Introduction

PREFACE BBA is a four year academic program where students are instructed how to maintain a company, analyzing a firm & its activity, how to do a business and also to be a successful business executive. It is also an arrangement where students are introduced with the practical life style in a corporate world. To be a successful corporate person it is must to implement your knowledge, experience in your life, not to gain and study only. Dhaka City College is the center of excellence where students are make their lifestyle in a shape to face the struggles outside the college with the help of college instructors. Department of Business Administration of this college does not work on the different policy. As students of BBA Program of this college, here we learn how to be a successful one. Making of reports are also a step to gather practical knowledge that helps to get forward. Instructors of the department are so much supportive and interested about reports and they influenced plus help students to do different term paper, reports on different companies and firms. This report is also a crop of their support and our effort. We make a financial analysis report on Agricultural Marketing Company Limited, a concern of PRAN GROUP as the course of Principle of Finance. We tried our best to make this report as our knowledge supports us. We hope our report can make a face of the company which can help you to get better information about the company. Thank you.

1

Introduction

OBJECTIVE We were instructed from our finance course lecturer Ms. Jafrin Sultana to submit a financial report on a public company that has a membership on Dhaka Stock Exchange (DSE). We choose Agricultural Marketing Company Limited (PRAN) which fulfill all the demand of our instructor, to make a financial analysis report on it. We had some objectives behind making the report. These are …

- To know how to make a financial report. - To gather practical knowledge on analyzing a company financially. - To be experienced on calculating and making analysis on ratio, risk, scenario,

DuPoint System, Peer-to-Peer and others. - To arrange an overall financial idea against a company.

We believe that we were successful to fulfill most of our objectives. Thanks Allah to bless on us.

2

Introduction

METHODOLOGY Agriculture Marketing Company Limited (PRAN) is a well known and leading food company in Bangladesh. So, to make a financial report on this company we have to give our full effort. It is not an easy job to analyze AMCL (PRAN)’s financial performance. We tried our best. We collect information from website, reference book from Bangladesh, yearly annual report of AMCL (PRAN) and from other sources. To collect further information, we have to go to the head office of AMCL (PRAN). We tried to meet with the head of finance department and head of accounting department. But they were to busy on their job. Beside this, the head office didn’t provide us such information that can help us making the report. We have to go to Dhaka Stock Exchange to collect the annual reports of AMCL (PRAN) and after a lot of straggle we got that. We take information from the book of “Balance Sheet of Joint Stock Companies (2000-2004)” published by the Statistics Department of Bangladesh Bank. We also have collected information from the PRAN GROUP website (www.pranfoods.net). Besides this we have collected as many information we can collect from outside source. Thank You.

3

Introduction

LMITATIONS It would be a book if we start to narrate our problems and struggles. We have to face lots of problem to complete this report. As the date of submission was too close when we learned a little about make a financial report. We have to take preparation for our 2nd midterm exam with the makings of report. We feel lack of latest financial and accounting information when we constructing the report. We have to base on the old information in maximum time. But anyhow we tried to attach latest information about AMCL (PRAN). On the annual report got a lot of problem. The balance sheets were puzzled us. Besides this there was not sufficient information to make further calculation. AMCL (PRAN)’s website is not so much informatics. They do not attach or upload any kind of information that can help us in further financial calculation. The head office of AMCL (PRAN) was not supportive. They don’t give us any kind of information & instruction that can help us. We have to face a lot of hazards on collecting information. But we believe that we have succeeded to make a standard report at last. Thank You.

4

Company at a Glance

COMPANY NAME Agricultural Marketing Company Limited (PRAN) YEAR OF ESTABLISHMENT 1980 KEYWORD IN DSE & CSE AMCL(PRAN) CORPORATE MISSION Poverty and Hunger are curses COMPANY AIM To generate employment and earn dignity and self-respect from compatriots through Profitable enterprises COMPANY POLICY To market products of consistent quality at home and abroad as per world standards produced hygienically in accordance with good manufacturing practices in state of the art plants & process, packed in appropriate packaging and remain committed to these objectives at all the times CORPORATE HEAD OFFICE Property Heights, 12 R K Mission Road, Dhaka – 1203 LOCATION OF PRODUCTION Ghorashal, Palash, Narshingdi PRODUCT CATAGORIES

Juice, Drinks, Beverage, Culinary, Snacks, Confectionary, Dairy

MAJOR EXPORTING PRODUCTS Fruit Juices, Fruit Drinks Instant Powdered Drinks, Pickles , Canned Fruits & Vegetables, Extruded & Fried Snacks, Tea, Aromatic Rice, Puffed Rice, Flattened Rice, Jam & Jelly, Plain Spices, Blended Spices, Mustard Oil, Mineral Water, Dehydrated Fruits, Tomato Ketchup / Sauce, Toffees, Candies, Bubble Gum, Biscuits & other confectionery etc. MAJOR EXPORTING COUNTRIES India, KSA, UAE, Kuwait, Bahrain, Qatar, Djibouti ,Angola, Australia, Austria,, Belgium, Benin, Brunei, Burkina Faso, Bhutan, Cameroon, Canada, Capo Verde Islands, Chad, Congo Eritrea, Equatorial Guinea, Ethiopia, France, Gabon, Gambia, Germany, Ghana, Greece Guinea, India, Italy, Ivory Coast, Japan, Korea, Lebanon, Malaysia, Mali, Mauritania Mauritius, Myanmar, Mayo tee, Nederland Antilles, Nepal, Niger, Oman, Pakistan Palestine, Qatar, RCA, Reunion Islands, Senegal, Sierra Leone, Singapore, Sri Lanka Sudan, Sweden, Switzerland, Togo, UK, USA & Yemen.

