Bata Shoe Company

Introduction:
As a part of the assignment Program of BBA course requirement, we were assigned to do our assignment in Bata Shoe Company (Bangladesh) Limited.

Company Information
Company Secretary
Md. Hashim Reza

Legal Advisers
Malik Law Associates

Auditors
Rahman Rahman Huq Chartered Accountants 9, Mohakhali C/A (11th Floor) Dhaka-1212

Bankers
Eastern Bank Ltd. Dutch Bangla Bank Ltd. HSBC Ltd. Islami Bank (Bangladesh) Ltd.

Factories
1. Tongi Industrial Area Tongi, Gazipur 2. Dhamrai, Dhaka

Tannery
Dhamrai, Dhaka

Registered Office
Bata Shoe Company (Bangladesh) Limited Tongi Industrial Area Tongi, Gazipur

Share Liaison Office

6, B. B. Avenue (2nd Floor) Dhaka

Bata Shoe Company

Board of Directors:
Fernando Garcia Restrepo Chairman Present Position Group Managing Director, Bata Emerging Market (WEST) Previous Positions President Director, Bata Indonesia Managing Director, Bata Kenya Managing Director, Bata India Vice President, Wholesale & Marketing, Bata Ltd, Toronto, Canada Managing Director, Bata Bangladesh
Rokanuddin Moahud Bar-at-law Independent Director Senior Advocate in the Supreme Court in Bangladesh

Muhammad Qayyum Vice Chairman & Managing Director Previous Positions Retail Manager, Futura Footwear Limited, South Africa Retail Manager, Bata Pakistan Limited Area Manager, Bata Pakistan Limited Merchandise Planning & Budget Control Manager, Bata Pakistan Limited Mike Middleton Director Current Positions CFO, Bata Emerging Markets Limited, Bangladesh Director, Bata Pakistan Limited Director, Bata Shoe of Thailand Public Company Limited Director, Bata Malaysia Limited Director, Bata Shoe Company of Ceylon Limited Commissioner, P.T. Sepatu Bata Tbk, Indonesia Previous Positions Finance Manager, Shoe Company (Malawi) Limited Company Secretary, The Zimbabwe Bata Shoe Company Limited Finance Manager, Bata Shoe Company (Kenya) Limited Director of Finance, Bata Limited, Toronto, Canada

Rashidul Hasan Independent Director Current Positions Chairman, Uttara Finance & Investments Ltd. Independent Director, Reckitt Benckiser Bangladesh Ltd Independent Director, Monno Group of Industries Trustee, Kumudini Welfare Trust of Bangladesh Ltd Previous Positions Founder Chairman of IDLC the first joint venture leasing company of Bangladesh CEO & Managing Director of IPDC the first joint venture investment company of Bangladesh Director General, Department of Industries of the

Bata Shoe Company

Executive Summary
In leather and foot wear sector, Bata Shoe Company (Bangladesh) Ltd. is one of the growing companies in Bangladesh. In our opinion the financial statement, the prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standard (BFRS), give a true and fair view of the stat of the companys affairs as at 31 December 2010 and of the result of its operations and its cash flows for the year then ended and comply with the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. During the year 2010 Bata Shoe Company (Bangladesh) Ltd. recorded a profit before tax of taka 743 million, an impressive increase of taka 113 million against 2009. In 2010 your company achieved a turnover of taka 5,663 million representing an increase of more than 10% against 2009. The Company currently has nearly 1000 independent dealers throughout the country. In this assignment we have tried to highlight the companys current financial situation and ratio analysis (cross sectional analysis) of Bata Ltd which is one of the growing companies in Bangladesh. We have also tried to provide recommendation according to each identified problem on the basis of each ratio.

Vision:

Bata Shoe Company

We see Business as a means to the well being of the shareholders and all other stakeholders, society at large keeping in line with the Nations interest.

Mission Statement:
Our Mission is to provide world-class products to our valued Customers, Maintaining high Ethical Standard business.

Objective:
Our primary objective is to conduct transparent business operation within legal and social framework with aims to attain the mission with qualitative & quantitative target in business operation.

