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    Report

    OnRatio Analysis Singer Bangladesh Limited

    And Industry overview

    Prepared as the partial course requirement of Portfolio and Investment Analysis (FBK 415)

    Faculty of Business Administration and Management (BAM)

    PATUAKHALI SCIENCE AND TECHNOLOGY UNIVERSITYWebsite-www.bam.pstu.ac.bdAuthor E-mail: [email protected]

    mailto:[email protected]:[email protected]
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    Submitted to

    Md. Alamgir HossenCourse Instructor

    Faculty of Business Administration and ManagementPatuakhali Science and Technology University

    Submitted By:

    Md. Atiqur Rahman

    Exam Roll: 22

    Reg. No. 00551

    Level: IV, Semester: ISession: 2003-2004

    BBA ProgramFaculty of Business Administration and Management

    Patuakhali Science and Technology University.

    Submission Date: 29-08-2008.

    Patuakhali Science and Technology University

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    ACKNOWLEDGEMENTS

    Preparation of any report involves many valued contribution from a number of persons. At first Iwould like to thank Mr. Alomgir Hosen, Instructor of this course for his valuable suggestionsand advices throughout the analysis. Without his help and suggestions this report wont be likethis.

    Mr. Zakir Hosen, Lecturer, Department of Accounting and Information Systems of this tuniversity and Mr. Hamim Rahmatullah, Member, Board of Directors Singer Bangladesh Ltd,extended their helping hand in the preparation of the report. I convey my gratitude to them by

    this epistle.

    It is my sincerest hope that this endeavor will bring success.

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    August 29, 2008

    Md. Alomgir Hossen

    Course Instructor

    Department of Finance and Banking

    Faculty of Business administration & Management

    Patuakhali Science and Technology University

    Dumki, Patuakhali-8602.

    Subject: Submission of the Report on Ratio analysis of Singer Bangladesh Ltd..

    Dear Sir,

    Here is the analytical report on Ratio analysis of Singer Bangladesh Ltd. that was assigned

    as a requirement for the completion of BBA Program. This report intends to identify the financial

    analysis of Singer Bangladesh Ltd. I tried my best to furnish this report with all the necessary

    information required to fulfill the objectives of the report.

    I hope that this report will be able to draw your appreciation.

    Thanking you.

    Sincerely Yours,

    (Md. Atiqur Rahman)

    Roll-0022, Reg-00551

    Level-04, Semester-I

    BBA Program

    PSTU

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    Table of Contents

    Topics Name Page No.

    Executive summary I

    Introduction 01

    Origin of the report and Objective of the study 02

    Literature Review II-III

    Methodology and Limitation of the Study 03-04

    Brief History of Singer Bangladesh & Ratio analysis 05-12

    Overview of the Electronics Industry of Bangladesh 13

    Findings 14

    Conclusion 15

    Appendix IV-X

    References XI

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    EXECUTIVE SUMMARY

    The company accounts represent the financial statements of Singer Bangladesh Limited. Theinvestment in associate companies was accounted under the cost method. The carrying valueof associate company investments is shown at cost and only dividend income received fromassociate companies is recognized as income. Net revenue of the Company for the yearincreased from Tk. 2,547 million to Tk. 3,556 million, i.e. an increase of 39.62%. Both ourchannels of distribution, Retail and Wholesale, contributed towards the increase in therevenue of the company. There was increase in turnover for all the products but most significantincreases were achieved in the White Goods, Motor Cycle and Air Conditioners range. WhiteGoods segment growth was driven by an increase in sales of Refrigerators, while Motor Cycles

    and Air Conditioners growth was mainly due to product differentiation and improvement ofquality. The gross profit for the year under review was Tk. 821 million, compared to Tk. 638million in the previous year , i.e. a growth of 28.70%. The gross margin percentage decreaseddue to: Increase in the cost of raw materials (higher cost and duty of copper) , amortization of pre-operating, expenses of Cable project Price based competition in the market, Trade in(Exchange of new products against old products). The operating profit for the year was Tk 256million as compared to Tk. 200 million in the previous year , i.e. a growth of 28% Operatingprofit as a percentage of sales decreased from 7.88% to 7.19%. The main reason for decrease inthe operating Profit were increases in the cost of rent occupancy, shop maintenance andadvertisement and sales promotion to in order to remain competitive in the market. Non-operating income of the Company decreased from Tk. 36.50 million to Tk. 33.15 million. The

    non-operating income decreased mainly due to lower dividend income received fromassociate company. Operating expenses of the Company increased by 29.32% from Tk.437.12 million in 2006 to Tk. 565.29 million in 2007. This was mainly due to the increase incosts of advertisement and sales promotion, shop operating expenses, shop rents, sellingand collecting commissions, royalties, electricity, traveling and entertainment expenses.However, as a percentage of net sales, the Company's operating expenses decreased from17.15% % to 15.94%. Non-oInterest expenses increased due to financing the higher levels ofinventories and receivables and also to fund capital expenditure. Singer Bangladesh Limitedis liable to pay income tax at 30% less 10% rebate for dividend payments of more than 20%for the year . T ax holiday facilities on televisions and Motor Cycles have expired for which thecorporate tax has increased. Accordingly the current year income tax provision was

