Download - Desco Final Account Analysis
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Analyzing Financial Statements
Submitted To:
Mr. Sheikh Abu Taher
Lecturer and Course Teacher
FNB 106 : Financ ial Accounting
Submitted By:
Student name ID
Nadisha ahmed 591
Rafiur Rahman 600
K.M. Sakib (Group Leader) 605
Mohsi nihad mosabbir ornab 613
August 24,2011Assignment
Department of Finance & Banking
J ahangirnagar University, Dhaka, Bangladesh
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35DESCO Annual Report 2010
Financial Statements
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APPLICATIONOF FUND
Non Current AssetsProperty, Plant&Equipment 2 8,440,892,392 7,293,090,558
Capital Work -in- Progress 3 335,313,744 50,442,120
InvestmentinShares 4 29,131,000 23,392,193
8,805,337,136 7,366,924,871
Current Assets
StoresandSpares 5 4,671,791,624 4,840,363,451
AccountsReceivable 6 2,375,140,475 2,130,059,408
Advances&Deposits 7 134,659,063 204,155,440
AdvanceIncomeTax 8 438,322,022 386,901,394
CashandBank Balances 9 9,668,541,622 8,491,302,150
17,288,454,805 16,052,781,843
Current LiabilitiesCreditorsforGoods/Works 10 1,028,992,195 1,081,397,673
AccountsPayable 11 1,865,308,079 1,631,201,600
CreditorsforOtherFinance 12 747,920,808 714,182,281
CreditorsforExpenses 13 79,095,756 78,605,476
CurrentMaturityofLongTermLoans 14 257,279,761 254,502,284
AccruedInterestonLoans 15 359,487,193 488,677,181
ProvisionforIncomeTax 16 405,311,657 718,119,385
4,743,395,449 4,966,685,880
Net Current Assets 12,545,059,356 11,086,095,962
21,350,396,492 18,453,020,833
SOURCESOF FUND
Capital &Reserves
ShareCapital 17 1,601,704,440 1,334,753,700
ShareMoneyDeposit 18 75,000,000 75,000,000
GOBEquity 19 1,552,140,000 1,552,140,000
ProposedDividend 38 - 600,639,165
Retainedearnings 20 5,531,011,195 3,757,874,232
Equity 8,759,855,635 7,320,407,097
Long Term Liabilities
LoanfromADB/GOB 21 6,482,508,563 5,368,637,037
DeferredTaxLiability 35.2 1,213,835,706 990,291,231
DuetoDESA(forassetstakenover) 22 4,039,671,539 4,039,671,539
ConsumerSecurityDeposits 23 854,525,049 734,013,930
12,590,540,857 11,132,613,736
21,350,396,492 18,453,020,833
Thesefinancialstatementsshouldbereadinconjunctionwiththeannexednotes.
CompanySecretary Director (Finance) Director ManagingDirector
Signedintermsofour separatereportofevendateannexed.
Dhaka, 31 October, 2010 Aziz HalimKhair Choudhury
CharteredAccountants
Balance Sheet as on 30 June 2010
Particulars Note 30 June 2010 30 June 2009
Taka Taka
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CompanySecretary Director (Finance) Director ManagingDirector
Signedintermsofour separatereportofevendateannexed.