5

Highlights of Five Years (2001-2006)

HIGHLIGHTS OF PRAN GROUP (2001-06) Company Data (Figure in taka)

DESCRIPTION 2006 2005 2004 2003 2002 2001

Authorized Capital 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000

Paid Up Capital 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000

Gross Profit 199,231,970 204,813,078 200,779,694 196,041,728 182,647,753 171,112,426

Net Profit Before Tax 31,228,166 42,534,943 41,652,958 46,150,166 44,166,962 42,985,692

Total Asset 990,644,654 995,607,375 968,368,328 943,907,412 813,749,612 691,098,642

Net Asset 673,783,245 660,584,792 622,251,899 580,472,010 509,202,925 445,812,934

Current liabilities 500,364,804 499,627,981 503,199,292 464,013,742 391,729,576 334,673,215

Shareholder Equity 337,687,792 330,037,953 309,015,238 293,913,711 270,253,283 247,679,451

Long Term Debt 152,592,058 165,941,504 156,153,798 185,979,959 151,766,753 108,745,976

Current Ratio 1.35 1.32 1.24 1.25 1.30 1.33

Quick Ratio 0.36 0.34 0.26 0.27 0.39 0.35

Total Asset Turnover 88% 80% 80% 80% 88% 93%

Net profit After Taxation 28,947,713 40,771,757 40,309,163 44,386,931 43,410,767 41,935,472

Net Profit margin 3.34% 5.11% 5.20% 5.90% 6.06% 6.54%

Return on Total Asset (ROA) 2.92% 4.10% 4.16% 4.70% 5.33% 6.07%

Return on Total Equity (ROE) 9% 12% 13% 15% 16% 17%

Inventory Turnover Ratio 1.35 1.21 1.16 1.22 1.50 1.43

Earning Per Share BDT 36.18 BDT 50.96 BDT 50.39 BDT 55.48 BDT 54.26 BDT 52.42

Proposed Dividend 20,800,000 20,800,000 19,200,000 19,200,000 20,000,000 20,000,000

Unclaimed Dividend 1,580,230 2,706,690 1,224,623 1,003,600 913,719 580,316

Stock 496,023,771 491,608,049 493,278,897 456,605,572 357,347,834 328,013,450

Trade Debtors 45,504,079 42,501,462 29,956,569 15,220,740 17,431,470 19,136,408

Investment 16,480,000 18,210,000 18,880,000 18,680,000 17,950,000 2,600,000

Administrative & Selling Expenses 86,359,063 82,485,540 81,356,529 81,048,447 81,624,756 79,355,071

6

COMPERATIVE INCOME STATEMENT (2001-06)

COMPERATIVE INCOME STATEMENT (2001-06)        

      

(Figures in Taka)

FISCAL YEARS 2006 2005 2004 2003 2002 2001 Sales 867,000,825 797,683,342 775,131,774 752,710,227 716,883,310 640,747,605 Cost of Goods Sold (667,768,855) (592,870,264) (574,352,080) (556,668,499) (534,235,557) (469,635,179) Gross Profit 199,231,970 204,813,078 200,779,694 196,041,728 182,647,753 171,112,426 Expenses: (166,360,216) (160,039,454) (156,934,476) (147,462,606) (136,156,214) (125,864,329) Administrative & Selling Expenses 86,359,063 82,485,540 81,356,529 81,048,447 81,624,756 79,355,071 Financial Expenses 80,001,153 77,553,914 75,577,947 66,414,159 54,531,458 46,509,258 Operating Profit 32,871,754 44,773,624 43,845,218 48,579,122 46,491,539 45,248,097 Contribution to Workers' Participation & Welfare Funds (1,643,588) (2,238,681) (2,192,260) (2,428,956) (2,324,577) (2,262,405) Net profit before Taxation 31,228,166 42,534,943 41,652,958 46,150,166 44,166,962 42,985,692 Provision before Income Tax (2,280,453) (1,763,186) (1,343,795) (1,763,235) (756,195) (1,050,220) Net profit After Taxation 28,947,713 40,771,757 40,309,163 44,386,931 43,410,767 41,935,472 Basic Earnings Per Share (EPS) BDT 36.18 BDT 50.96 BDT 50.39 BDT 55.48 BDT 54.26 BDT 52.42

7

COMPERATIVE BALANCE SHEET (2001-06)

COMPERATIVE BALANCE SHEET (2001-06) 2006 2005 2004 2003 2002 2001 NET ASSETS Property, Plant & Equipment 300,381,409 316,812,646 327,236,429 344,755,402 286,596,687 242,685,708 Investment 16,480,000 18,210,000 18,880,000 18,680,000 17,950,000 2,600,000 Current Assets 673,783,245 660,584,792 622,251,899 580,472,010 509,202,925 445,812,934 Stock 496,023,771 491,608,049 493,278,897 456,605,572 357,347,834 328,013,450 Trade Debtors 45,504,079 42,501,462 29,956,569 15,220,740 17,431,470 19,136,408 Advance & Deposits 92,771,180 93,291,132 76,235,298 90,619,101 102,406,341 79,106,537 Cash & Cash Equivalents 39,484,215 33,184,149 22,781,135 18,026,597 32,017,280 19,556,539 Current Liabilities 500,364,804 499,627,981 503,199,292 464,013,742 391,729,576 334,673,215 Current Portion of long-term Loan 44,209,923 46,533,312 41,875,000 45,625,000 35,624,333 19,916,667 Short Term Loan from Bank (Secured) 424,111,655 418,762,505 417,645,508 386,748,095 328,399,834 299,178,721 Liabilities for Goods 12,891,489 10,816,582 13,609,529 8,276,626 6,165,434 5,587,769 Liabilities for Expenses 6,304,038 8,413,189 20,263,963 16,246,147 15,233,293 5,807,492 Liabilities for Other Finance 169,468 76,119 109,713 1,645,449 1,332,000 1,124,960 Interest Payable 4,471,647 5,210,687 3,443,926 1,355,373 527,895 Worker Profit Participation Fund 2,582,715 2,238,681 … … … … Income tax payable 4,043,639 4,870,216 5,027,030 4,468,825 2,705,590 1,949,395 Unclaimed Dividend 1,580,230 2,706,690 1,224,623 1,003,600 913,719 580,316 Net Current Assets 173,418,441 160,956,811 119,052,607 116,458,268 117,473,349 111,139,719 490,279,850 495,979,457 465,169,036 479,893,670 422,020,036 356,425,427