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    computed at Tk. 38,621,276. The net profit after tax for the year was Tk.101.82 million,compared to Tk. 116.64 million in 2006. As a percentage, the net profit decreased by 12.71 %over the previous year's figure. This was mainly due to lower rate of gross margin, increase offinance costs and lower dividend income from associate company.

    The industry average is in a good position rather than the others in the electronics industry. Thefinancial analysis of the various ratio shows this data tremendously.

    Introduction

    Singer in 1851, with a borrowed capital of only $40, Isaac Merritt Singer set up a company tomanufacture and sell a revolutionary product a machine to automate and assist in the making ofclothing. Little did he realize that the newly formed I. M. Singer and Company was destined tobecome the world leader in the manufacturing and distribution of sewing related products andthat the Singer brand name would one day become famous around the world.As a youth, I. M. Singer, a native of Troy, New York, had an exceptional aptitude for mechanicalthings. Born in 1811, he spent his early adulthood as an actor. At the age of 38, he settled in NewYork City and devoted his time to become an inventor. His fascination with early attempts atautomating the sewing process grew and by 1853, the first Singer machines, manufactured in aNew York City factory, were selling for $100. Two years later, with a first prize at the Worlds

    Fair in Paris, Singer originated the hire-purchase plan to increase sales, the first company everto do so. This plan was to have almost as much influence as the brand name itself. Today, overhalf of Singers sales in developing countries uses this method of payment to generate sales andadditional income.Ten years later, the newly incorporated Singer Manufacturing Company held 22 patents, withannual sales of 20,000 machines. In 1867, Singer opened its first sewing machine factory outsideof United States in Glasgow, Scotland. By 1880, world sales exceeded 500,000. Additionalfactories were established in the United States and within no time, one of the best knownemblems the Red S Girl trademark became familiar worldwide.By turn of the century, many exciting developments had taken place within SingerManufacturing Company. In 1885, Singer introduced the first electric sewing machine. By 1890,

    the company claimed an 80 percent worldwide market share, with sales heading towards1,350,000 machines. In 1904, a separate subsidiary, the Singer Sewing Machine Company, wasestablished to handle sales and distribution in the Western Hemisphere and beyond. At this point,Singers rich heritage had become firmly established around the world. Singer Thailand providesan early example of this heritage. In 1863, the governess to the King of Siam presented a sewingmachine to the King, heralding Singers presence in Thailand. This example was repeated inother parts of the world over time.In 1908, the Singer Building at 149 Broadway in New York was inaugurated. The 47 storiesbuilding, which was the tallest in the world at the time, remained Singers corporate headquartersfor the next 54 years.

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    Singer soon moved into the manufacturing of industrial sewing machines, and in 1975,introduced its first electronic sewing machine. Singers manufacturing facilities are nowstrategically located around the world with major facilities in Brazil, India and China.

    In 1960 Singer Corporation brought a change in the business philosophy of the company. Afterdedicating more than a hundred years to manufacturing and marketing one single product thesewing machine Singer began diversification of its product range. It acquired Packard BellElectronics in 1966 and General Precision Equipment Corporation in 1968.Singer's manufacturing base of electronic and electrical products gradually spread in Asia, EastAfrica, Middle East, Latin andSouth America. Today Singer's name is synonymous with household goods across the World.

    Origin of the Report

    As a part of the BBA curriculum, all students have to have been assigned to make a report for a

    specific organization. As a partial course material I made a report on Ratio Analysis of Singer

    Bangladesh Limited. For this purpose, the student has been done the report and prepared the

    paper according to the instructions of the course instructor.

    Objective of the study

    This report prepared mainly by considering the following objectives;

    To know about the financial ratios of Singer Bangladesh Limited.

    To evaluate the financial strength of the company.

    To evaluate the financial position of the company in electronics industry.

    To know about the accounting procedures of the company.

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    Literature Review

    Ledger:Ledger is the permanent store house of all transaction. According to L.C. Cropper, The

    book in which a traders transactions are recorded in a classified permanent form is calledthe ledger. Ledger is the record book of classifying transaction which consist debit,credit and balance. The ledger keeps in one place all the information about changes inspecific account balances.

