introduction to ratio analysis final

8/13/2019 Introduction to Ratio Analysis Final

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1.1 Introduction to ratio analysis:

Financial information is always prepared to satisfy in some way the needs of various

interested parties (the "users of accounts"). Stakeholders in the business (whether they are

internal or external to the business) seek information to find out three fundamental questions:

(1) How is the business trading?

(2) How strong is the financial position?

(3) What are the future prospects for the business?

For outsiders, published financial accounts are an important source of information to enable

them to answer the above questions.

To some degree or other, all interested parties will want to ask questions about financial

information which is likely to fall into one or other of the following categories, and be about:

Performance Area Key Issues

Profitability Is the business making a profit?

How efficient is the business at turning revenues into profit?

Is it enough to finance reinvestment?

Is it growing?

Is it sustainable (high quality)?

How does it compare with the rest of the industry?

Financial efficiency Is the business making best use of its resources?

Is it generating adequate returns from its investments?

Is it managing its working capital properly?

Liquidity and

gearing

Is the business able to meet its short-term debts as they fall due?

Is the business generating enough cash?

Does the business need to raise further finance?

How risky is the finance structure of the business?

Shareholder return What returns are owners gaining from their investment in the business?

How does this compare with similar, alternative investments in other

businesses?

1. Introduction


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2.1 Definition of 'Ratio Analysis':

A tool used by individuals to conduct a quantitative analysis of information in a

company's financial statements. Ratios are calculated from current year numbers and are then

compared to previous years, other companies, the industry, or even the economy to judge the

performance of the company. Ratio analysis is predominately used by proponents of

fundamental analysis.

A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical

values taken from an enterprise's financial statements. Often used in accounting, there are

many standard ratios used to try to evaluate the overall financial condition of a corporation or

other organization. Financial ratios may be used by managers within a firm, by current and

potential shareholders (owners) of a firm, and by a firm's creditors. Security analysts use

financial ratios to compare the strengths and weaknesses in various companies. If shares in a

company are traded in a financial market, the market price of the shares is used in certain

financial ratios.

Ratios can be expressed as adecimal value, such as 0.10, or given as an equivalentpercent

value, such as 10%. Some ratios are usually quoted as percentages, especially ratios that are

usually or always less than 1, such as earnings yield, while others are usually quoted as

decimal numbers, especially ratios that are usually more than 1, such asP/E ratio;these latter

are also called multiples. Given any ratio, one can take itsreciprocal;if the ratio was above 1,

the reciprocal will be below 1, and conversely. The reciprocal expresses the same

information, but may be more understandable: for instance, the earnings yield can be

compared with bond yields, while the P/E ratio cannot be: for example, a P/E ratio of 20

corresponds to an earnings yield of 5%.

2.2 Sources of data for financial ratios:

Values used in calculating financial ratios are taken from the balance sheet, income

statement,statement of cash flows or (sometimes) thestatement of retained earnings.These

2. Literature Review
http://en.wikipedia.org/wiki/Financial_statementhttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Financial_analysthttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Decimal_separatorhttp://en.wikipedia.org/wiki/Percenthttp://en.wikipedia.org/wiki/Earnings_yieldhttp://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Reciprocal_%28mathematics%29http://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Statement_of_cash_flowshttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Statement_of_retained_earningshttp://en.wikipedia.org/wiki/Statement_of_cash_flowshttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Income_statementhttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Reciprocal_%28mathematics%29http://en.wikipedia.org/wiki/P/E_ratiohttp://en.wikipedia.org/wiki/Earnings_yieldhttp://en.wikipedia.org/wiki/Percenthttp://en.wikipedia.org/wiki/Decimal_separatorhttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Financial_analysthttp://en.wikipedia.org/wiki/Creditorhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Financial_statement


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comprise the firm's "accounting statements" or financial statements.The statements' data is

based on the accounting method and accounting standards used by the organization.

2.3 Purpose and types of ratios:

Financial ratios quantify many aspects of a business and are an integral part of the financial

statement analysis.Financial ratios are categorized according to the financial aspect of the

business which the ratio measures. Liquidity ratios measure the availability of cash to pay

debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets.Debt

ratios measure the firm's ability to repay long-term debt. Profitability ratios measure the

firm's use of its assets and control of its expenses to generate an acceptable rate of return.

Market ratios measure investor response to owning a company's stock and also the cost of

issuing stock. These are concerned with the return on investment for shareholders, and with

the relationship between return and the value of an investment in companys shares.

Financial ratios allow for comparisons

between companies between industries between different time periods for one company between a single company and its industry average

Ratios generally hold no meaning unless they arebenchmarked against something else, like

past performance or another company. Thus, the ratios of firms in different industries, which

face different risks, capital requirements, and competition, are usually hard to compare.

2.4 Accounting methods and principles:

Financial ratios may not be directly comparable between companies that use different

accounting methods or follow variousstandard accounting practices.Mostpublic companies

are required by law to usegenerally accepted accounting principles for their home countries,

but private companies,partnerships and sole proprietorships may not use accrual basis

accounting. Large multi-national corporations may use International Financial Reporting

Standards to produce their financial statements, or they may use the generally accepted

accounting principles of their home country.
http://en.wikipedia.org/wiki/Financial_statementshttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Benchmarkinghttp://en.wikipedia.org/wiki/Accounting_methodshttp://en.wikipedia.org/wiki/Standard_accounting_practicehttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Generally_accepted_accounting_principleshttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standardshttp://en.wikipedia.org/wiki/Sole_proprietorshiphttp://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Private_companyhttp://en.wikipedia.org/wiki/Generally_accepted_accounting_principleshttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Standard_accounting_practicehttp://en.wikipedia.org/wiki/Accounting_methodshttp://en.wikipedia.org/wiki/Benchmarkinghttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Financial_statement_analysishttp://en.wikipedia.org/wiki/Financial_statements


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There is no international standard for calculating the summary data presented in all financial

statements, and the terminology is not always consistent between companies, industries,

countries and time periods.

2.5 Abbreviations and terminology:

Various abbreviations may be used in financial statements, especially financial statements

summarized on the Internet. Sales reported by a firm are usually net sales, which deduct

returns, allowances, and early payment discounts from the charge on aninvoice.Net income

is always the amount after taxes, depreciation, amortization, and interest, unless otherwise

stated. Otherwise, the amount would be EBIT, or EBITDA (see below).

Companies that are primarily involved in providing services with labor do not generally

report "Sales" based on hours. These companies tend to report "revenue" based on the

monetary value of income that the services provide.

Note that Shareholder's Equity and Owner's Equity are not the same thing, Shareholder's

Equity represents the total number of shares in the company multiplied by each share's book

value; Owner's Equity represents the total number of shares that an individual shareholder

owns (usually the owner withcontrolling interest), multiplied by each share's book value. It is

important to make this distinction when calculating ratios.