Financed By : Share holder Equity 337,687,792 330,037,953 309,015,238 293,913,711 270,253,283 247,679,451 Share Capital 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 Share Premium 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 Reserve & Surplus 196,887,792 189,237,953 169,815,238 154,713,711 130,253,283 107,679,451 Proposed Dividend 20,800,000 20,800,000 19,200,000 19,200,000 20,000,000 20,000,000 Long Term Debt 152,592,058 165,941,504 156,153,798 185,979,959 151,766,753 108,745,976 490,279,850 495,979,457 465,169,036 479,893,670 422,020,036 356,425,427

8

SWOT Analysis

SWOT ANALYSIS As far we know SWOT analysis is a combination of analysis of a company which includes Strength, Weakness, Opportunity, and Threat of that company. Let’s make SWOT Analysis of “Agricultural Marketing Company Limited (PRAN)”. Strength of Agricultural Marketing Company Limited (PRAN)

As far we know Agricultural Marketing Company Limited (PRAN) is one of the leading food

producing and food exporting company in Bangladesh. “PRAN Juice”, “PRAN Mango Bar”, “PRAN Badam Vaja”, “PRAN Squash” are the well known and well consumed product in Bangladesh produced by them. Besides this they have produced more than 50 verities of products. Besides this, Agricultural Marketing Company Limited (PRAN) is also export their products more then 45 countries. Their product chain is too large. Though in recent years, their profitability is in downward position, their foods become a brand. If they take care more about it, they will be a best company.

Weakness of Agricultural Marketing Company Limited (PRAN)

Though Agricultural Marketing Company Limited (PRAN) is a leading food company, it is not a

well profitable company now. In year 2006, the company becomes collapse. All the lines and bars of the graph of profitability are declining. YEAR 2006 is the year, where company made the worst performance that they ever do before. As the condition of Bangladesh in year 2006 is not suitable for doing business, all the businessmen are in vain. So nothing to be done by the company. Besides this, Agricultural Marketing Company Limited (PRAN) is a too much fluctuating company. All the activity ratios, liquidity ratios say that in last 5 years the company performance is jumping. It makes the firm risky for the investors to invest. AMCL (PRAN) prefer short term loan, but it increase the interest expenditure. Maximum products of Agricultural Marketing Company Limited (PRAN) are not at that quality level which customers want. They should try to maintain the quality. A market research is important to take decision about it

9

SWOT Analysis

Opportunity of Agricultural Marketing Company Limited (PRAN)

Agricultural Marketing Company Limited is a concern of PRAN GROUP is famous for their food

products. Besides this, their mission is to make Bangladesh hunger and poverty free, aim is to producing quality food. They have the opportunity to fulfill their mission. If AMCL (PRAN) tries to increase their food quality more that the customers want, their sales will be increased at a surrounded rate. The efficiency of Agricultural Marketing Company Limited (PRAN) is at a good look. They tries to increase their productivity. It’s a good sign of development. And by make time series analysis of AMCL (PRAN), they are improving.

Threat of Agricultural Marketing Company Limited (PRAN)

There lies a lot of thereat for AMCL (PRAN). The competitors of AMCL (PRAN) are strong enough

to produce quality goods. They produced maintain better quality then AMCL (PRAN). Square Consumers Products, Akiz Foods Bangladesh Limited, BDFoods Limited, Arku Ltd. Cocola foods ltd., are becomes threat for the company. AMCL (PRAN) is not aware of creating a branding image of their products. Their marketing policy in too old and not suitable with today’s world.

10

Ratio Analysis

RATIO ANALYSIS As the definition of ratio analysis we know that it involves method of calculating and interpreting financial ratios to analysis and monitor the firm’s performance. The basic inputs to ratio analysis are the firm’s income statement and balance sheet. In this report, financial ratio analyses are conducted for wishing and evaluating the operating performance of the company AMCL (PRAN). We analyze the ratio under the following categories:- A. Profitability Ratio - Gross Profit Margin - Operating Profit Margin - Net Profit Margin - Earnings per Share - Return of Total Assets (ROA) - Return on Stockholders Equity Ratio (ROE) B. Liquidity Ratio - Current Ratio - Quick Ratio C. Activity Ratio - Inventory Turnover - Total Asset Turnover - Average Payment Period

11

Ratio Analysis

A. PROFITABILITY RATIO An indication of good financial health and how effectively the firm is being managed is the company’s ability to earn a satisfactory profit and return on investment. Investors will be reluctant to associate themselves with an entity that has poor earning potential since the market price of stock and dividend potential will be adversely affected. Some major ratios that measure its operating results are summarized below:

Gross Profit Margin The gross profit margin reveals the percentage of each dollar left over after the business the business has paid for its goods. The higher the gross profit earned the better. Gross profit equals net sales less cost of goods sold.

