introduction to ratio analysis final
TRANSCRIPT
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1.1 Introduction to ratio analysis:
Financial information is always prepared to satisfy in some way the needs of various
interested parties (the "users of accounts"). Stakeholders in the business (whether they are
internal or external to the business) seek information to find out three fundamental questions:
(1) How is the business trading?
(2) How strong is the financial position?
(3) What are the future prospects for the business?
For outsiders, published financial accounts are an important source of information to enable
them to answer the above questions.
To some degree or other, all interested parties will want to ask questions about financial
information which is likely to fall into one or other of the following categories, and be about:
Performance Area Key Issues
Profitability Is the business making a profit?
How efficient is the business at turning revenues into profit?
Is it enough to finance reinvestment?
Is it growing?
Is it sustainable (high quality)?
How does it compare with the rest of the industry?
Financial efficiency Is the business making best use of its resources?
Is it generating adequate returns from its investments?
Is it managing its working capital properly?
Liquidity and
gearing
Is the business able to meet its short-term debts as they fall due?
Is the business generating enough cash?
Does the business need to raise further finance?
How risky is the finance structure of the business?
Shareholder return What returns are owners gaining from their investment in the business?
How does this compare with similar, alternative investments in other
businesses?
1. Introduction
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2.1 Definition of 'Ratio Analysis':
A tool used by individuals to conduct a quantitative analysis of information in a
company's financial statements. Ratios are calculated from current year numbers and are then
compared to previous years, other companies, the industry, or even the economy to judge the
performance of the company. Ratio analysis is predominately used by proponents of
fundamental analysis.
A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical
values taken from an enterprise's financial statements. Often used in accounting, there are
many standard ratios used to try to evaluate the overall financial condition of a corporation or
other organization. Financial ratios may be used by managers within a firm, by current and
potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use
financial ratios to compare the strengths and weaknesses in various companies. If shares in a
company are traded in a financial market, the market price of the shares is used in certain
financial ratios.
Ratios can be expressed as adecimal value, such as 0.10, or given as an equivalentpercent
value, such as 10%. Some ratios are usually quoted as percentages, especially ratios that are
usually or always less than 1, such as earnings yield, while others are usually quoted as
decimal numbers, especially ratios that are usually more than 1, such asP/E ratio;these latter
are also called multiples. Given any ratio, one can take itsreciprocal;if the ratio was above 1,
the reciprocal will be below 1, and conversely. The reciprocal expresses the same
information, but may be more understandable: for instance, the earnings yield can be
compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20
corresponds to an earnings yield of 5%.
2.2 Sources of data for financial ratios:
Values used in calculating financial ratios are taken from the balance sheet, income
statement,statement of cash flows or (sometimes) thestatement of retained earnings.These
2. Literature Review
http://en.wikipedia.org/wiki/Financial_statementhttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Financial_analysthttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Decimal_separatorhttp://en.wikipedia.org/wiki/Percenthttp://en.wikipedia.org/wiki/Earnings_yieldhttp://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Reciprocal_%28mathematics%29http://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Statement_of_cash_flowshttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Statement_of_cash_flowshttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Reciprocal_%28mathematics%29http://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Earnings_yieldhttp://en.wikipedia.org/wiki/Percenthttp://en.wikipedia.org/wiki/Decimal_separatorhttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Financial_analysthttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Financial_statement -
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comprise the firm's "accounting statements" or financial statements.The statements' data is
based on the accounting method and accounting standards used by the organization.
2.3 Purpose and types of ratios:
Financial ratios quantify many aspects of a business and are an integral part of the financial
statement analysis.Financial ratios are categorized according to the financial aspect of the
business which the ratio measures. Liquidity ratios measure the availability of cash to pay
debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets.Debt
ratios measure the firm's ability to repay long-term debt. Profitability ratios measure the
firm's use of its assets and control of its expenses to generate an acceptable rate of return.
Market ratios measure investor response to owning a company's stock and also the cost of
issuing stock. These are concerned with the return on investment for shareholders, and with
the relationship between return and the value of an investment in companys shares.
Financial ratios allow for comparisons
between companies between industries between different time periods for one company between a single company and its industry average
Ratios generally hold no meaning unless they arebenchmarked against something else, like
past performance or another company. Thus, the ratios of firms in different industries, which
face different risks, capital requirements, and competition, are usually hard to compare.
2.4 Accounting methods and principles:
Financial ratios may not be directly comparable between companies that use different
accounting methods or follow variousstandard accounting practices.Mostpublic companies
are required by law to usegenerally accepted accounting principles for their home countries,
but private companies,partnerships and sole proprietorships may not use accrual basis
accounting. Large multi-national corporations may use International Financial Reporting
Standards to produce their financial statements, or they may use the generally accepted
accounting principles of their home country.
http://en.wikipedia.org/wiki/Financial_statementshttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Benchmarkinghttp://en.wikipedia.org/wiki/Accounting_methodshttp://en.wikipedia.org/wiki/Standard_accounting_practicehttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Generally_accepted_accounting_principleshttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Generally_accepted_accounting_principleshttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Standard_accounting_practicehttp://en.wikipedia.org/wiki/Accounting_methodshttp://en.wikipedia.org/wiki/Benchmarkinghttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Financial_statements -
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There is no international standard for calculating the summary data presented in all financial
statements, and the terminology is not always consistent between companies, industries,
countries and time periods.
2.5 Abbreviations and terminology:
Various abbreviations may be used in financial statements, especially financial statements
summarized on the Internet. Sales reported by a firm are usually net sales, which deduct
returns, allowances, and early payment discounts from the charge on aninvoice.Net income
is always the amount after taxes, depreciation, amortization, and interest, unless otherwise
stated. Otherwise, the amount would be EBIT, or EBITDA (see below).
Companies that are primarily involved in providing services with labor do not generally
report "Sales" based on hours. These companies tend to report "revenue" based on the
monetary value of income that the services provide.
Note that Shareholder's Equity and Owner's Equity are not the same thing, Shareholder's
Equity represents the total number of shares in the company multiplied by each share's book
value; Owner's Equity represents the total number of shares that an individual shareholder
owns (usually the owner withcontrolling interest), multiplied by each share's book value. It is
important to make this distinction when calculating ratios.
2.6 Other abbreviations:
(Note: These are not ratios, but values in currency.)
