fin301 financial statement analysis final

8/18/2019 FIN301 Financial Statement Analysis Final

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Financial StatementAnalysisTrend Analysis of PRAN AMCL


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Submitted by –

Tabassum Akhter – 1!"11

Fariha #afor Rima – 1!"1$

Maeesha Tasnem%11!"!"1

Section& !1

Semester& Fall $!1"

Course& Financial Mana'ement (F)N!1*

Submitted to –

Sohana +adud Ahmed

Lecturer

,RAC ,usiness School (,,S*

Date of Submission: 11th December 2014


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Letter of Transmittal

-ate& 11th -ecember. $!1"

To

Sohana +adud Ahmad

Faculty of ,RAC ,usiness School

,RAC /ni0ersity

Subect& Submission of re2ort on 3Analysis of Financial Statements4

-ear Madam.

This is our 'reat 2leasure to ha0e the o22ortunity to submit the re2ort on 3Analysis of

Financial Statements4 as a 2art of our course studies5

The re2ort is 2re2ared based on our reference te6t book 7Mana'erial Finance8. 1"th edition.

9ebsites of PRAN A'ricultural Marketin' Co5 Ltd and their consecuti0e : year8s annual re2ort

that 9e collected from -haka ;6chan'e office5 Throu'h our best sincerity 9e tried to calculateand e0aluate the ratios and their analysis 9ithin se0eral limitations5 +e sincerely ho2e and

belie0e that these findin's 9ill be able to meet the re


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Acknowledement

+ith the 'reat o22ortunity 'i0en to us for 9ritin' this re2ort. it has brou'ht a sense of 2leasure to

be able to submit it5 +e 9ould like to thank all the contributors of this 2iece of 9ritin'5/nfortunately. the list of e62ressi0e 7thankyous8% no matter ho9 e6tensi0e% is al9ays incom2lete

and inadeo9e0er. to start 9ith. 9e 9ould like to thank our Almi'hty ?od for besto9in'

us 9ith 2atience and coura'e to finish this hu'e task 9ith the 'i0en deadline5

)n addition. 9e sincerely ackno9led'e our debt to Sohana +adud Ahmad. honorable faculty of

,RAC business school. ,RAC /ni0ersity. for her 0aluable counselin' for im2ro0ements needed

on the re2ort5 +ithout her encoura'ement and a22ro2riate 'uidelines. this 9ork 9ould ha0e been

e6tremely difficult to be accom2lished5


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1.0 INTRODUCTION

Table of Contents

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"5 TR;N- ANAL=S)S FR@M $!!%$!1

Li


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balance sheet. and cash flo9 statement 9hen calculatin' a s2ecific com2any8s 5@ne of the most

common 9ays of analyin' financial data is to calculate ratios from the data to com2are a'ainst

those of other com2anies or a'ainst the com2anyGs o9n historical 2erformance5

15$ Objectives

The obecti0e of this re2ort is to 'i0e a detailed insi'ht into PRAN A'ricultural Marketin' Co5

Ltd58s financial records and 2osition in the market5 Alon' 9ith that. the re2ort is also intended to

2ro0ide an analysis of the financial 2erformance of the com2any by calculatin' and then study

the follo9in' ratios&

• Li


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$51 About Organization

PRAN (Pro'ramme for Rural Ad0ancement Nationally* A'ricultural Manufacturin' Com2any

Ltd5 is the lar'est manufacturin' o2eratin' com2any in the food and be0era'e sector of

,an'ladesh for about decades5 )t has been 2layin' a maor role in countryGs food 2rocessin'

business5 The com2any 2roduces different ty2es of uice and drinks. mineral 9ater. soft drinks.

and others as its main source of re0enue5 -es2ite constraint of 2o9er resources and 2olitical

turmoil in recent years. the com2anyGs achie0ement in res2ect of re0enue collection. cost control

and contribution to the national e6che


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3.1 Ratio Analysis

Ratio Analysis is the first ste2 in a financial analysis5 )t is a form of Financial Statement Analysis

that is used to obtain a


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after a sale has been made5 -S@ is also called A0era'e Collection Period (ACP*5

