Analysis of Financial Performance of BD Lamps Limited

7/25/2019 Analysis of Financial Performance of BD Lamps Limited

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[fnancial statement analysis] BUSA-530

Internship Report

On

The analysis of financial performance of

BD Lamps Limited

Submitted by

WWW.ASSIGNMNT!"INT.#"M

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www.AssignmentPoint.com


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At first I would like to thank my instructor for giving me such an important job like ratio analysis

as a class project. I would like to place my gratitude to the Supervisor of BD Lamps Ltd to

enable me to complete my class project in their esteemed organiation. !ithout his helpful

guidance" the completion of this research project was unthinkable. #ery special thanks go to

finance manager of BD Lamps Ltd for helping me in all phase of the research process. $is

overwhelming support for this project gave me the inspiration to do a better report.

%his report &%he analysis of financial performance of Bangladesh Lamps Limited' is prepared to

fulfill the partial re(uirement of corporate finance program of )BA *rogram of +oyal +oads

,niversity" -anada.

%he main aim of this report is to find out the financial situation and the financial trend of

Bangladesh Lamps Limited. And justify the result from investor and creditors point of view.

/rom this analysis we find out the financial performance and this analysis from the annual report

issued by Bangladesh Lamps Limited from the year 0112 to 0113" which was the main source of

information.

After the analying the different ratios of Bangladesh Lamps Limited we can see that there were

a slight increment in 4arnings *er Share and in 0113" which is good for any company. As awhole from the analysis we can say that Bangladesh Lamps Limited had a e5cellent year in

0113. %imely initiative by the company for producing -/L 6 4nergy Saving Lamps 7 in the

factory" gave it an edge over other competitors" to take lead in the business of energy saving

lamps in the country. In this respect" the achievement in -/L was 819.:; growth in terms of

value over the previous year.

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BANGLADESH LAMPS LIMITED AT A GLANCE

Bangladesh Lamps Limited ( the company ) is a public limited company incorporated in 1960 inBangladesh under the companies act 1913. The entire shareholding of hilips !olland "as sold andtransferred on # $arch 1993 to Transcom Limited% a company incorporated in Bangladesh% thus ma&ingthe company a subsidiary of Transcom Limited .

Bangladesh Lamps Limited (BLL)% part of Transcom 'roup is the preeminent and largest manufacturer ofelectric light bulbs in Bangladesh. ith o*er +,0%000 s-uare feet of factory space located in the heart ofha&a and ++3 strong "or& force% the company manufactures hilips branded lighting products under ane/clusi*e licensing agreement from !L 2lectronics .4. !olland. ith the ne"ly installed state ofthe art B! production line (peed5 #+00 bulbshr)% the company can produce up to 60 million bulbs peryear and is loo&ing to e/port products "orld"ide.BLL7s product range includes all types of incandescentlight bulbs mainly clear% frosted 8rgenta% color and other special light bulbs. The company gets technicalassistance from hilips !olland and strictly adheres to 2uropean -uality standard (2).

The company produces and sells hilips% Transtec and aini& brand electric bulbs and Transtec brand:L in local mar&et .

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Origin of the report

%his report is prepared to fulfill the partial re(uirement of -orporate /inance of )BA program

of +oyal +oads ,niversity on the ratio analysis of a company. So the business organiation

Bangladesh Lamps Limited is chosen and I am discussing on different ratio of this company of

two years from 0112 to 0113. I have based this report from the background information and

knowledge that I ac(uired from Bangladesh Lamps Limited and it provides a reliable and

effective insight into the ratio analysis of the particular company. I did this report on financial

performance because its a re(uirement of /inancial Accounting course. I have tried to reflect my

e5perience on my report in terms of financial performance of Bangladesh Lamps Limited.

Objectie of the Report

%he specific objectives aimed for this report is. %o find out the financial situation of B?- Bangladesh Limited.

;. Identify the problem area

:. @iving suggestion to overcome those problems9. /inally comment on the result from investor and creditors point of view.

