ASSIGNMENT

RATIO ANALYSIS Case: AMCL(PRAN)

MOHAMMAD ROKUNUZZAMAN Senior Officer Agrani Bank Limited Purana Paltan Corporate Branch Course Co-ordinators: A.N.K.MIZAN & TAHMINA RAHMAN, BIBM, Dhaka.
28/01/13

Course Name: FINANCIAL ANALYSIS FOR BANKERS.

Submitted To: Bangladesh Institute of Bank Management

LETTER OF TRANSMITTAL January 28, 2013 To Course Coordinators of Financial Analysis for Bankers Course Bangladesh Institute of Bank Management.

Subject: Submission

of assignment on Ratio Analysis of AMCL-PRAN

Sir, As a part of the Financial Analysis for Bankers Course an assignment is enclosed herewith. The assignment was prepared on Ration Analysis of AMCL-PRAN . In the course of preparing the assignment I studied relevant documents, data, and information. I also have gathered practical knowledge too. I pray and hope that the mistakes, the assignment may have, will be kindly excused. Finally, I beg your kind consideration for evaluating this report.

Sincerely Yours,

Mohammad Rokunuzzaman Senior Officer Agrani Bank Limited Purana Paltan Corporate Branch

A. Background of the assignment: I have been selected by Agrani Bank Limited authority to participate 8 day long training course from January 20-29, 2013. As an integral part for the evaluation of this course BIBM authority assigned me this topic. B. Rationale of the assignment: Academic knowledge is far away from the practical knowledge. It is quite out of research to practice all the academic aspects in the reality. So this assignment gave me opportunity to gather practical knowledge and compare it with academic knowledge.

C. Calculation of the required ratios of AMCL-PRAN

SL NO 1 2 3 4 5 6 7 8 REQUIRED RATIOS RETURN ON ASSET(ROA) RETURN ON EQUITY(ROE) DEBT TO EQUITY(D/E) TOTAL EQUITY TO TOTAL ASSET(TE/TA) TOTAL DEBT TO TOTAL ASSET(TD/TA) CURRENT ASSET TO TOTAL ASSET(CA/TA) VOLUME OF TOTAL SALES(TS) VOLUME OF TOTAL ASSET(TA) 30-Jun-08 3.89% 10.49% 1.69 0.37 0.63 0.73 985,454,208 923,186,537 30-Jun-09 4.01% 11.10% 1.77 0.36 0.64 0.67 1,106,659,846 997,590,888 30-Jun-10 3.91% 11.47% 1.94 0.34 0.66 0.62 1,205,155,338 1,115,683,180 30-Jun-11 3.88% 11.33% 1.92 0.34 0.66 0.65 1,316,345,576 1,172,667,837

Source: Appendix-1&2.

D. Analysis & Findings 1) Trend analysis of AMCL-PRAN on the basis of RETURN ON ASSET (ROA):

It is the ratio of net income to total assets. It provides an idea of the overall return on investment earned by the firm. The ROA after interest and taxes are computed as follows: Return on total assets (ROA) = Net Income/ total Assets The following table shows the ROA ratios of AMCL PRAN from 2008 to 20011.
YEAR RETURN ON ASSET(ROA) JUNE,2008 JUNE,2009 JUNE,2010 JUNE,2011 3.89% 4.01% 3.91% 3.88%

Fig-1.1 RETURN ON ASSET(ROA) Trend of AMCL-PRAN.

Comment: AMCL PRAN has improves its return on asset from 2008 to 2009 but it is decreasing in 2010 and 2011. This is alarming for them. AMCL pran should concentrate on their assets, debt and inventories to increase its net income.

2) Trend analysis of AMCL-PRAN on the basis of RETURN ON EQUITY(ROE): This is the ratio of net income to common equity. It measures the rate of return on Owners investment. The return on equity (ROE) or the rate of return on stockholders return is measured as follows: Return on Common Equity (ROE) = Net income available to common stockholders/ Equity = Net Income / Equity YEAR RETURN ON EQUITY(ROE) JUNE,2008 JUNE,2009 JUNE,2010 JUNE,2011 10.49% 11.10% 11.47% 11.33%

Fig-1.2 RETURN ON EQUITY(ROE) Trend of AMCL-PRAN. Comment: AMCL PRAN has improved ROE from 2008 to 2010 but in 2011 it is decreasing. AMCL PRAN needs to increase its ROE. It indicates that the return that is earned by them is utilized by debt, as their debt-equity ratio is increasing. 3) Trend analysis of AMCL-PRAN on the basis of DEBT TO EQUITY(D/E): This is the ratio of total debt to equity. It measures the ingredients of liability structure of a firm . The Debt to equity (D/E) as follows: Debt to equity (D/E)= Total Debt/Equity YEAR JUNE,2008 JUNE,2009 JUNE,2010 JUNE,2011 DEBT TO EQUITY(D/E) 1.69 1.77 1.94 1.92

