Professional Documents
Culture Documents
Submitted To:
Mr. Sheikh Abu Taher Lecturer and Course Teacher FNB 106 : Financial Accounting
Submitted By:
Student name Nadisha ahmed Rafiur Rahman K.M. Sakib (Group Leader) Mohsi nihad mosabbir ornab ID 591 600 605 613
August 24,2011
Financial Analysis refers to the assessment of a business to deal with the planning, budgeting, monitoring, forecasting, and improving of all financial details within an organization. Understanding an organizations financial health is a fundamental aspect of responding to todays increasingly stringent financial reporting requirements. To avoid risks, organizations must quickly
identify ascertain financial ratios and trends of liabilities and assets analyze and adjust planned and forecasted amounts act to provide regulatory statements as needed
Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. DESCO (DHAKA ELECTRIC SUPPLY COMPANY LIMITED) is a public limited company. We have gone through the financial statements of DESCO and analyze those on the basis of ratios.
Financial Statements
35
Balance Sheet
Particulars
as on 30 June 2010
Note
APPLICATION OF FUND
Non Current Assets Property, Plant & Equipment Capital Work -in- Progress Investment in Shares Current Assets Stores and Spares Accounts Receivable Advances & Deposits Advance Income Tax Cash and Bank Balances Current Liabilities Creditors for Goods/Works Accounts Payable Creditors for Other Finance Creditors for Expenses Current Maturity of Long Term Loans Accrued Interest on Loans Provision for Income Tax Net Current Assets 2 3 4 8,440,892,392 335,313,744 29,131,000 8,805,337,136 4,671,791,624 2,375,140,475 134,659,063 438,322,022 9,668,541,622 17,288,454,805 1,028,992,195 1,865,308,079 747,920,808 79,095,756 257,279,761 359,487,193 405,311,657 4,743,395,449 12,545,059,356 21,350,396,492 7,293,090,558 50,442,120 23,392,193 7,366,924,871 4,840,363,451 2,130,059,408 204,155,440 386,901,394 8,491,302,150 16,052,781,843 1,081,397,673 1,631,201,600 714,182,281 78,605,476 254,502,284 488,677,181 718,119,385 4,966,685,880 11,086,095,962 18,453,020,833
5 6 7 8 9
10 11 12 13 14 15 16
SOURCES OF FUND
Capital & Reserves Share Capital Share Money Deposit GOB Equity Proposed Dividend Retained earnings Equity Long Term Liabilities Loan from ADB/GOB Deferred Tax Liability Due to DESA (for assets taken over) Consumer Security Deposits 17 18 19 38 20 1,601,704,440 75,000,000 1,552,140,000 5,531,011,195 8,759,855,635 6,482,508,563 1,213,835,706 4,039,671,539 854,525,049 12,590,540,857 21,350,396,492 1,334,753,700 75,000,000 1,552,140,000 600,639,165 3,757,874,232 7,320,407,097 5,368,637,037 990,291,231 4,039,671,539 734,013,930 11,132,613,736 18,453,020,833
21 35.2 22 23
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, 31 October, 2010 Aziz Halim Khair Choudhury Chartered Accountants
36
Income Statement
Particulars
Note
2009-2010 Taka
10,810,974,226 178,217,188 10,989,191,414
2008-2009 Taka
9,799,615,712 205,225,995 10,004,841,707
OPERATING REVENUE
Energy Sales (Net of Vat) Other Operating Revenue Total Revenue from Operation 24 25
INCOME TAX
Current Tax Provision Deferred Tax Provision Net Profit After Tax Basic Earnings per Share 35.1 35.2 (149,037,371) (223,544,475) (372,581,846) 1,788,730,635 111.68 (533,472,132) (533,472,132) 1,607,337,522 100.35
36
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, 31 October, 2010 Aziz Halim Khair Choudhury Chartered Accountants
37
GOB Equity
Proposed Dividend
Total Taka
- (317,798,500)
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, 31 October, 2010 Aziz Halim Khair Choudhury Chartered Accountants
38
Note
2009-2010 Taka
10,736,499,500 589,913,372 319,559,818 803,683,195 (7,842,804,434) (619,900,904) (124,787,322) (195,862,119) (431,843,705) (774,193,750) 2,460,263,651
2008-2009 Taka
9,714,268,126 552,723,170 249,396,178 598,413,710 (6,838,886,262) (331,336,879) (101,367,992) (279,224,646) (562,712,744) (526,897,787) 2,474,374,874