2.6 Other abbreviations:

(Note: These are not ratios, but values in currency.)

COGS = Cost of goods sold, or cost of sales. EBIT =Earningsbeforeinterest andtaxes EBITDA = Earnings before interest, taxes,depreciation,andamortization EPS = Earnings per share
http://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Sales_%28accounting%29http://en.wikipedia.org/wiki/Net_saleshttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/EBIThttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Taxeshttp://en.wikipedia.org/wiki/EBITDAhttp://en.wikipedia.org/wiki/Depreciationhttp://en.wikipedia.org/wiki/Amortizationhttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Amortizationhttp://en.wikipedia.org/wiki/Depreciationhttp://en.wikipedia.org/wiki/EBITDAhttp://en.wikipedia.org/wiki/Taxeshttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/EBIThttp://en.wikipedia.org/wiki/Cost_of_goods_soldhttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Net_saleshttp://en.wikipedia.org/wiki/Sales_%28accounting%29http://en.wikipedia.org/wiki/Internet


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2.7 Ratios:

2.7.1 Profitability ratios:

Profitability ratios measure the company's use of its assets and control of its expenses to

generate an acceptable rate of return

Gross profit marginor Gross Profit Rate

OR

Operating Income Margin, Operating profit marginor Return on sales(ROS)

Note: Operating income is the difference between operating revenues and operating expenses,

but it is also sometimes used as a synonym for EBIT and operating profit. This is true if the

firm has no non-operating income. (Earnings before interest and taxes / Sales)

Profit margin,net margin or net profit margin

Return on equity (ROE)

Return on investment (ROI ratio orDu Pont Ratio)
http://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Profit_marginhttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Return_on_investmenthttp://en.wikipedia.org/wiki/Du_Pont_Ratiohttp://en.wikipedia.org/wiki/Du_Pont_Ratiohttp://en.wikipedia.org/wiki/Return_on_investmenthttp://en.wikipedia.org/wiki/Return_on_equityhttp://en.wikipedia.org/wiki/Profit_marginhttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxes


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Return on assets (ROA)

Return on assets Du Pont (ROA Du Pont)

Return on Equity Du Pont (ROE Du Pont)

Return on net assets (RONA)

Return on capital (ROC)

Risk adjusted return on capital (RAROC)

OR

Return on capital employed (ROCE)

Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's Equity

Cash flow return on investment (CFROI)

Efficiency ratio
http://en.wikipedia.org/wiki/Return_on_assetshttp://en.wikipedia.org/wiki/Return_on_assets_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_Equity_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_net_assetshttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Risk_adjusted_return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_capital_employedhttp://en.wikipedia.org/wiki/Cash_flow_return_on_investmenthttp://en.wikipedia.org/wiki/Efficiency_ratiohttp://en.wikipedia.org/wiki/Efficiency_ratiohttp://en.wikipedia.org/wiki/Cash_flow_return_on_investmenthttp://en.wikipedia.org/wiki/Return_on_capital_employedhttp://en.wikipedia.org/wiki/Risk_adjusted_return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_capitalhttp://en.wikipedia.org/wiki/Return_on_net_assetshttp://en.wikipedia.org/wiki/Return_on_Equity_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_assets_Du_Ponthttp://en.wikipedia.org/wiki/Return_on_assets


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Net gearing

Basic Earnings Power Ratio

2.7.2 Liquidity ratios:

Liquidity ratios measure the availability of cash to pay debt.

Current ratio (Working Capital Ratio)

Acid-test ratio (Quick ratio)

Cash ratio

Operation cash flow ratio

2.7.3 Activity ratios (Efficiency Ratios):

Activity ratios measure the effectiveness of the firms use of resources.

Average collection period

Degree of Operating Leverage (DOL)
http://en.wikipedia.org/w/index.php?title=Net_gearing&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Basic_Earnings_Power_Ratio&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Basic_Earnings_Power_Ratio&action=edit&redlink=1http://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/wiki/Current_ratiohttp://en.wikipedia.org/wiki/Current_ratiohttp://en.wikipedia.org/wiki/Quick_ratiohttp://en.wikipedia.org/wiki/Cash_ratiohttp://en.wikipedia.org/wiki/Operating_cash_flowhttp://en.wikipedia.org/wiki/Debtor_collection_periodhttp://en.wikipedia.org/w/index.php?title=Degree_of_Operating_Leverage&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Degree_of_Operating_Leverage&action=edit&redlink=1http://en.wikipedia.org/wiki/Debtor_collection_periodhttp://en.wikipedia.org/wiki/Operating_cash_flowhttp://en.wikipedia.org/wiki/Cash_ratiohttp://en.wikipedia.org/wiki/Quick_ratiohttp://en.wikipedia.org/wiki/Current_ratiohttp://en.wikipedia.org/wiki/Accounting_liquidityhttp://en.wikipedia.org/w/index.php?title=Basic_Earnings_Power_Ratio&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Net_gearing&action=edit&redlink=1


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DSO Ratio

Average payment period

Asset turnover

Stock turnover ratio

Receivables Turnover Ratio

Inventory conversion ratio

Inventory conversion period (essentially same thing as above)

Receivables conversion period

Payables conversion period

Cash Conversion Cycle

Inventory Conversion Period + Receivables Conversion Period - Payables Conversion

Period
http://en.wikipedia.org/wiki/DSO_Ratiohttp://en.wikipedia.org/w/index.php?title=Average_payment_period&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Average_payment_period&action=edit&redlink=1http://en.wikipedia.org/wiki/Asset_turnoverhttp://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Receivables_Turnover_Ratiohttp://en.wikipedia.org/wiki/Receivables_Turnover_Ratiohttp://en.wikipedia.org/w/index.php?title=Inventory_conversion&action=edit&redlink=1http://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/wiki/Cash_conversion_cyclehttp://en.wikipedia.org/w/index.php?title=Inventory_conversion&action=edit&redlink=1http://en.wikipedia.org/wiki/Receivables_Turnover_Ratiohttp://en.wikipedia.org/wiki/Stock_turnoverhttp://en.wikipedia.org/wiki/Asset_turnoverhttp://en.wikipedia.org/w/index.php?title=Average_payment_period&action=edit&redlink=1http://en.wikipedia.org/wiki/DSO_Ratio


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2.7.4 Debt ratios (leveraging ratios):

Debt ratios measure the firm's ability to repay long-term debt. Debt ratios measure financial

leverage.

Debt ratio

Debt to equity ratio

Long-term Debt to equity (LT Debt to Equity)

Times interest-earned ratio / Interest Coverage Ratio

OR

Debt service coverage ratio

2.7.5 Market ratios:

Market ratios measure investor response to owning a company's stock and also the cost of

issuing stock. These are concerned with the return on investment for shareholders, and with

the relationship between return and the value of an investment in companys shares.

