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Executive Summary
BOC is the leading oxygen production company in Bangladesh. BOC is competing with
many others such as MJL Bangladesh Limited, Summit Power, DESCO and Khulna Power to
hold the leading position in the sector. By doing this report on BOC we have tried to have a
deeper look on the financial performance of the company and we have tried to apply our
theoretical knowledge in the practical life. In this report we have done ratio calculation, ratio
analysis , calculation of risk and return, stock valuation, finding the dividend policy and
weighted average cost of capital . By doing all of those things we have tried to evaluate the
financial performance of the company.
First of all we have calculated ratios and we have analyzed those ratios to comment on the
performance of company. By analyzing the ratios we have also tried to find the weak side of the
company and we have recommended the company to overcome them Secondly we have found
the risk and return of the company to compare it with the market. By doing it we have
determined that the company is less riskier than market. In the next step we have evaluated the
stock price of the company which indicates that the stock price of the company is over-valued.
we have also found the optimum weighted average cost of capital of the company which from
our analysis indicates the best ultimate mixture of debt and equity for the company. Last but not
the least we have found that the company is following the second view of dividend policy.
In conclusion we can say that by doing this report we have understood the basic jobs of a
financial manager. This report will help us to make practical financial decisions in our future life.
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BOC Bangladesh Limited
Vertical Balance Sheet
2010 2009 2008 2007 2006Assets:
Non-current assets:Property, plant and equipment 37.24% 35.681800% 35.41% 50.05% 58.665%Intangible assets 0.17009% 0.227% 0.244% 0.169872% 0.055%Investment in subsidiary 0.00078% 0.00078% 0.0009199% 0.0009969% 0.001079%
Total non-current assets 37.420% 35.91% 44.46% 50.2213% 58.7213%Current assets:Inventories 12.9008% 10.7864% 24.90% 19.27% 17.33%Trade debtors 7.1415% 5.9709% 6.53% 5.76% 7.704%Advances, deposits and prepayments 4.1985% 4.14376% 4.12% 4.51% 3.87%Cash and cash equivalents 38.34% 43.189% 19.99% 20.234% 12.370%
Total current assets 62.58% 64.09% 55.54% 49.7787% 41.27870%Total assets 100% 100% 100% 100% 100%
Equity and Liabilities:Shareholders equity:
Share capital 5.43% 5.88% 7.00% 7.59% 8.2120%Revaluation reserve 0.72% 0.78% 2.12% 2.25% 2.49207%General reserve 64.97% 64.43% 60.37% 59.61% 56.73506%
Total equity 71.12% 71.10% 69.50% 69.50% 67.43942%Non-current liabilities:
Employee benefits 4.08% 3.15% 10.32% 0.11% 0.156%Deferred tax liabilities 2.31% 2.74% 4.15% 11.11% 10.8676%Other non-current liabilities 5.91% 6.41% 0.00% 5.38% 5.97%
Total non-current liabilities 12.31% 12.31% 14.47% 16.60% 16.9936%Current liabilities:
Current Portion of Financial Lease 0.03% 0.065835%Trade creditors 2.19% 1.89% 0.1027% 1.21% 2.24762%Expense creditors and accruals 7.38% 6.74% 2.0970% 6.70% 5.40166%Sundry creditors 1.97% 2.90% 7.42% 2.73% 2.68456%Provision for taxation 5.00% 5.01% 2.49% 3.22% 5.16476%
Total current liabilities 16.47% 16.59% 3.916% 13.90% 15.56440%Total liabilities 28.88% 28.90% 30.50% 30.50% 32.56058%
Total equity and liabilities 100% 100% 100% 100% 100%
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BOC Bangladesh Limited
Vertical Income Statement
2010 2009 2008 2007 2006
Revenue 100% 100% 100% 100% 100%
Cost of sales -58.06% -59.54% -66.61% -65.59% -66.05%
Gross profit margin 41.94% 40.46% 33.39% 34.41% 33.95%
Operating expenses -16.26% -18.41 -16.54% -17.65% -20.16%
Operations profit margin 25.68% 22.04 16.85% 16.76% 13.79%
Gain on sale of lease land 4.01% 0.07% 0.22%
Other income 0.55% -0.05 0.04%
Interest income 2% 2.16% 1.43% 0.67% 0.26%
Profit before taxation 28.23% 28.16% 18.32% 17.50% 14.27%Taxation -7.35% -5.93% -3.94% -4.32% -3.82%
Net profit margin 20.88% 22.23% 14.38% 13.18% 10.45%
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BOC Bangladesh Limited
Horizontal Balance Sheet
2010 2009 2008 2007 2006
Assets: Non-currentassets:Property, plant and equipment 95.99% 84.88% 88.41% 92.36% 100%Intangible assets 466.34% 574.95% 519.67% 333.46% 100%Investment in subsidiary 100% 100% 100% 100% 100%
Total non-current assets 96.34% 85.34% 88.82% 92.59% 100%Current assets:
Inventories 112.58% 86.87% 168.60% 120.40% 100%Trade debtors 140.17% 108.16% 99.47% 80.99% 100%Advances, deposits and prepayments 163.85% 149.25% 124.79% 125.05% 100%
Cash and cash equivalents 468.57% 487.08% 189.54% 177.04% 100%Total current assets 366.30% 216.67% 157.86% 130.55% 100%Total
assets 151.20% 139.55% 117.32% 108.26% 100%
Equity and Liabilities:Shareholders
equity:Share capital 100% 100% 100% 100% 100%Revaluation reserve 43.68% 43.68% 100% 100% 100%General reserve 173.41% 158.48% 124.84% 113.75% 100%
Totalequity 159.67% 147.11% 120.90% 111.57% 100%Non-current
liabilities:EmployeebenefitsDeferredliabilities 111.44% 110.67% 100%Deferred tax liabilities 58.67% 64.21% 81.59% 97.59% 100%Finance Lease 77.21% 100%Other non-current
liabilitiesTotal non-current liabilities 1.10% 101.08% 99.92% 105.77% 100%Current liabilities:
Current Portion of Financial Lease 183.03% 53.61% 100%Trade creditors 142.52% 117.52% 109.48% 58.34% 100%Expense creditors and accruals 206.60% 175.53% 161.24% 134.35% 100%Sundry creditors 111.03% 150.49% 108.72% 110.24% 100%Provision for taxation 146.38% 135.41% 88.95% 67.74% 100%
Total currentliabilities 160.01% 148.78% 120.81% 96.67% 100%
Totalliabilities 133.66% 123.88% 109.91% 101.42% 100%
Total equity andliabilities 151.20% 139.55% 117.32% 108.26% 100%
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BOC Bangladesh Limited
Horizontal Income Statement
2010 2009 2008 2007 2006
Sales 135.05% 116.27% 105.92% 84.79% 100%
Cost Of Goods Sold 119.21% 104.80% 106.81% 84.19% 100%
Gross Profit 167.57% 138.59% 104.19% 80.96% 100%
Operating Expense 109.37% 106.20% 86.89% 74.25% 100%
EBIT 252.67% 185.94% 129.48% 103.09% 100%
Interest Expense 31.75% 22.02% 22.38% 46.33% 100%
EBT 268.50% 229.65% 136.06% 104.08% 100%
Tax 260.82% 180.48% 109.12% 95.94% 100%
Net Income 279.13% 247.66% 145.92% 107.07% 100%
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BOC Bangladesh Limited
Pro forma balance sheet (% of Sales Method)
As at December 31, 2011
Fixed Asset 1,137,280,634
Current Asset 1,902,240,868
Total Asset 3,039,521,502
Equity and Liabilities
Share capital 152,183,000
Revaluation reserve (3470493237*0 .6305%) 21,881,460
General reserve 7,436,411,822
Total Equity 7,610,476,282
Total non-current liabilities 344,977,000
Total Current Liabilities 488,602,928
Total liabilities 833,579,928
Proposed Dividend (5,404,534,708)
Total equity and liabilities 3,039,521,502
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BOC Bangladesh Limited
Pro Forma Income statement (% of Sales Method)
For the year ended Dec 31, 2011
2011
Revenue (3199375000
(1.084741)
3470493237
Cost of turnover 347049323758% 2012886077
Gross Profit 1457607160
Operating Expenses:
Operating Expenses 347049323716.26% (564302200)
Operating profit 893304960
Profit before other income 34704932375.50% 190877128
Interest income 34704932372% 6940986474Profit before taxation 8025168562
Taxation 802516856224.021
%
(1927725740
)
Profit after taxation 6097442822
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BOC Bangladesh Limited
Pro forma balance sheet (% of Sales Method)
As at December 31, 2012
Fixed Asset 1,306,249,830
Current Asset 2,184,862,501
Total Asset 3,491,112,331
Equity and Liabilities:
Share capital 152,183,000
Revaluation reserve (3986114829*0 .6305%) 25,132,454
General reserve 7,780,301,238
Total Equity 7,957,616,692
Total non-current liabilities 344,977,000
Total Current Liabilities 540,532,126
Total liabilities 885,509,126
Proposed Dividend (5,352,013,487)
Total equity and liabilities 3,491,112,331
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BOC Bangladesh Limited
Pro - Forma Income statement BOC Bangladesh Limited
For the year ended Dec 31, 2012
2011
Revenue (3470493237
(1.148573)
3986114829
Cost of turnover 398611482958% 2311946601
Gross Profit 1674168228
Operating Expenses:
Operating Expenses 398611482916.26% 648142271.
