Chapter One: 1.2 Objective of the Study 1
Introduction 1.3 Methodology of the Study 1
(1) 1.4 Data Analysis 1
1.5 Limitation of the Study 1
2.1 Existing Financial Condition of Alim 2
Industries Limited
2.2 Current Ratio 2–3
2.3 Acid Test Ratio 3
2.4 Days to Sell Inventory 3–4
Chapter Two: 2.5 Gross Profit Margin 4
Situational Analysis 2.6 Operating Profit Margin 4–5
(2 – 10) 2.7 Debt to Equity 5
2.8 Debt to Total Asset 5–6
2.9 Interest Coverage 6
2.10 Accounts Receivable Turnover 6–7
2.11 Collection Period 7
2.12 Accounts Payable Turnover 8
2.13 Payable Turnover in Days 8–9
2.14 Inventory Turnover 9
2.15 Total Asset Turnover 9 – 10
Chapter Three: Findings 11
Chapter Four: Recommendation 12
Conclusion 13
 Chapter One: Introduction
1.1 Background of the Study
Without any doubt, finance is one of the most important areas of business that manages, control,
organizes plan regarding financial goals. To be more specific, finance department provides an
organization where to spend, how to spend, and when to spend.
As a part of project report, I have chosen financial aspects of Alim Industries Limited in order to
utilize my theoretical knowledge into practical field.
1.2 Objective of the Study
In this report, several techniques of financial analysis have been determined, scrutinized and
implemented for analyzing the monetary performance of Alim Industries Limited for a better
understanding on its financial performance.
1.3 Methodology of the Study
Financial data of Alim Industries Limited were collected directly from the top management of this
company. They provided me some items of their 3 years financial statement. I have also collected
additional data which is related to this report.
1.4 Data Analysis
For analyzing data, I have used some ratios for understand financial activities of Alim Industries
Limited during the period of 2016-2018.
1.5 Limitation of the Study
There is some confidential information for maintain secrecy that Alim Industries Limited did not
provide me. For that reason, I cannot add those data in this report.

1
 Chapter Two: Situational Analysis
2.1 Exiting Financial Condition of Alim Industries Limited
Finance is one of the major parts of an organization that is responsible for collecting funds for the
organization, investing the fund and utilizing the fund for organization and various assets. Every
organization follows a concept that is the combination of debt and equity used by a company to
finance its overall operations and development that is capital structure. The capital structure of
Alim Industries Limited from 2016 to 2018 is given below:
Debt
Asset
Equity

Source 2016 2017 2018

Amount Percentage Amount Percentage Amount Percentage
Debt 11635177995 84% 13155230670 83% 14076212468 80%
Equity 2216224380 16% 2694444836 17% 3519053117 20%
Asset 13851402375 100% 15849675506 100% 17595265585 100%
Table 1: Capital Structure of Alim Industries Limited

Trend Analysis of Debt and Equity of

AIL
100% 84% 83% 80%

50% Debt
16% 17% 20%
Equity
0%
2016 2017 2018

From the above chart and table, it is showing that most of the fund of Alim Industries Limited is
coming from its debt. The average debt of AIL from 2016 to 2018 is 82.33%.
2.2 Current Ratio
It is a liquidity ratio that determines the company has enough resources to tackle its short-term
obligations. The standard ratio is 2:1 that means current ration should be double than current
liability.
Current Asset
Current Ratio = Current Liability

AIL 2016 2017 2018

Current Ratio 1.31 1.24 1.35

2
 Trend Analysis of Current Ratio
1.4
1.35 1.31 1.35
1.3 1.24
1.25
1.2
1.15
2016 2017 2018

Interpretation: From the above table and graph, we can see that current ratio of AIL shows
downward trend from 2016 to 2017, but increased slightly in 2019. It indicates that Alim Industries
Limited has enough resources to meet its short-term obligations.
2.3 Acid Test Ratio
It determines how quickly the company can meet its short-term obligations by converting its short-
term assets into cash. The higher the value of acid test, the better a position of the company is in.
Current Asset − Inventory
Acid Test Ratio = Current Liability