COGS = Cost of goods sold, or cost of sales. EBIT =Earningsbeforeinterest andtaxes EBITDA = Earnings before interest, taxes,depreciation,andamortization EPS = Earnings per share
http://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Sales_%28accounting%29http://en.wikipedia.org/wiki/Net_saleshttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/EBIThttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Taxeshttp://en.wikipedia.org/wiki/EBITDAhttp://en.wikipedia.org/wiki/Depreciationhttp://en.wikipedia.org/wiki/Amortizationhttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Amortizationhttp://en.wikipedia.org/wiki/Depreciationhttp://en.wikipedia.org/wiki/EBITDAhttp://en.wikipedia.org/wiki/Taxeshttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/EBIThttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Net_saleshttp://en.wikipedia.org/wiki/Sales_%28accounting%29http://en.wikipedia.org/wiki/Internet -
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2.7 Ratios:
2.7.1 Profitability ratios:
Profitability ratios measure the company's use of its assets and control of its expenses to
generate an acceptable rate of return
Gross profit marginor Gross Profit Rate
OR
Operating Income Margin, Operating profit marginor Return on sales(ROS)
Note: Operating income is the difference between operating revenues and operating expenses,
but it is also sometimes used as a synonym for EBIT and operating profit. This is true if the
firm has no non-operating income. (Earnings before interest and taxes / Sales)
Profit margin,net margin or net profit margin
Return on equity (ROE)
Return on investment (ROI ratio orDu Pont Ratio)
http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Profit_marginhttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Return_on_investmenthttp://en.wikipedia.org/wiki/Du_Pont_Ratiohttp://en.wikipedia.org/wiki/Du_Pont_Ratiohttp://en.wikipedia.org/wiki/Return_on_investmenthttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Profit_marginhttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxes -
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Return on assets (ROA)
Return on assets Du Pont (ROA Du Pont)
Return on Equity Du Pont (ROE Du Pont)
Return on net assets (RONA)
Return on capital (ROC)
Risk adjusted return on capital (RAROC)
OR
Return on capital employed (ROCE)
Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's Equity
Cash flow return on investment (CFROI)
Efficiency ratio
http://en.wikipedia.org/wiki/Return_on_assetshttp://en.wikipedia.org/wiki/Return_on_assets_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_Equity_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_net_assetshttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Risk_adjusted_return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_capital_employedhttp://en.wikipedia.org/wiki/Cash_flow_return_on_investmenthttp://en.wikipedia.org/wiki/Efficiency_ratiohttp://en.wikipedia.org/wiki/Efficiency_ratiohttp://en.wikipedia.org/wiki/Cash_flow_return_on_investmenthttp://en.wikipedia.org/wiki/Return_on_capital_employedhttp://en.wikipedia.org/wiki/Risk_adjusted_return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_net_assetshttp://en.wikipedia.org/wiki/Return_on_Equity_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_assets_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_assets -
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Net gearing
Basic Earnings Power Ratio
2.7.2 Liquidity ratios:
Liquidity ratios measure the availability of cash to pay debt.
Current ratio (Working Capital Ratio)
Acid-test ratio (Quick ratio)
Cash ratio
Operation cash flow ratio
2.7.3 Activity ratios (Efficiency Ratios):
Activity ratios measure the effectiveness of the firms use of resources.
Average collection period
Degree of Operating Leverage (DOL)
http://en.wikipedia.org/w/index.php?title=Net_gearing&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Basic_Earnings_Power_Ratio&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Basic_Earnings_Power_Ratio&action=edit&redlink=1http://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/wiki/Current_ratiohttp://en.wikipedia.org/wiki/Current_ratiohttp://en.wikipedia.org/wiki/Quick_ratiohttp://en.wikipedia.org/wiki/Cash_ratiohttp://en.wikipedia.org/wiki/Operating_cash_flowhttp://en.wikipedia.org/wiki/Debtor_collection_periodhttp://en.wikipedia.org/w/index.php?title=Degree_of_Operating_Leverage&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Degree_of_Operating_Leverage&action=edit&redlink=1http://en.wikipedia.org/wiki/Debtor_collection_periodhttp://en.wikipedia.org/wiki/Operating_cash_flowhttp://en.wikipedia.org/wiki/Cash_ratiohttp://en.wikipedia.org/wiki/Quick_ratiohttp://en.wikipedia.org/wiki/Current_ratiohttp://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/w/index.php?title=Basic_Earnings_Power_Ratio&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Net_gearing&action=edit&redlink=1 -
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DSO Ratio
Average payment period
Asset turnover
Stock turnover ratio
Receivables Turnover Ratio
Inventory conversion ratio
Inventory conversion period (essentially same thing as above)
Receivables conversion period
Payables conversion period
Cash Conversion Cycle
Inventory Conversion Period + Receivables Conversion Period - Payables Conversion
Period
http://en.wikipedia.org/wiki/DSO_Ratiohttp://en.wikipedia.org/w/index.php?title=Average_payment_period&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Average_payment_period&action=edit&redlink=1http://en.wikipedia.org/wiki/Asset_turnoverhttp://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Receivables_Turnover_Ratiohttp://en.wikipedia.org/wiki/Receivables_Turnover_Ratiohttp://en.wikipedia.org/w/index.php?title=Inventory_conversion&action=edit&redlink=1http://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/w/index.php?title=Inventory_conversion&action=edit&redlink=1http://en.wikipedia.org/wiki/Receivables_Turnover_Ratiohttp://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Asset_turnoverhttp://en.wikipedia.org/w/index.php?title=Average_payment_period&action=edit&redlink=1http://en.wikipedia.org/wiki/DSO_Ratio -
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2.7.4 Debt ratios (leveraging ratios):
Debt ratios measure the firm's ability to repay long-term debt. Debt ratios measure financial
leverage.
Debt ratio
Debt to equity ratio
Long-term Debt to equity (LT Debt to Equity)
Times interest-earned ratio / Interest Coverage Ratio
OR
Debt service coverage ratio
2.7.5 Market ratios:
Market ratios measure investor response to owning a company's stock and also the cost of
issuing stock. These are concerned with the return on investment for shareholders, and with
the relationship between return and the value of an investment in companys shares.