2
Operating profit 1026025957
Profit before other income 17602000
Interest income 63951000
Profit before taxation 1107578957
Taxation 110757895724.021%
266051541
Profit after taxation 8415274157
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Liquidity
Ratio
2006 2007 2008 2009 2010 Industry
Average
(2010)Current Ratio 2.652
times
3.581
times
3.47 times 3.86 times 3.80 times 4.0788
times
Acid Test
Ratio
1.54 times 2.20 times 1.918
times
3.21 times 3.02 times 3.36036
times
Net Working
capital
ratio
476515
TK
719857
TK
859097
TK
1228261
TK
1292137
TK
4596716639
TK
Cash
Conversio
n Cycle
87 days 122 days 130 days 72 days 82 days 108 day
Asset
Manage
ment
Ratio
Inventory
Turnover
4.852
times
3.39 times 3.07 times 5.85 times 5.138
times
4.42058 times
Total Asset
Turnover
1.27 times .996 times 1.149
times
1.06 times 1.1418
times
0.75948 times
Fixed Asset
Turnover
2.168
times
1.99 times 2.585
times
2.95 times 3.0518
times
6.32456 times
Daily Sales
Outstanding
22 days 21 day 21 day 21 day 23 day 40.968
day
Average
Payment
Period
10 days 7 days 10 days 11 days 12days 42.054 day
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Debt M
Ratio
Debt Ratio 32.560% 30.50% 30.50% 28.90% 28.78% 23.78%
Time Interest
Earned
74.113
times
164.884
times
428 times 625.98
times
589.88
times
200.38 times
Profitability
Ratio
Gross Profit
Margin
33.945% 34.41% 33.39% 40.46% 41.49% 30.04%
Operating
Profit Margin
13.786% 16.76% 16.85% 22.05% 25.68% 21.60%
Net Profit
Margin
10.439% 13.18% 14.38% 22.24% 20.88% 19.00%
Return on
Asset
13.288% 13.14% 16.53% 23.58% 23.84% 11.46%
Return on
Equity
19.704% 18.91% 23.78% 33.17% 33.48% 19.19%
Stock Market
RatioEPS TK 16.18/
share
Tk 17.32/
share
Tk 23.61/
share
Tk 40.08/
share
Tk 43.90/
share
Tk 32.706/
Share
P/E Ratio 7.3609 18.5334 11.2579 11.9338 15.769 35.85
Market to
Book value
ratio
1.4502
times
3.50359
times
2.6771
times
4.030
times
5.2795
times
5.548
times
DU Pont Equation ROA Net Profit Margin Total Asset Turnover
2006 13.26% 10.44% 1.27
2007 13.13% 13.18% 0.996
2008 16.54 14.38% 1.15
2009 23.57% 22.24% 1.06
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DU Pont Equation ROE Net Profit Margin Total Asset Turnover Equity Multiplier
2006 19.70% 10.44% 1.27 1.482007 18.91% 13.18% 0.996 1.44
2008 23.78% 14.38% 1.15 1.44
2009 33.17% 22.24% 1.06 1.41
2010 33.48% 20.88% 1.14 1.40
FINANCIAL ANALYSIS
1. Liquidity Ratios:
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations.
The analysis of these ratios is done by comparing a company's most liquid assets (those easily
convertible to cash) to its short-term liabilities.
The greater the coverage of liquid assets to short-term liabilities the better as it is for that
company as it can pay its debts that are coming due in the near future and still fund its ongoing
operations. On the other hand, a company with a low coverage rate will have difficulty meeting
running its operations, as well as meeting its obligations.
The biggest difference between each ratio is the type of assets used in the calculation. Whileeach ratio includes current assets, the more conservative ratios will exclude some current assets
as they aren't as easily converted to cash.
Liquidity
Ratio
2006 2007 2008 2009 2010 Industry
Average
(2010)
Current
Ratio
2.652
times
3.581
times
3.47 times 3.86 times 3.80 times 4.0788
timesAcid Test
Ratio
1.54 times 2.20 times 1.918
times
3.21 times 3.02 times 3.36036
times
Net
Workin
476515
TK
719857
TK
859097
TK
1228261
TK
1292137
TK
4596716639
TK
2010 23.80% 20.88% 1.14
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g
capital
ratio
Cash
Conver
sion
Cycle
87 days 122 days 130 days 72 days 82 days 108 day
a. Current Ratio:
The current ratio is used to test a company's liquidity (also referred to as its current or working
capital position) by deriving the proportion of current assets available to cover current liabilities.
It measures the number of dollars of current assets for each dollar of current liabilities.
0
0.5
1
1.5
2
2.5
3
3.5
44.5
2006 2007 2008 2009 2010
t
i
m
e
s
year
current ratio
Industry Average
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Interpretation:
In 2010, BOC current assets were 3.80 times higher than their current liabilities.
Though this particular ratio gradually increased from the initial year 2006 to 2010, the
performance is not satisfactory.
This ratio has a industry average of 4.07 times which is quite above the BOC current
ratio. So it is need to be fixed.
In 2007, current assets increased by a huge margin and current liability decreased
compared to 2006. In 2008 Proportionate increase in current liability was more than
current assets compared to last year. Proportionate increase in current asset in 2009 was
more than current liability and the complete opposite happened in 2010 whereproportionate increase in current liability was more than current assets.
BOC should increase its current assets or decrease current liabilities to increase this
particular ratio.
b. Quick (Acid Test) Ratio:
The quick ratio or the acid-test ratio is a liquidity indicator that further refines the current ratioby measuring the amount of the most liquid current assets there are to cover current liabilities.
The quick ratio excludes inventory and other current assets, which are more difficult to turn into
cash.
9.704
3.8
2.08
3.64
1.17
4.078
0
2
4
6
8
10
12
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
current ratio
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Interpretation:
In 2010 the current assets excluding inventories were 3.02 times higher than current
liabilities.
0.000
0.500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
2006 2007 2008 2009 2010
TI
M
E
S
year
Acid test
Industry Average
8.786
3.02
1.48
2.6598
0.856
3.36036
0
1
2
34
5
6
7
8
9
10
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Acid test
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It is slightly below the industry average which is unfavorable for the company.
Though this particular ratio slightly increased in 2009, but it decreased in the 2010.
In 2010 relative increase in inventory and current liabilities was more than increase in
current assets as a result the ratio decreased.
The company should start adjusting its current liabilities and inventories to increase its
quick ratio.
c. Net working capital ratio:
The working capital is used to calculate exactly what amount of capital is working in market. It
is derived by deducting current liabilities from current assets.
$-
$1,000,000,000.0
$2,000,000,000.0
$3,000,000,000.0
$4,000,000,000.0
$5,000,000,000.0
$6,000,000,000.0
2006 2007 2008 2009 2010
A
m
o
n
u
t
Year
Working capital
Industry Average
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Interpretation:
In 2010, BOCs net working capital was 46.11% of total assets.
In 2007 it decreased by a huge amount but it overcame in 2008 and remained nearly same
in the following year.
It is quite below the industry average which is not good for the company.
d. Cash Conversion Cycle:
We use cash to invest in assets. Those assets eventually generates revenue, thus in this way the
original cash we invested comes back to us in the form of revenue. Cash conversion cycle is the
number of days it takes to get back the initial investment the company made.