    Trial Balance:Trial balance is the list of ledger account balances. A trial balance may be defined as astatement of debit and credit balances extracted from the ledger with a view to test thearithmetical accuracy of the books.The primary purpose of a trial balance is to prove(check) that the debits equal the credits after posting. Customarily, a trial balance isprepared at the end of accounting period.

    Financial Statement Preparation:After a work sheet has been completed, all the data that are required for the preparation

    of financial statements are at hand. Financial statement is the statement that reflects thecollection, tabulation, and final summarization of the accounting data. After transitionsare identified, recorded, summarize four financial statements are prepared fromsummarized accounting data. Preparing the financial statements are given below

    Income Statement:Income statement is a financial statement that presents the revenue and expenses andresulting net income or net loss of a company for a specific period of time.

    Owners Equity Statement:Owner equity is a financial statement that summarized the changes in owners equity for

    specific period of time.

    Balance Sheet Statement:Balance sheet statement is a statement that reports the assets, liabilities, and ownersequity at a specific date.

    Cash Flow Statement:Cash flow statement is a statement that summarizes information about the cash inflow(receipts) and cash outflows (payments) for specific period of time. It based on operatingactivities, investing activities, financing activities. It may be done either of two methods-

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    Direct method, indirect method. Companies 98.7% favor the indirect method for tworeasons: (1) it is easily and less costly to prepare, and (2) it focuses on the differencesbetween net income and net cash flow from operating activities.

    Closing Entries:Entries made at the end of an accounting period to transfer the balances of temporary

    accounts to a permanent owners equity accounts, owners capital. Current Liability:

    A current liability is a debt that can reasonably be expected to be paid from existingcurrent assets or through the creation of other current liability, and within one year or theoperating cycle, whichever is longer. The major types of current liabilities are notespayable, accounts payable, sales taxes payable, unearned revenues, and accrued liabilitiessuch as taxes, salaries, wages and interest payable.

    Contingent Liabilities:Contingent liabilities are potential liabilities that may become an actual liability in thefuture.

    Long-term Liabilities:Long-term liabilities means obligations expected to be paid after one year.

    Financial Statement Analysis:Analyzing financial statement involves evaluating three characteristics of a company: itsliquidity, its profitability, and its solvency. Various tools are used to evaluate thesignificance of financial statement data. Three commonly used tools are these:

    Horizontal analysis evaluates a series of financial statement data over a periodof time.

    Vertical analysis financial statement data by expressing each item in a financialstatement as a percent of a base amount.

    Ratio analysis expresses the relationship among selected items of financialstatement data. A ratio expresses the mathematical relationship between onequality and another. The relationship is expressed in terms of a percentage, arate, or a simple proportion.

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    Methodology of the study

    My study was exploratory in nature and the data gatehering procedure was interview method.

    The frame work of our research methodlogy is illustrasted below:

    Seletion of organization

    There are various organizations in Bangladesh who are engaged in electronics business. I select Singer Bangladesh Limitedbecause of my own choice (because this sector is responsible for

    earning forign currancy than any other sectors in Bangladeh).

    Literature review

    For preparing the report and makes a report outline I have to find some related articals andjournals. I study the articals written by some famous person on this ground also evaluate somejournals prepared by the my group members and friends of different university.

    Tabualtion

    Tabualtion consists of sorting the date into categories and classes described by the dummy tableswhich have been prepared counting the data. Through tabulation we prepared final tables from

    Desk Work

    Literature Review Financialinformation

    review

    Making work

    Data analysis

    Tabulation

    Report writing

    Report Presentation

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    raw data that would help us in great deal in writing our report with findings and analyses moreperfectly and purposefull based on which this report is prepared.

    Report writing

    After getting the information I prepare the final report with guideline of our course teacher. Aftertaking his suggestions and review my report I submit the report for his cosideration.

    Report Presentation

    After submission the report I have to present the main concept and impotant points of my reportto concern of my honorable coure teacher and my friends.

    Research Type

    Due to my research type I have to conduct quantative research which includes the firmsmarketing policy and procedure.

    Secondary Data

    In addition to primary data, the paper is also based on secondary data collected throughcompany's corporate profile, magazine, reports, different journals and articles and company'swebsites.

    Data Analysis

    After taking the interview I analyze data and sorting the important data from other relevant andunrelevant data. Than I calculate the quantitative figure which is presented in the later part of thereport.