Earnings per share (EPS)
http://en.wikipedia.org/wiki/Leverage_%28finance%29http://en.wikipedia.org/wiki/Leverage_%28finance%29http://en.wikipedia.org/wiki/Debt_ratiohttp://en.wikipedia.org/wiki/Debt_ratiohttp://en.wikipedia.org/wiki/Debt_to_equity_ratiohttp://en.wikipedia.org/w/index.php?title=Long-term_Debt_to_equity&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Times_interest-earned_ratio_/_Interest_Coverage_Ratio&action=edit&redlink=1http://en.wikipedia.org/wiki/Debt_service_coverage_ratiohttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/wiki/Debt_service_coverage_ratiohttp://en.wikipedia.org/w/index.php?title=Times_interest-earned_ratio_/_Interest_Coverage_Ratio&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Long-term_Debt_to_equity&action=edit&redlink=1http://en.wikipedia.org/wiki/Debt_to_equity_ratiohttp://en.wikipedia.org/wiki/Debt_ratiohttp://en.wikipedia.org/wiki/Leverage_%28finance%29http://en.wikipedia.org/wiki/Leverage_%28finance%29


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Payout ratio

OR

Dividend cover (the inverse of Payout Ratio)

P/E ratio

Dividend yield

Cash flow ratio orPrice/cash flow ratio

Price to book value ratio (P/B or PBV)

Price/sales ratio

PEG ratio

2.7.5.1 Other Market Ratios:

EV/EBITDA

EV/Sales
http://en.wikipedia.org/wiki/Payout_ratiohttp://en.wikipedia.org/wiki/Dividend_coverhttp://en.wikipedia.org/wiki/PE_ratiohttp://en.wikipedia.org/wiki/Dividend_yieldhttp://en.wikipedia.org/wiki/Price/cash_flow_ratiohttp://en.wikipedia.org/wiki/P/B_ratiohttp://en.wikipedia.org/wiki/Price/sales_ratiohttp://en.wikipedia.org/wiki/PEG_ratiohttp://en.wikipedia.org/wiki/EV/EBITDAhttp://en.wikipedia.org/wiki/EV/Saleshttp://en.wikipedia.org/wiki/EV/Saleshttp://en.wikipedia.org/wiki/EV/EBITDAhttp://en.wikipedia.org/wiki/PEG_ratiohttp://en.wikipedia.org/wiki/Price/sales_ratiohttp://en.wikipedia.org/wiki/P/B_ratiohttp://en.wikipedia.org/wiki/Price/cash_flow_ratiohttp://en.wikipedia.org/wiki/Dividend_yieldhttp://en.wikipedia.org/wiki/PE_ratiohttp://en.wikipedia.org/wiki/Dividend_coverhttp://en.wikipedia.org/wiki/Payout_ratio


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Summit Power Limited

3.1 Organizational Profile of Summit Power Ltd.:

Company Name: Summit Power Limited

Registered Address: Summit Centre (9th Floor), 18 Karwan Bazar, Dhaka-1215

Plant

Addresses:

Paid Up Capital: Tk. 3,033,539,730 (Ordinary Shares)

Sponsors: Summit Industrial and Mercantile Corporation (Pvt.) Ltd. & Euro Hub

Investments Ltd.

Off taker: Bangladesh Power Development Board (BPDB), Rural Electrification Board

Number of Employees: 144

Total electric output: 317 MW

Engine type: CATERPILLER G3616, CATERPILLER G3516, Wrtsil 16V34SG,

Wrtsil 20V34SG, Wrtsil 18V46GD, GE JGS 620 GS-NL

Year of Starting Commercial Operation: 2001

3. Organization Profile

Ashulia, Savar 45 MW

Madhabdi, Narshingdi 35 MW

Chandina, Comilla 25 MW

Ullapara, Sirajganj 11 MW

Maona, Gazipur 33 MW

Jangalia, Comilla 33 MW

Rupgonj, Narayanganj 33 MW

Madanganj, Narayanganj 102 MW


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3.1.2 History of Summit Power Ltd.:

Summit Power Limited (SPL),sponsored by Summit Group, is the first Bangladeshi

Independent Power Producer (IPP) in Bangladesh in private sector providing power to

national grid. SPL was incorporated in Bangladesh on March 30, 1997 as a Private Limited

Company. On June 7, 2004 the Company was converted to Public Limited Company under

the Companies Act 1994.

Summit Power Limited in the year 2001, has successfully established three power plants of

11 MW capacity each, for sale of electricity to Rural Electrification Board (REB) on Build,

Own and Operate basis at Savar, Narsingdi and Comilla. During 2006 and 2007 in each of the

above three places, 2nd unit was commissioned enhancing the capacity of SPL to 105 MW.

In 2009 SPL with its 99% owned two subsidiaries has established 4 new power plants raising

its capacity to 215 MW. In 2011 SPL has commissioned another power plant of 102 MW

capacity at Narayanganj under Summit Narayanganj Power Limited, where SPL has 55%

ownership.

In association with its parent company Summit Industrial & Mercantile Corporation (Pvt.)

Ltd. (SIMCL), SPL has also participated and became lowest bidder in three more power

plants tender and expected to sign contracts with BPDB for establishment of 52 MW SummitShantahar, 104 MW Summit Saidpur and 104 MW Summit Amin Bazar Power Plants. These

are 15 years term IPP is expected to be commissioned by 3rd quarter of 2012.

Considering the immense opportunities, the company is striving to establish more power

plants around the country. The fast-growing company has set a mission to expand the

company with a power generation capacity to the tune of 1000 MW, which is a modest 20%

of the electricity requirement in Bangladesh.

3.1.3 Our Vision:

To provide quality & uninterrupted electricity to the vast majority of rural Bangladesh for

their personal, social & economic development.


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3.1.4 Our Mission:

"Empowering Bangladesh, we can & we will." To expand the company into a power

generation capacity to the tune of 1000 MW this is 20% of the electricity requirement of

Bangladesh and maintains that level.

3.1.5 Our Quality Policy:

We are committed to generate and provide uninterrupted supply of electricity to our

customers as per their demand by meeting all the requirements of Power Purchase

Agreements signed between the company and the valued Customer.

We integrate the philosophy of "Pioneering Sprit" with "Continuous Improvement" by

efficient utilization of Capital, Machines, Materials and Human Resources.