AIL 2016 2017 2018

Acid Test Ratio 0.98 0.96 1

Trend Analysis of Acid Test Ratio

1.02
1.00 1
0.98
0.98
0.96
0.96
0.94
2016 2017 2018

Interpretation: From the above graph and table, the acid test ratio of AIL shows downward trend
from 2016 to 2017, but increased slightly in 2019. From 2016 to 2017, it was hard for Alim
Industries Limited to convert its asset into cash when it needs to pay. Because the ratio was below
than the standard value. In 2018, the acid test ratio of AIL was 1 that means it was in the standard
level.
2.4 Days to Sell Inventory
It explains the number of days the company takes to sell its inventory within one year. The small
value of this ratio is preferable because it indicates the company is more effectively and efficiently
selling off its inventory.
Inventory
Days to Sell Inventory = Cost of Goods Sold Per Day days

3
 AIL 2016 2017 2018
Days to Sell Inventory 110 96 93

Trend Analysis of Days to Sell

Inventory
120
110
100 110

90 93
96
80
2016 2017 2018

Interpretation: The above graph shows that days to sell inventory of AIL was decreasing
continuously from 2016 to 2018. On average, Alim Industries Limited takes almost 100 days to
sell its inventory.
2.5 Gross Profit Margin
It assesses a company’s financial health to determine the percentage of profit that comes from after
deducting cost of goods sold. The higher a company’s gross profit margin is, the more money it’s
generating in profit through the sale of its goods and services.
Gross Profit
Gross Profit Margin = x 100
Net Sales

AIL 2016 2017 2018

Gross Profit Margin 26% 24% 24%

Trend Analysis of Gross Profit Margin

27%
26%
26%
25%
24%
24% 24%
23%
2017 2018 2019

Interpretation: From the above table and graph, it is clear that gross profit margin of AIL was
slightly decreased from 2016 to 2017 and remained constant in 2018. Basically, higher value is
preferable in this ratio that indicates company generates profit from its selling goods.
2.6 Operating Profit Margin
It allows to examine how much profit the company gains after paying its variable costs. The higher
the ratio, the more profit is available to fund on company’s non-operational costs.
Operating Profit
Operating Profit Margin = x 100
Net Sales

4
 AIL 2016 2017 2018
Operating Profit Margin 13% 13% 13%

Trend Analysis of Operating Profit

Margin
15% 13%
13%
10% 13%

5%
0%
2016 2017 2018

Interpretation: From the above table and graph, it is clear that operating profit margin of AIL
remained constant in three consecutive years (2016 to 2018). Generally, higher value is preferable
in this ratio that indicates company generates profit after paying its variable cost.
2.7 Debt to Equity
It is a solvency ratio that determines how much of a company's investment comes from debt and
shareholder equity. In general, the lower value of this ratio indicated the company is secured more
financially. Since the significant part of its operations are being funded by investor’s equity.
Total Liability
Debt to Equity = Shareholder′s Equity

AIL 2016 2017 2018

Debt to Equity 5.25 4.88 4

Trend Analysis of Debt to Equity

6 5.25 4.88
4 4
2

0
2016 2017 2018

Interpretation: From the above graph and table, the debt to equity ratio of AIL was falling
continuously from 2016 to 2018. Lower ratio indicates that the company is secured more
financially.
2.8 Debt to Total Asset
This solvency ratio measures the percentage of a company's assets that are invested by creditors
rather than by inventors. The lower value of this ratio is preferable because a higher ratio will put
the company in a tough position in which the company may unable to repay its loan.
Total Liability
Debt to Total Asset = Total Asset

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 AIL 2016 2017 2018
Debt to Total Asset 0.84 0.83 0.80