21267269811292137000
7869377944
12545059356
441126777
4854885612
0
2E+09
4E+09
6E+09
8E+09
1E+10
1.2E+10
1.4E+10
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
working capital
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Interpretation:
In 2010 on average BOC inventory remained at its level for nearly 83 days before it was
sold and it took 82 days which means a little time of a day to get back the initial
investment that was made.
This is hugely favorable for the company.
0
20
40
60
80
100
120
140
2006 2007 2008 2009 2010
D
A
Y
S
YEAR
Cash Conversion Cycle
Industry Average
116
82
144
190
8
108
0
20
40
6080
100
120
140
160
180
200
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Cash Conversion Cycle
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2. Asset Management Ratios:
Asset management ratios measure profitability that is affected by the way that the assets of a
business are used. These ratios which are also known as efficiency ratios help us to overcome
these problems of in efficient use of assets. The ratios are used to ensure that production targets
are met efficiently.
Asset
Manage
ment
Ratio
2006 2007 2008 2009 2010 Industry
Averag
e
(2010)
Inventory
Turnover
4.852 times 3.39 times 3.07 times 5.85 times 5.138 times 4.42058
times
Total Asset
Turnover
1.27 times .996 times 1.149 times 1.06 times 1.1418
times
0.75948
times
Fixed Asset
Turnover
2.168 times 1.99 times 2.585 times 2.95 times 3.0518
times
6.32456
times
Daily Sales
Outstand
ing
22 days 21 day 21 day 21 day 23 day 40.968
day
Average
Payment
Period
10 days 7 days 10 days 11 days 12days 42.054 day
e. Inventory Turnover Ratio:
The ratio is regarded as a test of Efficiency and indicates the rapidity with which the company is
able to move its merchandise.
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Interpretation:
In the year 2010, the company sold out and restocked its inventory 5.138 times.
This particular ratio is above the industry average which is quite good for the company.
Though it is decreasing from 2006 to 2008 but got increased in a great amount in the year
2009.
0
1
2
3
4
5
6
7
2006 2007 2008 2009 2010
T
I
ME
S
YEAR
Inventory Turnover Ratio
Industry Average
3.45
5.138
2.79
1.8529
8.872
4.42058
01
2
3
4
5
6
7
8
9
10
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
inventory turnover
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The ratio got slightly decreased in the 2010 so the company needs to be more focus for the
near future.
f. Total Asset Turnover Ratio:
The total asset turnover illustrates how much of sales have been generated from the total assets
used.
0
0.2
0.4
0.60.8
1
1.2
1.4
2006 2007 2008 2009 2010
T
IM
E
S
YEAR
Total Asset Turnover Ratio
Industry Average
0.2113
1.1418
0.76
0.4143
1.27
0.75948
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Total Asset Turnover Ratio
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Interpretation:
In 2010 every 1 taka worth fixed asset was generated by 3.0518 taka worth of sales.
This ratio got decreased from the year 2006 to 2007 but increased from 2007 to 2010.
Comparing to its industry average it is quite unfavorable. It is far below the industry average.
So the ratio needs to be fixed.
In 2007, it decreased due to decrease in sales and also increases in fixed asset. But it
increased in the rest of the years due to a greater portion of increase in sales than fixed asset.
Average Collection Period (Days Sales Outstanding/DSO):
The Days Sales Outstanding ratio shows both the average time it takes to turn the receivables
into cash and the age, in terms of days, of a company's accounts receivable. This ratio is of
particular importance to credit and collection associates.
0.3043.0518 2.58 1.23
24.457
6.32456
0
5
10
15
20
25
30
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Fixed Asset Turover Ratio
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0
5
10
15
20
25
30
35
40
45
2006 2007 2008 2009 2010
D
A
Y
S
YEAR
Average Collection Period
Industry Average
3023
16.84
80
55
40.986
0
10
20
30
40
50
60
70
80
90
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Average Collection Period
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Interpretation:
In 2010, on an average BOC took 23 day to collect its account receivables from its
customers.
Its quite impossible to measure the well being of a company only by measuring days sales
turnover. We also need to analyze the Average payment period which is on an average how
much days needed to pay of the creditors.
h. Average Payment Period (APP):
Average payment period determines on an average how much time are needed to pay back the
creditors of the company.
0
5
10
15
20
25
30
35
40
45
2006 2007 2008 2009 2010
D
A
YS
YEAR
Average Payment PeriodIndustry Average
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Interpretation:
On an average it took 12 days for Reckitt to clear its accounts payable to its creditors.
We can see from these two ratios that BOC has to pay their creditors before collecting
money from customer. So the condition is not favorable for the company. To improve
their performance BOC has to collect their money as quickly as possible.
3. Debt Management Ratios:
The third series of ratios in this tutorial are debt ratios. These ratios give users a general idea of
the company's overall debt load as well as its mix of equity and debt. Debt ratios can be used to
determine the overall level of financial risk a company and its shareholders face. In general, the
greater the amount of debt held by a company the greater the financial risk of bankruptcy.
While it is not mandatory in understanding the individual debt ratios, it will give some
background information on the debt of a company. The ratios covered in this section include the
debt to asset ratio, which is gives a general idea of a company's financial leverage as does the
debt-to-equity ratio. While the interest coverage ratio show how well a company can meet its
obligations.
2012
3.27
87 88
42.058
0
10
20
30
40
50
60
70
80
90
100
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Average Payment Period
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a. Debt ratio:
Debt ratio is the ratio of total asset to total debt which measures the percentage of funds which
provided by the creditors.
Debt
Manage
ment
Ratio
2006 2007 2008 2009 2010 Industry
Averag
e
(2010)
Debt Ratio 32.560% 30.50% 30.50% 28.90% 28.78% 23.78%Time
Interest
Earned
74.113
times
164.884
times
428 times 625.98
times
589.88
times
200.38
times
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
30.000%
35.000%
2006 2007 2008 2009 2010
%
YEAR
Debt Ratio
Industry Average
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Interpretation:
In the year 2010, BOC 28.78% % of total asset were financed by the debt.
For every 1 taka of total assets nearly 0.29 taka is financed by total debt.
The debt ratio for BOC was slightly decreasing in last two years which is very favorable
for the company because lower the debt ratio, the higher the cushion against creditors
losses in the event of bankruptcy.
b. Time interest Earned:
The interest coverage ratio is used to determine how easily a company can pay interest expenses
on outstanding debt. The lower the ratio, the more the company is burdened by debt expense.
2.61%
28.78%
36.12%
48.25%
3.15%
23.78%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Debt Ratio
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Interpretation:
In 2010 BOCs EBIT was 589.88 higher than interest expense. The ratio is far above the industry average so the company is in a good shape.
The ratio got increased from 2006 to 2009. But it got decreased in the year 2010.
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010
T
IM
E
S
YEAR
Times Interest Earned
Industry Average
4.32
589.88
6.94
200.38
0
100
200
300
400
500
600
700
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Times Interest Earned
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The proportionate increase in EBIT was higher than the interest expense so the company
was going well .But the ratio got suddenly decreased in the year 2010. So the company
should have a look into this fact.
4. Profitability Ratios:
Profitability ratios distinguish the different measures of corporate profitability and financial
performance. The long-term profitability of a company is vital for both the survivability of the
company as well as the benefit received by shareholders. It is these ratios that can give insight
into the all important "profit".
Profitability is the net result of a number of policies and decisions. Profitability ratios show the
combined effects of liquidity, asset management, and debt on operating results.
Profitability
Ratio
2006 2007 2008 2009 2010 ndustry
Average
(2010)
Gross Profit
Margin
33.945% 34.41% 33.39% 40.46% 41.49% 30.04%
Operating
Profit Margin
13.786% 16.76% 16.85% 22.05% 25.68% 21.60%
Net Profit
Margin
10.439% 13.18% 14.38% 22.24% 20.88% 19.00%
Return on
Asset
13.288% 13.14% 16.53% 23.58% 23.84% 11.46%
Return onEquity
19.704% 18.91% 23.78% 33.17% 33.48% 19.19%
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a. Gross Profit Margin:
A company's cost of sales, or cost of goods sold, represents the expense related to labor, raw
materials and manufacturing overhead involved in its production process. Thus the gross profit
margin is used to analyze how efficiently a company is using its raw materials, labor and
manufacturing-related fixed assets to generate profits. A higher margin percentage is a favorable
profit indicator.
