This is an internship report contains “The Accounting Strategy of Paragon Ceramic Industries Ltd.” This report will give a clear idea about the Accounting Strategy include that future forecasting of Paragon Ceramic Industries ltd. I have started my analysis from discussing the basic issues. In this report, I have discussed the mission, objective and goal of PCIL. During the span of its operation the Paragon Ceramic Industries Ltd. had successfully position itself as an acclaimed by business community.
After that I have described the products of PCIL. I have presented SWOT analysis of Paragon Ceramic Industries ltd. from SWOT analysis I have found that Paragon Ceramic Industries Ltd. has huge opportunity in the ceramic Product Sector to shine and can establish a strong pillar in the market.
Paragon Ceramic Industries Ltd has its product mix, price, place, promotion, people and physical evidence. The accounting departments control the accounting strategy of PCIL. PCIL has very strong accounting strategy, future development awareness program and overall play an important role on economic growth of Bangladesh.
I have tried together as much information as possible & together all the information to enrich it. I believe that it was a fascinating experience to work live in the accounting sector & it has enriched both my knowledge & experience.
1. 1 Introduction:
This report has been prepared as a part of the internship program which is an integral part of the BBA program under the Dept. of Accounting Faculty of Business Administration Department of Shaikh Borhanuddin Post Graduate College, Dhaka. The organization attachment was started on 25 December, 2010 and ended on 25 March, 2011. This report on “The Accounting Strategy Paragon Ceramic Industries Ltd.” was assigned by academic supervisor Nazmun Nahar Shanta Lecturer of Department of Accounting of Shaikh Borhanuddin Post Graduate College.
1.2 Objective of the Report:
The objective of the report is to make an analysis of Accounting Strategy of Paragon Ceramic Industries Ltd in terms of the Ceramic Industry. This study attempted to understand the financial conditions of Paragon Ceramic Industries Ltd on different segments such as liquidity, profitability & solvency. The purpose is also to make recommendations for improving the financial stability and soundness of different services provided to the different parties engaged with this company. It is also the purpose of the researcher to help the management by providing an idea to take appropriate decisions about the quality of the investing & financing in future.
1.3 Methodology of the study:
For smooth and accurate study everyone have to follow some rules & regulation. The study impute were collected from two sources:
Practical desk work Face to face conversation with the officer direct observations Face to face conversation with the client
1.3.2 Secondary sources:
Project Report of PCIL Files & Folders Daily diary (containing my activities of practical orientation in PCIL) maintained by me various publications of PCIL Websites
1.4 Literature Review:
“We shall remain as the high quality export oriented production in the Ceramic industry by: Being an innovative and technology driven Company consistently delivering world-class products ensuring best consumer satisfaction through continuous value added services provided by highly professional and committed team.”
PCIL believes in togetherness with its customers, in its march on the road to growth and progress with customer satisfaction. To achieve the desired goal, there will be pursuit of excellence at all stages with a climate of continuous improvement, because, in PCIL, we believe, the line of excellence is never ending. Ceramic industries strategic plans and networking will strengthen its competitive edge over others in rapidly changing competitive ceramic markets. Its personalized quality of satisfaction to the customer with the trend of constant improvement will be cornerstone to achieve our high definition production success.
- To provide high quality of ceramic product satisfaction both local and international market.
- To provide excellent quality, design, differentiate ceramic production and manufacturing service.
- To maintain corporate and business ethics
- To become a pioneer ceramic company both local and international market.
- To display team spirit and professionalism.
- To have a sound capital base.
- To increase our turnover by 100% in the next six years.
PCIL manufacture and produce high definition and export oriented porcelain tableware ceramic products to meet the demand of home and abroad.
PCIL located at Dogori, Mirzapur, Gazipur and enjoys all the required infra-structure facilities like water, power, gas, labor, transport and communication etc. These will facilitate the project for procurement of raw materials and marketing of products.
1.4.5 Building and civil works:PCIL consist of factory shed, raw material godown, finished goods godown, packing room, crushing room, lab and dormitory, generator room, toilet, mould, sagger, medical room, workshop, stack yard guard room etc.
1.4.6 Plant & Machinery:
The project will be equipped with imported machinery brand new machine for producing bone china and porcelain table ware.
1.4.7 Local machinery:
The project will require some other machinery which could procure from local market. The cost of the local machinery has been estimated at Tk. 331.86 lac.
1.4.8 Erection and Installation:
Erection, installation, test operation and commissioning will be carried out by local Expert / erectors under the overall guidance & supervision of the sponsors.