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Titas Gas Transmission and Distribution Company

Limited

3.2 Historical Background of Titas Gas Transmission and Distribution Co.Ltd.:

The history of the use of Natural Gas as a source of energy and feed-stock in Bangladesh

dates back to early sixtys. Haripur Gas Field, discovered in Sylhet district in the year 1955,

cameinto commercial production in 1961 with the supply of gas to Natural Gas Fertilizer

Factory (NGFL) at Fenchuganj by 28 miles 8 DN pipeline. The Chatak Gas Field,

discovered in 1959 was brought into commercial production with commencement of gas

supply to Chatak Cement Factory in 1960 by 12 miles long transmission pipeline.

Titas Gas T & D Co. Ltd. (TGTDCL) was formed in November 1964 as a joint Stock

Company (Under the Companys Act 1913) of the central Government of Pakistan on the one

hand and Pakistan Shell Oil Company on the other, with a view to transmitting and

distributing natural gas to the Dhaka city the then provincial capital of Pakistan from the

discovered gas field called Titas located on the bank of the River Titas, within the close

vicinity of the present Brahmanbaria district of Bangladesh. The authorized capital was Taka

17.8 million only, divided into 17800 shares of Taka 10.00 each. Ninety percent of the shares

were subscribed by the then central Government of Pakistan and remaining ten percent by the

Shell Oil Company.

The basic objective of the Company was to construct, own and operate natural gas

transmission & distribution facilities in the mid-eastern region of Bangladesh i.e. Comilla,

Mymensingh and Dhaka district with the right of purchasing, transmission, distribution, sales

and disposal of natural gas within the jurisdiction of greater districts before creation of newdistricts.


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In December 1971, after nine months of liberation war, Bangladesh emerged in the world

map as a new independent state with the same geographical boundary of the then East

Pakistan. Plunged into a state of total economic collapse following the war of liberation,

vigorous activities were immediately started at all levels to rebuild the country. Certain

national priorities were set by the then Govt. and significant changes were brought about in

the management of development activities. A no. of Sector or Corporations were formed and

each of them was entrusted with the operation and management of the units under it. In

March 26, 1972 Govt. has formed Bangladesh Oil, Gas & Mineral Corporation (BOGMC)

under the Presidential Executive Order and Titas Gas T&D Co. Ltd. has become an enterprise

of BOGMC. Titas Gas T&D Co. Ltd. which was earlier established as a joint stock company

with 90% share capital of the Govt. of Pakistan naturally vested to the Govt. of the Peoples

Republic of Bangladesh and the rest 10% share capital of Pakistan Shell Oil Company was

transferred to the newly formed Bangladesh Shell Oil Company. During 1975, under the

nationalization program, Govt. has brought back 10% share of Shell Oil Co. and Titas Gas

T&D Co. Ltd. has become a 100% Government owned Company. Meanwhile, during

August1974, Bangladesh Oil & Gas Corporation/Petrobangla and during October 1975,

Ministry of Energy & Mineral Resources had been formed. TGTDCL has been placed under

the administrative control of the newly formed ministry along with Petrobangla and its

subsidiary Companys.

The gas supply area of the Company has been extended to new areas of Greater Dhaka,

Greater Mymensingh and Brahmanbaria which includes Dhaka Metropolitan city & suburbs,

Tongi, Joydevpur, Gazipur, Mirzapur, Tangail, Savar, Dhamrai, Manikaganj, Aricha,

Narayanganj, Sonargaon, Rupganj, Araihazar, Jinjira, Keraniganj, Munshiganj, Mirkadim,

Brahmanbaria, Bhairab Bazar, Ashuganj, Narsingdi, Ghorashal, Madhabdi, Sreepur,

Mymensingh, Netrokona, Jamalpur, Sherpur, Kishoreganj, Tarakandi, Bhaluka, Trishal &Gaffergaon. Presently, Titas system is receiving gas from Titas, Habiganj, Narsingdi &

Bakhrabad Gas Fields under Bangladesh Gas Fields Co. Ltd. and from Rashidpur,

Kailashtila, Beanibazar Gas Fields under Sylhet Gas Fields Co. Ltd. and Jalalabad Gas Field

of Oxydental/Unicol.

The Company own and operate 735 Km of Transmission pipelines (6DN thru 24 DN) and

7585 Km of Distribution & Service lines (3/4DN thru 12DN).


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Presently, in Titas System the Daily average offtake of gas is 800 Million Cubic Feet

(MMCF) and the yearly Revenue Earnings is Tk. 24000 million. The Company has so far

given gas connection to around 9,73,419 customers (17 Power stations, 4 Fertilizer factories,

2953 Industrial units, 7832 Commercial units, 152 Seasonal units, 55 CNG and 968016

Domestic customers). TGTDCL alone is saving a sum of over Tk.22000.00 Million annually

on fuel import bill of the country other than its payment to National Exchequer in the form of

Excise Duty, CD/VAT, Corporate Tax and Dividend. At Present, there are 2642 Employees

(660 Officers and 1982 Staffs) serving in the Company, among which 205 are foreign trained

Graduate Engineers, Economists and Accountants.

Among the four gas marketing Companies the market share of business of TGTDCL is 70 %

of which Power, Fertilizer, Industrial, Commercial, Domestic and Seasonal are 48.20 %,

18.97 %, 20.28 %, 1.04 %, 11.56 % and 0.13 % respectively.

The company operates from its own office complex at Titas Bhaban, Kawranbazar C/A, that

is in the centrally located business area of Dhaka Metropolitan City. The office is fully

furnished with all modern office facilities and logistics. The office is also equipped with

security system with modern digital telephone, Fax, SCADA as well as electronic mail.

With the increased shape the authorized and paid-up capital of the Company has increased to

Tk. 2000 million and 1507.30 million. Titas Gas is now a household name for its uses in

the houses, Power plants, Industries, hotels and restaurants. And as raw materials to the

Fertilizer factories, it is helping attain autarky in food and other agricultural products.

TGTDCL has, by its own right and merit, earned the reputation as well the capacity to

undertake any major project in Gas Engineering, Pipeline Construction, Operation and

Maintenance thereof and also in the marketing of gas in the country.