Trend Analysis of Debt to Total Asset

1.50

1.00 0.841 0.83

0.80
0.50

0.00
2016 2017 2018

Interpretation: From the above graph and table, the debt to total asset ratio of AIL was slightly
fluctuated from 2016 to 2018. Lower ratio is preferable to avoid debt.
2.9 Interest Coverage
It is a solvency ratio that measures how many times a company can cover its current interest
payment with its available earnings. It is also called “Time Interest Earned”. Higher ratio is
obviously a good sign for the company, because it indicates that the company has the ability to
pay interest on its debt. But the value of this ratio should be greater than 1.5, otherwise its ability
to meet interest expenses may be questionable.
EBIT / Operating Profit
Interest Coverage = Interest Expenses

AIL 2016 2017 2018

Interest Coverage 3.70 5.26 3.06

Trend Analysis of Interest Coverage

6.00 5.26
3.70
4.00 3.06

2.00

0.00
2016 2017 2018

Interpretation: From the above graph and table, interest coverage of AIL was heavily fluctuated
from 2016 to 2018. Higher ratio indicates that a good sign for company’s ability to pay interest.
2.10 Accounts Receivable Turnover
This ratio measures a company's effectiveness in collecting its money owned by clients when the
company sells goods. A high receivable turnover indicates that the company is efficient and has a
high proportion of quality customers that pay their debts quickly. On the other hand, low turnover

6
shows that the company might have poor collection process, bad credit policies or customer which
are not creditworthy.
Net Sales
Accounts Receivable Turnover = Accounts Receivable / Trade Debtors

AIL 2016 2017 2018

ART 2 3 3

Trend Analysis of Accounts

Receivable Turnover
4
3
3 3
2
2
1
0
2016 2017 2018

Interpretation: From the above graph and table, the accounts receivable turnover of AIL was risen
slightly from 2016 to 2017 and remained constant in 2018.
2.11 Collection Period
This ratio explains how much time the company takes to collect its money from its clients with in
a year. Generally, lower ratio is more favorable that indicates the company collects payment faster.
Days in the Year
Collection Period = Accounts Receivale Turnover days

AIL 2016 2017 2018

Collection Period 156 136 120

Trend Analysis of Collection

Period
200
156 136
100 120

0
2016 2017 2018

Interpretation: From the above graph and table, the collection period of AIL was falling gradually
from 2016 to 2018. It means that Alim Industries Limited is trying to collect its money faster than
previous years.

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2.12 Accounts Payable Turnover
This ratio allows the company to compare its credit purchases against its accounts payable amount
in order to measure how often it pays its suppliers. A higher ratio is a good sign of financial strength
that shows the company has an established track record of paying its bills on time. A lower ratio
is a warning sign that means the company has lack of cash to repay its creditors.
Annual Credit Purchase
Payable Turnover = Accounts Payable / Trade Creditors

AIL 2017 2018

Payable Turnover 55 48

Trend Analysis of Accounts Payable

Turnover
60
55
55
50
48
45
40
2017 2018

Interpretation: From the above graph and table, the accounts payable turnover of AIL was
decreased significantly from 2017 to 2018 Higher ratio is preferable which means Alim Industries
Limited has strong financial track records to pay its bill on time to its creditors.
2.13 Payable Turnover in Days
This ratio explains how much times the company needs to pay off its accounts payable. Generally,
lower ratio is more favorable that indicates the company has enough cash to meet its accounts
payable.
Days in the Year
Payable Turnover in Days = Payable Turnover days

AIL 2017 2018

PT in Days 7 8

Trend Analysis of Payable Turnover in

Days
9
8 8
7
7
6
2017 2018

8
Interpretation: From the above graph and table, the payable turnover in days of AIL was increased
slightly from 2017 to 2018.
2.14 Inventory Turnover
This ratio shows the number of times the company's inventory is sold in a given time period. A
higher inventory ratio is considered as more positive outcome which means the company's
inventory is bought and sold quickly and efficiently.
Costs of Goods Sold
Inventory Turnover = Inventory