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%30.000%
35.000%
40.000%
45.000%
2006 2007 2008 2009 2010
%
YEAR
Gross Profit Margin
Industry Average
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Interpretation:
In the year 2010, for every 100 taka sale BOC received 41.49%taka.
BOC gross profit was increasing efficiently every year except the year 2008.
BOC gross profit was increasing every year with a greater proportion compared to sales.
That is the reason behind its increasing of this ratio.
Comparing with industry average it is quite good . So it can be said that the company is
in a good track.
b. Operating Profit Margin:
The operating profit margin ratio indicates how much profit a company makes after paying forvariable costs of production such as wages, raw materials, etc. It is expressed as a percentage of
sales and shows the efficiency of a company controlling the costs and expenses associated with
business operations. Phrased more simply, it is the return achieved from standard operations and
does not include unique or one time transactions.
52.89%
41.94%
24.67%21.58%
9.10%
30.04%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Gross Profit Margin
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0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
30.000%
2006 2007 2008 2009 2010
%
YEAR
Operating Profit Margin
Industry Average
42.25%
25.68%
17.72%14.19%
8.17%
21.60%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Operating Profit Margin
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Interpretation:
In 2010, for every 100 taka sale BOC received 25.68 taka.
This particular ratio is increasing every year .
It is quite above the industry average which is favorable for the company.
Net Profit Margin:
Investors or any stakeholders of a company can easily see from a complete profit margin analysis
that there are several income and expenditure operating elements in an income statement that
determine a net profit margin. It allows investors to take a comprehensive look at a company's
profit margins on a systematic basis.
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
2006 2007 2008 2009 2010
%
YEAR
Net Profit Margin
Industry Average
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Interpretation:
In the year 2010, BOC made a net profit margin of 20.88% which means for every 100
taka sale Reckitt has made a net profit of 20.88 taka.
The ratio kept going up from year 2006 to 2009.But the ratio got decreased in 20010.
The ratio is quite favorable for the company as it is above the industry average.
Because of the decrease in interest and rising net income of every year this particular ratio
has increased every year excepting the year 2010.
The company should have a look into it as it goes down.
c. Return on asset:
The Return on Total Assets, also called return on investment measures the overall effectiveness
of management in generating profits with its available assets. The higher the firms return on
total assets, the better it is considered.
37.51%
20.88%
13.21%
16.55%
6.85%
19%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Net Profit Margin
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Interpretation:
In 2010, every 100 taka worth of asset of BOC was generating 23.84 taka of net income.
This ratio got slightly decreased from the initial year to 2007 but then hugely increased in
2009. But in 2010 it again decreased.
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
30.000%
2006 2007 2008 2009 2010
%
YEAR
Return On Asset
Industry Average
7.93%
23.84%
10%
6.85%8.67%
11.46%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Return On Asset
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This particular ratio is nearly double of industry average which is very favorable for the
company.
Due to greater portion of increase in total asset than net income this ratio got decreased in
2007. In 2009, both net income and total asset increased by a huge amount but net income
increased by a greater portion which is reason behind increment. Then in 2010, the
proportionate in net income was less than the proportionate increase in total asset .So the
ratio got decreased.
d. Return on Equity:
This particular ratio completely belongs to the shareholders of the company. It measures how
much return the shareholder will get on their investment. It also measures the amount of Net
Income earned by utilizing each dollar of Total common equity. It is the most important of the
Bottom line ratio. By this, we can find out how much the shareholders are going to get for their
shares.
0.000%
5.000%
10.000%
15.000%
20.000%
25.000%
30.000%
35.000%
40.000%
2006 2007 2008 2009 2010
%
YEAR
Return On Equity
Industry Average
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Interpretation:
In the year 2010, shareholders of BOC earned 33.48 taka for every 100 taka investment
in the company.
The ratio got decreased in the year 2007. Its huge increment year in 2009. In 2010, the
ratio increased from the previous year.
This ratio is nearly 2 times above than the industry average which means it gives its
shareholders 2 times more profit than its competitors industry.
As the ROE is quite favorable for the company, we can say that the company is doing a
great job in profitability ratio.
8.41%
33.48%
15.63%
20.42%18.02% 19.19%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Return On Equity
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5. Stock Market Ratios:
Stock Market ratios attempt to simplify the evaluation process by comparing relevant data that
help users gain an estimate of valuation. When looking at the financial statements of a company,
many users can suffer from information overload as there are so many different financial values.
Stock Market ratios help to evaluate easily.
For example, the most well-known investment valuation ratio is the P/E ratio, which compares
the current price of company's shares to the amount of earnings it generates. The purpose of this
ratio is to give users a quick idea of how much they are paying for each 1 taka of earnings. And
with one simplified ratio, you can easily compare the P/E ratio of one company to its competition
and to the market.
Stock
Market
Ratio
2006 2007 2008 2009 2010 Industry
Average
(2010)
EPS Tk 16.18/
share
Tk 17.32/
share
Tk 23.61/
share
Tk 40.08/
share
Tk 43.90/
share
Tk 32.706/
Share
P/E Ratio 7.3609 18.5334 11.2579 11.9338 15.769 35.85
Market to
Book value
ratio
1.4502
times
3.50359
times
2.6771
times
4.030
times
5.2795
times
5.548
times
a. Earnings Per Share:
The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serve as an indicator of a company's profitability. The earnings per share is a good
measure of profitability and when compared with EPS of similar companies, it gives a view of
the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of
years indicates whether or not the earning power of the company has increased.
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Interpretation:
In the year 2010, the common shareholders of BOC earned 43.90 taka for every share
they hold.
Earnings per share of BOC have gradually increased from 2006 to 2010. It got a huge
increment in 2009.
This is much above the industry average which means investors are earning more per
share than the competitor industrys investors.
The reason behind their success is their growing net income.
05
101520253035404550
2006 2007 2008 2009 2010
P
E
R
S
HA
R
E
YEAR
Earning Per Share
Industry Average
2.06
43.9
3.62
111.68
2.27
32.706
0
20
40
60
80100
120
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Earning Per Share
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Market to book value (M/B) ratio:
The Market to Book value of the share compares the book value of the share which is the internal
or face value of the share with the market price of the share. The market to book value is quite
important. If the stock goes bankrupt, the shareholders might receive most of their investment
back or not at all depending on the specific ratio. Furthermore, value investing is based on the
concept of high intrinsic value of a stock. The price to value can give one a helping hand when
screening stocks with high value compared to its selling price.
0
1
2
3
4
5
6
2006 2007 2008 2009 2010
T
I
M
E
S
YEAR
Market to Book Value
Industry Average
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Interpretation:
In the year 2010, market price per share was 5.28 times higher than the book value per
share.
This particular ratio increased in 2007 but decreased in 2008. It kept on increasing for
2009 and 2010.
It is slightly below the industry average so the condition is not favorable for the company.
From 2006 to 2007 the market price increased a lot and book value got decreased. This is
the reason behind the increment in 2007. Then in 2008, the market price increased but
book value increased by a greater portion. In 2009 and 2010 the market price increased
more than book value.
.
5.473 5.2795
4.31173.713
8.963
5.548
0
1
2
3
4
5
6
7
8
9
10
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
Market to Book Value
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b. Price earnings Ratio:
The price/earnings (P/E) ratio is the best known of the investment valuation indicators. The P/E
ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by
investment professionals and the investing public. The price-to-earnings ratio is a financial ratio
used for valuation: a higher P/E ratio means that investors are paying more for each unit of net
income, so the stock is more expensive compared to one with a lower P/E ratio. The P/E ratio
also shows current investor demand for a company share.
This particular ratio has no unit. It should be near the industry average. Very low and high P/E
ratio is unfavorable for the company.
0
5
10
15
20
25
30
35
40
2006 2007 2008 2009 2010
YEAR
P/E Ratio
Industry Average
68.0097
15.769
27.596618.1858
49.692
35.85
0
1020
30
40
50
60
70
80
Summit Power BOC MJL DESCO Khulna Power IndustryAverage
P/E Ratio
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Interpretation:
In the year 2010, BOCs shareholders were willing to pay 15.769 taka for every 1 taka of
reported earnings.