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Jamuna Oil Company Limited

3.3 Organizational Profile of Jamuna Oil Ltd.:

Company Name:Jamuna Oil Company LTD (JOCL)

Type:Public (DSE:JOCL)

Industry:Petroleum

Founded:1964 HeadquartersChittagong,Bangladesh

Area served:National

Products:Oil,Petrol,Octane,Diesel,Kerosene

Revenue: BDT 489.4 million (2011)

Operating income: BDT 179.3 million (2011)

Net income: BDT 128.7 million (2011)

Employees:591 (2005)

Website:jamunaoil.gov.bd

3.3.1 Historical Background of Jamuna Oil Ltd.:

In 1964 Pakistan National Oil Limited (PNOL), the maiden National Oil Company of the

then Pakistan was established as a private limited company. The company started functioning

with an authorized capital of Tk.2.00 crore. After the Independence of Bangladesh in 1971the Government of the Peoples Republic of Bangladesh acquired the assets and liabilities of
http://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Types_of_business_entityhttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Dhaka_Stock_Exchangehttp://www.mydse.com/Details_Company.php?ID=132http://en.wikipedia.org/wiki/List_of_petroleum_companieshttp://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Oilhttp://en.wikipedia.org/wiki/Petrolhttp://en.wikipedia.org/wiki/Octanehttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Kerosenehttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://www.jamunaoil.gov.bd/http://www.jamunaoil.gov.bd/http://www.jamunaoil.gov.bd/http://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Bangladeshi_takahttp://en.wikipedia.org/wiki/Kerosenehttp://en.wikipedia.org/wiki/Diesel_fuelhttp://en.wikipedia.org/wiki/Octanehttp://en.wikipedia.org/wiki/Petrolhttp://en.wikipedia.org/wiki/Oilhttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Chittagonghttp://en.wikipedia.org/wiki/List_of_petroleum_companieshttp://www.mydse.com/Details_Company.php?ID=132http://en.wikipedia.org/wiki/Dhaka_Stock_Exchangehttp://en.wikipedia.org/wiki/Public_companyhttp://en.wikipedia.org/wiki/Types_of_business_entity


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Pakistan National Oil Limited by virtue of Bangladesh Abandoned Property (control,

Management & Disposal) Order, 1972 (P. O. No. 16 of 1972) and the Company was renamed

as Bangladesh National Oil Limited. The Company has been finally renamed as Jamuna Oil

Company Limited (JOCL) by the Government on 13 January, 1973. At that time the company

was operated by an adhoc committee called Oil Companies Advisory Committee (OCAC)

under Petrobangla, constitute by the notification No. 21 m-4/76 (NR) dated 21-4-73, M/O.

Natural Resources. Jamuna Oil Company Limited was registered with the registrar of Joint

Stock Companies & Firms as fully Government owned Private Limited Company on 12

March, 1975 under Companies Act 1913 with authorized capital of Tk. 10.00 crore and paid-

up capital of Tk. 5.00 crore. Subsequently, in the year 1976 the assets and liabilities of the

Company were transferred & handed over to Bangladesh Petroleum Corporation (BPC) as

per schedule stated in clause 31(c) of BPC Ordinance No. LXXXVIII (published in

Bangladesh Gazette extra ordinary on 13 November, 1976). Since then Jamuna Oil Company

Limited has been functioning as a Subsidiary of BPC. On 1 January, 1986 all assets and

liabilities of Indo-Burmah Petroleum Company Limited (IBPCL) were transferred to the

Company.

In 2005-2006 FY the paid-up capital of the company was increased to Tk. 10.00 crore from

Tk. 5.00 crore by issuing of bonus share out of its profit. The company was converted into a

Public Limited Company from a Private Limited Company on 25 June, 2007 and its

authorized capital was increased to Tk. 300.00 crore. On 10 August, 2007 the paid-up capital

of the company was increased to Tk.45.00 crore by issuing bonus share of Tk. 35.00 crore.

The company was enlisted with Dhaka Stock Exchange Limited and Chittagong Stock

Exchange Limited on 9 January, 2008 with a view to off-load 1.35 crore shares of Tk.10.00

each under direct listing procedure and accordingly the shares of the company were off-

loaded in the capital market.There is a Board of Directors constituting of 9 members to run

the Company. The overall activities of the company are performed with the approval of the

Board of Directors. The company implements the Government policies as per the guidance

and directives of BPC from time to time.


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20

4.1 Calculation:

Measuring and evaluating the Financial Statement and Dividend Policy, in Energy

sector; Bangladesh. We collected financial statement of Summit Power Ltd, Titas Gas

Transmission and Distribution Co. Ltd, & Jamuna Oil Co. Ltd. After collecting data we

calculated the ratio analysis in energy sector.

4.1.1 Calculation of Summit Power Ltd.:


Ratio Formula 2006 2007 2008 2009 2010

2. QuickRatio

Current assets - Inventory 0.22:1 0.23:1 0.64:1 0.73:1 0.52:1

Current liabilities

Interpretation They are having fewer quick assets against each tk. current liabilities. But

their quick ratio is growing. In 2010 again falls their quick ratio.

4. Analysis and Result

Ratio Formula 2006 2007 2008 2009 2010

1. CurrentRatio

Current assets 0.38:1 0.38:1 0.87:1 0.89:1 0.60:1

Current liabilities

Interpretation They are having fewer current assets against each tk. of current liabilities. But

their current ratio is growing. In 2010 again falls their current ratio.


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21

Ratio Formula 2006 2007 2008 2009 2010

3. InventoryTurnover

Cost of goods sold 2.45

Times

3.31

Times

4.55

Times

6.51

Times

5.79

TimesInventory

Interpretation They are inventory conversion time is upward into liquidity.

Ratio Formula 2006 2007 2008 2009 2010

4. AverageCollection

Period

Accounts Receivable 45.04

Days

59

Days

42

Days

46

Days

53

DaysAverage sales per day

Interpretation They have needed averagely 49.008 day to convert accounts receivable intocash.

Ratio Formula 2006 2007 2008 2009 2010

5. TotalAsset

Turnover

Sales 0.20

Times

0.26

Times

0.25

Times

0.28

Times

0.24

TimesTotal assets

Interpretation They have almost same times of total assets to convert sales. But averagely

they have 0.25 times total assets to convert into sale.

Ratio Formula 2006 2007 2008 2009 2010

6. Debt Ratio Total liabilities 59.01%

68.09

%

45.36

%

56.87

%

42.47

%Total assets

Interpretation They have been financing averagely 54.36% of assets by the debt.


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22

Ratio Formula 2006 2007 2008 2009 2010

7. TimeInterest

Earned

Ratio

Earnings before interest and

taxes

4.43

Times

2.38

Times

2.36

Times

2.24

Times

3.005

Times

Interest

Interpretation They have downward time to payoff the interest. But in 2010 time to payoff

the interest is increased.

Ratio Formula 2006 2007 2008 2009 2010

8. GrossProfit

Margin

SalesCost of goods sold 53.01

%

51.06

%

54.42

%

52.9

%

54.97

%Sales

Interpretation The gross profit margin almost same percentage.

Ratio Formula 2006 2007 2008 2009 2010

9. OperatingProfit

Margin

Operating profit 33.01

%

39.22

%

44.45

%

44 % 47.76

%Sales

Interpretation From 2006 to 2010 operating profit margin gradually increased.

Ratio Formula 2006 2007 2008 2009 2010

10.Net ProfitMargin

Earnings available for common

stockholders

27 % 23.08

%

26.48

%

24.52

%

31.87

%

Sales

Interpretation Their net profit margin almost same. But in 2010 increased net profit margin.


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23

Ratio Formula 2006 2007 2008 2009 2010

11.EarningsPer Share

(EPS)


stockholders

22.40

Tk.