Dhaka, 31 October, 2010 Aziz HalimKhair Choudhury
CharteredAccountants
OPERATING REVENUE
EnergySales(NetofVat) 24 10,810,974,226 9,799,615,712OtherOperatingRevenue 25 178,217,188 205,225,995
Total Revenue fromOperation 10,989,191,414 10,004,841,707
COST OF ENERGY SALES
EnergyPurchase(includingwheelingCharge) 26 7,845,646,912 7,117,531,238
OperatingExpenses 27 243,981,218 223,793,553
Depreciation(Operating) 34 566,749,957 518,475,544
8,656,378,087 7,859,800,335
Gross Margin 2,332,813,327 2,145,041,372
COST &EXPENDITURE
AdministrativeExpenses 28 126,159,977 104,840,703
EmployeeExpenses 29 619,018,529 334,395,921
BadDebtsProvision 6.2 12,007,263 11,015,698
Depreciation(NonOperating) 34 41,347,127 36,666,370
798,532,896 486,918,692
Operating Profit 1,534,280,431 1,658,122,680
NONOPERATING INCOME/(EXPENSE)
InterestIncome 30 872,083,490 666,222,788
InterestExpenses 31 (221,200,045) (169,794,396)
Exchange(Loss)/Gain 32 (32,193,487) (10,580,118)
Appreciation/ (diminution)invalueofInvestment 4.1 5,738,807 (5,738,807)
MiscellaneousIncome 33 2,603,285 2,577,507
Non Operating Income(Net) 627,032,050 482,686,974
Net Profit before tax 2,161,312,481 2,140,809,654
INCOME TAX
CurrentTaxProvision 35.1 (149,037,371) (533,472,132)
DeferredTaxProvision 35.2 (223,544,475) -
(372,581,846) (533,472,132)
Net Profit After Tax 1,788,730,635 1,607,337,522
Basic Earnings per Share 36 111.68 100.35
Thesefinancialstatementsshouldbereadinconjunctionwiththeannexednotes.
Income Statement for the year ended 30 June 2010
Particulars Note 2009-2010 2008-2009
Taka Taka
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FOR
THE YEAR
EN
DED30
JUN
E20
10
Balance at 1st July 2009 1,334,753,700 75,000,000 1,552,140,000 3,757,874,232 600,639,165 7,320,407,097
GOBEquity - - - - - -
Netprofitfortheyear - - - 1,788,730,635 - 1,788,730,635
Priorsyear'sadjustment 37 - - - (15,593,672) - (15,593,672)
Stock Dividendpaid 266,950,740 (266,950,740) -
CashDividendpaid - - - - (333,688,425) (333,688,425)
Balance at 30June 2010 1,601,704,440 75,000,000 1,552,140,000 5,531,011,195 - 8,759,855,635
FORTHE YEARENDED 30JUNE 2009
Balance at 1st July 2008 1,334,753,700 75,000,000 1,264,440,000 1,478,782,960 317,798,500 4,470,775,160
GOBEquity - - 287,700,000 - - 287,700,000
Netprofitfortheyear - - - 1,607,337,522 - 1,607,337,522
Priorsyear'sadjustment 37 - - - 1,272,392,915 - 1,272,392,915
ProposedDividend - - - (600,639,165) 600,639,165 -
Dividendpaid - - - - (317,798,500) (317,798,500)
Balance at 30June 2009 1,334,753,700 75,000,000 1,552,140,000 3,757,874,232 600,639,165 7,320,407,097
Thesefinancialstatementsshouldbereadinconjunctionwiththeannexednotes.
CompanySecretary Director (Finance) Director ManagingDirector
Signedintermsofour separatereportofevendateannexed.