It is very much below the industry average which is unfavorable for the company.
Du Pont Equation:
DU Pont Equation ROA Net Profit Margin Total Asset Turnover
2006 13.26% 10.44% 1.27
2007 13.13% 13.18% 0.996
2008 16.54 14.38% 1.15
2009 23.57% 22.24% 1.06
2010 23.80% 20.88% 1.14
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Interpretation:
In 2010 every 100 taka of asset generated 10.44 taka of net profit. Thus the ROA
of13.26% % comprised of10.44 % in Net Profit Margin and 1.27times Total Asset
Turnover.
The ROA increased on a more or less steady range from 2008 to 2010. The only
exception to the steadiness being the ROA of 2007 which was 13.13%. The main reason
for the steady increase was due to the gradual increase in Net Profit Margin. The huge
increase in 2009 was due to the great increase net profit margin from 14.38% to
22.24%.The only exception in 2007 where Net Profit Margin increased slightly but
Total Asset Turnover fell in a great amount.
ROA of 2010 was more than that of 2009. This occurred as total asset turnover increased
from 1.06 to 1.14. Although, the net profit margin decreased 22.24% to 20.88% the total
asset turnover increased .The increase in total asset turnover was more significant than
the reduction in net profit margin in this case.
Extended Du Pont Equation:
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DU Pont Equation ROE Net Profit Margin Total Asset
Turnover
Equity
Multiplier
2006 19.70% 10.44% 1.27 1.48
2007 18.91% 13.18% 0.996 1.44
2008 23.78% 14.38% 1.15 1.44
2009 33.17% 22.24% 1.06 1.41
2010 33.48% 20.88% 1.14 1.40
Interpretation:
In 2010 shareholders earned 33.48 taka for every 100 taka invested. This comprised of
10.44% of Net Profit margin, 1.14times of Total Asset Turnover and 1.40 times Equity
Multiplier.
The ROE increased on a gradual basis from 19.70% in 2006 to 33.48% in 2010, the only
exception being 18.91% in 2007.Without considering the 2007 ROE, the main reason forthe rise from 2008 to 2009 was the increase in Net profit margin from 23.78 to 33.17% .
The exception was 2007 was as the total asset turnover and equity multiplier decreased in
2007.
ROE of 2010 was slightly above that of 2009. The main reason for this was the increase
in Total Asset Turnover and from 2009 to 2010 the influence of which was greater than
the fall in Net Profit margin which decreased from 2009 to 2010.
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BOC BANGLADESH Date Closing PriceMonthly Return
% General indexMonthly
Return %2010
January 03-01-2010 506.2 13.10% 4,568.4017.483
31-01-2010 572.50 5,367.10
February 01-02-2010 569.7 2.76% 5,451.15
2.0007028-02-2010 585.4 5,560.56
March 01-03-2010 582.5 -11.16% 5,567.40
(0.1311204)28-03-2010 517.5 5,560.10
April 01-04-2010 515.8 4.83% 5,594.321.08252
29-04-2010 540.7 5,654.88
May 02-05-2010 539.4 11.98% 5,631.308.46180
31-05-2010 604.00 6,107.81
June 01-06-2010 621.00 4.10% 6,152.39
0.009930-06-2010 647.00 6,153.68
July 04-07-2010 656.00 19.36% 6,217.08
2.02152729-07-2010 783.70 6,342.76
August 01-08-2010 781.20 -5.61% 6,436.773.436506
31-08-2010 737.00 6,657.97
September 02-09-2010 740.00 6.86% 6,774.87
4.76038630-09-2010 791.70 7,097.38
October 03-10-2010 816.20 1.43% 7,223.49
10.1617431-10-2010 827.90 7,957.12
November 01-11-2010 826.40 -2.94% 7,947.80
8.2467430-11-2010 802.10 8,602.44
December 01-12-2010 795.60 -12.98% 8,723.18(4.96114)
30-12-2010 662.30 8,290.41
BOC BANGLADESH Date Closing Price
Monthly Return%
General index
MonthlyReturn %
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2009
January 01-01-2009 268.10 -1.98% 2,807.61
(5.63183)
29-01-2009 262.80 2,649.49
February 01-02-2009 265.90 5.11% 2,661.69(3.4109)
26-02-2009 279.50 2,570.96
March 01-03-2009 285.60 -8.05% 2,626.27(6.8291)
31-03-2009 262.60 2,446.92
April 01-04-2009 261.50 -6.85% 2,443.254.5576
30-04-2009 243.60 2,554.36
May 03-05-2009 241.50 3.27% 2,539.17
1.3031-05-2009 249.60 2,572.18
June 01-06-2009 249.00 18.27% 2,597.0015.91297
30-06-2009 294.50 3,010.26
July 02-07-2009 292.30 16.01% 3,069.71
(5.0620)30-07-2009 339.10 2,914.53
August 02-08-2009 348.20 6.23% 2,941.02
0.0088431-08-2009 369.90 2,941.28
September 01-09-2009 368.70 6.13% 2,950.124.53439
30-09-2009 391.30 3,083.89
October 01-10-2009 411.70 4.71% 3,123.24
7.7395529-10-2009 431.30 3,364.26
November 01-11-2009 436.50 -4.19% 3,392.02
29.1546026-11-2009 418.20 4,380.95
December 01-12-2009 419.60 16.04% 4,424.022.520558
30-12-2009 486.90 4,535.53
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BOCBANGLADESH Date
ClosingPrice
MonthlyReturn %
Generalindex
MonthlyReturn %
2008
January 01/01/ 2008 322.8 -14.78% 3,008.91(3.3812)
31/01/ 2008 231.20 2,907.17
February 03/02/ 2008 276.20 -3.33% 2,890.251.4230
28/02/ 2008 267.00 2,931.38
March 02/03/ 2008 254.30 -5.56% 2,916.203.4440
31/03/ 2008 241.00 3,016.49
April 01/04/ 2008 240.90 4.57% 3,025.571.56268
30/04/ 2008 251.40 3,072.85
May 04/05/ 2008 249.40 11.43% 3,101.942.1343
29/05/ 2008 277.90 3,167.99June 01/06/ 2008 301.80 18.42% 3,207.89
(6.46499)30/06/ 2008 246.20 3,000.50
July 02/07/ 2008 244.20 37.80% 3,029.24(8.53376)
31/07/ 2008 336.50 2,761.05
August 03/08/ 2008 309.90 -6.68% 2,689.94
2.8074928/08/ 2008 289.20 2,765.46
September 01/09/ 2008 298.00 4.80% 2,820.795.17690
25/09/ 2008 312.30 2,966.82
October 05/10/ 2008 309.80 -13.04% 3,001.37 (8.421820)
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30/10/ 2008 269.40 2,748.60
November 02/11/ 2008 266.00 -11.09% 2,684.69(8.03704)
30/11/ 2008 236.50 2,468.92
December 01/12/ 2008 237.40 11.96% 2,517.0511.0519
30/12/ 2008 265.80 2,795.34
BOCBANGLADESH Date
ClosingPrice
MonthlyReturn %
Generalindex
MonthlyReturn %
2007
January 04-01-2007 116.40 3.61% 1589.41 14.0257831-01-2007 120.60 1805.12
February 05-02-2007 120.00 13.17% 1,883.62
(1.91833)28-02-2007 135.80 1,791.54
March 01-03-2007 134.00 -5.97% 1,794.02(1.8472)
29-03-2007 126.00 1,760.88
April 02-04-2007 124.60 -2.01% 1,737.360.3436
30-04-2007 122.10 1,743.33
May 03-05-2007 122.70 -0.81% 1,762.3613.68732
31-05-2007 121.70 2,003.58
June 03-06-2007 124.80 2.88% 2,007.057.08670
28-06-2007 128.40 2,149.32
July 02-07-2007 129.70 29.22% 2,190.468.84380
31-07-2007 167.60 2,384.18
August 01-08-2007 166.10 6.56% 2,394.11 2.54708
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29-08-2007 177.00 2,455.09
September 03-09-2007 183.20 16.79% 2,540.971.262357
30-09-2007 205.90 2548.49
October 01-10-2007 207.30 4.05% 2,627.028.51577
31-10-2007 215.70 2,850.81
November 01-11-2007 218.90 37.50% 2,836.324.7522840
29-11-2007 301.00 2,971.11
December 02-12-2007 290.40 10.54% 2,878.744.81009
30-12-2007 321.00 3,017.21
BOCBANGLADESH Date
ClosingPrice
MonthlyReturn %
Generalindex
MonthlyReturn %
2006January 01-01-2006 107.90 -4.82% 1669.80
(1.5849)30-01-2006 102.70 1656.27
February 01-02-2006 103.60 -9.07% 1649.64(7.1658)
28-02-2006 94.20 1531.43
March 05-03-2006 97.90 4.39% 1543.88(4.0490)
30-03-2006 102.20 1491.77
April 02-04-2006 102.20 -5.77% 1478.47 (7.93271)30-04-2006 96.30 1361.27
May 02-05-2006 93.10 3.33% 1355.16(0.008855)
31-05-2006 96.20 1355.04
June 01-06-2006 96.10 3.23% 1349.75