100×=Sales NetProfit Gross

Margin Profit Gross

Calculation of Gross Profit Margin of AMCL (PRAN) (Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 2005 2006 Net Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0 Gross Profit TK. 171,1 TK. 182,6 TK. 196,0 TK. 200,7 TK. 204,8 TK. 199,2 Gross Profit Margin 26.71% 25% 26.04% 25.90% 25.68% 22.97%

Gross Profit Margin

21.00%

22.00%

23.00%

24.00%

25.00%

26.00%

27.00%

2001 2002 2003 2004 2005 2006

Years

Per

cent AMCL (PRAN)

INDUSTRY AVERAGE

Comment: The graph shows a fluctuating situation. Here the industry average is 25.38%. Though the profit condition was good enough, but now it is in alarming position.

12

Ratio Analysis

Operating Profit Margin Operating profit margin is an indication of the firm’s profitability from current operations without regard to the interest charge accruing from the capital structure. The formula is –

SalesInterest & Tax Before Profit

Margin Profit Operating =

Calculation of Operating Profit Margin of AMCL (PRAN) (Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 2005 2006 Net Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0 Profit Before Tax & Interest TK. 45,24 TK. 46,49 TK. 48,57 TK. 43,84 TK. 44,77 TK. 32,87 Operating Profit Margin 7.06% 6.49% 6.45% 5.66% 5.61% 3.79%

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%

Perc

ent

2001 2002 2003 2004 2005 2006

Years

Operating Profit margin

AMCL (PRAN)

INDUSTRY AVERAGE

Comments: As the industry average is 5.84%, the situation of the firm is not admirable. It looses its standards. As we see YEAR 2001 was the golden period for firm, but YEAR 2006 is profit decreases abut 3%. Beside this profit are fluctuating.

13

Ratio Analysis

Net Profit Margin This ratio measures the relationship between net profits and sales of a firm. Depending on the concept of net profit employed. Basically the net profit to sales expresses the cost price effectiveness of the operation. The formula is:

SalesInterest & Tax AfterProfit

Margin Profit Net =

Calculation of Net Profit Margin of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Net Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0 Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94 Net Profit Margin 6.54% 6.06% 5.90% 5.20% 5.11% 3.34%

Net Profit Margin

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2001 2002 2003 2004 2005 2006

Year

Per

cent INDUSTRY AVERAGE

AMCL (PRAN)

Comment: From the above table and graph we got that the situation is alarming. We take the base or industry average is 5.36%.As the line of net profit margin of AMCL (PRAN), Year 2006 is so much bad for the firm. It will be better for company to take care of their earning and expenditure.

14

Ratio Analysis

Earnings per Share Earnings per share indicate the amount of earnings for each common share held. When preferred stock is included in the capital structure, net income must be reduced by the preferred dividends to determine the amount applicable to common stock.

Share of Number Totaltaxes after Profit

Share per Earning =

Calculation of Earning Per Share of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Total number of share 800,000 800,000 800,000 800,000 800,000 800,000 Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94 Earning Per Share (EPS) 52.42 54.26 55.48 50.39 50.96 36.18

0

10

20

30

40

50

60

Taka

2001 2002 2003 2004 2005 2006

Year

Earning Per Share

AMCL (PRAN)INDUSTRY AVERAGE

Comment: Let’s have a look on the graph. As the industry average of AMCL (PRAN) is TK. 49.95 or TK. 50, the situation is not good at all. The graph represents that bar of EPS of AMCL (PRAN) is downward.

15

Ratio Analysis

Return of Total Assets (ROA) The return on total asset (ROA) indicates the efficiency with which management has used its available resources to generate income. The formula of calculation of ROA is –

AssetTotaltaxes after Profit

(ROA) AssetsTotal of Return =

Calculation of Return of Total Assets (ROA) of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Total Asset TK. 6910 TK. 8137 TK. 9439 TK. 9683 TK. 9956 TK. 9906 Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94 Return of Total Assets (ROA) 6.07% 5.33% 4.70% 4.16% 4.10% 2.92%

Return on Total Assets (ROA)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2001 2002 2003 2004 2005 2006

Year

Per

cent AMCL (PRAN)

INDUSTRY AVERAGE

Comment: In the year 2005, the company has made highest utilization of assets. But this year it is the downward situation. Besides this the overall situation is not satisfactory. The line of industry average is on 4.55%.

16

Ratio Analysis

Return on Stockholders Equity Ratio (ROE) ROE measures the rate of return on the common stockholders or shareholders’ investment. The formula for measurement is –

Equity rsStockholde Totaltaxes after Profit

(ROE) Ratio Equity rsStockholde on Return =

Calculation of Return on Stockholders Equity Ratio (ROE) of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Total Stockholders Equity TK. 2476 TK. 2702 TK. 2939 TK. 3090 TK. 3300 TK. 3376 Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94 ROE 16.93% 16.06% 15.10% 13.04% 12.35% 8.57%

Return on Stockholders Equity Ratio (ROE)

0.00%2.00%4.00%6.00%8.00%

10.00%12.00%14.00%16.00%18.00%

2001 2002 2003 2004 2005 2006

Year

Per

cent

AMCL (PRAN)

INDUSTRYAVERAGE

Comment: From the above data table and line chart, we can easily imagine where the ROE line goes to. As the industry average is 13.68%, the expected return goes on a half position on this 6 year calculation. The firm must have follow up it.

17

Ratio Analysis

B. LIQUIDITY RATIO Liquidity is a company’s ability to meet its maturing short-term obligation. Liquidity is essential to conducting business activity, particularly in times of adversely. In fact, liquidity is a pre-requisite for the survival of the firm. Here we interpret the firm’s liquidity with the help of some major ratios.