Earnings per share (EPS)
http://en.wikipedia.org/wiki/Leverage_%28finance%29http://en.wikipedia.org/wiki/Leverage_%28finance%29http://en.wikipedia.org/wiki/Debt_ratiohttp://en.wikipedia.org/wiki/Debt_ratiohttp://en.wikipedia.org/wiki/Debt_to_equity_ratiohttp://en.wikipedia.org/w/index.php?title=Long-term_Debt_to_equity&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Times_interest-earned_ratio_/_Interest_Coverage_Ratio&action=edit&redlink=1http://en.wikipedia.org/wiki/Debt_service_coverage_ratiohttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Debt_service_coverage_ratiohttp://en.wikipedia.org/w/index.php?title=Times_interest-earned_ratio_/_Interest_Coverage_Ratio&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Long-term_Debt_to_equity&action=edit&redlink=1http://en.wikipedia.org/wiki/Debt_to_equity_ratiohttp://en.wikipedia.org/wiki/Debt_ratiohttp://en.wikipedia.org/wiki/Leverage_%28finance%29http://en.wikipedia.org/wiki/Leverage_%28finance%29 -
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Payout ratio
OR
Dividend cover (the inverse of Payout Ratio)
P/E ratio
Dividend yield
Cash flow ratio orPrice/cash flow ratio
Price to book value ratio (P/B or PBV)
Price/sales ratio
PEG ratio
2.7.5.1 Other Market Ratios:
EV/EBITDA
EV/Sales
http://en.wikipedia.org/wiki/Payout_ratiohttp://en.wikipedia.org/wiki/Dividend_coverhttp://en.wikipedia.org/wiki/PE_ratiohttp://en.wikipedia.org/wiki/Dividend_yieldhttp://en.wikipedia.org/wiki/Price/cash_flow_ratiohttp://en.wikipedia.org/wiki/P/B_ratiohttp://en.wikipedia.org/wiki/Price/sales_ratiohttp://en.wikipedia.org/wiki/PEG_ratiohttp://en.wikipedia.org/wiki/EV/EBITDAhttp://en.wikipedia.org/wiki/EV/Saleshttp://en.wikipedia.org/wiki/EV/Saleshttp://en.wikipedia.org/wiki/EV/EBITDAhttp://en.wikipedia.org/wiki/PEG_ratiohttp://en.wikipedia.org/wiki/Price/sales_ratiohttp://en.wikipedia.org/wiki/P/B_ratiohttp://en.wikipedia.org/wiki/Price/cash_flow_ratiohttp://en.wikipedia.org/wiki/Dividend_yieldhttp://en.wikipedia.org/wiki/PE_ratiohttp://en.wikipedia.org/wiki/Dividend_coverhttp://en.wikipedia.org/wiki/Payout_ratio -
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Summit Power Limited
3.1 Organizational Profile of Summit Power Ltd.:
Company Name: Summit Power Limited
Registered Address: Summit Centre (9th Floor), 18 Karwan Bazar, Dhaka-1215
Plant
Addresses:
Paid Up Capital: Tk. 3,033,539,730 (Ordinary Shares)
Sponsors: Summit Industrial and Mercantile Corporation (Pvt.) Ltd. & Euro Hub
Investments Ltd.
Off taker: Bangladesh Power Development Board (BPDB), Rural Electrification Board
Number of Employees: 144
Total electric output: 317 MW
Engine type: CATERPILLER G3616, CATERPILLER G3516, Wrtsil 16V34SG,
Wrtsil 20V34SG, Wrtsil 18V46GD, GE JGS 620 GS-NL
Year of Starting Commercial Operation: 2001
3. Organization Profile
Ashulia, Savar 45 MW
Madhabdi, Narshingdi 35 MW
Chandina, Comilla 25 MW
Ullapara, Sirajganj 11 MW
Maona, Gazipur 33 MW
Jangalia, Comilla 33 MW
Rupgonj, Narayanganj 33 MW
Madanganj, Narayanganj 102 MW
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3.1.2 History of Summit Power Ltd.:
Summit Power Limited (SPL),sponsored by Summit Group, is the first Bangladeshi
Independent Power Producer (IPP) in Bangladesh in private sector providing power to
national grid. SPL was incorporated in Bangladesh on March 30, 1997 as a Private Limited
Company. On June 7, 2004 the Company was converted to Public Limited Company under
the Companies Act 1994.
Summit Power Limited in the year 2001, has successfully established three power plants of
11 MW capacity each, for sale of electricity to Rural Electrification Board (REB) on Build,
Own and Operate basis at Savar, Narsingdi and Comilla. During 2006 and 2007 in each of the
above three places, 2nd unit was commissioned enhancing the capacity of SPL to 105 MW.
In 2009 SPL with its 99% owned two subsidiaries has established 4 new power plants raising
its capacity to 215 MW. In 2011 SPL has commissioned another power plant of 102 MW
capacity at Narayanganj under Summit Narayanganj Power Limited, where SPL has 55%
ownership.
In association with its parent company Summit Industrial & Mercantile Corporation (Pvt.)
Ltd. (SIMCL), SPL has also participated and became lowest bidder in three more power
plants tender and expected to sign contracts with BPDB for establishment of 52 MW SummitShantahar, 104 MW Summit Saidpur and 104 MW Summit Amin Bazar Power Plants. These
are 15 years term IPP is expected to be commissioned by 3rd quarter of 2012.
Considering the immense opportunities, the company is striving to establish more power
plants around the country. The fast-growing company has set a mission to expand the
company with a power generation capacity to the tune of 1000 MW, which is a modest 20%
of the electricity requirement in Bangladesh.
3.1.3 Our Vision:
To provide quality & uninterrupted electricity to the vast majority of rural Bangladesh for
their personal, social & economic development.
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3.1.4 Our Mission:
"Empowering Bangladesh, we can & we will." To expand the company into a power
generation capacity to the tune of 1000 MW this is 20% of the electricity requirement of
Bangladesh and maintains that level.
3.1.5 Our Quality Policy:
We are committed to generate and provide uninterrupted supply of electricity to our
customers as per their demand by meeting all the requirements of Power Purchase
Agreements signed between the company and the valued Customer.
We integrate the philosophy of "Pioneering Sprit" with "Continuous Improvement" by
efficient utilization of Capital, Machines, Materials and Human Resources.
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Titas Gas Transmission and Distribution Company
Limited
3.2 Historical Background of Titas Gas Transmission and Distribution Co.Ltd.:
The history of the use of Natural Gas as a source of energy and feed-stock in Bangladesh
dates back to early sixtys. Haripur Gas Field, discovered in Sylhet district in the year 1955,
cameinto commercial production in 1961 with the supply of gas to Natural Gas Fertilizer
Factory (NGFL) at Fenchuganj by 28 miles 8 DN pipeline. The Chatak Gas Field,
discovered in 1959 was brought into commercial production with commencement of gas
supply to Chatak Cement Factory in 1960 by 12 miles long transmission pipeline.
Titas Gas T & D Co. Ltd. (TGTDCL) was formed in November 1964 as a joint Stock
Company (Under the Companys Act 1913) of the central Government of Pakistan on the one
hand and Pakistan Shell Oil Company on the other, with a view to transmitting and
distributing natural gas to the Dhaka city the then provincial capital of Pakistan from the
discovered gas field called Titas located on the bank of the River Titas, within the close
vicinity of the present Brahmanbaria district of Bangladesh. The authorized capital was Taka
17.8 million only, divided into 17800 shares of Taka 10.00 each. Ninety percent of the shares
were subscribed by the then central Government of Pakistan and remaining ten percent by the
Shell Oil Company.