    Limitations of the study

    It is very natural and expected htat every research study has to face certain problems or must

    have some limitations my study faced following problems:

    a. Lack of proper quantatitive information.

    b. Time constraints..

    c. Lack of financial support.

    d. Communication problems.

    Dispite the above limitations, I put my best effort to make the study meaningful and

    representative one.

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    Brief History of Singer Bangladesh & Ratio Analysis

    BRIEF HISTORY

    Singer Bangladesh Ltd. Ltd. is a renowned company in Bangladesh. It is a flagship company inthe electrical industry which has reached this mountain of success by fighting many potentialcompetitors. It initially started its operation in Bangladesh 1905. It was incorporated as a PrivateLtd. Company in 1964 and converted into Public Limited Company in 1991. Its initial publicoffering started in Dhaka and Chittagong stock exchange simultaneously in 1995. Their missionis to produce and provide quality & innovative electronics products for people, maintainstringently ethical standard in business operation also ensuring benefit to the shareholders,stakeholders and the society

    at large.

    RATIO ANALYSIS

    Financial ratios are useful indicators of a firm's performance and financial situation. Financialratios can be used to analyze trends and to compare the firm's financials to those of other firms.Financial ratios can be classified according to the information they provide. The following typesof ratios frequently are used:

    1. Liquidity ratios

    2. Asset management ratios3. Debt management ratios4. Profitability ratios5. Market value ratios

    LIQUIDITY RATIOS

    Liquidity ratios are the first ones to come in the picture. These ratios actually show therelationship of a firms cash and other current assets to its current liabilities. Two ratios arediscussed under Liquidity ratios. They are:

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    1. Current ratio2. Quick/ Acid Test ratio.

    Current ratio: This ratio indicates the extent to which current liabilities are covered by thoseassets expected to be converted to cash in the near future. Current assets normally include cash,

    marketable securities, accounts receivables, and inventories. Current liabilities consist ofaccounts payable, short-term notes payable, current maturities of long-term debt, accrued taxes,and other accrued expenses (principally wages).

    Current Ratio = Current Assets / Current Liabilities

    Following table shows the Current ratios of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005 2004

    Current ratio 1.21 times 1.23 times 1.43 times 1.66 times

    Following graph shows the change of Current ratios over different periods:

    From the analysis, we can see that in 2004 the current assets were 1.66 times than the currentliabilities that has not fluctuated much through out these three years. A minimal decrease is seenin 2005 and it go down to 1.43 times which kept slightly decreasing and resulted at 1.23 times in2006 and again decrease in 2007 by 1.21 times. The reason for such instability can be there notinvesting remarkably on assets and not making any huge loan or financing from outside. If wetake a closer look on the balance sheet, this assumption gets a more realistic touch. Year by yearassets have gone slightly down and the liabilities as well, but proportionately assets were a littlerlower than the liabilities which actually reflected as a marginal increase in the ratio.

    2. Quick/ Acid Test ratio: This ratio indicates the firms liquidity position as well. It actuallyrefers to the extent to which current liabilities are covered by those assets except inventories.

    Quick Ratio = (Current Assets-Inventories) / Current Liabilities

    Following table shows the Quick/ acid test ratios of Singer Bangladesh Ltd. in different years:

    Year 2007 2006

    Quick ratio 0.51 times 0.55 times

    Following graph shows the change of Current ratios over different periods:Analysis of this ratio speaks in a same language as current ratio. In 2006, the quick ratio was0.55 times which decreased very silently just like current ratio and resulted as 0.51 times in2007. Both of these ratios portray the idea that square has so far an almost constant liquidityposition which is not so good at some point, but at the same token it can be said that they havenot been able to improve them-selves. Standing at this point, we can make an assumption thatmay be their profit margin was so high that they can make some investments paying off theliabilities that could result in an decrease in assets and increase in liabilities to make the liquidity

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    position far not good. This assumption can only be proved as we go on analyzing their financialstatement and calculate the profitability ratios.

    ASSET MANAGEMENT RATIOS

    Asset management ratios are the financial statement ratios that measure how effectively abusiness uses and controls its assets. Below are discussed five types of asset management ratios:

    1. Inventory turnover ratio2. The days sales outstanding3. Average payment period4. Fixed asset turnover ratio

    5. Total asset turnover ratio

    1. Inventory turnover ratio: The ratio is regarded as a test of efficiency and indicates therapidity with which the company is able to move its merchandise.