D. E. F.
Cash & Cash equivalents increase /(decrease) during the year Cash & Cash equivalents at the beginning of the year Cash & Cash equivalents at the ending of the year
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, 31 October, 2010 Aziz Halim Khair Choudhury Chartered Accountants
39
BALANCE SHEET
APPLICATION OF FUND
Non Current Assets Property, Plant & Equipment Capital Work -in- Progress: Investment in Shares Current Assets Stores and Spares Accounts Receivable Advances & Deposits Advance Income Tax Cash and Bank Balances Current Liabilities Creditors for Goods Creditors for Expenses Creditors for Other Finance Accounts Payable Current Maturity of Long Term Loans Accrued Interest on Loans Provision for Income Tax Net Current Assets
as on June 30, 2008 Taka Note June 30, 2008 June 30, 2007
2 3 4
7,235,269,951 51,695,861 29,135,000 7,316,100,812 774,928,505 1,827,843,956 239,853,243 134,898,928 7,548,641,031 10,526,165,665 20,174,859 61,803,929 511,497,336 1,351,935,828 253,860,247 1,116,597,987 762,950,546 4,078,820,731 6,447,344,934 13,763,445,746
6,919,299,969 68,146,338 6,987,446,307 916,718,318 1,876,732,950 106,318,194 87,949,401 5,667,737,073 8,655,455,937 21,199,975 81,076,031 413,509,773 1,271,910,501 172,387,673 1,040,511,410 260,749,184 3,261,344,547 5,394,111,390 12,381,557,698
5 6 7 8 9
10 11 12 13 14 15 16
SOURCES OF FUND
Shareholders Equity Share Capital Share Money Deposit GOB Equity Proposed Dividend Un-appropriated Profit 17 18 19 36 20 1,271,194,000 75,000,000 1,264,440,000 381,358,200 1,478,782,960 4,470,775,160 1,608,542,769 3,061,150,839 4,039,671,539 583,305,439 7,684,127,817 13,763,445,746 1,271,194,000 75,000,000 1,241,940,000 317,798,500 882,996,127 3,788,928,627 1,058,542,769 3,422,286,180 3,666,534,532 445,265,589 7,534,086,302 12,381,557,698
Deferred Tax Liability Long Term Liabilities: Loan from ADB/GOB Due to DESA (For assets taken over) Consumer Security Deposits
34.2 21 22 23
This financial statement should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, October 26, 2008 A. Qasem & Co. Chartered Accountants
38
INCOME STATEMENT
Operating Revenue Energy Sales (Net of VAT) Other Operating Revenue Total Revenue from Operation Cost of energy Sales Energy Purchase Operating Expenses Depreciation (Operating) Gross Margin Cost & Expenditures Administrative Expenses Employee Expenses Bad Debts Provision Depreciation (Non Operating) Operating Profit Non Operating Income/(Expense) Interest Income Interest Expenses Exchange Gain/(Loss) Miscellaneous Income Total Non Operating Income/(Expense) Net Profit before tax Income Tax Expense Current Tax Provision Deferred Tax Provision Net Profit After Tax Basic Earnings per Share
for the year ended June 30, 2008 Taka Note 24 25 2007-2008 9,012,673,170 176,713,518 9,189,386,688 2006-2007 7,219,587,714 161,691,524 7,381,279,238
26 27 33
28 29 1.9 33
77,366,239 273,295,215 99,088,395 34,277,342 484,027,191 1,752,184,549 529,177,699 (255,564,990) 45,371,936 1,162,371 320,147,016 2,072,331,565 (521,500,000) (550,000,000) (1,071,500,000) 1,000,831,565 78.73
73,721,100 206,076,932 9,573,967 27,364,536 316,736,535 1,282,202,314 247,105,883 (283,783,491) 5,657,843 9,895,780 (21,123,985) 1,261,078,329 (150,000,000) (400,000,000) (550,000,000) 711,078,329 55.94
30 30 31 32
34.1 34.2
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, October 26, 2008 A. Qasem & Co. Chartered Accountants
39