Objective of the Study General Objective:

The Broad objective of this assignment is to analysis Financial Performance evaluation of Bata Company Bangladesh Ltd.

Specific objectives:
The following objectives can be listed as the specific objectives of study.

To identify and assess the present financial performance of Bata Company To calculate the financial ratios and identify the areas of concern. To understand the implications in analyzing and interpreting the financial ratios. To identify the findings and raise possible recommendations for Bata Ltd.

Bangladesh Ltd.

Bata Shoe Company

Sources of data:
Sources of secondary data of this report are:
Annual Report of Bata Ltd.

Different text book and journals. Various reports and articles related to study. Some of my course elements as related to this assignment. Web base support from the internet.

Marketing Operations: Retail

In 2010 our Retail channel sold 8.6 million pairs of shoes with a turnover of taka 3.5 billion which is 109% growth against last year. To achieve this outstanding growth in spite of global recession, company took different initiatives like product innovation, aggressive marketing programmers, market expansion, human resource development, operational efficiency, team work etc.

Non Retail
Non Retail business played a vital role in the companys total turnover in 2010. This business channel includes 5 different divisions namely Dealers Support Program (DSP), Wholesalers, Rural Sales, Department Stores and Industrial & Institutions. The Company discontinued business with low volume dealers and focused on the high contribution dealers to minimize business risks and operating expenses. In addition, emphasis was given to open new dealers. Around 71 new dealers were opened during the year which contributed around Tk. 88 million in turnover. Currently, the company has 562 DSPs and 393 wholesalers running under a sound meaningful business policy focused on development of good relationship.

Bata Industrials
The company has established a new business channel under the brand Bata Industrials to serve the industrial growth. After launching Bata Industrials shoes and we received very encouraging feedback from different industrial groups who focus on quality and safety such as petrochemicals, food Industries, machineries, automobile parts, electrical equipments etc.

Manufacturing
The company operates two manufacturing facilities one in Tongi and the other in Dhamrai. With a production capacity of 110,000 pairs of shoes daily, the company also has a modern tannery facility with an output of 3.4 million square feet of leather annually. In 2010 company produced

Bata Shoe Company

over 24.9 million pairs. Currently company continues producing quality & fashionable shoes to respond to customers demand.

Human Resources
Bata Shoe Company (Bangladesh) Ltd. organized a day long Workshop on COSTEF (Costing & Efficiency) on June 01, 2010 at the Human Resources Training Center, Tongi. A total of 30 participants from Merchandising, Product Development and Distribution department participated in the workshop. The main topics were Concept of BSO Costing/Standard Cost, Material Calculation, Practical Session - One Pair Area Drawing & Paper Skin Tracing, Labour Cost & Concept of SPM, Production Expenses, Capacity Utilization, Prodeffcost, Negotiation with Supplier and Pricing & Gross Margin Establishment.

Data Collection Procedure:

Conducting this report secondary data are used. Data regarding the Performance Evaluation of The Bata Company Bangladesh Ltd. were collected from secondary sources like: Annual Reports, journals, official website. I also collect some information by using internet.

Instruments Used for Analysis: Ratio analysis

Time series (Trend) analysis: Time-series analysis evaluates performance over time. Comparison of current to past performance, using ratios, allows the firm to determine whether it is progressing as planned. Additionally, timeseries analysis is often helpful in checking the reasonableness of a firms projected financial statements. Cross- sectional analysis: Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same point in time.

Ratio Analysis:
Involves methods of calculating and interpreting financial ratios of average and monitor the firms performance. Liquidity Ratio:

Liquidity means ability to satisfy its short-term obligations as they come due. Liquidity refers to the solvency of the firms overall financial position the ease with which it can pay its bills. The two basic measures of liquidity are the current ratio and the quick ratio.

Bata Shoe Company

Current ratio:
A measure of liquidity which is calculated by dividing the firms current assets by its current liabilities Current Ratio = Current Asset/Current Liabilities
Year Current Ratio 2006 1.54 2007 1.42 2008 1.45 2009 1.44 2010 1.45

Graphically show:
1.55 1.5 1.45 1.4 1.35 Current ratio 2006 2007 2008 2009 2010

Comments:

Quick (Acid-Test) Ratio:

A measure of liquidity calculated by dividing the firms current assets minus inventory by its current liabilities Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.
Year Quick Ratio 2006 0.62 2007 .40 2008 .41 2009 .47 2010 .38

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Graphically show:

Comments:

Debt Ratio:
The debt ratio measures the proportion of total assets provided by the firms creditors.