    Inventory turnover ratio = Gross Turnover / Inventories

    Following table shows the Inventory Turnover ratio of Singer Bangladesh Ltd. in different years:

    Year 2007 2006

    Current ratio 3.31 times 3.37 times

    Analysis shows a gradual declination of Inventory Turnover Ratio over the last two yeas. In 2006the ratio was 3.37 times, then it rapidly declined to 3.31 times in following year.The companys balance sheets show decrease of inventory with declining turnover every year.Declining inventory turnover commonly indicates that the company is not being able to flush itsinventory very well as it was doing in the previous years. A low turnover rate may point tooverstocking, obsolescence, or deficiencies in the product line or marketing effort. Highinventory levels are unhealthy because they represent an investment with a zero rate of return inaddition to the increased cost associated with maintaining those inventories. It also opens the

    company up to trouble should prices begin to fall. However, in some instances a low rate may byappropriate, such as where higher inventory levels occur in anticipation of rapidly rising pricesor shortages.In order to improve Inventory Turnover ratio, at first an end-to-end view in addressing inventoryneeds to be looked at. Supply chains need to be optimized, production processes should have tobe efficient as well, so that the suppliers become able to produce and deliver materials in atimely, low cost fashion that allows the company to minimize their inventory and cost ofmaterials. Collaborative relationships with customers can allow them to make their demand for products more predictable thereby allowing to minimize finished product inventory withoutfailing to meet their needs for volume and timeliness.

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    Discount-driven sales may generate a boost in sales. Such discounts can erode the companysprofit margins but will boost revenue and rate of inventory turnover. The company might looklike it is becoming leaner, when in fact it may simply be pushing products into the marketplaceusing artificial low pricing. However, before it can be done, the gross margins reported by thebusiness needs to be analyzed carefully. If gross margins decrease as a percentage of sales in

    spite of an increase in inventory turnover, they should not apply this policy. Supplier-financedinventory may reduce inventories and show improved inventory turnover by forcing suppliers tocarry the inventory for the company. The suppliers assume the cost of maintaining inventory andpasses that cost on. Alternatively, the company may reduce inventory by the use of expressshipment or other costly means of delivery to ensure the availability of materials and supplieswhen needed. Solutions of maintaining inventory that simply shift cost to suppliers return thecost in added mark-ups to the materials and supplies purchased. This results in a rise in unitproduct.

    2. The Days Sales Outstanding: The Days Sales Outstanding ratio shows both the average timeit 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.Days Sales Outstanding (DSO) = Trade Debtors / (Annual gross turnover/365)

    Following table shows the DSOs of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    DSO 54.02 days 54.61 days 55.04 days

    Analysis shows that DSO was 55.04 days in 2005; highest among the three years. In 2006, it was54.61 days and in 2007 it was 54.02 days; lowest among the three years.

    Since the DSO was the highest in 2005 that indicates that customers were taking longer times topay their bills, which may be a warning that customers were dissatisfied with the company'sproduct or service, or that salespeople were making sales to customers that are less credit-worthy, or that salespeople have to offer longer payment terms in order to seal the deal. Longcredit policy might be used deliberately to boost sales temporarily. Of course, it could also meanthat the company has an inefficient or overtaxed accounts receivables department. However, thesignificant improvement in 2007 signifies that the company collected its outstanding receivablesquicker than the previous years and that the credit terms are getting more realistic. It alsoconnotes that the company had greater control over quality of its customer relationshipmanagement (CRM) during the following year.

    3. Average payment period: The accounts payable turnover ratio includes all outstandingobligations that a company owes its creditors.

    Average Payment Period (APP) = Payables / (Cost of goods sold/365)

    Following table shows the APPs of Singer Bangladesh Ltd. in different years:

    Year 2007 2006

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    APP 51.28 days 36.21 days

    Analysis shows a gradual increase of companys average payment period. In 2006 the averagepayment period was 36.21 days, and then it became 51.28 days consecutively for the followingyear.

    The underlying reason for the ratio to go up is the significant increase of companys debt;especially short and long term Bank loans (which made the current portion of long-term loanshigh). Each year this amount is getting higher than the previous years. Furthermore, in 2006there was a huge sum trade credits unpaid. All these played key role for the payables to increase.A long payment period at first improves the company's liquidity, but my also be an indicator forliquidity problems. Therefore, it is important to keep the value equal or close to the averagevalue. Since the companys payment period is getting longer, i.e. the company pays too late, thenit means the liquidity problem of the company. The company probably lacks of the money to payits liability. Hence, questions may arise on the company's credit worthiness and paying habits. It

    has long been recognized that late payment of business debt is a serious problem for suppliers ofgoods and services. Late Payment can make it necessary for a company to increase borrowingand to extend overdraft facilities. Time and resources can be taken up on maintaining andcollecting late payments instead of being devoted to other areas of business.