for the year ended June 30, 2008 Taka 2007-2008 2006-2007 7,697,598,455 379,435,343 796,720,657 193,792,063 (5,146,107,768) (206,076,932) (422,376,798) (71,150,586) (425,419,409) 2,796,415,025
Cash Flow from Operating Activities Received from Energy Sales Collection of Govt. Duty, VAT & Tax Received from Other Operating & Non Operating Activities Received against Financial Income Payment for Energy Purchase Payment for Employee Expenses Payment for Administrative and Other Expenses Payment for Interest on Long Term Loan Payment for Govt. Duty, VAT and Tax Net Cash Inflow from Pperating Activities:
9,108,378,764 501,983,694 372,837,372 529,129,615 (6,109,439,167) (273,448,628) (893,966,734) (179,478,413) (458,790,571) 2,597,205,932
B.
Cash Flow from Investing Activities Investment in Shares Acquisition of Property & Plant Acquisition of Stores & Equipment Net Cash Used in Investing Activities: Cash Flow from Financing Activities Long Term Loan Dividend Paid Long Term Loan Paid Consumer Security Deposits Net Cash Inflow from Financing Activities: Cash & Cash Equivalents increase /(decrease) during the year Cash & Cash Equivalents at the beginning of the year Cash & Cash Equivalents at the ending of the year
C.
D. E. F.
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, October 26, 2008 A. Qasem & Co. Chartered Accountants
40
Proposed Dividend
Total
1,235,940,000 6,000,000 -
1,241,940,000
254,238,800 3,249,973,094 6,000,000 711,078,330 76,116,003 317,798,500 (254,238,800) (254,238,800) 317,798,500 3,788,928,627 317,798,500 3,788,928,627 22,500,000 - 1,000,831,565 - (23,686,532) 381,358,200 (317,798,500) (317,798,500) 381,358,200 4,470,775,160
35 36
These financial statements should be read in conjunction with the annexed notes.
Company Secretary
Director (Finance)
Director
Managing Director
Signed in terms of our separate report of even date annexed. Dhaka, October 26, 2008 A. Qasem & Co. Chartered Accountants
41
Types
Name of Ratio
Current Ratio
Numerator
Current Assets Current Assets Inventories Sales
Denominator
Current Liabilities Current Liabilities
Quick Ratio
2.66
2.25
Accounts Receivable Turnover Average collection period (In days) Inventory Turnover Total Debt to Total Assets Total Debt To Total Equity Interest Coverage Return on Equity Return on Assets Gross profit Rate Assets Turnover
365
Average Accounts Receivable Accounts Receivable Turnover Average Inventory Total Assets Total Equity Interest Expense Average Common Equity Average Total Assets Sales Average Total Assets
4.63
4.698
78.89
77.71
Cost of Goods Sold Total Liabilities Total Liabilities EBIT Net Income
8,656,378,087 4,671,791,624 = 17333936306 26093791941 17333936306 8,759,855,635 = 2,161,312,481 221,200,045 = 1,788,730,635 8,759,855,635 = 2,161,312,481 26093791941= 2,332,813,327 2,375,140,475 = 2,375,140,475 26093791941=
7,859,800,335 4,840,363,451 = 16099299616 23419706714 = 16099299616 7,320,407,097 = 2,140,809,654 169,794,396 = 1,607,337,522 7,320,407,097= 2,140,809,654 23419706714 = 2,145,041,372 2,130,059,408 = 2,130,059,408 23419706714 =
Profitability Ratios
EBIT to Sales Return on Sales Earnings Per Share Price earnings Book value per share
EBIT Net Income Net Income - dividends Market Price of Common Share Common Equity
Dividend payout
Market Price of Common Share Dividend per common Share Dividend per common Share
Numbers Common Shares Outstanding Book Price of Common Share Market Price of Common Share EPS
8,759,855,635 29,130 =
300715.95