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29-06-2006 99.20 1339.525(0.75754)
July 02-07-2006 98.80 9.92% 1,341.254.8879
31-07-2006 108.60 1,406.81
August 01-08-2006 110.60 11.03% 1,426.6511.24522
31-08-2006 122.80 1,587.08
September 03-09-2006 124.90 -8.25% 1,588.24(1.61877)
28-09-2006 114.60 1562.53
October 01-10-2006 115.00 -1.65% 1,551.88(0.6592)
31-10-2006 113.10 1,541.65
November 01-11-2006 112.90 4.61% 1,533.20(0.385476)
30-11-2006 118.10 1,527.29
December 03-12-2006 117.20 1.62% 1,544.174.2313
27-12-2006 119.10 1610.67
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Expected rate of return (Monthly) 3.469682%
(Annual Return) 3.469682% * 12 = 41.636184%
Standard Deviation 11.37875%
C.V. 3.2795
Where,
Rate of Return =
Standard Deviation =
* 100
Coefficient of variation (CV) =
Expected Rate of Return (Monthly) 2.536899%
(Annually) 2.536899 * 12 = 30.36%
Standard Deviation 7.085807%
C.V. 2.7931
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y = 0.3998x + 0.0246R = 0.062
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
-15.0000%-10.0000%-5.0000%0.0000%5.0000%10.0000%15.0000%20.0000%25.0000%30.0000%35.0000%
A x i s
T i t
l e
Axis Title
Chart Title
Series1
Linear (Series1)
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SUMMARYOUTPUT
Regression StatisticsMultiple R 0.248993R Square 0.061997AdjustedR Square 0.045825StandardError 0.11115Observations 60
ANOVA
df SS MS F Significan
ce F Regression 1 0.04736
0.04736
3.833518 0.055054
Residual 580.71654
70.0123
54
Total 590.76390
8
Coefficients
Standar d Error t Stat P-value
Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept 0.024553 0.015256 1.609411 0.112956 -0.00599 0.055091
-
0.00599 0.055091
X Variable1 0.399845
0.204218
1.957937
0.055054 -0.00894
0.808631
-0.0089
40.8086
31
RESIDUAL OUTPUT
Observation
Predicted Y
Residuals
1 0.018216-
0.066422 -0.0041 -0.0866
3 0.0083630.03553
74 -0.00714 -
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0.05056
5 0.0245890.00871
1
6 0.0215240.01077
6
7 0.044097 0.055103
8 0.0695170.04078
3
9 0.018081-
0.10058
10 0.021917-
0.03842
11 0.0230120.02308
8
12 0.041472
-
0.0252713 0.080635
-0.04453
14 0.0168830.11478
3
15 0.017167-
0.07687
16 0.025927-
0.04599
17 0.079281-
0.08743
18 0.052886 -0.02404
19 0.0599150.23229
8
20 0.0347380.03088
5
21 0.0296010.13829
522 0.058615 -0.0181
23 0.0435550.33144
5
24 0.043786 0.06158525 0.011034 -0.1588
26 0.030243-
0.06355
27 0.038304-
0.0939528 0.030801 0.01486
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1
29 0.0330670.08120
7
30 -0.0013-
0.18293
31 -0.00957 0.38753832 0.039606 -0.1064
33 0.0452530.00273
3
34 -0.00912-
0.12128
35 -0.00758-
0.10332
36 0.0687610.05086
8
37 0.002035 -0.0218
38 0.0109220.04022
5
39 -0.00275-
0.07778
40 0.042737-
0.11119
41 0.0297510.00296
142 0.08818 0.09455
43 0.00434
0.15576
9
44 0.0245880.03773
2
45 0.0426840.01861
3
46 0.055477-
0.00836
47 0.141126-
0.18305
48 0.0346310.12575
9
49 0.094458 0.036518
50 0.032578-
0.00502
51 0.035276-
0.14686
52 0.0288820.01939
3
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53 0.0583870.06137
5
54 0.0245930.01643
7
55 0.032636
0.16093
756 0.038294
-0.09437
57 0.0435870.02497
8
58 0.065162-
0.05083
59 0.057487-
0.08689
60 0.004716-
0.13456
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BOC BANGLADESH General index
Average Return %
Monthly 3.469682% 2.5368%
Yearly 41.636184% 30.36%
Standard Deviation11.37875% 7.085807%
CV 3.2795 2.7931
SLOPE () .399 1
By analyzing the above data, we can say that the beta of the company is 0.399. We know that the
market beta is always 1. So the beta of the company is less than 1 which is less risky than the
market. In spite of that BOCs standard deviation and C.V. both are higher than Market so total
risk of BOC is higher.
CAPM = R f + (R m-R f )
= 11+(30.442-11).399
=18.76%
Where, R f = 11%
Rm = 30.442%
= .399
Here, 11% t-bill which was a 91 days T-bill and was announced in 18 3 12 was used as the
risk free rate.
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Intrinsic share price
37.1850% 37.1850% 10% constantgrowth
Year 2010 2011 2012 2013
Dividend 35 48.014 65.87 72.457 (taka)
Outcomes: 40.429
46.703
586.457 TV2012=827.135
673.59
For constant growth rate after 2012 we need a rate less than the Ke rate of 18.76%. Sowe assumed the constant growth rate after 2012 to be 10%.
Intrinsic price is total of the outcomes which is Po= 673.59 taka
This does not reflect the true 2010 market price of 692.30 taka. There is a difference of 18.711taka among the two values. Which means share price is overvalued.
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CORPORATE VALUE MODEL
10% constant growth
Year 2010 2011 2012 2013
FcF 643777 655784 681282 749410.2(taka
Outcomes: 552192.66
483043.83
6065618.838 TV2012=8554910.959
7100855.328 (value of total company)
Value of 1 common share
(7100855.328 806476) = 6294379.328
=
= 413.614
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Weighted Average Cost of Capital (WACC)
Capital Structure = 28.78% Debt & 71.22% Equity
Cost of Debt =Kd = .1727%
Cost of Common Equity = K CS =17.848%
Cost of retained earnings = K RE =17.848%
Weight of debt =Wd = 28.78%
Weight of Common Equity = W CS = 6.154%
Weight of Retained Earnings = W RE = 65.066%
WACC
= WL*KL*(1-Tax rate)+W B*KB(1Taxrate)+W PS*KPS+WCS*KCS+WRE*KRE
= .2878*.001727(1- .24021)+0+0+ (.06154*.17848)+(.65066*.17848)
=0.0003776+0.1098+0.1169
= 22.707 %
WACC (market value)
Capital Structure = 28.78% Debt & 71.22% Equity
Cost of Debt =Kd = .1727%
Cost of Common Equity = K CS =17.848%
Cost of retained earnings = K RE =17.848%
Weight of debt =Wd = 6.117%
Weight of Common Equity = W CS = 80.056%Weight of Retained Earnings = W RE = 13.827
= WL*KL*(1-Tax rate)+W B*KB(1-Taxrate)+W PS*KPS+WCS*KCS+WRE*KRE
= [.06117*.001727(1- .24021)]+0+0+[ .80056 * .17848] +[ .13827 * .17848]
=16.76%
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Optimum Capital Structure
Value of the firm =
=
= 3022349.391
1. Capital Structure = 50% Debt & 50% Equity
WACC
= WL*KL*(1-Tax rate) +W B*KB (1Taxrate) +(W PS*KPS+(WCS*KCS+WRE*KRE )
= .50*.001727(1- .24021) +0+0+ .50*.17848
= 8.9896 %
Value of the firm =
=
= 7634209.267
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2. Capital Structure = 60% Debt & 40% Equity
WACC
= WL*KL*(1-Tax rate) +W B*KB (1Taxrate) + (W PS*KPS+ (W CS*KCS+WRE*KRE)
= .60*.001727(1- .24021) +0+0+ .40*.17848
= 7.2178 %
Value of the firm =
=
= 9508227.94
3. Capital Structure = 20% Debt & 80% Equity
WACC
= WL*KL*(1-Tax rate) +W B*KB (1Taxrate) + (W PS*KPS+ (W CS*KCS+WRE*KRE)
= .20*.001727(1- .24021) +0+0+ .80*.17848
= 14.3046 %
Value of the firm =
=
= 4797651.1638
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4. Capital Structure = 25% Debt & 75% Equity
WACC
= WL*KL*(1-Tax rate) +W B*KB (1Taxrate) + (W PS*KPS+ (W CS*KCS+WRE*KRE)
= .25*.001727(1- .24021) +0+0+ .75*.17848
= 13.418 %
Value of the firm =
=
= 5114658.49
The second option that consists of 60% Debt & 40% Equity has the perfect combination of
Capital Structure for the company and it also has the highest value for the firm of 9508227.94.