Rese!rch "etho#o$og%

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Information used to prepare this report has been collected from both the Secondary source and

the primary survey. %he secondary sources of information were collected from Bangladesh

Lamps Limited" Dhaka Stock 45change" Annual report of Bangladesh Lamps Limited"

periodicals and materials from various newspapers" internet and articles. An open discussion

method was followed to gather primary information by interviewing the company secretary of

the company.

Intro#&ction

%he Balance Sheet and the Statement of Income are essential" but they are only the starting point

for successful financial management. Applying R!tio An!$%sisto /inancial Statements for the

business is to analye the success" failure" and progress of the business.

+atio Analysis enables the business ownermanager to spot trends in a business and to compare

its performance and condition with the average performance of similar businesses in the same

industry. %o do this comparing the ratios with the average of businesses similar to the concern

business and compare the ratios for several successive years" watching especially for any

unfavorable trends that may be starting. +atio analysis may provide the allimportant early

warning indication that allows solving the businesss problems before the business is destroyed.

!hen it comes to investing" analying financial statement information 6also known as

(uantitative analysis7" is one of" if not the most important element in the fundamental analysis

process. At the same time" the massive amount of numbers in a companyCs financial statements

can be bewildering and intimidating to many investors. $owever" through financial ratio

analysis" company is able to work with these numbers in an organied fashion.

/inancial ratio analysis is the calculation and comparison of ratios which are derived from the

information in a companyCs financial statements. %he level and historical trends of these ratios

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can be used to make inferences about a companyCs financial condition" its operations and

attractiveness as an investment.

/inancial ratios are calculated from one or more pieces of information from a companyCs

financial statements. /or e5ample" the gross margin is the gross profit from operations divided

by the total sales or revenues of a company" e5pressed in percentage terms. In isolation" a

financial ratio is a useless piece of information. In conte5t" however" a financial ratio can give a

financial analyst an e5cellent picture of a companyCs situation and the trends that are developing.

A ratio gains utility by comparison to other data and standards. %aking our e5ample" a gross

profit margin for a company of 0:E is meaningless by itself. If we know that this companyCs

competitors have profit margins of 81E" we know that it is more profitable than its industry

peers which are (uite favorable. If we also know that the historical trend is upwards" for e5ample

has been increasing steadily for the last few years" this would also be a favorable sign that

management is implementing effective business policies and strategies.

%here are three alternative means of e5pressions for ratio analysis. %hey are given below.

*ercentage

+ate

*roportion

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R!tio !n!$%sis

+atio analysis involves methods of calculating and interpreting financial ratios to assess thefirms performance. +atio analysis of a firms financial statements is of interest to shareholders"

creditors and firms own management. +atio analysis is the starting point in developing the

information desired by the analyst. +atio analysis provides only a single snapshot" the analysis

being for one given point or period in time. In ratio analysis it is possible to compare the

company ratio with a standard one. +atio analysis can be classified as follows. *rofitability ratio

;. Investors ratio

Li'&i#it% #i"ension

A firmCs ability to pay its debts can be measured partly through the use of li(uidity ratios. A firm

should ensure that it does not suffer from lack of li(uidity and also that it is not too much highly

li(uid. Short term li(uidity involves the relationship between current assets and current

liabilities. If a firm has sufficient net working capital 6the e5cess of current assets over current

liabilities7" it is deemed to have sufficient li(uidity. %here are some ratios that are commonly

used to measure li(uidity directly" they are.3> ;.:3

An!$%sis

Analysis shows that inventory turnover is less in 2$ from 2!. Here we found that the level of

inventory is increasing day by day as well as the turnover is not increasing. -t happens because

the rate of sales is less than the rate of increase in inventory.

Debtor co$$ection perio#

%his ratio measures the (uality of debtors. A short collection period implies prompt payment by

debtors. It reduces the chances of bad debts. Similarly" a longer collection period implies too

liberal and inefficient credit collection performance. It is difficult to provide a standard collection

period of debtors.

())* ())+

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Debtors co$$ection perio# 8:1 823

An!$%sis

Analysis shows that there is no consistency in debtors collection period. -t decreases from "!$ to

"# in 2$ which is not good at all.

Cre#itors p!%"ent perio#

%he average payment period ratio represents the number of days by the firm to pay its creditors.