Generally Paragon Ceramic Industries Ltd. follows cost based pricing method. After calculation of the total manufacturing cost (Direct & Indirect RM cost, Direct & Indirect Labor cost and Manufacturing overhead cost) and adds 10% GP to get the price point of the product. But this is not the rule of thumb in pricing the Ceramic products. Competitor based pricing policy is also followed as well because of the increased competition in the Ceramic market.
Paragon follows the direct distribution policy to make the ceramic product available in the market. Paragon distributes Ceramic Products through its own sales force. Distribution activities of Paragon Ceramic in all over Bangladesh are covered by dealers. Small dealers collect ceramic products from the large-scale dealers. Ultimate users buy ceramic products from these small dealers.
1.5 RESEARCH OBJECTIVES:
1.5.1 Broad objective:
To assess and find out the financial conditions of the firm to analysis how much the company is capable of doing business properly in future.
1.5.2 Specific objective:
Why the customer are loyal to buy Paragon Ceramic’s product.
How Paragon Ceramic can build the relationship with the target customer and the dealer through their products.
Find out the source of information.
Find out the customer satisfaction level in consideration to the product quality.
Find out the customer satisfaction level in consideration to the service of PCIL.
How Paragon Ceramic can create awareness in the consumer mind.
1.6 Contact methods:
To collect data for the report I use different contact method. I use personal or face to face contact method, Practical desk work, direct observations, project report and websites.
1.7 Limitations of the study:
There were some restrictions to have access to the information confidential by concern authority.
Besides The study has been conducted on the subject of A Report on “The Accounting Strategy of Paragon Ceramic Industries LTD.” Key limitations of the study are as follows:
- Time was the most important limitation in preparation of the internship report; that was very limited which disable many opportunities for a comprehensive study.
- 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 has been more useful and attractive.
- It was very difficult to collect data from such a big organization. My internship was at Paragon Ceramic Industries LTD. But for better interpretation I had to collect some information from the head office. But because of some divisional and confidential problem, I could not get enough information.
- Another limitation of the report is ceramic industries policy not to disclose some data and information to keep secrecy.
- Large-scale research was not possible due to constraints and restrictions posed by the organization.
- This research was limited only to the Accounting department; it does not cover the corporate division of PCIL.
1.8 Scope of the Report:
The scope of this study was strictly confined to the Project report & personal contact with the employees of Paragon Ceramic Industries ltd. To collect the information I worked in the Accounts section of PCIL. All other data related to the Accounting Strategy analysis was collected from web sites of PCIL and other related sources.
1.9 FOCUS OF PCIL:
Paragon Ceramic Industries Limited focuses on the following things:
- Commitment to achieve total customer satisfaction.
- Commitment to project the company as an ethical and socially responsible one.
- Commitment to continue as the market leader through consistent sales growth, increasing productivity and developing new products befitting customer needs.
- Ensuring continuous improvement in operations through utilization of highly professionals and dedicated team, proper process management and participation of the stakeholders.
- Setting measurable targets at appropriate stages and continuously monitoring them.
1.10 Inventory Cost
Inventory accounting involves the valuation of inventories and accounting for changes in inventory. Inventory can change in value due to obsolescence, deterioration, decreases or increases in demand, supply levels and market trends. These inventories make up a substantial amount of a company’s assets on their balance sheet and need to reflect an accurate value.
1. Inventory Valuation Methods
- There are several methods for valuing inventories. They are FIFO, LIFO and average cost. The Generally Accepted Accounting Principals (GAAP) require that inventories are properly accounted for based on standards set out therein. The goal is to avoid a potential overstatement of profit by understating the inventory values. Financial reports of many companies have been called into question due to doubts about their inventory accounting practices. This form of overstating profits is also called window dressing.
- One method of valuing inventory is the first-in-first-out (FIFO) method. With this method the first goods sold are calculated as the first goods purchased. Production cost in this scenario matches the increasing or decreasing cost of goods at the point in which they are used. The oldest inventory is considered to be the first inventory used. The ending inventory value is based on the price paid for the last goods received.
- The last-in-first-out (LIFO) method states that the last items purchased were the first items sold. The newest products are moved to the front of the shelves and become the first ones grabbed. Many retail outlets value their inventory with this method. The value of the ending inventory is based on the cost of the first goods purchased.
Average Cost Method
- The last method of valuing inventory is the average-cost method. With this method the average cost of goods is calculated from the beginning inventory and on purchases made throughout the accounting cycle period. The ending inventory is valued on this average cost of goods purchased. This method is more complex and takes more input to calculate. However, most inventory systems make the accounting valuations for you by simply telling the software what valuation method you will be using.