Dhaka, 31 October, 2010 Aziz HalimKhair Choudhury
CharteredAccountants
Statement of Changes in Equity for the year ended 30 June 2010
Particulars Note Share Share Money GOB Reserve Proposed Total
Capital Deposit Equity & Surplus Dividend Taka
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A.CASH FLOW FROM OPERATING ACTIVITIES
ReceivedfromEnergySales 10,736,499,500 9,714,268,126CollectionofGovt.Duty, VAT &Tax 589,913,372 552,723,170
ReceivedfromOtherOperating&NonOperatingActivities 319,559,818 249,396,178
ReceivedagainstFinancial Income 803,683,195 598,413,710
PaymentforEnergyPurchase (7,842,804,434) (6,838,886,262)
PaymentforEmployeeExpenses (619,900,904) (331,336,879)
PaymentforAdministrative&OtherExpenses (124,787,322) (101,367,992)
PaymentforInterestonLongTermLoan (195,862,119) (279,224,646)
IncomeTaxPaid (431,843,705) (562,712,744)
PaymentforGovt.Duty, Vat&Tax (774,193,750) (526,897,787)
Net cash inflowfromoperating activities 2,460,263,651 2,474,374,874
B.CAS
H FLO
W FRO
MIN
VESTIN
GAC
TIVITIES
AcquisitionofProperty&Plant (193,473,710) (557,901,078)
AcquisitionofStores&Equipment (2,096,556,826) (3,584,094,636)
Net cash used in investing activities (2,290,030,536) (4,141,995,714)
C.CASH FLOW FROM FINANCING ACTIVITIES
LongTermLoanreceived 1,445,003,853 2,856,377,073
DividendPaid (323,318,100) (125,674,650)
LongTermLoanPaid (235,190,514) (271,128,954)
ConsumerSecurityDeposits 120,511,119 150,708,490
Net cash inflowfromfinancing activities 1,007,006,358 2,610,281,959
D. Cash&Cashequivalentsincrease/(decrease)duringtheyear 1,177,239,472 942,661,119
E. Cash&Cashequivalentsatthebeginningoftheyear 8,491,302,150 7,548,641,031
F. Cash &Cash equivalents at the ending of the year 9,668,541,622 8,491,302,150
Thesefinancialstatementsshouldbereadinconjunctionwiththeannexednotes.
CompanySecretary Director (Finance) Director ManagingDirector
Signedintermsofour separatereportofevendateannexed.
Dhaka, 31 October, 2010 Aziz HalimKhair Choudhury
CharteredAccountants
Cash Flow Statement for the year ended 30 June 2010
Particulars Note 2009-2010 2008-2009
Taka Taka
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38
Taka
Note June 30, 2008 June 30, 2007
APPLICATION OF FUND
Non Current Assets
Property, Plant & Equipment 2 7,235,269,951 6,919,299,969
Capital Work -in- Progress: 3 51,695,861 68,146,338
Investment in Shares 4 29,135,000 -
7,316,100,812 6,987,446,307
Current Assets
Stores and Spares 5 774,928,505 916,718,318
Accounts Receivable 6 1,827,843,956 1,876,732,950
Advances & Deposits 7 239,853,243 106,318,194
Advance Income Tax 8 134,898,928 87,949,401
Cash and Bank Balances 9 7,548,641,031 5,667,737,073
10,526,165,665 8,655,455,937
Current Liabilities
Creditors for Goods 10 20,174,859 21,199,975
Creditors for Expenses 11 61,803,929 81,076,031
Creditors for Other Finance 12 511,497,336 413,509,773
Accounts Payable 13 1,351,935,828 1,271,910,501
Current Maturity of Long Term Loans 14 253,860,247 172,387,673
Accrued Interest on Loans 15 1,116,597,987 1,040,511,410
Provision for Income Tax 16 762,950,546 260,749,184
4,078,820,731 3,261,344,547
Net Current Assets 6,447,344,934 5,394,111,390
13,763,445,746 12,381,557,698
SOURCES OF FUND
Shareholders Equity
Share Capital 17 1,271,194,000 1,271,194,000
Share Money Deposit 18 75,000,000 75,000,000
GOB Equity 19 1,264,440,000 1,241,940,000
Proposed Dividend 36 381,358,200 317,798,500
Un-appropriated Profit 20 1,478,782,960 882,996,127
4,470,775,160 3,788,928,627
Deferred Tax Liability 34.2 1,608,542,769 1,058,542,769
Long Term Liabilities:
Loan from ADB/GOB 21 3,061,150,839 3,422,286,180