AIL 2016 2017 2018

IT 3 4 4

Trend Analysis of Inventory Turnover

6
4
4 3 4
2
0
2016 2017 2018

Interpretation: From the above table and graph, it is clear that the trend of inventory turnover for
AIL is slightly increased from 2016 to 2017 and remained same in 2018.
2.15 Total Asset Turnover
This efficiency ratio is measure with net sales that evaluates how well a company is using its assets
to make profits. The higher ratio is the more preferable outcome for most businesses. Because it
tells the company that it is using its resources in the most productive way to produce income.
Net Sales
Total Asset Turnover = Total Asset

AIL 2016 2017 2018

TAT 1 1 1

Trend Analysis of Total Asset

Turnover
1.5
1 1
1 1
0.5

0
2016 2017 2018

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Interpretation: From the above graph and table, the asset turnover of AIL remained the same in
as

three consecutive years (2016, 2017 and 2018). It means that Alim Industries Limited is generating
1 Taka in sales for every 1 Taka of assets.

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 Chapter Three: Findings
During the analysis of this report, I have got some major findings which are discussed below:
❖ Not enough Short-term Asset Converts into Cash
After calculating current ratio of Alim Industries Limited, it shows that the value is not in standard
level. It means that Alim Industries Limited has not enough resources to meet its short-term
obligation. In addition, due to having low cash on hand, AIL could convert all its available cash in
order to meet its short-term liabilities.

❖ Excessive Inventory
In days to sell inventory ratio, it shows that Alim Industries Limited takes 100 days on average
for its finished goods which are yet to be sold that will badly impact on its liquidity.

❖ Immoderate Debt Level

In debt to equity ratio, it shows that Alim Industries Limited has taken 82% as debt against its
equity. Though, Alim Industries Limited did not provide full picture of financial statement to me,
but based on theory, it can be said that short-term loans could be the major factor that increases
the debt level of AIL. Because, in payable turnover ratio, AIL takes around 8 days to pay off its
accounts payable.

❖ Collection Method
Alim Industries Limited takes 137 days on average for collecting money from its debtors. Though,
prices of AIL’s product are expensive, so a manufacturer company in agriculture machinery sector,
this is a standard level. Because, this ratio varies on different types of company in different
industries.

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 Chapter Four: Recommendation
After finding some problem on financial activities of Alim Industries Limited, following are some
humble suggestion that should be implemented by AIL to improve the efficiency level of financial
task:
❖ Due to having low level of cash on hand, it could make a major drawback on AIL’s financial
performance. In order to mitigate and avoid such situation in future, Alim Industries Limited
must focus on increasing current ratio by taking long-term loan instead of short-term.

❖ Alim Industries Limited takes almost 100 days to sell its products to its customer. It will badly
impact on its liquidity. In addition, excessive inventory will cause extra space needed for
storage. It will also increase the cost of the company. Therefore, Alim Industries Limited has
to focus on better inventory management in order to know which products need to go out first
that will give more efficiency on its production.

❖ Short-term loan could be the main reason behind increasing debt amount of Alim Industries
Limited. There is not a certain tool that can reduce the company’s debt quickly. Generally, the
company will take loan from the bank, and pay it with interest. In order to reduce debt ratio,
Alim Industries Limited should emphasis more on long-term borrowing instead of short-term
borrowing. It has to reduce debt as much as possible. Because, debt payment must be made
even the sales decline. It will also have less flexibility to obtain future financing since its may
be harder to raise additional money.

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Conclusion
Finance is the most important part for an organization. If there is any lacking on it, an organization
will face disastrous situation that turns it to become bankruptcy. There are some problems in
financial activities of Alim Industries Limited. But it is one of the renowned organizations in
Bangladesh that running its operation from 1990. Therefore, it has the capability to mitigate those
drawbacks and can dominate the market for long period of time.

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