Fig-1.3 DEBT TO EQUITY (D/E) Trend of AMCL-PRAN. Comment: The (D/E) ratio of AMCL PRAN is an alarming scenario because it shows total debt of AMCL is greater than total equity and it is increasing year and year. From 2008 to 2010 it is

increasing but in 2011 it is decreasing. It indicates that the return that is earned by them is utilized to maintain debt, so ROE is also decreasing. 4) Trend analysis of AMCL-PRAN on the basis of TOTAL EQUITY TO TOTAL ASSET (TE/TA): This is the ratio of total equity to total asset. It measures the portion of equity over firms total asset. The Total equity to Total Asset (TE/TA) as follows: Total equity to Total Asset (TE/TA)= Total Equity/Total Asset. YEAR TOTAL EQUITY TO TOTAL ASSET(TE/TA) JUNE,2008 JUNE,2009 0.37 0.36 JUNE,2010 0.34 JUNE,2011 0.34

Fig-1.4 TOTAL EQUITY TO TOTAL ASSET (TE/TA) Trend of AMCL-PRAN. Comment: The (TE/TA) ratio of AMCL PRAN is an alarming scenario because it shows total external debt of AMCL is increasing than total equity. It indicates that the return that is earned by them is utilized to fulfill external debt, so owners are getting less return from their business.

5) Trend analysis of AMCL-PRAN on the basis of TOTAL DEBT TO TOTAL ASSET (TD/TA): This is the ratio of total debt to total asset. It measures the portion of external debt over firms total asset. The Total debt to Total Asset (TD/TA) as follows: Total equity to Total Asset (TD/TA)= Total Debt/Total Asset. YEAR TOTAL DEBT TO TOTAL ASSET(TD/TA) JUNE,2008 JUNE,2009 JUNE,2010 JUNE,2011 0.63 0.64 0.66 0.66

Fig-1.5 TOTAL DEBT TO TOTAL ASSET(TD/TA) Trend of AMCL-PRAN. Comment: The (TD/TA) ratio of AMCL PRAN is an alarming scenario because it shows total external debt of AMCL is increasing than total equity. It indicates that the return that is earned by them is utilized to fulfill external debt, so owners are getting less return from their business. 6) Trend analysis of AMCL-PRAN on the basis of CURRENT ASSET TO TOTAL ASSET(CA/TA): This is the ratio of total current asset to total asset. The Total current asset to total asset (CA/TA) as follows: Total current to Total Asset (CA/TA)= Total Current/Total Asset. YEAR CURRENT ASSET TO TOTAL ASSET(CA/TA) JUNE,2008 JUNE,2009 0.73 0.67 JUNE,2010 0.62 JUNE,2011 0.65

Fig-1.6 CURRENT ASSET TO TOTAL ASSET(CA/TA) Trend of AMCL-PRAN. Comment: The (CA/TA) ratio of AMCL PRAN is an alarming scenario because it shows AMCL is losing their ability to fulfill requirement of fund to fulfill current liability. So their ability to provide working capital is decreasing. 7) Trend analysis of AMCL-PRAN on the basis of VOLUME OF TOTAL SALES(TS): Volume of total sales indicates the total revenue earned by a firm vide selling their productss. It can be said as revenue of a firm also. YEAR VOLUME OF TOTAL SALES(TS) JUNE,2008 JUNE,2009 JUNE,2010 JUNE,2011 985,454,20 1,106,659,84 1,205,155,33 8 6 8 1,316,345,576

Fig-1.7 VOLUME OF TOTAL SALES(TS) Trend of AMCL-PRAN. From graph we can see volume of total sales of AMCL-Pran is increasing. It is good for a firm. It also indicates firms operating efficiency is developing. 8

8) Trend analysis of AMCL-PRAN on the basis of VOLUME OF TOTAL ASSET(TA): Total asset is the combined form of a firms current and fixed asstes. YEAR VOLUME OF TOTAL ASSET(TA) JUNE,2008 JUNE,2009 JUNE,2010 JUNE,2011 923,186,53 1,115,683,18 7 997,590,888 0 1,172,667,837

Fig-1.8 VOLUME OF TOTAL ASSET(TA) Trend of AMCL-PRAN. From graph we can see volume of total asset of AMCL-Pran is increasing. It is good for a firm. It also indicates firms operating efficiency is developing. 9) SOURCES OF WORKING CAPITAL FINANCING for AMCL-PRAN:

Sources of Working Capital Short Term Loan from Bank Workers' Profit Participationa & Welfare Funds Unclaimed Dividend