The formula of -S@ is&Days Sales .utstandin )DS.$ &Accounts #ecei,able')/et Sales'0$

b$ +n,entory Turno,er #atio )+T.$: The in0entory turno0er ratio sho9s ho9

effecti0ely an in0entory is mana'ed by com2arin' cost of 'oods sold 9ith a0era'e

in0entory for a 2eriod5 The formula of )T@ is&+n,entory Turno,er #atio )+T.$ & %ost of oods Sold'+n,entory

c$ 3ied Assets Turno,er #atio )3AT$: The fi6ed turno0er ratio measures ho9

effecti0ely the firm uses its 2lant and e


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4! 9rofitability #atio: The 2rofitability ratio sho9s the combined effects of li


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%ha7ter 4: Trend Analy

4.1 Li#uidity Ratio"

Current Ratio&

Current Ratio for the Last 5 years

The 2ro2ortion of current assets in $!!J%$!! 9as hi'h. but later the 2ro2ortion decreased

ra2idly in the years $!!%$!1! and $!1!%$!115 This 9as because of the increase in current

liability es2ecially in short%term loan. deferred ta6 liability etc5 and also current asset has been

reduced in stock and ad0anced de2osits 2re2ayment5 After they faced this ra2id decrease they

9ere a'ain able to make their 2ro2ortions hi'h in the years $!11%$!1$ and $!1$%$!1 throu'h

much effort5 +e kno9 the 2ro2ortion of current ratio is al9ays re


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Kuick Ratios&

Quick Ratio for the Last 5 years

The


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4.2 Asset Management Ratio"

-ays Sales @utstandin' Ratio&

Days Sales Outstanding Ratio for the Last 5 years

The days%sales outstandin' ratio of any or'aniation al9ays needs to be lo95 As 9e can see from

the 'ra2h. the days sales outstandin' ratio 9as 15E days on $!!5 )t decreased by a si'nificant

E5" (almost Bdays* in the financial year ended $!1!5 This si'nifies an e0ident chan'e in the

com2anies credit 2olicy. 9here it 2laced hi'her im2ortance in collectin' debts faster5 >o9e0er.

the a0era'e collection 2eriod increased by days in F=$!11. but it a'ain slo9ly fell to 15"E

days (or almost $ 9eeks* in $!15 This im2ro0ement in debt collection created a 2ositi0e im2act

in the com2any8s


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)n0entory Turno0er Ratio&

Inventory Turnover Ratio for the Last 5 years

From the in0entory turno0er ratio of PRAN 9e can say. they are doin' a 'ood 9ork of not

stackin' u2 their 2roducts5 The in0entory turno0er ratio has increased by almost 1J5B$ o0er the

last : years5 This si'nifies that PRAN is bein' able to sell its 2roducts at a


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Fi6ed Assets Turno0er Ratio&

Fixed ssets Turnover Ratio for the Last 5 years

The fi6ed assets turno0er ratio of PRAN has im2ro0ed in the last : years5 )n $!! the ratio 9as

5E5 Thou'h the ratio 9ent do9n to $5J: in $!1!. but from $!11 the ratio a'ain started to

increase5 Their fi6ed assets turno0er ratio in $!1 is "5E". 9hich is almost double the ratio of

$!1!5 This im2ressi0e increase in the fi6ed asset turno0er ratio may reflect the efficient assetmana'ement of PRAN. 9here it is 'eneratin' "5E" times of re0enue in relation to the net fi6ed

assets of the com2any5 >o9e0er. this mi'ht not e0en be the case. since the ra2id inflation of

,an'ladesh mi'ht ha0e caused the 0alue of many assets that 9ere 2re0iously 2urchased to be

seriously understated. resultin' in a misleadin' im2ro0ement of the fi6ed asset turno0er ratio5