Perpetual Inventory Accounting
- There are two types of inventory accounting. The first is called perpetual inventory accounting. With this method the amount of inventory is updated daily and shows a real-time value of a company’s inventory. Every time inventory is added or sold the inventory sub-ledger is updated. This is a very complex method of inventory accounting and is used in correlation with point-of-purchase inventory software. Wal-Mart has this type of system.
Periodic Inventory Accounting
- The periodic inventory accounting system is more widely used in industry. With this method all sales are recorded in real time, but the inventory is not updated. A physical inventory (count) occurs monthly, quarterly or possibly on an annual basis. This new inventory data is used to calculate the cost of goods sold. This method is less effective and does not provide information as accurately as the perpetual inventory method.
Paragone Ceramic Industries Ltd is the new organization in the Bangladesh. They just started their business all over this country and for the export they are getting huge feedback from the abroad. That’s ehy they can easily follow the inventory costing sector. Basically PCIL follow the averege inventory costing methode. It because With this method the average cost of goods is calculated from the beginning inventory and on purchases made throughout the accounting cycle period. The ending inventory is valued on this average cost of goods purchased. This method is more complex and takes more input to calculate. However, most inventory systems make the accounting valuations for you by simply telling the software what valuation method you will be using.
Besides this organization also maintain the standard costing methode. Basically its very important decision to follow the standard costing methode for the new organization. PCIL also follow their fiscal year policy with July-June, with the starnded costing expectation.
2.1 BACKGROUND OF THE COMPANY:
Paragon Ceramic Industries Ltd: An Overview
Paragon Ceramic Industries Limited (PCL) has been registered in 2009 in Bangladesh and went into commercial production in 2010. Paragon Factory is located in Mirzapur, Gazipur Area, about 50Km from the Capital Dhaka City, where all the infrastructural facilities are available. Total investment in the Company is over US$ 15 Million.
Paragon is the manufacturer and exporter of High Definition Porcelain Tableware from Bangladesh, equipped with the most modern state-of-the-art and latest machinery from Takasago, Japan, having about 1,400 highly skilled and motivated employees. Paragon is equipped with the top-of-line Testing and Quality Control Laboratory facilities and has at its disposal, own captive gas-based Power generation capability, own water supply through Deep Tube well, and medical and sanitary facilities. Paragon is one of the most environment-friendly Tableware Plant in the World. The Factory is set up on about 10 acres of land has a total covered area of more than 250,000 sft. About 40,000 Pieces of top class porcelain tableware is produced at PCL per day, which is about 14.00 Million Pcs production per year, combining body formulation, forming, glazing, firing, decoration and decal printing procedure. Paragon Ceramic will be producing about 75,000 sheets per month, starting from single color up to 16 Colors including Gold/Platinum, both On glaze and In glaze and completely Lead, Cadmium and Barium Free. Paragon plans to produce about assorted 180,000 Pieces White and/or Brown Cartons per month, with additional capability to supply 4 Color Printed Cartons. Paragon Ceramic is capable of producing variety and wide range of Porcelain Tableware for Retail as well as Hotel, offering 10 Shapes and about 50 Designs in 2010. Most of the new Shapes in Porcelain can be developed and produced at the plant within 10/12 weeks from placement of order. Starting from 5 Pcs Place setting to 20 Pcs Dinner set and 95 Pcs full Service Sets to variety of gift Items, all Customized range of High Definition Porcelain Table Top is supplied by the factory.
2.2. Market Share Analysis:
Paragon Ceramic Industries Ltd. is being promoted as a private limited company by a group of 6 (Six) persons. The particulars of the promoting directors with the position and extent of share holding in the company are as follow:
|Serial No.||Name of the Sponsors||Share|
|1.||Mr. Bilal Dawood Mamun||16%|
|2.||Mr. Ebrahim Dawood Mamun||16%|
|3.||Mr. Md. Sahadat Hossain||16%|
|4.||Mr. Md. Morsheduzzaman||16%|
|5.||Mr. Md. Asaduzzaman||16%|
|6.||Mr. Farian Yusuf||20%|
2.3 Background of the Promoters:
1. Mr. Bilal Dawood Mamun: Chairman of the Paragon Ceramic Industries Ltd. and well known Industrialist in the country. He is engaged in various businesses since long time and a pioneer in Aluminum Industry in Bangladesh. Mr. Bilal Dawood Mamun has a proven track record of achievements in Business and Industry sector.
2. Mr. Ebrahim Dawood Mamun: Deputy Chairman of the Paragon Ceramic Industries Ltd. and also reputed industrialist in the country. He is engaged in many businesses since last 20 years. Mr. Ebrahim Dawood Mamun has a success record of managing business and industry.