Current Ratio This ratio, which is subject to seasonal fluctuations, is used to measure the ability of an enterprise to meet its current liabilities out of current assets. Current Ration is a measure of margin of safety to creditors. The formula for the calculation of current ratio is –

sLiabilitie Current AssetsCurrent

Ratio Current =

Calculation of Current Ratio of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Current Assets TK. 4458 TK. 5092 TK. 5804 TK. 6222 TK. 6605 TK. 6737 Current Liabilities TK. 3346 TK. 3917 TK. 4640 TK. 5031 TK. 4996 TK. 5003 Current Ratio 16.93% 16.06% 15.10% 13.04% 12.35% 8.57%

Current Ratio

1.15

1.20

1.25

1.30

1.35

1.40

2001 2002 2003 2004 2005 2006

Year

Tim

es

AMCL (PRAN)

INDUSTRYAVERAGE

Comment: As the data table and line chart, overall position is quite well. Here we take industrial average as 1.30.

18

Ratio Analysis

Quick Ratio The acid-test ratio or quick ratio is the ratio between quick current assets and quick current liabilities. The term quick asset refers to current assets which can be converted into cash immediately or at a short notice without diminution of value. The current assets which are excluded are; prepaid expenses and inventory. The exclusion of inventory is based on the reasoning that is it is not easily and readily convertible into cash.

sLiabilitie CurrentInventory- AssetsCurrent

Ratio Quick =

Calculation of Quick Ratio of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Current Assets TK. 4458 TK. 5092 TK. 5804 TK. 6222 TK. 6605 TK. 6737 Inventory TK. 3280 TK. 3573 TK. 4566 TK. 4932 TK. 4916 TK. 4960 Current Liabilities TK. 3346 TK. 3917 TK. 4640 TK. 5031 TK. 4996 TK. 5003 Quick Ratio 16.93% 16.06% 15.10% 13.04% 12.35% 8.57%

Quick Ratio

0.000.050.100.150.200.250.300.350.400.45

2001 2002 2003 2004 2005 2006

Year

Tim

es

AMCL (PRAN)

INDUSTRYAVERAGE

Comments: Though the graph show a good improve, but the data table says something different. There are huge amounts of inventory of the firm and this makes the firm risky. Here the industry average is 0.33 times.

19

Ratio Analysis

C. ACTIVITY RATIO Activity ratio measures the speed with which various accounts are converted into sales or cash – inflows or outflows. Here we measure the firm’s activity with the help of some major ratios.

Inventory Turnover Inventory turnover commonly measures the activity, or liquidity, of a firm’s inventory. It calculated as –

Inventory

Sold Goods of CostTurnover Inventory =

Calculation of Inventory Turnover of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Cost of Goods Sold TK. 4696 TK. 5342 TK. 5566 TK. 5743 TK. 5928 TK. 6677 Inventory TK. 3280 TK. 3573 TK. 4566 TK. 4932 TK. 4916 TK. 4960 Inventory Turnover 1.43 1.50 1.22 1.16 1.21 1.35

Inventory Turnover

0.000.200.400.600.801.001.201.401.60

2001 2002 2003 2004 2005 2006

Year

Tim

es

AMCl (PRAN)

INDUSTRYAVERAGE

Comment: In the comparison with the industry average (1.310), we see there are a lot of fluctuations in the graph. In Year 2002, company was on a better position then other one.

20

Ratio Analysis

Average Collection Period The average collection Period, or average age of accounts receivable, is useful in evaluating credit and collection policies. It is arrived at by dividing the average daily sales into accounts receivable balance. The formula of calculation of average Collection Period is –

Day Per Sales Average Receivable Accounts

Period Collection Average =

Calculation of Average Collection Period of AMCL (PRAN) (Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 2005 2006 Accounts Receivable TK. 191 TK. 174 TK. 152 TK. 299 TK. 425 TK. 455 Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0 Average Collection Period 10.75 8.75 7.28 13.91 19.18 18.89

Average Collection Period

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006

Years

Day

s

AMCL (PRAN) INDUSTRY AVERAGE

Comments: As the graph, the overall situation is not satisfactory, but it is on a normal level. Here the industry average is 13.13 days

21

Ratio Analysis

Total Asset Turnover The total asset turnover is helpful in evaluating a company’s ability to use its base efficiency to generate revenue. The total asset is calculated as follows;

AssetTotalSales

Turnover AssetTotal =

Calculation of Return of Total Assets (ROA) of AMCL (PRAN) (Figures in 00,000)

FISCAL YEARS 2001 2002 2003 2004 2005 2006 Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0 Total Asset TK. 6910 TK. 8137 TK. 9439 TK. 9683 TK. 9956 TK. 9906 Total Asset Turnover 0.93 0.88 0.80 0.80 0.8012 0.875

Total Asset Turnover

0.70

0.75

0.80

0.85

0.90

0.95

2001 2002 2003 2004 2005

Year

Tim

e

AMCL (PRAN) INDUSTRY AVERAGE

Comment: The table and the graph say the asset turnover line make fluctuation. But it is good news that firms tries to become efficient. In 2003-05 the company was not in bad position. The industry average is 0.85

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SUMMARY OF RATIO ANALYSIS

SUMMARY OF RATIO ANALYSIS DESCRIPTION/ YEARS 2001 2002 2003 2004 2005 2006

Time Series

LIQUIDITY

Current Ratio 1.33 1.30 1.25 1.24 1.32 1.35 Improving Quick Ratio 0.35 0.39 0.27 0.26 0.34 0.36 Improving

ACTIVITY Inventory Turnover 1.43 1.50 1.22 1.16 1.21 1.35 Improving Average Collection Period 10.75 8.75 7.28 13.91 19.18 18.89 Fluctuating