    4. Fixed asset turnover ratio: The Fixed Asset Turnover ratio measures the effectiveness ingenerating Net Sales revenue from investments in Net Property, Plant, and Equipment back intothe company evaluates only the investments.

    Fixed assets turnover ratio (FATO) = Gross Turnover / Net fixed assets

    Following table shows the FATO ratios of Singer Bangladesh Ltd. in different years:

    Year 2007 2006

    FATO 7.96 times 5.96 times

    Analysis shows that the fixed asset turnover ratio was as high as 7.96 times among two years.However, it declined to 5.96 times in the following year. In 2007 the turnover somewhatincreased to 7.96 times.The rapid declination of turnover in 2006 occurred because sales did not keep pace with theincrease of companys fixed assets. Companys capital work-in-progress increased substantially

    in the year 2007. 2006 capital work-in-progress was also higher then the previous year. It mayhappen if the company was not being able to utilize its assets efficiently. However, conclusionsshould not be drawn solely on the numerical results of this ratio. A careful study on the balancesheet shows that large amount of investments were made during that year that inflate the dollarvolume of fixed assets, and give an impression of mismanagement. The case is applicable for the2005-06 as well. The turnover was lowest in 2006 only because no significant investments weremade during that period and the capital work-in-progress was lowest amongst the three years.Therefore, enough evidence is not available from this ratio analysis whether the company isreally performing inefficiently or it is the investments that pulled down the turnover. Perhapstotal asset turnover ratio can tell more about what really went wrong.

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    5. Total asset turnover ratio: The Total Asset Turnover is similar to fixed asset turnover sinceboth measures a company's effectiveness in generating sales revenue from investments back intothe company. Total Asset Turnover evaluates the efficiency of managing all of the company'sassets.

    Total assets turnover ratio (TATO) = Gross Turnover/Total Assets

    Following table shows the TATO ratios of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    TATO 7.96 times 5.96 times 7.48 times

    Analysis shows a gradual fall of companys total asset turnover. In 2005, it was 7.48 times,declined to 5.95 times in the following year and then again increases tremendously to 7.96 times

    in 2007.It may be an indicator of companys pricing strategy as company with high profit margins tendsto have low asset turnover. It is in fact might be one of the reasons for why the assets turnoverwas low in the year 2006. Profit margin go down from 7.48 % in 2005 to 5.96 % in the next year.However, there are other reasons as well. In 2006 total assets decreased by 5.96% while salesincreased by only 11.57%. Other than investment in marketable securities, every other assetespecially long-term investments, inventories, short-term loans and cash balance had gone upsubstantially. Same is the case for the year 2007 as sales could not keep up with assets. Long-term investment, capital work-in-progress, inventories, short-term loan was also high during thisyear. On the other hand, the profit margin was only 7.96%. So it could be concluded than higherprofit margin may not be the actual reason for the turnover to go down. Perhaps the company is

    not utilizing its assets efficiently.

    Debt Management Ratios of Singer Bangladesh Limited

    Debt Management Ratios

    Debt management ratios reveal 1) the extent to which the firm is financed with debt and 2) itslikelihood of defaulting on its debt obligations.

    1. Debt ratio: The ratio of total debt to total assets, generally called the debt ratio, measures thepercentage of funds provided by the creditors.

    Debt ratio = Total Debt / Total Assets

    Following table shows the Debt ratios of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    Debt ratio 31% 46% 37%

    Calculating the debt ratio, we came to see that this company is not that highly leveraged one. In2005, it was 37%, in 2006, it suddenly went up to 46%, and than again in 2007, it climbed down

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    to 31%. A little bit of fluctuation is seen here in debt management, which is actually nothing buttheir strategic move. The reason behind such fluctuation is better understandable form thebalance sheet. In 2006, the company has issued long-term loan, which happens to be BTD389,193,080 that is way too high than the previous years loan, which is BDT 36,544,158 thatactually increased the total debt thus resulting in a high debt ratio. Again, in the following year

    they paid off the loans and have not made any huge financing from outside which decreased.

    PROFITIBILITY RATIO:

    Profitability is the net result of a number of policies and decisions. Profitability ratios show thecombined effects of liquidity, asset management and debt on operating results.There are four important profitability ratios that we are going to analyze:

    1. Net Profit Margin2. Gross Profit Margin3. Return on Asset4. Return on Equity

    1. Net Profit Margin: Net Profit Margin gives us the net profit that the business is earning perdollar of sales. The equation is as follows:

    Net Profit margin = Net income available to the stockholders / gross turnover

    Following shows the Net Profit Margin of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    Net Profit Margin 2.86% 4.58% 2.83%

    Therefore, the Net Profit Margin was 2.83% in 2005, increase to 4.58% in 2006 and then againdecreased to 2.86% in 2007.The main reason that the profit margin declined is high cost. High cost, in turn, generally occursdue to inefficient operations. Profit margin also declined because in 2005-06 Singer BangladeshLtd. used a lot of long-term debt. This invariably resulted in more interest cost, which broughtthe Net income down.