30.90

Tk.

25.71

Tk.

31.40

Tk.

38.7

Tk.

Number of shares of common

stock outstanding

Interpretation Their earning per share is increasing every year. But in 2008 earnings per

share is fall down.

Ratio Formula 2006 2007 2008 2009 2010

12.Return onTotal

Assets

(ROA)


stockholders

5.7% 6% 6.9% 6.9% 7.78%

Total assets

Interpretation Their earning against assets has been increase gradually from 2006 to 2010.

Ratio Formula 2006 2007 2008 2009 2010

13.Return onCommon

Equity

(ROE)


stockholders

15.17

%

18.82

%

12.56

%

16.06

%

13.85

%

Common stock equity

Interpretation Their return on equity increased in2006, 2007 and 2009. Except in 2008 and

2010 thats becausecommon stock equity was increased.


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Ratio Formula 2006 2007 2008 2009 2010

14.Price /Earnings

Ratio(P/E)

Market price per share of

common stock

23.64

Tk.

60.12

Tk.

37.57

Tk.

38.57

Tk.

3.62

Tk.

Earnings per share

Interpretation Investors want to invest averagely 32.70 tk. for 1 tk. of earning. In 2008 and

2009 it was constrain but in 2007 it was very high and 2010 it was very low.

Ratio Formula 2006 2007 2008 2009 2010

15.Market/Book

Ratio

(M/B)


common stock

3.28

Tk.

11.31

Tk.

4.88

Tk.

6.17

Tk.

5 Tk.

Book value per share of

common stock

Interpretation From 2006 to 2007 market to book value ratio increased, but in 2008 it

decrease but again it increased in 2006. But again it falls in 2010.


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4.1.2 Calculation of Titas Gas Transmission and Distribution Co. Ltd.:

Titas Gas Transmission and Distribution CompanyLimited

Ratio Formula 2006 2007 2008 2009 2010

1. CurrentRatio

Current assets 1.11:1 1.19:1 1.35:1 1.29:1 1.19:1

Current liabilities

Interpretation From 2006 to 2009 they are having good current assets against each tk.

current liabilities. It was upward. But In 2009 & 2010 again falls their current

ratio.

Ratio Formula 2006 2007 2008 2009 2010

2. QuickRatio


Current liabilities

Interpretation From 2006 to 2009 they are having good quick assets against each tk. current

liabilities. It was upward. But In 2009 & 2010 again falls their current ratio.

Ratio Formula 2006 2007 2008 2009 2010



Times

25.09

Times

25.90

Times

25.33

Times

30.66

TimesInventory

Interpretation They are inventory conversion time is downward into liquidity. But in 2010

it increase.


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26

Ratio Formula 2006 2007 2008 2009 2010


Period


Days

127.72

Days

114.17

Days

88.71

Days

78.68


Interpretation They are average collection period is downward.

Ratio Formula 2006 2007 2008 2009 2010

5. Total AssetTurnover

Sales 1.01

Times

1.02

Times

1.22

Times

1.23

Times

1.27

TimesTotal assets

Interpretation They have almost same times total assets to use to convert sales. And total

asset turnover times are upward.

Ratio Formula 2006 2007 2008 2009 2010

6. DebtRatio

Total liabilities 76.5% 74.49

%

62.65

%

61.10

%

58.01

%Total assets

Interpretation They have been financing averagely 66.55% of assets by the debt. And debtratio trained is downward.

Ratio Formula 2006 2007 2008 2009 2010

7. TimeInterest

Earned

Ratio


taxes

16.9

Times

22.84

Times

35.84

Times

71.27

Times

112.74

Times

Interest

Interpretation They have upward time to payoff the interest. But in 2010 time to payoff the

interest is very high.


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27

Ratio Formula 2006 2007 2008 2009 2010

8. GrossProfit

Margin


%

14.85

%

16.72

%

16.69

%

17.74

%Sales

Interpretation The gross profit margin is averagely 15.95%. But in 2008 & 2009 it was

constrain and it is also upward trained.

Ratio Formula 2006 2007 2008 2009 2010

9. OperatingProfitMargin

Operating profit 8.57

%

9.68

%

11.92

%

12.04

%

14.02

%Sales

Interpretation From 2006 to 2010 operating profit margin gradually increased.

Ratio Formula 2006 2007 2008 2009 2010

10.Net ProfitMargin


stockholders

16.07

%

20.57

%

9.43

%

10.01

%

11.02

%

Sales

Interpretation From 2006 to 2007 it was upward. But in 2008 it falls and again it increase.

Ratio Formula 2006 2007 2008 2009 2010

11.EarningsPer Share

(EPS)


stockholders

1161

Tk.

1548

Tk.

49.25

Tk.

63.67

Tk.

85.62

Tk.

Number of shares of common

stock outstanding

Interpretation Their earning per share is very high from 2006 to 2007. Because the company

was listed in 2008. Then their earnings per share gradually increased.


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28

Ratio Formula 2006 2007 2008 2009 2010

12.Return onTotal

Assets

(ROA)


stockholders

16.29

%

19.41

%

11.51

%

13.01

%

15.03

%

Total assets

Interpretation Their earning has been increase gradually from 2006 to 2010. But it falls in

2008 and again it gradually increased.

Ratio Formula 2006 2007 2008 2009 2010

13.Return onCommon

Equity

(ROE)


stockholders

59.96

%

67% 30.80

%

32.78

%

34.92

%

Common stock equity

Interpretation Their return on equity was high in2006 & 2007. But from 2008 to 2010 it

gradually increased.

Ratio Formula 2006 2007 2008 2009 2010

14.Price /Earnings

Ratio (P/E)


common stock

0Tk. 0Tk. 10.14

Tk.

10.78

Tk.

11.66

Tk.

Earnings per share

Interpretation The company listed in 2008 for that reason we cannot find 2006 & 2007 P/E

ratio. But after listing the P/E ratio gradually increased.

Ratio Formula 2006 2007 2008 2009 2010

15.Market/Book Ratio

(M/B)


common stock

0Tk. 0Tk. 3.12

Tk.

3.53

Tk.

4.07

Tk.


common stock

Interpretation The company listed in 2008 for that reason we cannot find 2006 & 2007 M/B

ratio. But after listing the M/B ratio gradually increased.


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29

4.1.3 Calculation of Jamuna Oil Ltd.:


Ratio Formula 2006 2007 2008 2009 2010

1. CurrentRatio

Current assets 1.06:1 1.07:1 1.11:1 1.14:1 1.14:1

Current liabilities

Interpretation From 2006 to 2010 they are having good current assets against each tk.

current liabilities. It was upward.

Ratio Formula 2006 2007 2008 2009 2010

2. QuickRatio


Current liabilities

Interpretation They are having fewer quick assets against each tk. current liabilities. Quickis almost same but in 2007 it falls.