3. Mr. Md. Sahadat Hossain: Managing Director of the Paragon Ceramic Industries Ltd. has been engaged in ceramic & glass ware trading business since last 25 years. He is a renowned exporter-importer, wholesaler and distributor of ceramic goods all other durable items being the owner of many business concerns.
4. Mr. Md. Morsheduzzaman: Deputy Managing Director of Paragon Ceramic Industries Ltd. He has been engaged in ceramic & glass ware, trading and export business since last 25 years. He is well known wholesaler and distributor of ceramic tableware.
5. Mr. Farian Yusuf: C.E.O & Director of the proposed project, aged 29, holding Bangladeshi nationality, obtained B.A. Degree from United States of America. He is engaged in various businesses last 9 years.
6. Mr. Md. Asaduzzaman: The Director of Paragon Ceramic Industries Ltd. holding a Diploma in Civil Engineering. Besides he has 20 years of business experience in ceramic tableware
2.4 Management of the Company:
The sponsors have formed a Private Limited Company, registered with the office of the Registrar of Joint Stock Companies, Dhaka. The overall management will be vested with the Board of Director of the company who will be assisted by the sponsoring and executive directors. The board directors will decide and formulate policies and will provide guidelines for smooth operation of day-to-day business. Besides, skilled technical and managerial personnel will be recruited for smooth operation of the project.
2.5 Paragon Ceramic Industries Ltd: At a Glance:
Head Office located at Bijoynagar, Dhaka
Paragon Ceramic Industries Ltd. located on plot of land measuring 18 Bigha at Dogori, Mirzapur, Gazipur wich is about 40 km. away from the Dhaka city. All infrastructural facilities like water, power and gas are available at the project area. The land value including development and registration cost has been estimated at Tk. 1253 lac and development cost at Tk. 200.00 lac.
3.1 Area of Operation:
Paragon Ceramic operates in four broad segments of the Ceramic industry.
3.1.1 Porcelain Tableware:
The objective is to beautify the surfaces with protection from corrosion and erosion
This business category mainly targets household segment
Products are being offered to the consumers through a dealer network
Products fulfill the aesthetic value of the consumer Major revenue earning business area of PCIL
3.1.2 Bone China:
Bone Chine is very attractive product.
Products give extra facility
Products fulfill the satisfaction of the valuable customer
Direct marketing approach is being used to promote these product.
3.1.3 Ivory Collection:
High definition export oriented product.
Products are being offered mainly through International marketing approach.
3.1.4 Pearl Collection:
It is very high quality product
Market is mostly concentrated in International Market.
3.2 Manpower Structure:
The following personnel will be required for smooth operation of the project and proper maintenance of machinery:
|2||Engineers/ Ceramist/ Others||25|
|5||Semi Skilled Labor||235|
|4||Dy. Asst. Manager/ Executives||10|
|Total : A + B|
3.3 SWOT ANALYSIS:
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.
PCIL’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:
Strong brand names Good reputation among customers Cost advantages from proprietary know-how Exclusive access to high grade natural resources Favorable access to distribution networks
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses: High cost structure Lack of access to the best natural resources Lack of access to key distribution channels High cost for importing raw materials
In some cases, a weakness may be the flip side of strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.
The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include: An unfulfilled customer need in some cases Arrival of new technologies Loosening of regulations Removal of international trade barriers A developing market such as the Internet. Mergers, joint ventures or strategic alliances.
Moving into new market segments that offer improved profits. A new international market. A market vacated by an ineffective competitor
Changes in the external environmental also may present threats to the firm. Some examples of such threats include: Shifts in consumer tastes away from the firm’s products Emergence of substitute products New regulations Increased trade barriers A new competitor in home market. Price wars with competitors. A competitor has a new, innovative product or service. Competitors have superior access to channels of distribution. Taxation is introduced on product or service.
3.3.5 The SWOT Matrix:
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm’s strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:
|Opportunities||S-O strategies||W-O strategies|
|Threats||S-T strategies||W-T strategies|
S-O strategies pursue opportunities that are a good fit to the company’s strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.
W-T strategies establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats.