Due to DESA (For assets taken over) 22 4,039,671,539 3,666,534,532Consumer Security Deposits 23 583,305,439 445,265,589
7,684,127,817 7,534,086,302
13,763,445,746 12,381,557,698
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
BALANCE SHEET as on June 30, 2008
DESCO A l R 2008
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DESCO A l R 2008 3
INCOME STATEMENT for the year ended June 30, 2008
Taka
Note 2007-2008 2006-2007
Operating Revenue
Energy Sales (Net of VAT) 24 9,012,673,170 7,219,587,714
Other Operating Revenue 25 176,713,518 161,691,524
Total Revenue from Operation 9,189,386,688 7,381,279,238
Cost of energy Sales
Energy Purchase 26 6,151,294,250 4,946,360,677
Operating Expenses 27 302,356,176 393,778,258
Depreciation (Operating) 33 499,524,522 442,201,454
6,953,174,948 5,782,340,389
Gross Margin 2,236,211,740 1,598,938,849
Cost & ExpendituresAdministrative Expenses 28 77,366,239 73,721,100
Employee Expenses 29 273,295,215 206,076,932
Bad Debts Provision 1.9 99,088,395 9,573,967
Depreciation (Non Operating) 33 34,277,342 27,364,536
484,027,191 316,736,535
Operating Profit 1,752,184,549 1,282,202,314
Non Operating Income/(Expense)
Interest Income 30 529,177,699 247,105,883
Interest Expenses 30 (255,564,990) (283,783,491)
Exchange Gain/(Loss) 31 45,371,936 5,657,843
Miscellaneous Income 32 1,162,371 9,895,780
Total Non Operating Income/(Expense) 320,147,016 (21,123,985)
Net Profit before tax 2,072,331,565 1,261,078,329
Income Tax Expense
Current Tax Provision 34.1 (521,500,000) (150,000,000)
Deferred Tax Provision 34.2 (550,000,000) (400,000,000)
(1,071,500,000) (550,000,000)
Net Profit After Tax 1,000,831,565 711,078,329
Basic Earnings per Share 78.73 55.94
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
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DESCO A l R 2008 4
Taka
Particulars Note Share Share Money GOB Reserve & Proposed Total
Capital Deposit Equity Surplus Dividend
Balance at Ist July 2006 1,271,194,000 75,000,000 1,235,940,000 413,600,294 254,238,800 3,249,973,094
GOB Equity - - 6,000,000 - - 6,000,000
Net profit for the year - - - 711,078,330 - 711,078,330
Prior year's adjustment 35 76,116,003 76,116,003
Proposed Dividend 36 - - - (317,798,500) 317,798,500 -
Dividend paid (254,238,800) (254,238,800)
Balance at June 30, 2007 1,271,194,000 75,000,000 1,241,940,000 882,996,127 317,798,500 3,788,928,627
Balance at Ist July 2007 1,271,194,000 75,000,000 1,241,940,000 882,996,127 317,798,500 3,788,928,627
GOB Equity - - 22,500,000 - - 22,500,000
Net profit for the year - - - 1,000,831,565 - 1,000,831,565
Prior year's adjustment 35 - - - (23,686,532) - (23,686,532)Proposed Dividend 36 - - - (381,358,200) 381,358,200 -
Dividend paid - - - - (317,798,500) (317,798,500)
Balance at June 30, 2008 1,271,194,000 75,000,000 1,264,440,000 1,478,782,960 381,358,200 4,470,775,160
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
STATEMENT OF CHANGES IN EQUITY for the year ended June 30, 2008
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Analyzing The Financial
Statements
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Types Name of
Ratio
Numerator Denominator Applied to June
2010
Short term
liquidity
Ratios
Current Ratio Current
Assets
Current
Liabilities
17,288,454,805
4,743,395,449
=
3.64 16
4,
Quick Ratio CurrentAssets -
Inventories
CurrentLiabilities
(17,288,454,805- 4,671,791,624)
4,743,395,449
=
2.66 (1- 4
=
Accounts
Receivable
Turnover
Sales Average
Accounts
Receivable
10,989,191,414
2,375,140,475
=
4.63 10
2,
Average
collection
period (In
days)
365 Accounts
Receivable
Turnover
365 4.6267543
=
78.89 36
4.