Ratio Formula 2006 2007 2008 2009 2010



Times

0.007

Times

0.0046

Times

0.009

Times

0.01

TimesInventory

Interpretation They are inventory conversion time is downward into liquidity. But in 2010 itincrease.

Ratio Formula 2006 2007 2008 2009 2010


Period


Days

246.50

Days

79.09

Days

47.53

Days

237


Interpretation They are average collection period is downward. But in 2010 it againincreases.


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30

Ratio Formula 2006 2007 2008 2009 2010

5. TotalAsset

Turnover

Sales 0.075

Times

0.07

Times

0.08

Times

0.052

Times

0.051

TimesTotal assets

Interpretation They have almost same times total assets to use to convert sales. But

averagely they have 0.066 times total assets to convert into sale.

Ratio Formula 2006 2007 2008 2009 2010

6. Debt Ratio Total liabilities 88.63%

89.27

%

86.68

%

84.27

%

85.20

%Total assets

Interpretation They have been financing averagely 86.81% of assets by the debt. The debt

ratio almost same.

Ratio Formula 2006 2007 2008 2009 2010

7. TimeInterest

Earned

Ratio


taxes

2.85

Times

5.55

Times

9.08

Times

3.99

Times

10.6

Times

Interest

Interpretation They have upward time to payoff the interest. But in 2009 time to payoff the

interest is decreased.

Ratio Formula 2006 2007 2008 2009 2010

8. GrossProfit

Margin


%

94.20

%

94.53

%

91.99

%

91.11

%Sales

Interpretation The gross profit margin is almost same percentage.


31/45


32/45

32

Ratio Formula 2006 2007 2008 2009 2010

13.Return onCommon

Equity

(ROE)


stockholders

20.14

%

29.18

%

43.28

%

32.94

%

35.39

%

Common stock equity

Interpretation Their return on equity was gradually increased in2006 to 2008 and 2010,

except 2009.

Ratio Formula 2006 2007 2008 2009 2010

14.Price /Earnings

Ratio

(P/E)


common stock

0Tk. 0Tk. 11.45

Tk.

40.32

Tk.

26.56

Tk.

Earnings per share

Interpretation The company listed in 2007 for that reason we cannot find 2006 & 2007 P/E

ratio. After listing the P/E ratio gradually increased. But in 2010 it falls.

Ratio Formula 2006 2007 2008 2009 2010

15.Market/Book

Ratio

(M/B)


common stock

0Tk. 0Tk. 4.96

Tk.

13.27

Tk.

8.03

Tk.


common stock

Interpretation The company listed in 2007 for that reason we cannot find 2006 & 2007 M/B

ratio. After listing the M/B ratio increased. But in 2010 it falls.


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33

4.2 Comparison with the Industry Average in 2010:

0.980.6

1.19 1.14

0

0.5

1

1.5

Industry Average


Titas Gas Transmission and Distribution Company Limited

Jamuna Oil Limited

0.74 0.521.1

0.610

1

2

Industry Average



Jamuna Oil Limited

1. RatioIndustry

Average

Summit

Power

Limited

Titas Gas Transmission and

Distribution Company

Limited

Jamuna Oil

Limited

Current Ratio 0.98:1 0.60:1 1.19:1 1.14:1

Comparison Compare to industry average with Summit power has less current asset

against current liability. But Titas Gas Transmission and Distribution Co.

Ltd. & Jamuna Oil Ltd. has good current asset against current liability.

2. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Quick Ratio 0.74:1 0.52:1 1.10:1 0.61:1

Comparison

Compare to industry average with Summit power & Jamuna Oil Ltd has

less quick asset against quick liability. But Titas Gas Transmission and

Distribution Co. Ltd. has good current asset against current liability.


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34

12.155.79

30.66

0.010

20

40

Industry Average



Jamuna Oil Limited

122.953 78.68

237

0

100

200

300

Industry Average



Jamuna Oil Limited

3. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

InventoryTurnover

12.15Times

5.79Times

30.66 Times 0.01 Times

Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is not

good or efficient in inventory management. But Titas Gas Transmission and

Distribution Co. Ltd. are good or more efficient.

4. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Average

collection

Period

122.90

days

53 days 78.68 days 237 days

Comparison Compare to industry average with Summit power & Titas Gas Transmission

and Distribution Co. Ltd. is not good average collection period. But Jamuna

Oil Ltd has good average collection period.


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35

0.520.24

1.27

0.0510

0.5

1

1.5

Industry Average



Jamuna Oil Limited

61.90%42.47%

58.01%85.20%

0.00%

50.00%

100.00%

Industry Average



Jamuna Oil Limited

5. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Total AssetTurnover

0.52Times

0.24Times


Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is not

good asset turnover. But Titas Gas Transmission and Distribution Co. Ltd.

is good asset turnover.

6. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Debt Ratio 61.90% 42.47% 58.01% 85.20%

Comparison Compare to industry average with Summit power & Titas Gas Transmission

and Distribution Co. Ltd. is efficient. But Jamuna Oil Ltd is inefficient.


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36

42.12

3.005

112.74

10.60

50

100

150

Industry Average



Jamuna Oil Limited

54.61% 54.97%

17.74%

91.11%

0.00%

50.00%

100.00%

Industry Average



Jamuna Oil Limited

7. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Time InterestEarned Ratio

42.12Times

3.005Times


Comparison Compare to industry average with Summit power & Jamuna Oil Ltd is

inefficient. But Titas Gas Transmission and Distribution Co. Ltd are

efficient.

8. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Gross Profit

Margin

54.61% 54.97% 17.74% 91.11%


good. But Titas Gas Transmission and Distribution Co. Ltd are not good.


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37

36.01%47.76%

14.02%

46.25%

0.00%

20.00%

40.00%

60.00%

Industry Average



Jamuna Oil Limited

48.20%31.87%

11.02%

101.70%

0.00%

50.00%

100.00%

150.00%

Industry Average



Jamuna Oil Limited

9. RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Operating

Profit Margin

36.01% 47.76% 14.02% 46.25%


good. But Titas Gas Transmission and Distribution Co. Ltd are not good.

10.Ratio IndustryAverage SummitPowerLimited

Titas Gas Transmission andDistribution Company

Limited

Jamuna OilLimited

Net profit

Margin

48.20% 31.87% 11.02% 101.7%

Interpretation Compare to industry average with Summit power & Titas Gas Transmission

and Distribution Co. Ltd is not good. But Jamuna Oil Ltd is good.