Average Payment Period 4.66 4.88 5.51 9.95 9.76 8.23 Fluctuating

Total Asset Turn Over 0.93 0.88 0.80 0.80 0.8012 0.875 Improving

DEBT Debt Ratio 64% 67% 69% 68% 66.85% 65.90% Improving Times Interest Earned Ratio 97% 92% 73% 62% 56.81% 40.86% Declining

PROFITABILITY Gross Profit Margin 26.71% 25% 26.04% 25.90% 25.68% 22.97% Declining Operating Profit Margin 7.06% 6.49% 6.45% 5.66% 5.61% 3.79% Declining

Net Profit Margin 6.54% 6.06% 5.90% 5.20% 5.11% 3.34% Declining Earnings Per Share BDT 52.42 BDT 54.26 BDT 55.48 BDT 50.39 BDT 50.96 BDT 36.18 Declining Return of Total Assets 6.07% 5.33% 4.70% 4.16% 4.10% 2.92% Declining

Return of Common Stock Ratio 16.93% 16.06% 15.10% 13.04% 12.35% 8.57% Declining

MARKET Price/Earnings (P/E) Ratio 7.62 6.75 7.43 10.39 10.19 10.67 Declining

Market/Book (M/B) Ratio 1.29 1.08 1.12 1.36 1.26 0.91 Declining

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DuPoint Analysis

** Please go to annexure to get detailed analysis & flowchart of DuPoint Analysis

DuPoint Analysis DuPont System of analysis is an analysis of profitability that breaks down return on assets between the profit margin and asset turnover. The second or modified version show how return on asset is translated into return on equity. Let see the DuPoint analysis of AMCL (PRAN).

DuPoint Analysis of AMCL (PRAN)

(Figure in Taka) FISCAL YEAR 2001 2002 2003 2004 2005 2006 1. Sales 640,747,605 716,883,310 752,710,227 775,131,774 797,683,342 867,000,825 2. Cost of Goods Sold 469,635,179 534,235,577 556,668,499 574,352,080 592,870,264 667,768,855 3. Operating Expenses 81,617,476 83,949,333 83,477,403 83,548,789 84,724,221 88,002,651 4. Interest Expenses 46,509,258 54,531,458 66,414,159 75,577,974 77,553,914 80,001,153 5. Taxes 1,050,220 756,195 1,763,235 1,343,795 1,763,186 2,280,453 6. Earnings Available For Common Stock Holders (1-2-3-4-5)

41,935,472 43,410,747 44,386,931 40,309,136 40,771,757 28,947,713

7. Net Profit Margin ((6÷1)*100) 6.54% 6.06% 5.90% 5.20% 5.11% 3.34%

8.Total Assets 691,098,642 813,749,612 943,907,412 968,368,328 995,607,375 990,644,654 9. Total Asset Turn Over (8÷1) 0.93 0.88 0.80 0.80 0.80 0.88

10. Return on Asset (ROA) (7*9) 0.061 0.053 0.047 0.042 0.041 0.029

11. Total Liabilities 691,098,642 813,749,612 943,907,412 968,368,328 995,607,375 990,644,654 12. Share holder Equity 247,679,451 270,253,283 293,913,711 309,015,238 330,037,953 337,687,792 13. Financial Leverage Multiplier (FLM) (11/12) 2.79 3.01 3.21 3.13 3.02 2.93

14. RETURN ON COMMON EQUITY (ROE) (10*13) 0.17 0.16 0.15 0.13 0.12 0.09

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Peer to Peer Comparison

PEER GROUP COMPARISON FOR YEAR 2004 To make peer to peer comparison we choose Yusuf Flower Mills LTD (YOUSUFLOUR) and Fu-Wang Ltd. Lets have a look on the comparisons. DESCRIPTION FU-WANG EVALUATION AMCL (PRAN) EVALUATION YOUSUFLOUR Current Ratio 1.22 Better 1.24 Better 0.73 Quick Ratio 0.88 Worst 0.26 Better 0.11 ACTIVITY Inventory Turnover 7.03 Worst 1.16 Worst 6.2 Average Collection Period (DAYS) 76.4 Better 13.91 - (not available) Average Payment Period (DAYS) 25.17 Better 9.95 - (not available) Total Asset Turn Over 1.06 Worst 0.80 Worst 4.47 DEBT Debt Ratio 35% Better 68% Better 0 Times Interest Earned Ratio 12.6 Worst 62% Worst (not available) Fixed Payment Coverage Ratio (not available) - (not available) - (not available) PROFITABILITY Gross Profit Margin 22.30% Better 25.90% Better 7% Operating Profit Margin 14.20% Worst 5.66% Better 3% Net Profit Margin 8.73% Worst 5.20% Better 2% Earnings Per Share (BDT) 1.63 Better 50.39 Better 0.16 Return of Total Assets 9.20% Worst 4.16% Worst 15% Return of Common Stock Ratio 14.20% Worst 13.04% Better -43% MARKET Price/Earnings (P/E) Ratio 7.63 Better 10.39 Worst 68.75 Market/Book (M/B) Ratio 1.08 Better 1.36 Better -8.66

25

Risk Analysis

* See appendixes for details formula and calculation

RISK ANALYSIS Risk is the chance that an outcome other then expected will occur. Generally the terms risk is used interchangeable with uncertainty to refer to variability of return associated with a given assets. More finally, risk is a measure of uncertainty about the outcome from a given event. This greaten the variability of possible outcomes, on both the high side and the low side, the grater the risk. There are two types of risk:

1. Business Risk

2. Financial Risk

Business Risk The chance that the firm will be unable to cover operating costs level is driven by the firm’s revenues stability and the structure of its operating cost. To find out risk of AMCL (PRAN) and Fu-Wang, we need the calculate –

- Expected EBIT

- Standard Deviation

- Coefficient of Variation

26

Risk Analysis

* See appendixes for details formula and calculation

Calculation of Business risk of AMCL (PRAN)

(Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 EBIT TK. 429.86 TK. 441.67 TK. 461.50 TK. 416.53 After calculation we get…. The Expected EBIT* of AMCL (PRAN) is 414.53 The Standard Deviation* is 47.88 The Coefficient of Variation* is 0.1155 or 11.6% Calculation of Business risk of Industry (FU-WANG)

(Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 EBIT TK. 64 TK. 317 TK. 405 TK. 405 After calculation we get…. The Expected EBIT* of FU-WANG is 297.75 The Standard Deviation* is 53.625 The Coefficient of Variation* is 0.18 or 18% Comments: From the above calculation we get that the coefficient of variation of sales of AMCL (PRAN) is lower then the industry as Fu-Wang Foods which means firm’s business risk is lower then the risk of industry.