A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being

paid promptly. %his situation enhances the credit worthiness of the company. $owever a very

favorable ratio to this effect also shows that the business is not taking the full advantage of credit

facilities allowed by the creditors.

())* ())+

Cre#itors p!%"ent perio# ;: G3

An!$%sis

&rom this analysis we get that there is a sharp decline of this ratio from 2! to 2$. &rom this

we can say that they have stretched payable till 2! and they have changed their policy and

tried not to pay the payable as early as possible and increasing current liability.

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1i2e# !sset t&rnoer

A similar measure of usage" but one" which concentrates on the productive capacity" as measured

by fi5ed assets" indicates how successful the company is in generating sales from fi5ed assets. It

measures how efficiently the companies are using fi5ed asset in generating sales.

())* ())+

1i2e# !sset t&rnoer :.G: ;.>:

An!$%sis

&rom the analysis we see that the turn over is the turnover is sometime increasing and sometime

it is decreasing. )he ratio has increased in 2$ compare with 2!. )his has happened because

sales have increased and on the other hand fi*ed asset has decreased.

By this analysis we can say that management has able to use fi*ed asset efficiently. )hus the way

they have increased their sales by decreasing the fi*ed asset.

Tot!$ !sset t&rnoer

%otal assets turnover indicates how well a company has used its fi5ed and current assets to

generate sales. It is the most asset measure ratio. Such ratio is probably most useful as an

indication of trends over of years. %here is no particular value" which is too high or too low" but a

sudden change would prompt the observer to ask (uestions. In these criteria a high ratio means

the company is achieving more profit.

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())* ())+

Tot!$ !sset t&rnoer .3: .G9

An!$%sis

)his increase has happened because the sales have decreased at a higher rate than the rate of

increase in total asset.

Profit!bi$it% Di"ension

%here are many measures of profitability" which relate the returns of the firm to its sales" assets"

or e(uity. As a group" these measures allow the analyst to evaluate the firms earnings with

respect to a given level of sales" a certain level of assets" or the owners investment. !ithout

profits" a firm could not attract outside capital. )oreover" present owners and creditors would

become concerned about the companys future and attempt to recover their funds. A class of

financial metrics that are used to assess a businessCs ability to generate earnings as compared

to its e5penses and other relevant costs incurred during a specific period of time. /or most of

these ratios" having a higher value relative to a competitorCs ratio or the same ratio from a

previous period is indicative that the company is doing well.

The profit!bi$it% r!tios !re3

8. @ross profit margin

0. ?perating profit margin

>. Het profit margin

;. +eturn on total asset 6+?A7

:. +eturn on total e(uity 6+?47

9. +eturn on capital employed 6+?-47

G. Dividend per share 6D*S7

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Gross profit "!rgin

%he gross profit margin measures the percentage of each sales amount remaining after the firm

has paid for its goods. It may be used as an indicator of the production operation and the relation

between production cost and selling price. %he gross profit margin is calculated as follows2E

An!$%sis

)he company is following to pay more dividends to attract investor to invest in their company.

But this strategy is not good because for the company for all time. -n 2$ their dividend payout

ratio increased because total dividend increased and . +eturn on e(uity;. 4arnings per share

:. Dividend per share

9. Asset per share

All of these ratios are related to profitability dimension. An investor wants to invest his money

on thos e organiations" which are profitable for him. So he might give more emphasie on

profitability dimension rather than other ratios. So that above ratio might give him a clear view

of the company whether it is profitable or not. By the following ratio we will justify BD Lamps

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Ltd from an investors point of view. All the ratios are shown in the anne5ure at the end of this

report.

Conc$&sion

In this report we have discussed about different ratio of B?- Bangladesh Ltd. ?ur main job was

to determine the financial position of this company whether it is running good or not. As we are

very new in finance course" we face some problem while doing this assignment. But we have

tried hard to complete this assignment successfully. /rom the over view of the data we find that

the company face some problem in different sector in 0113. ?therwise everything is tolerable but

they must try hard to increase their net income again to create a good impact on investor.

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Analysis of Financial Performance of BD Lamps Limited