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SCHOOL OF BUSINESS
Term Paper On Analysis and Interpretation of Financial Statement of BOC Bangladesh Limited
Prepared For
Prof Dr. Hasnan Ahmed Instructor Financial Accounting Department of MBA
Prepared By
Shaha Abdullah Faisal ID: 112091014 MBA, Spring 2009
Introduction:
Ratio analysis expresses the relationship among selected items of financial statement data. A ratio expresses the mathematical relationship between one quantity and another. The relationship is expressed in terms of a percentage, a rate or a simple proportion.
Company profile:
BOC Bangladesh ltd is a listed company ltd by shares and was incorporated in
Bangladesh In 1973 under the companies act 1913. The company became a listed entity in 1976. The company is listed both on Dhaka stock exchange and Chittagong stock exchange. The address of the registered office is 285,Tejgaon I/A, Dhaka 1208,Bangladesh. It has been a direct subsidiary of the BOC group PLC of United Kingdom since inception. The entire share capitals of BOC group have been taken over by LIND AG of Germany in 2006 through an acquisition process.
Liquidity ratios:
Current ratio Acid test ratio Receivables turnover Inventory turnover
Profitability ratios: Profit margin Asset turnover Return on assets Return on common stockholders equity Earnings per share (EPS) Price earnings ratio Payout ratio
Solvency ratios:
Debt to total assets ratio Times interest earned
Analysis of ratios:
Liquidity ratios:
Current ratio : Current Assets / Current Liabilities
Receivables turnover : Net credit sales / Average net receivable = 2498583000 / (142007000+115620000/ 2)
Profitability ratios:
Profit margin : Net income / Net sales = 359301000 / 2498583000 = .14 = 14%
= 2498583000 / (2174039000+2006197000 / 2)
Return on common stockholders equity : Net income / Average common stockholders equity = 359301000 / (1511516000+1394925000 / 2) = 359301000 / 1453220500
= .25 = 25%
Earnings per share (EPS) : 23.61 taka (shown in the financial statement)
Price earning ratio : Market price per share of stock / Earnings per share
= As no market price per share is shown in the financial statement, it is not computed.
Payout ratio : Cash dividend / Net income = As no cash dividend is shown in the financial statement it is not computed.
Solvency ratios:
Debt to total assets ratio : Total debt / Total asset
= 662523000 / 2174039000
= .30 = 30%
Times interest earned : Net income before tax and interest exp. / Interest expense
Findings :
Current ratio : It is shows that BOC have tk 3.47 Assets for tk 1 liabilities .
Acid test ratio : This ratio indicates that BOC have immediate liquidity of tk 1.91 against every tk 1 liabilities.
Receivables turnover: 19.40 times means BOC collect their receivables on average every 19 days.
Inventory turnover: 3.59 times means inventory converted in to cash in 3.59 times within 365 days.
Profit margin: Profit margin ratio indicates that 14% of sales contributes to the income of the company.
Asset turnover: Asset turn over 1.19 times means Company generated sales of 1.19 for each tk. it invested in asset.
Return on assets: In this year for each taka investment in total asset the company generated 17% net income .
Return on common stockholders equity: the firm was generating 25% of earning for each tk invested by stockholders.
Earnings per share (EPS): EPS is 23.61 it means each share of tk 10 earned tk
23.61
Debt to total assets ratio: It indicates that creditors provided 30% of total asset and company provide 70% of total asset of their own.
Recommendation:
BOC Bangladesh Ltd is a well known company in Bangladesh. I have found that
company has enough current assets and quick assets. Receivable turnover is very good. But company should utilize their asset more properly. Profit earning ratio of the company is also good. Company can pay dividend to their stockholders.