4.1 Product Mix and Capacity:
The Annual production capacity of the project on the basis of 360 working days in a year has been estimated as under:
|Porcelain tableware||Weight in||Unit||50%||50%||Total|
|27 cm Dinner Plate||670||Pcs||574560||574560||1149120|
|23 cm Soup Plate||480||Pcs||574560||574560||1149120|
|20 cm Dessert Plate||300||Pcs||574560||574560||1149120|
|23 cm Salad Bowl||560||Pcs||95760||95760||191520|
|16 cm Cereal Bowl||275||Pcs||302400||302400||604800|
|Cup & Sucre||330||Pcs||1200000||1200000||2400000|
|31 cm Round Plate||900||Pcs||95760||95760||191520|
|36 cm Platter||1100||Pcs||95760||95760||191520|
|Tea Pot with Lid||950||Pcs||95760||95760||191520|
|Sugar Pot with Lid||250||Pcs||95760||95760||191520|
|Creamer / Milk Pot||250||Pcs||95760||95760||191520|
|Soup Tureen/Casserole Lid||1675||Pcs||47880||47880||95760|
4.2 Manufacturing Processes:
Quality raw materials will be procured and then the manufacturing, process will be done chronologically.
4.2.1 Land and Location:
The project has been proposed to be located on plot of land measuring 18 Bigha at Dogori, Mirzapur, Gazipur which is about 40 km. away from the Dhaka city. All infrastructural facilities like water, power and gas are available at the project area.
4.2.2 Building and civil works:
The project will consist of factory shed, raw material godown, finished goods godown, packing room, crushing room, lab and dormitory, generator room, toilet, mould, sagger, medical room, workshop, stack yard guard room etc. The Project will also require some other civil works such as underground & overhead water reservoir, boundary wall etc.
4.3 Machinery and Equipment:
4.3.1 Imported Machinery:
The project will be equipped with imported brand new machine for producing porcelain table ware. This machinery will be imported from Japan, USA and China
4.3.2 Local Machinery:
In addition to the imported machinery the project will require some other machinery which will be procured from local market. The cost of the local machinery has been estimated at Tk. 331.86 lac. Details of price & specification may be seen in Annexure-III/B.
4.4 Technical service and quality control:
The technology involved in porcelain table ware manufacturing plant is quite familiar in Bangladesh. It is expected that no problem in this regard will be faced by the project. Necessary technical personnel will be recruited for smooth operation of the machinery and proper control of quality of the product.
The project will be operated by the power generator from its own captive gas generator. Cost of gas generator set has been included in imported machinery. REB will be connected for standby requirements.
The total requirement water will be supplied by projects own deep tube well. One pump will be required for supply of water from underground reservoir to overhead tank. Cost of pump has been included in local machinery cost and the cost of underground and overhead water reservoir has been included in civil cost.
The proect will require vehicles such as covered van, pick-up and car for transportation of raw materials and finished goods as well as office personnel. Cost of vehicles has been estimated at Tk. 90.00 lac.
4.5.4 Fuel & Lubricant:
The annual requirement of fuel and lubricants for PCIL has been estimated below:
4.5.5 Safety Provision:
The project will have its own safety devices for fight against fire accidental hazards. For this, firefighting equipment and first aid box has been considered. An amount of Tk. 3.00 has been estimated for this purpose.
4.5.6 Stores and Spares:
The annual requirement of stores and spares for the machinery and equipment has been estimated @ 1.5% and 2% of its cost for the 3rd and 4th years of operation respectively.
4.5.7 Repairs and Maintenance:
The annual requirement of repair and maintenance for the machinery and equipment has been estimated @ 0.5%, 1%, 1.5% and 2% of its cost for the 1st, 2nd, 3rd and 4th year of operation respectively while for building @ 0.5% of its cost for every year.
4.6 Raw Materials:
The Raw materials for PCIL are as follow:
- China Clay
- Premium China Clay
- Ball Clay (G)
- Ball Clay (GF)
- Zirconium Silicate
- Flint Pebbles
- Plaster Jiggering
- Plaster Casting
- Case Mould Plaster
- Aluminum Oxide
- Fire Clay
- Calcium Carbonate
- Zinc Oxide
- Sodium Silicate
- Potash Soap
- Sodium Carbonate
- Magnesium Chloride
- Talc. Powder
- Barium Carbonate
- Brushing Gold / Platinum
- Pigments & Dry Colors / Stein
- Mutsuhito Seal
- Decalcomania Paper
- Bright / Matt Gold Paste
- Matt / Bright Platinum Paste
- Pigments & Dry Colors
- Cover Coat
- Printing Oil
- Solvent & Thinner
- Coating Emulsion
- Removable / Bonding Liquid
- Bolting Cloth
- Glassine Paper
- Packing Materials 3% of sales (Local)
5.1 Analysis of Export of Porcelain Table Wares:
Porcelain table wares being the common household item at home and abroad no longer belongs to the high income group only, it is even commonly used by the middle income group people also in the country. As a result, these productions have huge demand in domestic and export market. Porcelain tableware is important export item of Bangladesh. Each year Bangladesh receives huge foreign currency by exporting ceramic products to many countries including European countries and USA. The total export of ceramic products in 2007 was US$ 30 million. Year wise export of ceramic tableware in million US$ is furnished in table – I.