The basic objective of the Company was to construct, own and operate natural gas
transmission & distribution facilities in the mid-eastern region of Bangladesh i.e. Comilla,
Mymensingh and Dhaka district with the right of purchasing, transmission, distribution, sales
and disposal of natural gas within the jurisdiction of greater districts before creation of newdistricts.
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In December 1971, after nine months of liberation war, Bangladesh emerged in the world
map as a new independent state with the same geographical boundary of the then East
Pakistan. Plunged into a state of total economic collapse following the war of liberation,
vigorous activities were immediately started at all levels to rebuild the country. Certain
national priorities were set by the then Govt. and significant changes were brought about in
the management of development activities. A no. of Sector or Corporations were formed and
each of them was entrusted with the operation and management of the units under it. In
March 26, 1972 Govt. has formed Bangladesh Oil, Gas & Mineral Corporation (BOGMC)
under the Presidential Executive Order and Titas Gas T&D Co. Ltd. has become an enterprise
of BOGMC. Titas Gas T&D Co. Ltd. which was earlier established as a joint stock company
with 90% share capital of the Govt. of Pakistan naturally vested to the Govt. of the Peoples
Republic of Bangladesh and the rest 10% share capital of Pakistan Shell Oil Company was
transferred to the newly formed Bangladesh Shell Oil Company. During 1975, under the
nationalization program, Govt. has brought back 10% share of Shell Oil Co. and Titas Gas
T&D Co. Ltd. has become a 100% Government owned Company. Meanwhile, during
August1974, Bangladesh Oil & Gas Corporation/Petrobangla and during October 1975,
Ministry of Energy & Mineral Resources had been formed. TGTDCL has been placed under
the administrative control of the newly formed ministry along with Petrobangla and its
subsidiary Companys.
The gas supply area of the Company has been extended to new areas of Greater Dhaka,
Greater Mymensingh and Brahmanbaria which includes Dhaka Metropolitan city & suburbs,
Tongi, Joydevpur, Gazipur, Mirzapur, Tangail, Savar, Dhamrai, Manikaganj, Aricha,
Narayanganj, Sonargaon, Rupganj, Araihazar, Jinjira, Keraniganj, Munshiganj, Mirkadim,
Brahmanbaria, Bhairab Bazar, Ashuganj, Narsingdi, Ghorashal, Madhabdi, Sreepur,
Mymensingh, Netrokona, Jamalpur, Sherpur, Kishoreganj, Tarakandi, Bhaluka, Trishal &Gaffergaon. Presently, Titas system is receiving gas from Titas, Habiganj, Narsingdi &
Bakhrabad Gas Fields under Bangladesh Gas Fields Co. Ltd. and from Rashidpur,
Kailashtila, Beanibazar Gas Fields under Sylhet Gas Fields Co. Ltd. and Jalalabad Gas Field
of Oxydental/Unicol.
The Company own and operate 735 Km of Transmission pipelines (6DN thru 24 DN) and
7585 Km of Distribution & Service lines (3/4DN thru 12DN).
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Presently, in Titas System the Daily average offtake of gas is 800 Million Cubic Feet
(MMCF) and the yearly Revenue Earnings is Tk. 24000 million. The Company has so far
given gas connection to around 9,73,419 customers (17 Power stations, 4 Fertilizer factories,
2953 Industrial units, 7832 Commercial units, 152 Seasonal units, 55 CNG and 968016
Domestic customers). TGTDCL alone is saving a sum of over Tk.22000.00 Million annually
on fuel import bill of the country other than its payment to National Exchequer in the form of
Excise Duty, CD/VAT, Corporate Tax and Dividend. At Present, there are 2642 Employees
(660 Officers and 1982 Staffs) serving in the Company, among which 205 are foreign trained
Graduate Engineers, Economists and Accountants.
Among the four gas marketing Companies the market share of business of TGTDCL is 70 %
of which Power, Fertilizer, Industrial, Commercial, Domestic and Seasonal are 48.20 %,
18.97 %, 20.28 %, 1.04 %, 11.56 % and 0.13 % respectively.
The company operates from its own office complex at Titas Bhaban, Kawranbazar C/A, that
is in the centrally located business area of Dhaka Metropolitan City. The office is fully
furnished with all modern office facilities and logistics. The office is also equipped with
security system with modern digital telephone, Fax, SCADA as well as electronic mail.
With the increased shape the authorized and paid-up capital of the Company has increased to
Tk. 2000 million and 1507.30 million. Titas Gas is now a household name for its uses in
the houses, Power plants, Industries, hotels and restaurants. And as raw materials to the
Fertilizer factories, it is helping attain autarky in food and other agricultural products.
TGTDCL has, by its own right and merit, earned the reputation as well the capacity to
undertake any major project in Gas Engineering, Pipeline Construction, Operation and
Maintenance thereof and also in the marketing of gas in the country.
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Jamuna Oil Company Limited
3.3 Organizational Profile of Jamuna Oil Ltd.:
Company Name:Jamuna Oil Company LTD (JOCL)
Type:Public (DSE:JOCL)
Industry:Petroleum
Founded:1964 HeadquartersChittagong,Bangladesh
Area served:National
Products:Oil,Petrol,Octane,Diesel,Kerosene
Revenue: BDT 489.4 million (2011)
Operating income: BDT 179.3 million (2011)
Net income: BDT 128.7 million (2011)
Employees:591 (2005)
Website:jamunaoil.gov.bd
3.3.1 Historical Background of Jamuna Oil Ltd.:
In 1964 Pakistan National Oil Limited (PNOL), the maiden National Oil Company of the
then Pakistan was established as a private limited company. The company started functioning
with an authorized capital of Tk.2.00 crore. After the Independence of Bangladesh in 1971the Government of the Peoples Republic of Bangladesh acquired the assets and liabilities of
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Dhaka_Stock_Exchangehttp://www.mydse.com/Details_Company.php?ID=132http://en.wikipedia.org/wiki/List_of_petroleum_companieshttp://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Oilhttp://en.wikipedia.org/wiki/Petrolhttp://en.wikipedia.org/wiki/Octanehttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Kerosenehttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://www.jamunaoil.gov.bd/http://www.jamunaoil.gov.bd/http://www.jamunaoil.gov.bd/http://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Kerosenehttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Octanehttp://en.wikipedia.org/wiki/Petrolhttp://en.wikipedia.org/wiki/Oilhttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/List_of_petroleum_companieshttp://www.mydse.com/Details_Company.php?ID=132http://en.wikipedia.org/wiki/Dhaka_Stock_Exchangehttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Types_of_business_entity -
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Pakistan National Oil Limited by virtue of Bangladesh Abandoned Property (control,
Management & Disposal) Order, 1972 (P. O. No. 16 of 1972) and the Company was renamed
as Bangladesh National Oil Limited. The Company has been finally renamed as Jamuna Oil
Company Limited (JOCL) by the Government on 13 January, 1973. At that time the company
was operated by an adhoc committee called Oil Companies Advisory Committee (OCAC)
under Petrobangla, constitute by the notification No. 21 m-4/76 (NR) dated 21-4-73, M/O.