InventoryTurnover
Cost ofGoods Sold
AverageInventory
8,656,378,087 4,671,791,624 =
1.85 7,84,8
Long Term
solvency
Ratios
Total Debt to
Total Assets
Total
Liabilities
Total Assets 17333936306
26093791941
0.664 16
23
Total Debt To
Total Equity
Total
Liabilities
Total Equity 17333936306
8,759,855,635 =
1.98 16
7,3
Interest
Coverage
EBIT Interest
Expense
2,161,312,481
221,200,045 =
9.77 2,
16
Profitability
Ratios
Return on
Equity
Net Income Average
Common
Equity
1,788,730,635
8,759,855,635 =
0.204 1,
7,3
Return onAssets
EBIT Average TotalAssets
2,161,312,481 26093791941=
0.082 2,23
Gross profit
Rate
Gross Profit Sales 2,332,813,327
2,375,140,475 =
0.982 2,
2,
Assets
Turnover
Sales Average Total
Assets
2,375,140,475
26093791941=
0.091 2,
23
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EBIT to Sales EBIT Sales 2,161,312,481
2,375,140,475 =
0.91 2,
2,
Return on
Sales
Net Income Sales 1,788,730,635
2,375,140,475 =
0.752 1,
2,
Earnings Per
Share
Net Income
- dividends
Average
C.S.O
111.68 111.68 10
Market
price &
Dividend
Ratios
Price
earnings
Market Price
of Common
Share
EPS 1,446 111.68 = 12.94 14
=
Book value
per share
Common
Equity
Numbers
Common
Shares
Outstanding
8,759,855,635
29,130 =
300715.95 7,3
29
Market to
book value
Ratio
Market Price
of Common
Share
Book Price of
Common
Share
1446 1000 = 1.446 14
DividendYield
Dividendper
common
Share
Market Priceof Common
Share
11099.14 1446 =
7.6757 4314
Dividend
payout
Dividend
per
common
Share
EPS 11099.14
111.68 =
99.383 43
=
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Types Name of
Ratio
Numerator Denominator Applied to June
2008
Short term
liquidity
Ratios
Current Ratio Current
Assets
Current
Liabilities
10,526,165,665
4,078,820,731=
2.58 8,6
3,2
Quick Ratio Current
Assets -Inventories
Current
Liabilities
9751237160
4,078,820,731=
2.39 77
3,2
Accounts
Receivable
Turnover
Sales Average
Accounts
Receivable
9,189,386,688
1,827,843,956 =
5.027 7,3
1
Average
collection
period (In
days)
365 Accounts
Receivable
Turnover
365
5.0274459=
72.60 36
3.9
Inventory
Turnover
Cost of
Goods Sold
Average
Inventory
6,953,174,948
774,928,505 =
8.97 5,
91
Long Term
solvency
Ratios
Total Debt to
Total Assets
Total
Liabilities
Total Assets 11762948548
17842266477=
0.66 10
15
Total Debt To
Total Equity
Total
Liabilities
Total Equity 11762948548
4,470,775,160 =
2.63 10
3,7
Interest
Coverage
EBIT Interest
Expense
2,072,331,565
255,564,990 =
8.11 1,2
28
Return on
Equity
Net Income Average
CommonEquity
1,000,831,565
3,788,928,627 =
0.26 7
4,4
Return on
Assets
EBIT Average Total
Assets
2,072,331,565
17842266477=
0.12 1,2
15
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Profitability
Ratios
Gross profit
Rate
Gross Profit Sales 2,236,211,740
9,189,386,688 =
0.24 1,5
7,3
Assets
Turnover
Sales Average Total
Assets
9,189,386,688
17842266477=
0.52 7,
15
EBIT to Sales EBIT Sales
2,072,331,5659
,189,386,688 =
0.23 1,
7,3
Return on
Sales
Net Income Sales 1,000,831,565
9,189,386,688 =
0.11 71
7,3
Earnings Per
Share
Net Income
- dividends
Average
C.S.O
78.73 78.73 55
Market
price &
Dividend
Ratios
Price
earnings
Market Price
of CommonShare
EPS 938.75 78.73
=
11.92 95
=
Book value
per share
Common
Equity
Numbers
Common
Shares
Outstanding
3,788,928,627
29,130 =
130,069.64 4,
2
Market to
book value
Ratio
Market Price
of Common
Share
Book Price of
Common
Share
938.75 1000 = 0.93875 95
Dividend
Yield
Dividend
per
commonShare
Market Price
of Common
Share
10856.66
938.75 =
11.57 86
95
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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.