|Year wise export of ceramic tableware|
|Year||Export (million US$)|
There are several methods for valuing inventories. They are FIFO, LIFO and average cost. The Generally Accepted Accounting Principals (GAAP) require that inventories are properly accounted for based on standards set out therein. The goal is to avoid a potential overstatement of profit by understating the inventory values. Financial reports of many companies have been called into question due to doubts about their inventory accounting practices. This form of overstating profits is also called window dressing.
5.2 Domestic Demand:
In order to estimate the domestic demand for porcelain table wares, we have threadbare discussion with the demand side and supply side professionals. The domestic demand for table wares has been estimated on the basis of some assumptions as opined by the demand and supply side professional. The assumptions for domestic demand estimation are:
- About 40% urban house hold needs 3-dozen of porcelain tableware weighting 9.00 kg.
- About 15%rural house hold use 1.5 dozen of ceramic tableware weighting 4.50 kg.
- Annual requirement for table ware for office, restaurant, hospitals, community centers etc. is expected to be 15% of the household requirement.
- In consideration of the above assumption and projecting the household as the users of ceramic product on the basis of 1.41% population growth rate, the demand for various tableware has been estimated as follow:
|Estimation of Demand for Tableware|
|House Hold||H.H.No.||Users||Consumption||Weight of||Demand|
|(HH) type||Mn.||No.||per HH||tableware||in ton|
|a) Urban||4.98||1.99||3.00 doz||9.00 kg||17910|
|b) Rural||19.92||2.99||1.50 doz||4.50 kg||13460|
5.3 Projection of Demand:
The future demand for various types of tableware are related with several salient factors such as quality of the products, price of the products, income of the consumer and improvement of the living standard of the people. As such, economic growth of development may be considered is to be the main factors which have a close relationship with demand for tableware of the country. While economic development of the country could be measured on the basis of GDP growth. Thus we could estimate this future demand for the products under consideration on the basis GDP growth. An average GDP growth of Bangladesh during the period from 2000 to 2007 – 08 was over 5.5% per annum. But to be on the conservative side, we may consider simple 5% growth rate for projecting the demand for tableware as estimated as follow:
|Projection of Future Demand|
|Year||Quantity (in M.ton)|
5.4 Supply Gap:
Considering the estimated demand for and applying 50% average output for export and 10% growth rate on the existing tableware production capacity, the supply gap has been estimated at 21657 M.ton in 2008 – 09 which is expected to be 22544 M.ton in the year 2011 – 2012, details may be seen as follow:
|Estimation of supply gap|
5.5 Distribution Coverage Analysis of Major Companies:
There are nine major existing ceramic tableware manufacturing company so far been developed in the country for producing a wide range of tableware products for domestic and export markets, while bone-china is a high quality and separate variety of ceramic table wares which are being produced by Shinepukur Ceramic Ltd. a company of Beximco Group. The principal products and total production capacity of the existing units are furnished as follow:
|Existing units and their production capacity|
|Name of the existing |
(Pcs in tons )
|Bengal Fine Ceramics Ltd. Presently not in operation.||Stoneware||28800||200|
|Peoples Ceramic industries|
|Standard Ceramic Industries|
|Tajma Ceramic Industries|
Ltd. Presently not in operation.
|Monno Ceramic Industries|
|Shinepukur Ceramics Ltd.||Porcelain||50000||5400|
|7||Artisan Ceramic Ltd.||Porcelain||20000||1600|
|8||Farr Ceramic Ltd.|
|H & S Ceramic Ltd.|
|10||Other small production units||Stone- ware||1400|
5.6 Export Potential and Marketing:
Ceramic manufacturing is gas-based labor intensive and skill-oriented project. As such, Bangladesh enjoys the comparative advantage in manufacturing ceramic tableware particularly in export market due to competitive cost. Traditionally Japan, UK, Germany and other European countries were exporting ceramic table ware for world markets. But due to tremendous wage increase, currency appreciation as well as non availability of willing worker to work in ceramic factories, many ceramic manufacturing projects of these countries was turned out unfeasible. Present trend indicates that most of the developed countries are importing ceramic tableware from developing countries to meet their domestic demand at least partially.