Debt Ratio = Total Liabilities / Total Assets

Year Debt Ratio 2006 2.21 2007 66.33 2008 61.10 2009 58.85 2010 56.74

Graphically show:

Bata Shoe Company

70 60 50 40 30 20 10 0 Debt Ratio 2006 2007 2008 2009 2010

Comments: Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the company able to pay interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

Year Time Interest Earned Ratio 2007 99.12 2008 89.11 2009 63.11 2010 52.98

Graphically show: Comments:

Total Asset Turnover:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate sales.

Total Asset Turnover = Sales/ Total Asset

Year Total Asset Turnover 2006 4.73 2007 1.77 2008 1.85 2009 1.89 2010 1.85

Graphically show:

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Comments: Inventory turnover:

A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover= Cost of goods sold/ Average Inventory

Year Inventory Turnover 2006 2.36 2007 2.02 2008 2.08 2009 2.26 2010 2.13

Graphically show:
2.4 2.3 2.2 2.1 2 1.9 1.8 Inventory turnover 2006 2007 2008 2009 2010

Comments:

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Average Collection Period:
The average amount of time needed to collect accounts receivable. Average Collection Period=Accounts receivable/ (Credit sales/365)
Year Average Collection Period 2006 11 2007 4 2008 6 2009 7 2010 9

Graphically show:

Comments: Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it represents the number of days by the firm to pay its creditors. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors. It can be calculated using the following formula:

Average Payment Period=Accounts payable/ Average purchase per day

Bata Shoe Company

Year Average Payment Period 2006 138 2007 155 2008 153 2009 118 2010 113

Graphically show:

Comments: Operating Profit Margin:

Measures the percentage of each sales dollar remaining after all costs and expenses other then interest, taxes and preferred stock dividends are deducted pure profits earned on each sales dollar. The operating profit margin is calculated as follows: Operating Profit Margin = Operating Profit / Sales
Year Operating Profit Margin 2006 10.54% 2007 12.77% 2008 14.02% 2009 12.77% 2010 13.62%

Graphically show:

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Comments: Gross profit margin:

The gross profit margin measures the percentage of each sales dollar remaining after the firm has paid for its goods. The gross profit margin is calculated as follows Gross profit margin = Gross Profit / Sales
Year Gross profit margin 2006 39.82 2007 33.27 2008 34.45 2009 37.02 2010 36.12

Graphically show:

Bata Shoe Company

Comments: Net profit Margin:
The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have deducted. The higher the net profit margin is better. The net profit margin is calculated as follows:

Net profit Margin = Net profit after Taxes / Sales

Year Net profit Margin 2006 11.04% 2007 8.17% 2008 9.72% 2009 8.74% 2010 9.61%

Graphically show:
12 10 8 6 4 2 0 Category 1 2006 2007 2008 2009 2010

Comments:

Return on Asset (ROA):

Return on asset (ROA), which is often called the firms return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Asset (ROA) = Net profit after Taxes / Total Assets

Bata Shoe Company

Year Return on Asset 2006 0.52% 2007 14.43% 2008 17.98% 2009 16.50% 2010 17.79%

Graphically show:

Comments:

Return on Equity (ROE):

The Return on Equity (ROE) measures the return earned on the owners investment. Generally, the higher this return, the better off the owners.

Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity

Year Return on Equity 2006 52.2% 2007 46.23% 2008 39.49% 2009 40.11% 2010 41.13%

Graphically show:

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Comments: Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the income or profit earned by the firm per share.

P/E ratio - Price per share / earnings per share

Earnings per share (EPS):

EPS represents the dollar amount earned behalf of each outstanding share of common stock.

EPS= Net income/no. of common share outstanding

Year EPS 2006 20.25 2007 23.75 2008 32.85 2009 32.85 2010 39.76

Graphically show:

Comments:

Bata Shoe Company