By following this capital structure the company can increase its share price. To do so the
company will have to keep the greater portion of the capital structure as loan.
The reason for which we will increase the loan is if we increase the loan the weighted averagecost of capital will decline. .
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Dividend Policy
BOC Bangladesh limited believes that High dividend Payment Increases the share price
Justification:
In 2010 the company paid dividend of $35. If we observe the historical trend of the company it
can be easily said that the company is following the second view of dividend policy.
People are always concern about their certain income. In the view of people dividend is a certain
income whereas they are uncertain about the income from the capital gain. The reason behind
their that belief is dividends can be predictable compared to capital gain as management can
control dividend but it cannot dictate the price of stock. The incremental risk associated with
capital gain relative to dividend income implies a higher required rate for discounting a dollar of
capital gains than for discounting a dollar of dividend. So higher dividend means higher share
price for the company in the eye of people
Keeping this in mind BOC Bangladesh Limited gives maximum return to their shareholders as
the form of dividend. This policy is also known as bird in the hand dividend theory.
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Appendix
1. General Reserve: (2011)
Opening balance: 1,836,607,000
Profit earned during the year 6,097,442,822
Payment of dividends (4, 976,38,000)
7,436,411,822
2. General Reserve: (2012)
Opening balance: 7,436,411,822
Profit earned during the year 841,527,416
Payment of dividends (497,638,000)7780301238
3. Average Tax Rate:
= EBT (1 - T) = Net profit after tax
2006 = 336425(1 -T) = 246252 Tax Rate = 26.803 %
2007 = 350155(1 - T) = 263651 Tax Rate = 24.704 %
2008 = 457740 (1 - T) = 359342 Tax Rate = 21.496 %
2009 = 772611 (1 - T) = 609870 Tax Rate = 21.064 %
2010 = 903256 (1 - T) = 668068 Tax Rate = 26.038 %
Average Tax Rate =
= 24.021 %
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4. Ratio Calculation :
BOC Bangladesh Limited
RATIO CALCULATION
2006
Current Ratio 764942/288427
2.652times
Acid TestRatio
764942-321087/288
427
1.54times
WorkingCapital
764942-288427
476515tk
CashConversionCycle
75+22-10 87 days
InventoryTurnoverRatio
1558198/321087
4.852times
Total AssetTurnover 2358955/1853115
1.97times
Fixed AssetTurnover
2358955/1088173
2.168times
AverageCollectionPeriod
142759/2358955/365
22 days
AveragePaymentPeriod
41651/1558198/365
10 days
Debt Ratio 609985/1853115*100
32.56%
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Times InterestEarned
325212/4388 74.114times
Gross Profit
Margin
800757/2358955*100
33.945 %
OperatingProfitMargin
325212/2358955 *100
13.786 %
Net ProfitMargin
246252/2358955*100
10.439 %
Return OnAsset
246252/1853115*100
13.288 %
OperatingReturn OnAsset
325212/1853115 *100
17.549%
Return OnEquity
246252/1249730*100
19.704%
Earnings PerShare
246252/15218 Tk 16.18/ share
Market ToBook Ratio
P/E Ratio
Book value per share = 82.1218/ share
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RATIO CALCULATION
2007
Current Ratio 998670/278813
3.581times
Acid TestRatio
998670-386602/278813
2.20times
WorkingCapital
998670-278813
Tk71985
7Cash
ConversionCycle
108+21-7 122 days
InventoryTurnoverRatio
1311832/386602
3.39times
Total Asset
Turnover
2000172/2006
219
0.996
timesFixed Asset
Turnover2000172/1007
5491.99
times
AverageCollectionPeriod
115620/2000172/365
21 days
AveragePayment
Period
24298/1311832/365
7 days
Debt Ratio 611941/2006219*100
30.50%
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Times InterestEarned
33540/2033 164.88times
Gross Profit
Margin
688340/2000172*100
34.41 %
OperatingProfitMargin
335263/2000172 *100
16.76 %
Net ProfitMargin
263651/2006219*100
13.18 %
Return OnAsset
263651/2006219*100
13.14 %
OperatingReturn OnAsset
335263/2006219 *100
16.71%
Return OnEquity
263651/1394278*100
18.91 %
Earnings PerShare
263651/15218 Tk 17.32/ share
Market ToBook Ratio
times
P/E Ratio
Book value per share = 91.6203 / share
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RATIO CALCULATION
2008
Current Ratio 1207552/348455
3.465times
Acid TestRatio
1207552-541345/348455
1.918times
WorkingCapital
1207552-348455
Tk85909
7Cash
ConversionCycle
119+21-10 130 days
InventoryTurnoverRatio
1664294/541345
3.07times
Total AssetTurnover
2498583/2174061
1.149times
Fixed AssetTurnover
2498583/966509
2.585times
AverageCollectionPeriod
142007/2498583/36521 days
AveragePaymentPeriod
45598/1664294/365
10 days
Debt Ratio 663151/21740
61*100
30.50%
Times InterestEarned
421083/982 428 times
Gross ProfitMargin
834289/2498583*100
33.39 %
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Book value per share = 99.28440 / share
OperatingProfitMargin
421083/2498583 *100
16.85 %
Net Profit
Margin
359342/2174061
*100
14.98 %
Return OnAsset
359342/2174061*100
16.53 %
OperatingReturn OnAsset
421083/2174061 *100
19.37%
Return OnEquity
359342/1510910*100
23.78 %
Earnings PerShare
359342/15218 Tk 23.61/ share
Market ToBook Ratio
times
P/E Ratio
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RATIO CALCULATION
2009
Current Ratio 1,657,380 / 429119 3.86 times Acid Test
Ratio 3.21 times
WorkingCapital
1657380 429119 tk1,228,261
CashConversionCycle
62 + 21 - 11 72 days
InventoryTurnoverRatio
1633072 / 278938 5.85 times
Total AssetTurnover
2742817 / 2586011 1.06 times
Fixed AssetTurnover
2742817 / 928631 2.95 times
AverageCollectionPeriod
154409 / (2742817 / 365)
21 days
AveragePaymentPeriod
48950 / (1633072 / 365)
11 days
Debt Ratio 747477 / 2586011 *
100
28.90%
Times InterestEarned
609699 / 966 625.98days
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Gross ProfitMargin
1109745 / 2742817* 100
40.46%
Operating
ProfitMargin
604699 / 2742817 *100
22.05%
Net ProfitMargin
609870 / 2742817 *100
22.24%
Return OnAsset
609870 / 2586011* 100
23.58%
OperatingReturn On
Asset
604699 / 2586011* 100
23.38%
Return OnEquity
609870 / / 1838534* 100
33.17%
Earnings PerShare
609870 / 15218 Tk 40.08 / share
Market ToBook Ratio
times
P/E Ratio
Book value per share = 120.8131/ share
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RATIO CALCULATION
2010
Current Ratio 1753636/461499
3.80times
Acid TestRatio
1753636-361478/461
499
3.02times
WorkingCapital
1753636-461499
Tk12921
37Cash
ConversionCycle
-71+23-12 82days
InventoryTurnoverRatio
1857531/361478
5.138times
Total AssetTurnover
3199375/2801974
1.1418times
Fixed AssetTurnover
3199375/1048338
3.0518times
AverageCollectionPeriod