A part from production cost advantage Bangladesh enjoys Generalized System of Preference (GSP) which allows duty free access to ceramic tableware in the developed countries. Also there is no quota restriction for export to any country.
Paragon Ceramic Industries Ltd. Will promote its products in the global market very efficiently and effectively. The company will launch huge promotional campaign and product development program. As a result, it is expected that it can achieve a commendable success in penetrating the international ceramics tableware markets within short period.
Trade Fairs in the target markets. The company will participate in the International Exhibitions in Frankfurt, Paris, Milan, Chicago, Tokyo, Delhi etc. everywhere set up permanent showroom in New York, Mumbai and Delhi. Furthermore promotional campaign will also be undertaken to create brand awareness among the consumers in the foreign markets after careful market study. Consumer behavior will be studied from time to time to design the product to suit the target segment of consumer. Attractive brochures, leaflets, digital portfolio, outlining product advantages and quality will be printed for distribution to consumers through shops chain store and supermarkets.
6.1 Capital Structure:
The authorized capital and paid-up capital of the company will be Tk. 8000.00 lac and Tk. 2369.65 lac respectively.
Profitability potential of the project has been estimated for five years of operation to access the financial viability of the project. The financial projections include estimation of sales, operating cost, administrative and selling expenses and financial overheads. The statement showing earning forecast is shown in Annexure- VI. The main assumptions of earning forecast are as follows:
- The factory will work on the basis of 24 hours operation per day and 360 working days in a year.
- The cost of raw materials has been calculated on the basis of prevailing market price while the sales prices of the proposed products have been considered at FOB prices;
- The cost of raw materials as well as the selling price of the finished goods have been kept constant throughout the projected years on the assumptions that any increase in the price of raw materials will be off-set by the consequential increase in selling prices;
- An increment @ 5% per annum has been considered in the calculation of wages and salaries and the amount of bonus is considered to be equal to two months pay;
- Depreciation has been charged on straight line method on the following rates
- Capacity utilization has been assumed at 80%, 85%, 90% and 90% for the first five years of operation.
- The project will pay Tax all the prevailing rate;
- Dividend has been estimated at the rate of 10%, on 1st, 2nd, 3rd, 4th and 5th year of project operation respectively; and
- Economic life of the project has been assumed to be 10 (ten) years without any major replacement.
6.2 Debt Service Coverage Ratios:
Debt-service coverage ratio worked out as follows:
|(Tk. in ‘000’)|
|Cash inflow||1st Year||2nd Year||3rd Year||4th Year|
|Net Profit after Tax|
|Depreciation & write-off||51475||51475||51475||51475|
|Interest on Loan|
|Installment on term Loan||32448||64896||64896||64896|
|Installment on IDCP||6749||6749||6749||6749|
|Interest on loan||77031||71559||64063||55764|
6.3 The Profitability Forecast of PCIL:
|Taka in ‘000)|
|Item||1st year||2nd year||3rd year||4th year|
|Cost of Goods Sold||401515||442222||472632||480729|
|Administrative & Marketing Expenses||25245||26363||27482||28599|
|Profit before Tax & Interest||184284||208652||220382||212945|
|Net Operating Profit||115603||144719||162999||162891|
|Income Tax||Tax Holiday||65200||65156|
|Net Profit after Tax||115603||144719||97799||97735|
|Dividend @ 10% on Paid up Capital||20933||20933||20933||20933|
|Cumulative Retained Earnings||94670||218456||295322||372124|
|Gross Profit to Sales||34%||35%||34%||33%|
|Profit before Tax & Interest to Sales||30%||31%||31%||29%|
|Net Operating Profit to Sales||19%||21%||23%||23%|
|Debt Service Coverage Ratio||2. 22||2. 00||1. 66||1. 71|
6.4 The Forecast Earning of PCIL:
|Item||Tk. In ‘000’|
|1st Year||2nd Year||3rd Year||4th Year|
|Cost of Goods Sold||427658||469774||501404||510128|
|Administrative & Marketing Expenses||25245||26363||27482||28599|
|Profit before Tax & Interest||215736||242153||253836||245820|
|Net operating Profit||138705||170594||189773||190056|
|Income Tax||Tax Holiday||37955||38011|
|Net profit after Tax||138705||170594||151813||152045|
|Dividend @ 10% on paid up capital||23696||23696||23696||23696|
|Cumulative Retained Earnings||115009||261907||390029||518378|
|Gross Profit Sales||36%||36%||36%||35%|
|Profit before Tax & Interest to|
|Net Operating profit to sales||21%||23%||14%||24%|
|Debt Service Coverage Ratio||2.3O||2.O5||1. 97||2.O4|