27

Risk Analysis

FINANCIAL RISK

The chance that firm will be unable to cover its financial obligations level is driven by the predictability of the firms operating cash flows and its cost financial obligations.

DEBT TO ASSETS RATIO It measures the extent to which borrowed funds has been used to finance the firm’s operation. Debt includes both short and long term debt. The formula for the calculation of this ratio is, Formula:

AssetsTotalDebt Total

Ratio Assets-To-Debt =

Calculation of Debt – to – Asset Ratio of AMCL (PRAN) (Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 2005 2006 Total Assets TK. 6911 TK. 8137 TK. 9440 TK. 9684 TK. 9956 TK. 9906 Total Liability/Debt TK. 4434 TK. 5435 TK. 6499 TK. 6593 TK. 6655 TK. 6529 Debt – to - Assets Ratio 0.64 0.67 0.69 0.68 0.67 0.66

Debt-To-Assets Ratio

-0.100.200.300.400.500.600.700.80

2001 2002 2003 2004 2005 2006

Year

Tim

es AMCL (PRAN)INDUSTRY AVERAGE

Comment: This ratio measures the share of the total assets financed by outside funds. We find that in comparison with the industry average (0.38) the firm posses a high debt to ratio. In that case the firm faces less financial risk then the industry.

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Risk Analysis

DEBT TO EQUITY RATIO Debt – To – Equity ratio shows the relationship between borrowed funds and owner’s capital. This ratio reflects the relative claims of creditors and shareholders against the assets of the firm. Formula:

Equity Holders Share TotalDebt Total

Ratio Equity-To-Debt =

Calculation of Debt – To – Equity Ratio of AMCL (PRAN) (Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 2005 2006 Total Liability/Debt TK. 4434 TK. 5435 TK. 6499 TK. 6593 TK. 6655 TK. 6529 Total Shareholders Equity TK. 2477 TK. 2702 TK. 2939 TK. 3090 TK. 3300 TK. 3376 Debt – To – Equity Ratio 1.7901 2.0115 2.2113 2.1337 2.0167 1.9339

0

0.5

1

1.5

2

2.5

Tim

es

2001 2002 2003 2004 2005 2006

Year

Debt-To-Equity Ratio

AMCL (PRAN)INDUSTRY AVERAGE

Comment: Here the industry average is (0.48) and we see that the ratio of firm is increasing over the year. In 2003, the ratio was highest (2.2113). It implies that for taka 2.2113 of outside liability the firm has taka 1 of owner’s capital which indicates that the owners are putting up relatively less for their own. It is danger signal for the creditors. If the firm should fail financially, the creditors will loss heavily.

29

Risk Analysis

TIME INTEREST EARN RATIO It is also known as “Interest Coverage Ratio”. The ratio measures the debt serving capacity of a firm insofar as fixed interest on long-term loan is concerned. Here is the formula – Formula:

Charge interest TotalTax & Interest Before Earning

Ratio Earn Interest Time =

Calculation of Time Interest Earn Ratio of AMCL (PRAN) (Figures in 00,000) FISCAL YEARS 2001 2002 2003 2004 2005 2006 Earning Before Interest& Tax TK. 894 TK. 988 TK. 1129 TK. 1171 TK. 1201 TK. 1112 Total Interest Charge TK. 465 TK. 546 TK. 661 TK. 756 TK. 775 TK. 800 Time Interest Earn Ratio 1.9226 1.8095 1.7080 1.5489 1.5497 1.390

02468

1012

TIM

ES

2001 2002 2003 2004 2005 2006

YEAR

Time Interest Earn Ratio

AMCL (PRAN) INDUSTRY AVERAGE

Comment: As we see here it is shocking news for AMCL (PRAN) that the difference between their ratio and the industry average (11.39) is very high. It indicates that the extent to which a fall in EBIT is tolerable in the sense that the ability of the firm to service its debt would be adversely affected. Here we got that the firm is loosing the ability to handle fixed charge liabilities and the assurance to payback of interest to the creditors is low.

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Scenario Analysis

Scenario Analysis

INCOME STATEMENTS FORCUSTING ( PRAN GROUP)