Natural Resources. Jamuna Oil Company Limited was registered with the registrar of Joint
Stock Companies & Firms as fully Government owned Private Limited Company on 12
March, 1975 under Companies Act 1913 with authorized capital of Tk. 10.00 crore and paid-
up capital of Tk. 5.00 crore. Subsequently, in the year 1976 the assets and liabilities of the
Company were transferred & handed over to Bangladesh Petroleum Corporation (BPC) as
per schedule stated in clause 31(c) of BPC Ordinance No. LXXXVIII (published in
Bangladesh Gazette extra ordinary on 13 November, 1976). Since then Jamuna Oil Company
Limited has been functioning as a Subsidiary of BPC. On 1 January, 1986 all assets and
liabilities of Indo-Burmah Petroleum Company Limited (IBPCL) were transferred to the
Company.
In 2005-2006 FY the paid-up capital of the company was increased to Tk. 10.00 crore from
Tk. 5.00 crore by issuing of bonus share out of its profit. The company was converted into a
Public Limited Company from a Private Limited Company on 25 June, 2007 and its
authorized capital was increased to Tk. 300.00 crore. On 10 August, 2007 the paid-up capital
of the company was increased to Tk.45.00 crore by issuing bonus share of Tk. 35.00 crore.
The company was enlisted with Dhaka Stock Exchange Limited and Chittagong Stock
Exchange Limited on 9 January, 2008 with a view to off-load 1.35 crore shares of Tk.10.00
each under direct listing procedure and accordingly the shares of the company were off-
loaded in the capital market.There is a Board of Directors constituting of 9 members to run
the Company. The overall activities of the company are performed with the approval of the
Board of Directors. The company implements the Government policies as per the guidance
and directives of BPC from time to time.
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4.1 Calculation:
Measuring and evaluating the Financial Statement and Dividend Policy, in Energy
sector; Bangladesh. We collected financial statement of Summit Power Ltd, Titas Gas
Transmission and Distribution Co. Ltd, & Jamuna Oil Co. Ltd. After collecting data we
calculated the ratio analysis in energy sector.
4.1.1 Calculation of Summit Power Ltd.:
Summit Power Limited
Ratio Formula 2006 2007 2008 2009 2010
2. QuickRatio
Current assets - Inventory 0.22:1 0.23:1 0.64:1 0.73:1 0.52:1
Current liabilities
Interpretation They are having fewer quick assets against each tk. current liabilities. But
their quick ratio is growing. In 2010 again falls their quick ratio.
4. Analysis and Result
Ratio Formula 2006 2007 2008 2009 2010
1. CurrentRatio
Current assets 0.38:1 0.38:1 0.87:1 0.89:1 0.60:1
Current liabilities
Interpretation They are having fewer current assets against each tk. of current liabilities. But
their current ratio is growing. In 2010 again falls their current ratio.
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Ratio Formula 2006 2007 2008 2009 2010
3. InventoryTurnover
Cost of goods sold 2.45
Times
3.31
Times
4.55
Times
6.51
Times
5.79
TimesInventory
Interpretation They are inventory conversion time is upward into liquidity.
Ratio Formula 2006 2007 2008 2009 2010
4. AverageCollection
Period
Accounts Receivable 45.04
Days
59
Days
42
Days
46
Days
53
DaysAverage sales per day
Interpretation They have needed averagely 49.008 day to convert accounts receivable intocash.
Ratio Formula 2006 2007 2008 2009 2010
5. TotalAsset
Turnover
Sales 0.20
Times
0.26
Times
0.25
Times
0.28
Times
0.24
TimesTotal assets
Interpretation They have almost same times of total assets to convert sales. But averagely
they have 0.25 times total assets to convert into sale.
Ratio Formula 2006 2007 2008 2009 2010
6. Debt Ratio Total liabilities 59.01%
68.09
%
45.36
%
56.87
%
42.47
%Total assets
Interpretation They have been financing averagely 54.36% of assets by the debt.
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Ratio Formula 2006 2007 2008 2009 2010
7. TimeInterest
Earned
Ratio
Earnings before interest and
taxes
4.43
Times
2.38
Times
2.36
Times
2.24
Times
3.005
Times
Interest
Interpretation They have downward time to payoff the interest. But in 2010 time to payoff
the interest is increased.
Ratio Formula 2006 2007 2008 2009 2010
8. GrossProfit
Margin
SalesCost of goods sold 53.01
%
51.06
%
54.42
%
52.9
%
54.97
%Sales
Interpretation The gross profit margin almost same percentage.
Ratio Formula 2006 2007 2008 2009 2010
9. OperatingProfit
Margin
Operating profit 33.01
%
39.22
%
44.45
%
44 % 47.76
%Sales
Interpretation From 2006 to 2010 operating profit margin gradually increased.
Ratio Formula 2006 2007 2008 2009 2010
10.Net ProfitMargin
Earnings available for common
stockholders
27 % 23.08
%
26.48
%
24.52
%
31.87
%
Sales
Interpretation Their net profit margin almost same. But in 2010 increased net profit margin.
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Ratio Formula 2006 2007 2008 2009 2010
11.EarningsPer Share
(EPS)
Earnings available for common
stockholders
22.40
Tk.
30.90
Tk.
25.71
Tk.
31.40
Tk.
38.7
Tk.
Number of shares of common
stock outstanding
Interpretation Their earning per share is increasing every year. But in 2008 earnings per
share is fall down.
Ratio Formula 2006 2007 2008 2009 2010
12.Return onTotal
Assets
(ROA)
Earnings available for common
stockholders
5.7% 6% 6.9% 6.9% 7.78%
Total assets
Interpretation Their earning against assets has been increase gradually from 2006 to 2010.
Ratio Formula 2006 2007 2008 2009 2010
13.Return onCommon
Equity
(ROE)
Earnings available for common
stockholders
15.17
%
18.82
%
12.56
%
16.06
%
13.85
%
Common stock equity
Interpretation Their return on equity increased in2006, 2007 and 2009. Except in 2008 and
2010 thats becausecommon stock equity was increased.