251301.308
1446 1000 =
1.446
1406.25 1000=
1.40625
11099.14 1446 =
7.6757
4314.27 1406.25 =
3.067925
11099.14 111.68 =
99.383
4314.27 100.35 =
42.99
Types
Name of Ratio
Current Ratio Quick Ratio
Numerator
Current Assets Current Assets Inventories Sales
Denominator
Current Liabilities Current Liabilities Average Accounts Receivable Accounts Receivable Turnover Average Inventory Total Assets
Accounts Receivable Turnover Average collection period (In days) Inventory Turnover Total Debt to Total Assets Total Debt To Total Equity Interest Coverage Return on Equity Return on Assets
5.027
3.933
365
72.60
92.80
6,953,174,948 774,928,505 = 11762948548 17842266477= 11762948548 4,470,775,160 = 2,072,331,565 255,564,990 = 1,000,831,565 3,788,928,627 = 2,072,331,565 17842266477=
8.97
5,782,340,389 916,718,318 = 10795430849 15642902244= 10795430849 3,788,928,627 = 1,261,078,329 283,783,491 = 711,078,329 4,470,775,160 = 1,261,078,329 15642902244 =
6.31
0.66
0.69
Total Equity
2.63
2.85
8.11
4.44
Net Income
0.26
0.16
EBIT
0.12
0.08
Gross Profit
Sales
0.24
0.22
Profitability Ratios
Sales
0.52
0.47
EBIT
0.17
Return on Sales Earnings Per Share Price earnings Book value per share
Net Income
Sales
0.11
0.10
78.73 11.92
55.94 17.06
Numbers Common Shares Outstanding Book Price of Common Share Market Price of Common Share
130,069.64
153,476.66
938.75 1000 =
0.93875
954.50 1000 =
0.95450
10856.66 938.75 =
11.57
8683.65 954.50 =
9.10
Performance Indicators
Net Income (BDT in Millions) Net income is an important measure of how profitable the company is over a period of time. The measure is also used to calculate earnings per share. Net income, like other accounting measures, is susceptible to manipulation through such things as aggressive revenue recognition or by hiding expenses. When basing an investment decision on net income numbers, it is important to review the quality of the numbers that were used to arrive at this value.
2000 1500 1000 500 0 2010 2009 2008 year 2007 year
According to the graph and ratios, we can see the advancement of income of DESCO. The company is gaining profit and also it has a positive rate of increment.
Profit (BDT in Millions) The primary objective of a business entity is to make profit and increase the wealth of its owners. The profit margin is mostly used for internal comparison. It is difficult to accurately compare the net profit ratio for different entities. Individual businesses' operating and financing arrangements vary so much that different entities are bound to have different levels of expenditure, so that comparison of one with another can have little meaning. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin. Profit margin is an indicator of a company's pricing strategies and how well it controls costs. Differences in competitive strategy and product mix cause the profit margin to vary among different companies.
DESCO has been going through a cross section. In the year 2009, it has a fall on the profit whether it has got it back on 2010. But the indicator is positive anyway.
Total Assets (BDT in Millions) Assets are bought to increase the value of a firm or benefit the firm's operations. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).
3000 2500 2000 1500 1000 500 0 2010 2009 year 2008 2007
year
As we know that asset is an indicator of profitability, DESCOs graph shows an increasing trend. The asset is raising but a problem here is storing asset can cause its fall apart.