6.5 The Projected Balance Sheet of PCIL:
|Projected Balance Sheet of PCIL|
|Tk. In ‘000’|
|Properties & Assets||Constr. Year||1st Year||2nd Year||3rd Year||4th Year|
|Current Assets :|
|Cash & Bank Balance||23827||127287||252198||358265||466042|
|Other Current Assets||–||107030||114952||123557||124938|
|Fixed Assets :|
|Preliminary & Pre-operating Expenses||4115||3292||2469||1646||823|
|Fixed Assets (net)||761940||711288||660636||609984||559333|
|Total Assets :||789882||948897||1030255||1093452||1151135|
|Short term liability :|
|Commercial Bank’s Loan||–||83203||89308||96028||97007|
|Term Loan :|
|Bank’s Term Loan||519171||486723||421827||356931||292035|
|Interest during construction period||33746||26997||202248||13499||6750|
|Owner’s Equity :|
|Total Capital & Liabilities||789882||948897||1030255||1093452||1151135|
6.6 Contribution to GDP:
On completion, the project will add Taka 4O1O.1O lac to the Gross Domestic Product of the country per annum detailed below:
|(Taka in ‘000’)|
|A:||Revenue Receipt (4th Year)||784547|
|B:||Less: Inter-firm transactions:|
|Store & spares||7998|
|Repairs & Maintenance||8846|
|Water, Power & Fuel||32176|
|Rent, Tax & Insurance||7661|
|Postage, telephone & Fax||800|
|Stationery & Printing||900|
|Travelling & Conveyance||1300|
|Total Contribution to GDP :||401010|
6.7 Budgetary Control of PCIL:
Budgetary actions carried out according to a budget plan. Through the use of a budget as a standard, an organization ensures that managers are implementing its plans and objectives and that their activities are appraised by comparing their actual performance against budgeted performance. Budgets are used as a basis for rewarding or punishing managers, or perhaps for modifying future budgets and plans.
|1||Cash in Hand/At Bank on 01.07.2010||3,754,528.00||3,754,528.00|
|2||Source of Fund:|
|a.||Income From operation||540,000,000.00|
|b.||Income From Wastage Sale||62,100,000.00|
|d.||Duty draw Back||64,800,000.00||669,600,000.00|
|Total Fund Available for Use||673,354,528.00|
|3||Application of Fund:|
|a.||Raw Materials Purchase||243,000,000.00|
|b.||Customes,Vat & other Duties||10,800,000.00|
|e.||Salary & Overtime||108,000,000.00|
|g.||Marketing & Selling Expenses||27,000,000.00|
|Total Application of Fund||670,250,000.00|
|5||Cash in Hand/At Bank on 30.06.2011||3,104,528.00|
Porcelain tableware are considered worldwide as sophisticated and fashionable, indispensable, household items. It should deserve to mention here that PCIL producing high quality tableware introducing a new wave of ceramic production in Bangladesh.
Table wares are the common house hold items. Besides porcelain table wares are also used as wedding and other ceremony gifts. Apart from the house hold use tableware are required to use in all types of social function in the offices, community centers, hotels, restaurants etc. On the other hand, porcelain is the very popular gift item usually preferred by the guest who attends in community function.
PCIL designed to manufacture high quality porcelain tableware. As per technical design, the annual production capacity of PCIL has been estimated to be 10 M.ton of different types of tableware.
PCIL set up for 100% exported oriented porcelain table ware manufacturing plant at Dogori, Mirzapur, Gazipur. PCIL will be able to produce world class quality table ware made of porcelains.
Paragon Ceramic Industries Ltd. has a very good ability to compare to most of the other ceramic industry. But though this, it still can improve its capacity by adopting its challenging accounting strategy by the following manners:
- PCIL should provide all their employees more effective training regarding customer satisfaction.
- More skilled labor, technician and competent personnel should be recruited and they should be properly natured.
- Inspection department should be managed with intelligent officials who are able to assess and control situations. It should be an exclusive department with promising career path for its development.
- More concrete effort should be given to keep desirable production capacity to meet the demand of ceramic products.
- Investigation should be done at the maximum satisfactory level before choosing inventory system.
- Effective and regular monitoring of different sensitive department of PCIL.
- More attention should be given on export of high definition product.
- Every high level officers, personnel, technician and labor should keep maintain good relationship for achieving the target accounting strategy and goal.
- As a result of integrity and sincere effort with accounting strategy PCIL will able to meet up the demand of home and abroad.
- With the support of the country’s GDP and the enthusiastic participation of different fair and exhibition it will open a dynamic growth of ceramic products in the modern age.