20102009
2008 2007
year
0
500
1000
1500
2000
year
Figure: Desco (Net Income)
According to the graph and ratios, we can see the advancement of income of
DESCO. The company is ga ining profit and also it has a positive rate of
increment.
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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 differententities 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 dec line 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.
0
1000
2000
3000
2010 2009 2008 2007
Year
Year
Figure: Desco (Profit)
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.
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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 beconverted into cash (although cash itself is also considered an asset).
20102009
20082007
year
0500
1000
1500
2000
2500
3000
year
Figure: Desco (Total Assets)
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 isat using its assets to generateearnings. 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.
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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 sec tion and also it has a
raising trend.
20102009
20082007
year
0
0.05
0.1
0.15
year
Figure: Desco (Return on Assets)
Earnings Per Share (BDT in Millions)
It measures performance from the perspec tive 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 evenbetter, 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.
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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.
0.6
0.65
0.7
2010 2009 2008 2007
YearYear
Figure: Desco (Total debt to Total Assets)
Growth of the Company:
The growth of the Company can be better conceived from the figures and
graphs. It appears from these figures and graphs that starting from a consumer
base of 71,000 nos with load demand of 90 MW in 1998, the Company has
grown to cater about 4,46,000 nos of consumers as of December 2010. At the
same time the shareholders equity increased from Tk. 7,320 million last year to Tk.
8,760 million, recording a growth of 19.67%. A graph can show the actual growth
of DESCO.
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Figure: Profitability Of DESCO
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).
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Future financial prospects
The future financial prospects of the DESCO will largely depend on the following
three critical factors:
1. Efficiency improvements involving reduction in losses, improvement in
collection rates, and reductions in operational and administration
costs.
2. Commercialization involving better management practices:
Management should be given full operational authority and
responsibility with accountability. Management should have the
authority to hire and fire staff and determine salary scales.
Performance should be measured against targets and
management and staff should be rewarded or penalized based on
their performance.
3. Implementation of cost reflective tariffs that are regularly adjusted.
The power sector of Bangladesh is currently imposing heavy financial burdens
on the Government budget. It isessential that this dependence is gradually
reduced over the coming years so that the countrys resources are targeted
more towards the soc ial and other needs of c itizens. In the long-term, the power
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sec tor should be self-sufficient, and be in a position to secure financ ing 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 J une 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 sec tor as a whole is weak and it reliesheavily on Government and donor support for its investment requirements.
Operational inefficiencies, lack of commercial focusand inadequate elec tricity
tariffs over the years have led to the poor financial health of the sector.
Electricity tariffs are below cost of service and the sec tor has failed to meet all of
itsdebt 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
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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 thatdoes 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 saidthat 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 solvencyof 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 g ro ss p ro fit m a rg inis a measure of the gross
profit earned on sales. The grossprofit margin considers the firm's cost of
goods sold, but does not include other costs. We can see that it has adecreasing rate and Re turn o n a sse tswhich is a measure of how
effectively the firm's assets are being used to generate profits is also in a
decreasing trend. Re turn o n e q uityis the bottom line measure for the
shareholders, measuring the profits earned for each dollar invested in thefirm's stock. It is also in a dec reasing 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 ithas 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 historica l cost
accounting, this ratio indicates management's success in c reating 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.