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Total Asset Turno0er Ratio&

Total sset Turnover Ratio for the Last 5 years

)n the last : years the total assets turno0er ratio of PRAN has increased5 There 9as a some9hat

insi'nificant decrease in times from 1511 ($!!* to 15! ($!1!*5 Later the amount ke2t on

increasin' from 151$ ($!11* to 15$ ($!1$* to 15B ($!1*5 Since the ratio is increasin' it can besaid that. PRAN is 'eneratin' a sufficient 0olume of business 'i0en their in0estment in total

assets of the com2any5 A'ain. 9e can comment that inflation of ,an'ladesh is not taken into

account 9hen calculatin' these fi'ures so the sli'ht increases in the total asset turno0er ratio

could be due to inflation and not because of PRAN8s efficient mana'ement5


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"5 $ebt Management Ratios"

-ebt Ratio (-HA* %

De!t Ratio

After an initial increase in the debt ratio debt to asset ratio (-HA* from E15EJ on $!! to

E5:$$ in $!1!. the debt ratio continuously dro22ed each year from E51 ($!11* toE!51B ($!1$* to :B5"E! ($!1*5 PRAN8s debt ratio 9as almost :J in the last year 9hich

indicates that its creditors ha0e su22lied more than half of firm8s total financin'5 PRAN should

consider lo9erin' its debt ratios. because the lo9er the ratio. the 'reater they can cushion a'ainst

creditor8s losses in the e0ent of li


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Time%)nterest%;arned Ratio (T);* –

Ti"e#Interest#$arned Ratio

>ere it is e0ident. T); for PRAN has been fluctuatin' o0er the : years5 @0erall. it has decreased

from !5"JE in $!! to !5":B in $!1 9hich means PRAN8s ability to 2ay its interest e62ense has

'one do9n5 This findin' can be attributed to the fact that its ;,)T has failed to increase at a

hi'her rate com2ared to its interest e62ense5

@0erall. the debt mana'ement ratios ha0e re0ealed that AMCL PRAN has 2oor debt ratio and

T); ratio5 This may affect the cost of debt in future5 The firm has raised debt ca2ital to 2ay

di0idend and increase fi6ed assets to as far as 2ossible5

"5" %ro!itability Ratios"


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Net Profit Mar'in (NPM* %

%et &ro't (argin

Analysis of PRAN8s net 2rofit re0eals that initially the net 2rofit mar'in insi'nificantly increased

from 5E1$ to 5E1B bet9een the years $!! to $!1!5 Follo9in' this the net 2rofit mar'in

e62erienced a sudden fall bet9een the years $!1! to $!11 from 5E1B to 5":E5 The decrease

in NPM 9as initiated due to a si'nificant fall of Tk5 B1"B"! in other incomes and therefore. the

earnin's after ta6 (;AT* increased 9ith a smaller mar'in com2ared to the sales the com2any

made5 >o9e0er. in the follo9in' years. the NPM 'radually increased from 5":E in year $!11

to 5:$ in year $!1$ to 5:$B in the year $!15 PRAN e62erienced this increase due to a

more si'nificant increase in the ;AT as their other income a'ain raised as 9ell as their sales of

those years com2ared to year $!115 PRAN8s hi'h cost of 'oods sold and less other incomes

kee2s its net income lo95

Return on Asset Ratio (R@A*%


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Return On sset

>ere. in can be deduced that the return on asset (R@A* of PRAN AMCL is declinin' throu'hout

the years $!! to $!11 from "5!!E to 5!B to 5JB5 >o9e0er. it suddenly soared in $!1$

and $!1 9ith a R@A of "5"E and "5JJ res2ecti0ely5 AMCL PRAN8s lack of concentration

on their fi6ed assets. debt and in0entories led to lo9er net income5 That is lo9 return result from

the com2anies hi'her than a0era'e use of debts and decreasin' fi6ed assets5


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Return on ;