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Ratio Formula 2006 2007 2008 2009 2010
14.Price /Earnings
Ratio(P/E)
Market price per share of
common stock
23.64
Tk.
60.12
Tk.
37.57
Tk.
38.57
Tk.
3.62
Tk.
Earnings per share
Interpretation Investors want to invest averagely 32.70 tk. for 1 tk. of earning. In 2008 and
2009 it was constrain but in 2007 it was very high and 2010 it was very low.
Ratio Formula 2006 2007 2008 2009 2010
15.Market/Book
Ratio
(M/B)
Market price per share of
common stock
3.28
Tk.
11.31
Tk.
4.88
Tk.
6.17
Tk.
5 Tk.
Book value per share of
common stock
Interpretation From 2006 to 2007 market to book value ratio increased, but in 2008 it
decrease but again it increased in 2006. But again it falls in 2010.
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4.1.2 Calculation of Titas Gas Transmission and Distribution Co. Ltd.:
Titas Gas Transmission and Distribution CompanyLimited
Ratio Formula 2006 2007 2008 2009 2010
1. CurrentRatio
Current assets 1.11:1 1.19:1 1.35:1 1.29:1 1.19:1
Current liabilities
Interpretation From 2006 to 2009 they are having good current assets against each tk.
current liabilities. It was upward. But In 2009 & 2010 again falls their current
ratio.
Ratio Formula 2006 2007 2008 2009 2010
2. QuickRatio
Current assets - Inventory 1.05:1 1.10:1 1.25:1 1.18:1 1.10:1
Current liabilities
Interpretation From 2006 to 2009 they are having good quick assets against each tk. current
liabilities. It was upward. But In 2009 & 2010 again falls their current ratio.
Ratio Formula 2006 2007 2008 2009 2010
3. InventoryTurnover
Cost of goods sold 43.63
Times
25.09
Times
25.90
Times
25.33
Times
30.66
TimesInventory
Interpretation They are inventory conversion time is downward into liquidity. But in 2010
it increase.
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Ratio Formula 2006 2007 2008 2009 2010
4. AverageCollection
Period
Accounts Receivable 138.5
Days
127.72
Days
114.17
Days
88.71
Days
78.68
DaysAverage sales per day
Interpretation They are average collection period is downward.
Ratio Formula 2006 2007 2008 2009 2010
5. Total AssetTurnover
Sales 1.01
Times
1.02
Times
1.22
Times
1.23
Times
1.27
TimesTotal assets
Interpretation They have almost same times total assets to use to convert sales. And total
asset turnover times are upward.
Ratio Formula 2006 2007 2008 2009 2010
6. DebtRatio
Total liabilities 76.5% 74.49
%
62.65
%
61.10
%
58.01
%Total assets
Interpretation They have been financing averagely 66.55% of assets by the debt. And debtratio trained is downward.
Ratio Formula 2006 2007 2008 2009 2010
7. TimeInterest
Earned
Ratio
Earnings before interest and
taxes
16.9
Times
22.84
Times
35.84
Times
71.27
Times
112.74
Times
Interest
Interpretation They have upward time to payoff the interest. But in 2010 time to payoff the
interest is very high.
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Ratio Formula 2006 2007 2008 2009 2010
8. GrossProfit
Margin
SalesCost of goods sold 13.73
%
14.85
%
16.72
%
16.69
%
17.74
%Sales
Interpretation The gross profit margin is averagely 15.95%. But in 2008 & 2009 it was
constrain and it is also upward trained.
Ratio Formula 2006 2007 2008 2009 2010
9. OperatingProfitMargin
Operating profit 8.57
%
9.68
%
11.92
%
12.04
%
14.02
%Sales
Interpretation From 2006 to 2010 operating profit margin gradually increased.
Ratio Formula 2006 2007 2008 2009 2010
10.Net ProfitMargin
Earnings available for common
stockholders
16.07
%
20.57
%
9.43
%
10.01
%
11.02
%
Sales
Interpretation From 2006 to 2007 it was upward. But in 2008 it falls and again it increase.
Ratio Formula 2006 2007 2008 2009 2010
11.EarningsPer Share
(EPS)
Earnings available for common
stockholders
1161
Tk.
1548
Tk.
49.25
Tk.
63.67
Tk.
85.62
Tk.
Number of shares of common
stock outstanding
Interpretation Their earning per share is very high from 2006 to 2007. Because the company
was listed in 2008. Then their earnings per share gradually increased.
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Ratio Formula 2006 2007 2008 2009 2010
12.Return onTotal
Assets
(ROA)
Earnings available for common
stockholders
16.29
%
19.41
%
11.51
%
13.01
%
15.03
%
Total assets
Interpretation Their earning has been increase gradually from 2006 to 2010. But it falls in
2008 and again it gradually increased.
Ratio Formula 2006 2007 2008 2009 2010
13.Return onCommon
Equity
(ROE)
Earnings available for common
stockholders
59.96
%
67% 30.80
%
32.78
%
34.92
%
Common stock equity
Interpretation Their return on equity was high in2006 & 2007. But from 2008 to 2010 it
gradually increased.
Ratio Formula 2006 2007 2008 2009 2010
14.Price /Earnings
Ratio (P/E)
Market price per share of
common stock
0Tk. 0Tk. 10.14
Tk.
10.78
Tk.
11.66
Tk.
Earnings per share
Interpretation The company listed in 2008 for that reason we cannot find 2006 & 2007 P/E
ratio. But after listing the P/E ratio gradually increased.
Ratio Formula 2006 2007 2008 2009 2010
15.Market/Book Ratio
(M/B)
Market price per share of
common stock
0Tk. 0Tk. 3.12
Tk.
3.53
Tk.
4.07
Tk.
Book value per share of
common stock
Interpretation The company listed in 2008 for that reason we cannot find 2006 & 2007 M/B
ratio. But after listing the M/B ratio gradually increased.
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4.1.3 Calculation of Jamuna Oil Ltd.:
Jamuna Oil Company Limited
Ratio Formula 2006 2007 2008 2009 2010
1. CurrentRatio
Current assets 1.06:1 1.07:1 1.11:1 1.14:1 1.14:1
Current liabilities
Interpretation From 2006 to 2010 they are having good current assets against each tk.
current liabilities. It was upward.
Ratio Formula 2006 2007 2008 2009 2010
2. QuickRatio
Current assets - Inventory 0.64:1 0.48:1 0.68:1 0.60:1 0.61:1
Current liabilities
Interpretation They are having fewer quick assets against each tk. current liabilities. Quickis almost same but in 2007 it falls.