200103/3199375/365
23 days
AveragePaymentPeriod
59360/1857531/365 12 days
Debt Ratio 806476/2801974*100
28.78%
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Times InterestEarned
82703/1393 589.880times
Gross Profit
Margin
1341844/3199375*100
41.94 %
OperatingProfitMargin
821703/3199375 *100
25.68 %
Net ProfitMargin
668068/3199375*100
20.88 %
Return OnAsset
668068/2801974*100
23.84 %
OperatingReturn OnAsset
821703/2801974 *100
29.33%
Return OnEquity
668068/1995498*100
33.48 %
Earnings PerShare
668068/15218 Tk 43.90/ share
Market ToBook Ratio
times
P/E Ratio
Book value per share = tk 131.1274/ share
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Summit Power
RATIOFormula 2010
Current
Ratio
= = 9.704 times
Acid TestRatio
= = 8.786 times
WorkingCapital Ratio
CA - CL = ( -)
= Tk 2126726981
Inventory
Turnover
= 3.45 times
DebtRatio
= = 2.609
TimesInterestEarned
Ratio
= = 4.32 times
OperatingProfitMargin
TotalAssetTurnover
= 0.2113
times
FixedAsset
Turnover
= 0.304 times
OperatingReturnOnAsset
= 8.9278
AverageCollect
= = 30 days
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ionPeriod
ReturnOnEquity
= =8.4103%
AveragePaymentPeriod
= = 20 days
CashConversionCycle
Days in Inventory + DSO APP = 106 + 30 20 = 116 days
ReturnOnAsset
=(616686948*100)/7779846388
= 7.926%
Grossprofitmargin
*100 = = 52.8889%
Net ProfitMargin
*100 = *100 = 37.5148%
Earningspershare
= = tk 2.06/share
Price toearningsratio(P/ERatio):
= = 140.1 / 2.06 =68.0097
Market-to-bookratio
= =5.473 times
DU PONTAnalysisROA = Net Profit Margin Total Asset
Turnover= 37.5148* .2113 = 7.926%
ROE = Net Profit Margin Total AssetTurnover Ratio Equity Multiplier
= 37.5148 * .2113 *1.061
=8.4103%
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Desco
RATIO CALCULATION 2010
Current Ratio 17288454805/4743395449 3.64 times
Acid TestRatio
2.6598 times
WorkingCapital
17288454805-4743395449 Tk 12545059356
CashConversionCycle
197 + 80 - 87190 days
InventoryTurnoverRatio
8,656,378,087 / 1.8529 times
Total AssetTurnover
10810974226/26093791941 0.4143 times
Fixed AssetTurnover
10810974226/8805337136 1.23 times
AverageCollectionPeriod
80 days
AveragePaymentPeriod
87days
Debt Ratio12,590,540,857 /26093791941
* 100 48.251%
Times InterestEarned
1534280431/221200045 6.94 times
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Gross ProfitMargin
2332813327/10810974226*100
21.58 %
Operating
ProfitMargin
1534280431/10810974226* 100
14.19 %
Net ProfitMargin
1788730635/10810974226*100
16.5455 %
Return OnAsset
1788730635/26093791941*100
6.85 %
OperatingReturn On
Asset
1534280431/26093791941*100
5.8799 %
Return OnEquity
1788730635/8759855635*100
20.42 %
Earnings PerShare
1,788,730,635 / 16,017,044 Tk111.68 / share
Market ToBook Ratio
2031.5 / 547.132 3.713 times
P/E Ratio 2031.5 / 111.68 18.1858
DU Pont
16.5455 * 0.4143 6.85%ROA:
ROE 16.5455 * .4143 * 2.9788 20.42%
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Khulna Power
RATIO CALCULATION 2010
Current Ratio 3023789428/2582662651 1.17 times
Acid Test Ratio 2209729816/2582662651 0.856 times
Average Collection Period 1185346485/21769213 55 days
Inventory Turnover 7222668468/814059612 8.872 times
Debt Ratio 18000/5719 3.15 times
Operating Profit Margin 648809596/7945762818*100 8.165%
Total Asset Turnover 7945762818/6272735929 1.27 times
Fixed Asset Turnover 7945762818/324896501 24.457 times
Operating Return OnAsset
648809596/6272795929 10.34%
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Average Payment Period 1733222020/19788133 88 days
Cash Conversion Cycle 41+55-88 8 days
Net Profit Margin 544091591/7945762818*100 6.85%
Gross Profit Margin 723094350/7945762818*100 9.1%
Return On Asset 544091591/6272735929*100 8.673%
ROE 544091593/3019023067*100 18.02%
EPS 544091593/239,881,950 Tk 2.27 / share
Market Book ratio 112.8/12.585 8.963 times
P/E Ratio 112.8/2.27 49.692
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MJL Bangladesh Limited
RATIO Formula CALCULATION
2010
CurrentRatio
3597263697/1727
8857532.08tim
es
Acid TestRatio
(3597263697-1039932037)/ 1727885753
1.48tim
es
Debt Ratio
1838265995 /5089393965
36.12%
TimesInterestEarned
681900999/NotGiven
N/A
InventoryTurnover
2898731931/1039932037
2.79time
s
Total AssetTurnover
3847949116/5089393965
.76time
s
Fixed AssetTurnover
3847949116/1492130269
2.58tim
es
Days salesoutstanding
177520128/ (3847949116/365
)
16.84day
s
Averagepaymentperiod
25966104/(2898731931/365)
3.27Day
s
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CashConversion Cycle
Days in Inventory + DSO APPDays In Inventory
=
131+16.84-3.27 144day
s
Gross profitmargin
949217185/3847949116
24.67%
Operatingprofitmargi n
681900999/3847949116
17.72%
Net profitmargin
508337317/3847949116
13.21%
Return onasset
508337317/5089393965
10%
OperatingReturn onasset
681900999/5089393965
13.39%
Return onEquity
508337317/32511
2797015.63
%
Earnings pershare
508337317/140320000
3.62
Price toearningsratio
136.40/3.62 37.679
Book valueper share
3251127970/1403200000
tk2.32/ shar
e
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Market tobookratio
136.4/2.32 58.79
ROA (Returnon Asset) Net Profit Margin Total
Asset Turnover Ratio
13.21 .76 10.04
ROE (ReturnonEquity)
Net Profit Margin TotalAsset Turnover Ratio
EquityMultiplier(TA/TE)
13.21 .761.56
15.72
5. DIVIDENED PAYOUT RATIO
2006
DIVIDENED PAYOUT RATIO =
g = (1-.308996) .19704 = 13.6155%
2007
Dividend payout ratio =
g = (1-.04049) .1891= 11.2694%
2008
Dividend Payout ratio = =
g = (1-.71996).2378 = 6.6586%
2009
Dividend Payout Ratio =
g = (1-.441674) = 18.5196%
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87
2010
Dividend Payout Ratio = = 8.541082%
=11.72082%
Dividend growth rate:
1. 2006 -2007 =
2. 2007-2008 =
3. 2008-2009 =
4. 2009-2010 =
5. Average =
Average of two growth rate
g = %
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6. WACC Calculation
COST OF COMMON STOCK
1ST APPROACH
CAPM = R f + (R m-R f )
= 11+(30.442-11).399
=18.76%
2nd APPROACH
Ke = =
=16.935%
Average of two
Ke =
=17.848%
cost of retained earnings 17.848%
Cost of debt =
Weight of debt =
Weight of common equity
Weight of Retained Earnings
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MARKET VALUE
Common share 15218000692.3 = 10555595
Debt =806476
Retained earnings = 1823141
Total asset market value
806476 + 10555595+1823141 = 13185212
Weight of debt =
Weight of common equity
Weight of Retained Earnings
Cost of common equity =17.848%
Cost of debt = .1727%
Note :
In this project, all companys annual year ends at 31 st December except DESCO whose annual
year ends at 31 st June. Due to lack of options in choosing competitors, it was assumed that
DESCOs annual year also ends at 31 st December.