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38

45.65 38.7

85.62

12.63

0

50

100

Industry Average



Jamuna Oil Limited

9.28% 7.78%

15.03%

5.04%0.00%

5.00%

10.00%

15.00%

20.00%

Industry Average



Jamuna Oil Limited

11.RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Earnings Per

Share (EPS)

45.65 Tk. 38.7 Tk. 85.62 Tk. 12.63 Tk.

Interpretation Compare to industry average with Summit power & Jamuna Oil Ltd is not

good. But Titas Gas Transmission and Distribution Co. Ltd are good.

12.RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Return on

Total Asset

(ROA)

9.28% 7.78% 15.03% 5.04%

Interpretation Compare to industry average with Summit power & Jamuna Oil Ltd is not

good to overall profitable asset. But Titas Gas Transmission and

Distribution Co. Ltd are good.


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39

28.05%

13.85%

34.92% 35.39%

0.00%

20.00%

40.00%

Industry Average



Jamuna Oil Limited

13.95

3.62

11.66

26.56

0

10

20

30

Industry Average



Jamuna Oil Limited

13.RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Return onCommon

Equity (ROE)

28.05% 13.85% 34.92% 35.93%

Interpretation Compare to industry average with Titas Gas Transmission and Distribution

Co. Ltd & Jamuna Oil Ltd is good to profitable investment. But Summit

power is not good.

14.RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Price /

Earnings

Ratio (P/E)

13.95

Tk.

3.62

Tk.

11.66 Tk. 26.56 Tk.


and Distribution Co. Ltd isnot good. But Jamuna Oil Ltd is good.


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40

5.7 54.07

8.03

0

2

4

6

8

10

Industry Average



Jamuna Oil Limited

15.RatioIndustry

Average

Summit

Power

Limited



Limited

Jamuna Oil

Limited

Market / Book

Ratio (M/B)

5.7 Tk. 5 Tk. 4.07 Tk. 8.03 Tk.


and Distribution Co. Ltd is not good. But Jamuna Oil Ltd is good.


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41

4.3 Dividend Policy:

4.3.1 Definition of dividend policy

The policy a company uses to decide how much it will pay out to shareholders in

dividends. Dividend policy is concerned with taking a decision regarding paying cashdividend in the present or paying an increased dividend at a later stage. The firm could also

pay in the form ofstock dividends which unlike cash dividends do not provide liquidity to the

investors; however, it ensures capital gains to the stockholders. The expectations of dividends

by shareholders helps them determine the share value, therefore, dividend policy is a

significant decision taken by the financial managers of any company.

4.3.2 Types of dividend policy:

The firms dividend policy must be formulated with two basic objectives in mind:

providing for sufficient financing and maximizing the wealth of the firms owners. There are

mainly three types of dividend policy:

1. Constant-Payout-Ratio Dividend Policy.2. Regular Dividend Policy.3. Low-Regular-and-Extra Dividend Policy.
http://en.wikipedia.org/wiki/Cash_dividendhttp://en.wikipedia.org/wiki/Cash_dividendhttp://en.wikipedia.org/wiki/Stock_dividendhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Shareholderhttp://en.wikipedia.org/wiki/Stock_dividendhttp://en.wikipedia.org/wiki/Cash_dividendhttp://en.wikipedia.org/wiki/Cash_dividend


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4.3.3 Dividend policy of Summit power ltd.


Particulars 2006 2007 2008 2009 2010

Dividend 143,000,000 171,600,000 370,655,000 555,984,000 910,061,919

Net Income 175,102,015 265,153,013 460,208,418 700,823,711 1,174,602,699

Number of

Shareholders

7,150,000 8,580,000 18,532,800 22,239,360 303,353,973

Dividend

Payout ratio

81.64% 64.71% 80.54% 79.33% 77.48%

Dividend per

share

20 Tk. 20 Tk. 20 Tk. 25Tk. 3Tk.

Summit power ltd. does not give any information about dividend policy. But by the

calculation we find out, That Summit Power Limited is following Constant- Payout- Ratio

dividend policy. But in 2007 they retain the most of the net income.


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4.3.4 Dividend policy of Titas Gas Transmission and Distribution Co. Ltd.

Titas Gas Transmission and Distribution Company

Limited

Particulars 2006 2007 2008 2009 2010

Dividend 0 882,554,000 803,893,000 2,312,500,000 2,997,647,1

20

Net Income 0 7,395,912,840 4,218,212,418 5,453,463,757 7,333,057,157

Number of

Shareholders

0 4,777,615 85,646,912 85,646,912 85,646,912

Dividend

Payout ratio

0 11.93% 19.05% 42.40% 40.88%

Dividend per

share

0 184.73 Tk. 9.39 Tk. 27Tk. 35Tk.

Titas Gas Transmission and Distribution Company Limited do not give any information

about dividend policy. But by the calculation we find out, That Titas Gas Transmission and

Distribution Company Limited are following Constant-Payout-Ratio dividend policy. They

did not give any dividend in 2006. In 2007 and 2008 is almost same percentage of dividend

payout ratio. In 2009 and 2010 they also offered same percentage of dividend which was

more than the last two previous years. From that two years dividend pattern, we can say that

firm is following constant pay out policy.


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4.3.5 Dividend policy of Jamuna Oil Company Limited


Particulars 2006 2007 2008 2009 2010

Dividend 0 365,000,000 180,000,000 180,000,000 144,000,000

Net Income 0 302,668,605 563,111,978 507,313,743 671,381,111

Number of

Shareholders

0 10,000,000 45,000,000 45,000,000 45,000,000

Dividend

Payout ratio

0 120.59% 31.96% 35.48% 21.45%

Dividend per

share

0 36.5 Tk. 4 Tk. 4Tk. 3.2Tk.

Jamuna Oil Company Limited does not give any information about dividend policy. But by

the calculation we find out, that is following Regular dividend policy except in 2007. But in

2006 they did not give any dividend. Because the company come to market in 2007.


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Conclusion:

The analysis of financial statements means different things to different people. It is of interest

to creditors, present and prospective investors, and the firm`s own management. This report

has presented the various financial statement analysis ratio useful in evaluating the firm`spresent and future financial condition. This technique is ratio analysis, which provides

relative measures of the performance and financial health of the company. The first involved

ratio analysis for the company last five years; the second involved making comparisons with

industry average, and third identify what dividend policy they follow. While ratio analysis is

an effective tool for assessing a company`s financial condition.

Bibliography:

1. Lawrence J. Gitman Principles of Managerial Finance, 12thed., Pearson Prentice Hall.Websites:

http://www.jamunaoil.gov.bd/http://www.summitpower.org/http://www.titasgas.org.bd/
http://www.jamunaoil.gov.bd/http://www.jamunaoil.gov.bd/http://www.summitpower.org/http://www.summitpower.org/http://www.titasgas.org.bd/http://www.titasgas.org.bd/http://www.titasgas.org.bd/http://www.summitpower.org/http://www.jamunaoil.gov.bd/

introduction to ratio analysis final

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