    2. Gross Profit Margin: Gross Profit Margin gives us the amount of Gross profit a firm isearning per dollar of its sales. The equation is as follows:

    Gross Profit Margin (GPM) = Gross profit / Gross turnover

    Following shows the Gross Profit Margin of Singer Bangladesh Ltd. in different years:

    Year 2007 2006

    Gross Profit Margin 23.08% 7.88%

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    So, the Gross Profit Margin has remained pretty much stable throughout the whole two years. Itincreased tremendously each year. It indicates that Singer Bangladesh is managing its Sales andCost of Goods Sold very well.

    03.Return on Total Assets (ROA): Return of total asset measures the amount of Net Incomeearned by utilizing each dollar of Total Assets. The equation is:

    Return on Total Assets (ROA) = Net income available to total common shareholders / Total

    assets

    Following shows the Return on Total Assets of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    ROA 13.27% 17.07% 8.55%

    So, return on total assets decreased gradually throughout the years. This may have occurredbecause Singer used more debt financing in 2007 and 2005 compared to 2006 which resulted inmore interest cost and brought the Net income down.

    4. Return on Equity (ROE): Return on Equity measures the amount of Net Income earned byutilizing 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. Theequation is:

    Return on Equity (ROE) = Net income available to common shareholders / Total common equity

    Following shows the Return on equity of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    Return on Equity 27.30% 35.42% 21.11%

    Therefore, the Return on Equity increased in 2006 but decreased a little in 2007. This again mayhave happened due to the issue of more long-term debt in 2007.

    Market Value Ratios of Singer Bangladesh Limited

    MARKET VALUE RATIOSThe final group of ratios, the market value ratios relates the firms stock price to its earnings andbook value per share. These ratios give management an indication of what investors think of thecompanys past performance and future prospects. In this section, we are going to have adiscussion mainly on two types of ratios:

    1. Price/ Earnings ratio2. Market/ Book ratio

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    1. Price/ Earnings ratio: The Price/ Earnings ratio (price-to-earnings ratio) of a stock is ameasure of the price paid for a share relative to the income or profit earned by the firm per share.

    P/E ratio - Price per share / earnings per share

    2. Market/ Book ratio: The ratio of book value to market value of stocks.

    Market/Book ratio (M/B) = Market price per share / Book value per share

    Following table shows the P/E and M/B ratios of Singer Bangladesh Ltd. in different years:

    Year 2007 2006 2005

    P/E Ratio 31.02 times 11.04 times 34.59 times

    M/B ratio 1.77 times 2.92 times 1.78 times

    The P/E ratio was 34.59 times in 2005 and decreased further to as 11.04 times in the following

    year. However, in 2007 it increased to 31.02 times which is an alarming signal for the potentialinvestors.The M/B ratio was 1.78 times in 2005 and increased further to 2.92 times in the following yearwhich was excellent to draw the attention of investors. However, in 2007 it became as same as2005 value.

    The main reason behind the declination of P/E and M/B ratio is the fall of price per share. Priceof share may fall for several reasons. Failing to meet market expectations is one of the mainreasons for the market to lose interest in a share. Shares are usually valued according to whatinvestors reckon the company will do in future. Therefore, when a business fails to meet thoseexpectations then it is not unreasonable for investors to reconsider their position. We can see this

    fact applicable for this company too. As the company was doing well in 2006, the share pricewas higher than among the three years. Interestingly, the impact on shares depends to a largedegree on the influence that they have on the market as well. During 2007 financial year thecapital market situation deteriorated to the level that the DSE General Index fell by 14.91%. Theoverall hostile market situation put a negative impact on Singer Bangladesh stock price too.Therefore, the investors should not be concerned much about the particular companys P/E andM/B ratio.

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    Overview of Electronics Industry of Bangladesh

    1. Sector Highlights

    o Rapid urbanization, migrations to urban centers and emergence of a consumingmiddle class have resulted in a modest growth in home appliance usage inBangladesh.

    o Global market of semi-conductor amounting about US$ 200 billion is clearly

    dominated by the Asian NIEs.o Manufacturing of semi-conductors could be established as a potential cottage

    industry.o Since 1996, phenomenal growth in cellular phone usage in Bangladesh has been

    registered and today, the number of customers reached at nearly two million.o The labor-intensiveness nature of electronic industry highly matches with the

    Bangladeshs competitiveness and invites foreign investment in this sector.