Ratio Formula 2006 2007 2008 2009 2010
3. InventoryTurnover
Cost of goods sold 0.019
Times
0.007
Times
0.0046
Times
0.009
Times
0.01
TimesInventory
Interpretation They are inventory conversion time is downward into liquidity. But in 2010 itincrease.
Ratio Formula 2006 2007 2008 2009 2010
4. AverageCollection
Period
Accounts Receivable 254.34
Days
246.50
Days
79.09
Days
47.53
Days
237
DaysAverage sales per day
Interpretation They are average collection period is downward. But in 2010 it againincreases.
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Ratio Formula 2006 2007 2008 2009 2010
5. TotalAsset
Turnover
Sales 0.075
Times
0.07
Times
0.08
Times
0.052
Times
0.051
TimesTotal assets
Interpretation They have almost same times total assets to use to convert sales. But
averagely they have 0.066 times total assets to convert into sale.
Ratio Formula 2006 2007 2008 2009 2010
6. Debt Ratio Total liabilities 88.63%
89.27
%
86.68
%
84.27
%
85.20
%Total assets
Interpretation They have been financing averagely 86.81% of assets by the debt. The debt
ratio almost same.
Ratio Formula 2006 2007 2008 2009 2010
7. TimeInterest
Earned
Ratio
Earnings before interest and
taxes
2.85
Times
5.55
Times
9.08
Times
3.99
Times
10.6
Times
Interest
Interpretation They have upward time to payoff the interest. But in 2009 time to payoff the
interest is decreased.
Ratio Formula 2006 2007 2008 2009 2010
8. GrossProfit
Margin
SalesCost of goods sold 90.37
%
94.20
%
94.53
%
91.99
%
91.11
%Sales
Interpretation The gross profit margin is almost same percentage.
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Ratio Formula 2006 2007 2008 2009 2010
13.Return onCommon
Equity
(ROE)
Earnings available for common
stockholders
20.14
%
29.18
%
43.28
%
32.94
%
35.39
%
Common stock equity
Interpretation Their return on equity was gradually increased in2006 to 2008 and 2010,
except 2009.
Ratio Formula 2006 2007 2008 2009 2010
14.Price /Earnings
Ratio
(P/E)
Market price per share of
common stock
0Tk. 0Tk. 11.45
Tk.
40.32
Tk.
26.56
Tk.
Earnings per share
Interpretation The company listed in 2007 for that reason we cannot find 2006 & 2007 P/E
ratio. After listing the P/E ratio gradually increased. But in 2010 it falls.
Ratio Formula 2006 2007 2008 2009 2010
15.Market/Book
Ratio
(M/B)
Market price per share of
common stock
0Tk. 0Tk. 4.96
Tk.
13.27
Tk.
8.03
Tk.
Book value per share of
common stock
Interpretation The company listed in 2007 for that reason we cannot find 2006 & 2007 M/B
ratio. After listing the M/B ratio increased. But in 2010 it falls.
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4.2 Comparison with the Industry Average in 2010:
0.980.6
1.19 1.14
0
0.5
1
1.5
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
0.74 0.521.1
0.610
1
2
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
1. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Current Ratio 0.98:1 0.60:1 1.19:1 1.14:1
Comparison Compare to industry average with Summit power has less current asset
against current liability. But Titas Gas Transmission and Distribution Co.
Ltd. & Jamuna Oil Ltd. has good current asset against current liability.
2. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Quick Ratio 0.74:1 0.52:1 1.10:1 0.61:1
Comparison
Compare to industry average with Summit power & Jamuna Oil Ltd has
less quick asset against quick liability. But Titas Gas Transmission and
Distribution Co. Ltd. has good current asset against current liability.
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12.155.79
30.66
0.010
20
40
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
122.953 78.68
237
0
100
200
300
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
3. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
InventoryTurnover
12.15Times
5.79Times
30.66 Times 0.01 Times
Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is not
good or efficient in inventory management. But Titas Gas Transmission and
Distribution Co. Ltd. are good or more efficient.
4. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Average
collection
Period
122.90
days
53 days 78.68 days 237 days
Comparison Compare to industry average with Summit power & Titas Gas Transmission
and Distribution Co. Ltd. is not good average collection period. But Jamuna
Oil Ltd has good average collection period.
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0.520.24
1.27
0.0510
0.5
1
1.5
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
61.90%42.47%
58.01%85.20%
0.00%
50.00%
100.00%
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
5. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Total AssetTurnover
0.52Times
0.24Times
1.27 Times 0.051 Times
Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is not
good asset turnover. But Titas Gas Transmission and Distribution Co. Ltd.
is good asset turnover.
6. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Debt Ratio 61.90% 42.47% 58.01% 85.20%
Comparison Compare to industry average with Summit power & Titas Gas Transmission
and Distribution Co. Ltd. is efficient. But Jamuna Oil Ltd is inefficient.
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42.12
3.005
112.74
10.60
50
100
150
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
54.61% 54.97%
17.74%
91.11%
0.00%
50.00%
100.00%
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
7. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Time InterestEarned Ratio
42.12Times
3.005Times
112.74 Times 10.6 Times
Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is
inefficient. But Titas Gas Transmission and Distribution Co. Ltd are
efficient.
8. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Gross Profit
Margin
54.61% 54.97% 17.74% 91.11%
Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is
good. But Titas Gas Transmission and Distribution Co. Ltd are not good.
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36.01%47.76%
14.02%
46.25%
0.00%
20.00%
40.00%
60.00%
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
48.20%31.87%
11.02%
101.70%
0.00%
50.00%
100.00%
150.00%
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
9. RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Operating
Profit Margin
36.01% 47.76% 14.02% 46.25%
Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is
good. But Titas Gas Transmission and Distribution Co. Ltd are not good.
10.Ratio IndustryAverage SummitPowerLimited
Titas Gas Transmission andDistribution Company
Limited
Jamuna OilLimited
Net profit
Margin
48.20% 31.87% 11.02% 101.7%
Interpretation Compare to industry average with Summit power & Titas Gas Transmission
and Distribution Co. Ltd is not good. But Jamuna Oil Ltd is good.
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45.65 38.7
85.62
12.63
0
50
100
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
9.28% 7.78%
15.03%
5.04%0.00%
5.00%
10.00%
15.00%
20.00%
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
11.RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Earnings Per
Share (EPS)
45.65 Tk. 38.7 Tk. 85.62 Tk. 12.63 Tk.
Interpretation Compare to industry average with Summit power & Jamuna Oil Ltd is not
good. But Titas Gas Transmission and Distribution Co. Ltd are good.