30-Jun08 409,262, 567 4,937,08 7 2,090,92 2 416,290, 576

30-Jun09

30-Jun10

30-Jun11 467,449,3 63 11,891,72 2

415,118, 428,240, 255 957 6,871,38 9,185,52 2 3

2,863,72 3,184,91 2 5 3,870,681 424,853, 440,611, 483,211,7 359 395 66

Conclusion

After all these ratio analysis of AMCL-PRAN we can conclude our discussion by saying that, some indicators like volume of total sales and volume of total asset is increasing which are necessary for a firm to survive in industry but other indicators showing investors and financial organizations should be cautious over them, because though their sales is increasing but their net profit is not increasing the same way, rather their debt is increasing than equity. Though the changes are not very significant in numbers but it is alarming. APPENDIX-1
Balance Sheet Years FIXED ASSETS Property, Plant and Equipment Investments (At Cost) Current Assets Stock Trade debtors Advance, Deposits and Prepayments Cash and Cash Equivalents Total Asset Current Liabilities Current Portion of Long Term Loan Short Term Loan from Bank Liabilities for Goods Liabilities for Expenses Liabilities for Other Finance Interest Payable Workers' Profit Participationa & Welfare Funds Income Tax Payable Unclaimed Dividend Net Current Assets net Assets FINANCED BY Shareholders' Equity Share Capital Share Premium Reserve and Surplus Proposed Dividend Deferred Tax Liability Long Term Debt Total Long term Liability and Owner's Equity 342,714,360 80,000,000 40,000,000 200,314,360 22,400,000 18,608,990 92,488,846 453,812,196 359,966,920 80,000,000 40,000,000 216,766,920 23,200,000 22,213,416 136,397,769 518,578,105 380,083,391 80,000,000 40,000,000 236,083,391 24,000,000 26,895,333 192,232,710 599,211,434 401,331,039 80,000,000 40,000,000 256,531,039 24,800,000 28,868,315 150,700,000 580,899,354 30-Jun-08 30-Jun-09 30-Jun-10 Amount in Taka 30-Jun-11

234,925,685 15,000,000 673,260,852 484,200,145 44,242,900 128,644,738 16,173,069 923,186,537 469,374,341 21,709,923 409,262,567 12,666,636 8,618,255 31,244 364,776 4,937,087 9,692,931 2,090,922 203,886,511 453,812,196

314,129,366 15,000,000 668,461,522 481,449,835 37,284,380 108,758,482 40,968,825 997,590,888 479,012,783 22,338,757 415,118,255 6,075,973 11,649,336 198,985 6,871,382 13,896,373 2,863,722 189,448,739 518,578,105

422,432,100

415,825,688

693,251,080 491,757,780 41,282,366 131,231,172 28,979,762 1,115,683,180 516,471,746 14,296,711 428,240,957 6,179,656 4,557,302 38,464,413 4,341,763 9,185,523 8,020,506 3,184,915 176,779,334 599,211,434

756,842,149 514,774,187 55,696,134 151,106,219 35,265,609 1,172,667,837 591,768,483 41,532,708 467,449,363 4,193,904 4,288,887 36,314,681 6,310,372 11,891,722 15,916,165 3,870,681 165,073,666 580,899,354

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TOTAL Liability and Owner's Equity

923,186,537

997,590,888

1,115,683,180

1,172,667,837

APPENDIX-2 Income Statement 30-Jun-08 Sales Cost of Goods Sold Gross Profit 985,454,208 761,332,926 224,121,282 30-Jun-09 Amount in Taka 30-Jun-10 30-Jun-11 1,316,345,576 1,029,503,278 286,842,298

1,106,659,846.00 1,205,155,338 858,841,641.00 935,681,509 247,818,205 269,473,829

Expenses Administative & Selling Expenses Financial Expenses Operating Profit Other Income Contribution to Workers' Participation & Welfare Fund Net Profit Before Taxation Provision for Tax Current Tax Deferred Tax Net Profit After Taxation Transferred to Statement of Changes in Shareholders' Equity Basic Earnings per Share (Per Value Tk. 100/-) Number of Share Used to Compute EPS

183,129,989 92,570,466 90,559,523 40,991,293

197,525,920 213,977,930 99,015,593.00 107,121,566 98,510,327.00 106,856,364 50,292,285 55,495,899 916,500 56,412,399

228,782,236 115,171,786 113,610,450 58,060,062 201,760 58,261,822 2,903,003 55,358,819 9,868,642 7,895,659 1,972,983

2,049,565 38,941,728 2,991,770 3,173,607 -181,837

2,514,614.00 2,820,620 47,777,671 53,591,779 7,807,868.00 9,998,055 4,203,442.00 5,316,138 3,604,426.00 4,681,917

35,949,958 44.94 800,000

39,969,803 43,593,724 49.96 54.49 80,000.00 800,000

45,490,177 56.86 800,000

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