    2. Industry Background

    The electronics industry in Bangladesh mostly produces consumer items. Homeappliances like television, radio, VCD and CD players, refrigerator, air conditioners,oven, electronic fan, blenders etc. are being assembled to a large extent. To ensure theperformance reliability, the key challenges in this sector are technical assistance andproper technology orientation of the industry. Developing the significant capacity and

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    skill in assembly and manufacture of a wide range of electronic components and parts iscrucial.

    As yet, Bangladesh does not have any telecommunication equipment industry in theprivate sector. However, an urgent need for diversification and modernization is felt

    among the existing entrepreneurs, government and professionals. Government is keen toprovide and ensure enabling assistance to the development of this sector.

    3. Industry Outlook and Opportunities

    Skilled, easily trainable and low-cost human resources are the main cost advantage ofsetting up electronic industry in Bangladesh. Growing domestic demand and internationalmarket access are some key attractive issues to the investors. In the economies likeMalaysia, Singapore, Korea and Thailand, electronics contribute a major portion in theGDP. They are encouraging electronic industry to shift from low-end assembly

    operations with high import content of inputs to upstream higher- value-added activities.In this context, relocation, outward investment and joint venture with Bangladeshicompanies could be gainful strategies. To capitalize on the comparative advantages,substantial foreign investment from those countries is highly encouraged.

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    Findings

    After analyzing all the ratios and comparing the industry average we have found out thefollowing information (Industry average are collected from the website of the Securities andExchange Commission of Bangladesh):

    1. Liquidity Ratios: In the liquidity ratio we can see that both current ratio and quick ratioimproved over time marginally. The situation was almost stable.

    2. Asset Management Ratios: Inventory turnover, Total Asset Turnover, Fixed Asset Turnover

    all had been relatively stable throughout the three years. Average Collection period is also verygood. The only problem here is the Average collection period which is way high. However, sucha situation is actually pretty much normal for big companies.

    3. Debt Management Ratios: Here Debt ratio has improved over time and TIE has remainedpretty much stable.

    4. Profitability Ratios: Apart from Gross Profit Ratio, most of the Profitability ratios haveactually decreased in 2007. Although the decrease rate is very minimal still it is a problem forSinger and they need to try to improve these ratios.

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    5. Market Value Ratios: Both P/E ratio and M/B ratio declined in the year 2007. But thishappened mostly not because of the companys failure but for the fact that the whole market wasnot so friendly for investment in that year.

    From the total analysis, we can summarize that Singer Bangladesh Ltd. Ltd. has been doingpretty good through out the years. It is true that last year there return did decline but it is stillpretty much satisfactory. Therefore, we can conclude that Singer Bangladesh Ltd. Ltd. is a good

    enough company to invest on.

    Compare with the Industry Average

    With collection of the industry overview and various position of the others competitors in theelectronics industry like the MNC as SONY, RANGS, ELECTRA, FLOFA Limited and othersSINGER able to make a precious impact on the customers of the industry as a whole. Here thecalculation shows that the averages of the electronics industry are good in position rather than

    others. But still the company struggling in the several sectors due to inflation and otherseconomic and social factors.

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    Conclusion

    Singer Bangladesh has a unique retail network. Its products are sold through 230 outlets acrossthe country. These are strategically located all over Bangladesh. Singer is the only company inthe country with such an extensive retail network. As a retail company, marketing consumerdurable products, Singers efforts have been focused on the store-merchandising concept. Thecompany has successfully given a different perspective to all the retail stores keeping in mindwhat makes up for a good shopping experience. Singer pioneered the concept of selling products

    on an easy installment plan in Bangladesh. Under the scheme, Singer products are offered tocustomers who need specific services but do not have enough cash to pay at a time.

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    References

    1. Annual Report-2007, Singer Bangladesh Limited.

    2. www.singerbd.com, official website of the singer Bangladesh limited, log-on 25th August,2008.

    3. Weygandt, J. J., Kieso, D. E., and Kimmel, P. D. Accounting Principles. 7th edition.

    John Wiley & sons, Inc. 2005

    4. Kieso, D. E., Weygandt, J. J., and Warfield, T. D. Intermediate Accounting.-11th

    edition. John Wiley & Sons, Inc. 2004

    5. www.boi.gov.bd, official website of the Board of Investment of Bangladesh govt. log-on25th August, 2008.

    6. www.sec.gov.bd, official website of the Securities and Exchange Commission ofBangladesh, log-on 25th August, 2008.

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