Return on Assets (BDT in Millions) An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. The assets of the company are comprised of both debt and equity. Both of these types of financing are used to fund the operations of the company.
The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. From the graph we can see that it a mixed section and also it has a raising trend.
Earnings Per Share (BDT in Millions) It measures performance from the perspective of investors and potential investors. Additionally, it shows the amount of earnings available to each ordinary shareholder, so that it indicates the potential return on individual investments. These results can be achieved by comparing the EPS of either different entities or the same entity's in different accounting periods, or even better, using both. Sometimes, the trend in EPS may be more accurate performance indicator than the trend in profit, though it is based on profit on ordinary activities after taxation.
Market to Book Value Ratio (BDT in Millions) This ratio reflects the growth of activity from one particular period to another. Growth can be measured in several ways, one method being the measurement of the increase in the value of share :
Total debt to Total Assets (BDT in Millions) This ratio indicates how strong the program is. It relates admitted assets and liabilities by dividing assets of the micro program scheme by its total liabilities. Clearly this needs to be over 1 for the scheme to be technically solvent.
Share Information:
The distribution of shareholding, market value of shares, type of shareholding of the company are shown below: General Authorized Capital: M.Tk.5000.00 Paid up Capital: M.Tk.1601.70 Class of Share: Ordinary Shares of Tk. 100/- each Stock Exchange Listing The issued Ordinary shares of Dhaka Electric Supply Company Ltd. (DESCO) are listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE).
sector should be self-sufficient, and be in a position to secure financing for its investment requirements from internal cash generation and on the strength of its balance sheet.
Our views
The financial statements are being prepared in accordance with Bangladesh Accounting Standards (BAS). It gives a true and fair view of the state of the companys affairs as of June 30, 2010 and of the results of its operations and its cash flows for the year then ended and comply with the applicable section of the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. Although the operational and financial performance of the power sector in Bangladesh has improved over recent years, the overall performance still remains poor. The financial situation of the sector as a whole is weak and it relies heavily on Government and donor support for its investment requirements. Operational inefficiencies, lack of commercial focus and inadequate electricity tariffs over the years have led to the poor financial health of the sector. Electricity tariffs are below cost of service and the sector has failed to meet all of its debt service obligations to the Government over the years. Analyzing those data we have got several ratios.
From the table and also from the short chart we can say that, the company DESCO is in a good form. Because
01. As per the short table, the current ratio shows an uprising sign. Short-term creditors prefer a high current ratio since it reduces their risk. There is also the quick ratio. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. It also has the increasing trend. Though The Accounts Receivable is in the same level or can be said that it has not changed a lot, it can be predicted that the company has been minimizing its risk level. 02. Financial leverage ratios provide an indication of the long-term solvency of the firm. Debt Equity ratio does not provides the increasing trend because we can see that in the FY 2007-08, it was 73.27 then it was 60.40 and now it is 67.33. It can be both uprising and low rising. 03. Profitability ratios offer several different measures of the success of the firm at generating profits. The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. We can see that it has a decreasing rate and Return on assets which is a measure of how effectively the firm's assets are being used to generate profits is also in a decreasing trend. Return on equity is the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm's stock. It is also in a decreasing rate. So it can be predicted that the company could face some financial problem in some days. 04. Earnings per share helps in determining the market price of the equity share of the company. It also helps to know whether the company is able to use its equity share capital effectively with compare to other companies. It also tells about the capacity of the company to pay dividends to its equity shareholders. From the chart it can be said that it has an increasing rate. 05. The Market-to-Book Ratio relates the firm's market value per share to its book value per share. Since a firm's book value reflects historical cost accounting, this ratio indicates management's success in creating value for its stockholders. The table shows an increasing trend there. So analyzing all of the ratios and also by seeing the trends we can say that the company will go on profitably without some dispersed incidents.