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"5: Mar&et 'alue Ratios"

;arnin's Per Share –

$arnings &er Share of the Last 5 years

Assessin' the abo0e 'ra2h. 9e can deduce that there has a drastic dro2 in the ;PS of Pran AMCL

bet9een the financial year $!! to $!1!5 This has been mainly due to the chan'e in the Face

Dalue from Tk 1!! to Tk 1! in the financial year $!1!5 Adustin' the fi'ures of year $!!J. $!!.

and $!1! alon' 9ith the chan'e in Face Dalue (that is. "5E. :5"" and :5EJE res2ecti0ely*. 9e

can calculate that the ;PS has increased by B5J o0er the last : years5 -es2ite the increase. the

;PS is still


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9rice 5arnin #atio )times$ for the Last years

The PH; ratio for PRAN AMCL increased si'nificantly by 115: from the F= $!!J to $!!5

>o9e0er. after that rise the PH; ratio has been do9n9ard slo2in'. fallin' a22ro6imately by

J5 o0er the last three financial years5 This fallin' PH; ratio may indicate a 30ote of noconfidence4 by the market. 9here they are less 9illin' to 2ay for com2any8s earnin's5 The PH;

ratio also 2oints that the market belie0es the com2any to ha0e 2oor lon'%term 2ros2ects o0er its

current 2osition5 >ence. they are less 9illin' to 2ay for the com2any8s earnin'. and may 0ie9 the

com2any8s stock to be 3o0er2riced45


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+e can make the follo9in' recommendations for AMCL PRAN after analyin' their lio9e0er. e0en thou'h there

ha0e been sli'ht im2ro0ements in the in0entory turno0er ratio. fi6ed asset turno0er ratio and total

asset turno0er ratio. it had not been reflected e


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enou'h return on their in0estment and such financial condition may lead to in0estors

9ithdra9in' their in0estments and may affect the 'ood9ill of the com2any ne'ati0ely5 )n order

to re'ain the trust of in0estors. PRAN AMCL first needs to im2ro0e the 2re0ious three ratios5

Mostly. they need to decrease their de2endency on debt so that the com2any doesn8t face

financial difficulties and can a0oid any case of bankru2tcy5 Also. net income should be increased

to increase the 2rofitability mar'in. 9hich in return 9ill hel2 to 'ain in0estors faith on the

com2any5


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To conclude. 9e can say. the financial condition of AMCL PRAN Com2any can be said to be 2erformin' moderately 9ell5 The com2any has under'one some maor e62ansions o0er ne9

industries in the recent years. as reflected by its increase in short%term and lon'%term loans5

>o9e0er. it is hi'h time for the com2any to undertake si'nificant chan'es in its structure of the

source of funds. as 9ell as to stri0e to boost the sales of the com2any8s 2roducts5 ;0en thou'h

our analysis has been constrained due to the una0ailability of industry a0era'e statistics. 9e can

still conclude that AMCL PRAN a22ears to be financially 2erformin' belo9 the ideal benchmark

of the ,an'ladeshi food and be0era'e industry5 >o9e0er. there is lot of sco2e and o22ortunities

yet to be har0ested by AMCL PRAN. and 9ith the 2ro2er balance of in0estments and return. the

com2any should be doin' 9ell in the u2comin' years5

E5! Conclusion


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,iblio'ra2hy

15 Leishman and >ussain. ($!1*5 Food Processin' )ndustries in ,an'ladesh. /S-A

Forei'n A'ricultire Ser0ice. 22 1 % $5

$5 Retrie0ed from % htt2&HH9995myaccountin'course5comHfinancial%ratiosHin0entory%

turno0er%ratio

5 Retrie0ed from % htt2&HH9995in0esto2edia5comHtermsHeHe2s5as2

fin301 financial statement analysis final

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