+ 10% FISCAL YEARS 2006 2007 2008 2009 2010 Sales TK. 86,700,083 TK. 953,700,908 TK.1,049,070,998 TK.1,153,978,098 TK.1,269,375,908 Cost of Goods Sold TK.66,776,886 TK. 734,545,741 TK.808,000,315 TK.888,800,346 TK.977,680,381 Gross Profit TK.19,923,197 TK.219,155,167 TK.241,070,684 TK.265,177,752 TK.291,695,527 Expenses: TK.16,636,022 TK.182,996,238 TK.201,295,861 TK.221,425,447 TK.243,567,992 Administrative & Selling Expenses TK.8,635,906 TK.94,994,969 TK.104,494,466 TK.114,943,913 TK.126,438,304 Financial Expenses TK.8,000,115 TK.88,001,268 TK.96,801,395 TK.106,481,535 TK.117,129,688 Operating Profit TK.3,287,175 TK.36,158,929 TK.39,774,822 TK.43,752,305 TK.48,127,535 Contribution to Workers' Participation & Welfare Funds TK.164,359 TK.1,807,947 TK.1,988,741 TK.2,187,616 TK.2,406,377 Net profit before Taxation TK.3,122,817 TK.34,350,983 TK.37,786,081 TK.41,564,689 TK.45,721,158 Provision before Income Tax TK.228,045 TK.12,709,864 TK.13,980,850 TK.15,378,935 TK.16,916,828 Net profit After Taxation TK.2,894,771 TK.21,641,119 TK.23,805,231 TK.26,185,754 TK.28,804,329

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Scenario Analysis

INCOME STATEMENTS FORCUSTING ( PRAN GROUP)

- 10% FISCAL YEARS 2006 2007 2008 2009 2010 Sales TK. 86,700,083 TK. 780,300,743 TK. 702,270,668 TK. 632,043,601 TK. 568,839,241 Cost of Goods Sold TK. 66,776,886 TK. 600,991,970 TK. 540,892,773 TK. 486,803,495 TK. 438,123,146 Gross Profit TK. 19,923,197 TK. 179,308,773 TK. 161,377,896 TK. 145,240,106 TK. 130,716,096 Expenses: TK. 16,636,022 TK. 149,724,194 TK. 134,751,775 TK. 121,276,597 TK. 109,148,938 Administrative & Selling Expenses TK. 8,635,906 TK. 77,723,157 TK. 69,950,841 TK. 62,955,757 TK. 56,660,181 Financial Expenses TK. 8,000,115 TK. 72,001,038 TK. 64,800,934 TK. 58,320,841 TK. 52,488,756 Operating Profit TK. 3,287,175 TK. 29,584,579 TK. 26,626,121 TK. 23,963,509 TK. 21,567,158 Contribution to Workers' Participation & Welfare Funds TK. 164,359 TK. 1,479,229 TK. 1,331,306 TK. 1,198,176 TK. 1,078,358 Net profit before Taxation TK. 3,122,817 TK. 28,105,349 TK. 25,294,814 TK. 22,765,333 TK. 20,488,800 Provision before Income Tax TK. 228,045 TK. 2,052,408 TK. 1,847,167 TK. 1,662,450 TK. 1,496,205 Net profit After Taxation TK. 2,894,771 TK. 26,052,942 TK. 23,447,648 TK. 21,102,883 TK. 18,992,594

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Findings

FINDINGS After we finished all the calculations and comparisons, we got something about the company which can be noted down.

- In most of the cases, the company’s position is fluctuating. On an expanded way, all the ratios, percentages are well in first two years and on the last year 2006, company improving. But in these middle 3 years the position is down the standards.

- The graph line of profitability and earnings or the company is declining. - The gap between Current Ratio and Quick Ratio is huge. - The inventory position of the company is increasing year by year. As we know that the

economy of Bangladesh, the price of raw-materials are fluctuating. In this situation huge amount of inventory make the company risky.

- Company’s inventory is staying on 70% - 75% of current assets all the year. - Companies “Processing of goods” related costs are increasing. - Selling and administrative expenses are on control. - Company is not interested in long term lone. They prefer short term lone. So the interest

expenses of the company increasing. - The EPS (Earning per Share) of the company is in alarming position in year 2006. - The Return on Equity (ROE) is in a bad position in recent year. - Company’s management efficiencies are admirable. - Company’s amounts of exporting food are increasing. Importers of AMCL (PRAN) are also

increasing

33

Recommendation

RECOMMENDATION We recommend company to follow up about some situations that will help company to go further up.

- Sales of the company are goes down. Marketing department should follow-up about the matter.

- The cost of processing goods should be reduced. Company can use new machinery or

techniques.

- Company should take care about inventory

- Interest rates of long term loan are low; company should avoid taking short-term loan.

- Company should decrease its business risk more.

- Company has to stop the production of low demanded food product of the company.

- They should increase food quality and also marketing quality.

34

DuPoint Analysis Flowchart

Sales

-

COGS

Earning Available for

Common Stockholder

- Operating Expenses

÷ Net Profit Margin

- Contribution

at Wale fare Fund

Sales

-

Interest

× Return on

Total Asset (ROA)

- Taxes

Return On Common

Stock Equity (ROE)

Sales

Current Assets ÷ Total Asset Turnover

+ Total Assets

×

Net Fixed Assets

Current

Liabilities

+ Total Liabilities

Long-term Debt

+

Total Liabilities & Stockholder

Equity = Total Asset

Stockholders Equity

÷

Financial Average

ratio

Common Stock Equity

35

Risk Analysis Formula

RISK ANALYSIS FORMULA To make calculation on business risk analysis, The formulas are… For Expected EBIT:

years of Number

Years Four Last of EBITEBIT Expected ∑=

For The Standard Deviation:

years of Number

EBIT Expected- Year Per EBITDeviation Standard ∑=

For Co-efficient of Variation:

100×=EBIT Expected

Deviation StandardVariation of efficient-Co

36

References

REFERENCES

+ Annual reports of Agricultural Marketing Company Limited (PRAN) 2001-2006

+ Balance Sheet of Joint Stock Companies 2000-04” published by Statistics Department of Bangladesh Bank.

+ Agricultural Marketing Company Limited (PRAN)’s website

+ Different Finance Related Books

+ http://www.dsebd.org

+ www.pranfoods.net

+ www.investopedia.com

+ www.wikipedia.com

+ www.finance.yahoo.com

+ www.weeklyindustry.com

37