12.RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Return on
Total Asset
(ROA)
9.28% 7.78% 15.03% 5.04%
Interpretation Compare to industry average with Summit power & Jamuna Oil Ltd is not
good to overall profitable asset. But Titas Gas Transmission and
Distribution Co. Ltd are good.
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28.05%
13.85%
34.92% 35.39%
0.00%
20.00%
40.00%
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
13.95
3.62
11.66
26.56
0
10
20
30
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
13.RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Return onCommon
Equity (ROE)
28.05% 13.85% 34.92% 35.93%
Interpretation Compare to industry average with Titas Gas Transmission and Distribution
Co. Ltd & Jamuna Oil Ltd is good to profitable investment. But Summit
power is not good.
14.RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Price /
Earnings
Ratio (P/E)
13.95
Tk.
3.62
Tk.
11.66 Tk. 26.56 Tk.
Interpretation Compare to industry average with Summit power & Titas Gas Transmission
and Distribution Co. Ltd isnot good. But Jamuna Oil Ltd is good.
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5.7 54.07
8.03
0
2
4
6
8
10
Industry Average
Summit Power Limited
Titas Gas Transmission and Distribution Company Limited
Jamuna Oil Limited
15.RatioIndustry
Average
Summit
Power
Limited
Titas Gas Transmission and
Distribution Company
Limited
Jamuna Oil
Limited
Market / Book
Ratio (M/B)
5.7 Tk. 5 Tk. 4.07 Tk. 8.03 Tk.
Interpretation Compare to industry average with Summit power & Titas Gas Transmission
and Distribution Co. Ltd is not good. But Jamuna Oil Ltd is good.
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4.3 Dividend Policy:
4.3.1 Definition of dividend policy
The policy a company uses to decide how much it will pay out to shareholders in
dividends. Dividend policy is concerned with taking a decision regarding paying cashdividend in the present or paying an increased dividend at a later stage. The firm could also
pay in the form ofstock dividends which unlike cash dividends do not provide liquidity to the
investors; however, it ensures capital gains to the stockholders. The expectations of dividends
by shareholders helps them determine the share value, therefore, dividend policy is a
significant decision taken by the financial managers of any company.
4.3.2 Types of dividend policy:
The firms dividend policy must be formulated with two basic objectives in mind:
providing for sufficient financing and maximizing the wealth of the firms owners. There are
mainly three types of dividend policy:
1. Constant-Payout-Ratio Dividend Policy.2. Regular Dividend Policy.3. Low-Regular-and-Extra Dividend Policy.
http://en.wikipedia.org/wiki/Cash_dividendhttp://en.wikipedia.org/wiki/Cash_dividendhttp://en.wikipedia.org/wiki/Stock_dividendhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Stock_dividendhttp://en.wikipedia.org/wiki/Cash_dividendhttp://en.wikipedia.org/wiki/Cash_dividend -
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4.3.3 Dividend policy of Summit power ltd.
Summit Power Limited
Particulars 2006 2007 2008 2009 2010
Dividend 143,000,000 171,600,000 370,655,000 555,984,000 910,061,919
Net Income 175,102,015 265,153,013 460,208,418 700,823,711 1,174,602,699
Number of
Shareholders
7,150,000 8,580,000 18,532,800 22,239,360 303,353,973
Dividend
Payout ratio
81.64% 64.71% 80.54% 79.33% 77.48%
Dividend per
share
20 Tk. 20 Tk. 20 Tk. 25Tk. 3Tk.
Summit power ltd. does not give any information about dividend policy. But by the
calculation we find out, That Summit Power Limited is following Constant- Payout- Ratio
dividend policy. But in 2007 they retain the most of the net income.
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4.3.4 Dividend policy of Titas Gas Transmission and Distribution Co. Ltd.
Titas Gas Transmission and Distribution Company
Limited
Particulars 2006 2007 2008 2009 2010
Dividend 0 882,554,000 803,893,000 2,312,500,000 2,997,647,1
20
Net Income 0 7,395,912,840 4,218,212,418 5,453,463,757 7,333,057,157
Number of
Shareholders
0 4,777,615 85,646,912 85,646,912 85,646,912
Dividend
Payout ratio
0 11.93% 19.05% 42.40% 40.88%
Dividend per
share
0 184.73 Tk. 9.39 Tk. 27Tk. 35Tk.
Titas Gas Transmission and Distribution Company Limited do not give any information
about dividend policy. But by the calculation we find out, That Titas Gas Transmission and
Distribution Company Limited are following Constant-Payout-Ratio dividend policy. They
did not give any dividend in 2006. In 2007 and 2008 is almost same percentage of dividend
payout ratio. In 2009 and 2010 they also offered same percentage of dividend which was
more than the last two previous years. From that two years dividend pattern, we can say that
firm is following constant pay out policy.
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4.3.5 Dividend policy of Jamuna Oil Company Limited
Jamuna Oil Company Limited
Particulars 2006 2007 2008 2009 2010
Dividend 0 365,000,000 180,000,000 180,000,000 144,000,000
Net Income 0 302,668,605 563,111,978 507,313,743 671,381,111
Number of
Shareholders
0 10,000,000 45,000,000 45,000,000 45,000,000
Dividend
Payout ratio
0 120.59% 31.96% 35.48% 21.45%
Dividend per
share
0 36.5 Tk. 4 Tk. 4Tk. 3.2Tk.
Jamuna Oil Company Limited does not give any information about dividend policy. But by
the calculation we find out, that is following Regular dividend policy except in 2007. But in
2006 they did not give any dividend. Because the company come to market in 2007.
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Conclusion:
The analysis of financial statements means different things to different people. It is of interest
to creditors, present and prospective investors, and the firm`s own management. This report
has presented the various financial statement analysis ratio useful in evaluating the firm`spresent and future financial condition. This technique is ratio analysis, which provides
relative measures of the performance and financial health of the company. The first involved
ratio analysis for the company last five years; the second involved making comparisons with
industry average, and third identify what dividend policy they follow. While ratio analysis is
an effective tool for assessing a company`s financial condition.
Bibliography:
1. Lawrence J. Gitman Principles of Managerial Finance, 12thed., Pearson Prentice Hall.Websites:
http://www.jamunaoil.gov.bd/http://www.summitpower.org/http://www.titasgas.org.bd/
http://www.jamunaoil.gov.bd/http://www.jamunaoil.gov.bd/http://www.summitpower.org/http://www.summitpower.org/http://www.titasgas.org.bd/http://www.titasgas.org.bd/http://www.titasgas.org.bd/http://www.summitpower.org/http://www.jamunaoil.gov.bd/