Financial Analysis of Agricultural Marketing

Company Limited (Pran)

Submitted To:
Riyashad Ahmed
Course Instructor
Corporate Finance (fin440)

Submitted by:
Name

Id

Section

Navila kalam
Shaikh rudaba tahseen
Mohammad mushfoqur rahman
tasnia afrin
S.m.majedul haque Chowdhury
md.nasimul islam

111 0055 030

111 0056 030
111 0060 030
111 0093 030
111 0135 030
111 0153 030

2
2
2
2
2
6

Submission date:
28 april , 2013.
th

1|Page

LETTER OF TRANSMITTAL
28th April 2013
Riyashad Ahmed
Lecturer,
School Of Business
North South University

Sir,
It is an immense gratification for us to put forward the report to you, which you requested us to
put in order to enhance our practical knowledge that you taught us in Corporate finance
(FIN440)
On the process of preparing this report, we learned to take steps as a cluster with each of us
working all the time on this project. It has helped us to expand a lot of knowledge about practice
and implementation of the finance in the corporate world that we learned in the class room with
its real life application. This has farther enforced our confidence that the things we learned will
be truly required in realistic existence, rather than text or definitions to be memorized and then
over and done.
If for whichever cause, you are unable to deduce anything, please do not pause to call us for
clarification. We hope you will forgive any of our mistakes, lacking or inconveniences.
Sincerely yours,
Navila kalam

ID: 1110055030

Shaikh Rudaba Tahseen

ID: 1110056030

Mohammad Mushfiqur Rahman ID: 1110060030

Tasnia Afrin

ID: 1110093030

S.M.Majedul Haque Chowdhury ID:1110135030

Md. Nasimul Islam

2|Page

ID: 1110153030

ACKNOWLEDGEMENTS
This report would have been impossible without the valuable contributions and limitless help of
several individuals. Our first acknowledge goes to the almighty Allah for giving us the patience
and courage to finish this task within its deadline. Then, we cordially thank our respected course
instructor, Riyashad Ahmed for his continuous guidance and support to make this report
possible. He assisted us whenever we needed any help. His generosity and liberality aid us to go
further with this report without any hazardous situation.

We would like to express our gratitude to our friends and classmates for their friendly and
cordial cooperation and suggestion during working on our project. They have generously
supplied insightful comments, helpful suggestions, and contributions all of which have
progressively enhanced this report.

We would like to thank each individual group member. Last but not the least we are very
thankful to our family. Without their help this report would not be done so successfully, specially
our mothers. We thank them all for their love and trust.

3|Page

DECLARATION STATEMENT:
We, the group of FIN440 would like to state following things:
We did not directly copy-paste from any source without giving the reference.
We did not submit the report to any organization or institution previously.
This report is prepared by the enthusiastic co-operation of all members of our group.

4|Page

Executive Summary
The term paper provides a complete in-depth financial analysis of AMCL. The term paper starts
by providing the Vertical and Horizontal Balance Sheet and Income Statements so that a clear
idea about the companys growth is seen. Pro-forma Balance Sheet and Income Statements for
2012 and 2013 are provided to give a slight insight about AMCL's future prospects. Along with
it complete ratio analysis with both time series and cross-sectional analysis has been provided.
The Standard risk is provided to understand the probability of any unfavorable condition that
share holders can face. The market returns and AMCLs returns are analyzed for the same
period to find the market Beta () and the Risk free rate of return is taken from the website of
Bangladesh Bank. A detailed calculation of the companys Cost of capital and weighted average
cost of capital (WACC) is provided to understand the companys cost of financing and the return
it requires to maintain its share price. Furthermore, the Companys Optimum Capital Structure,
Intrinsic price of shares is calculated and analyzed. Lastly AMCLs Dividend policy is shortly
briefed.
The complete report gives a thorough analysis of AMCL's financial performance over the years

5|Page

Table of Contents
LETTER OF TRANSMITTAL ............................................................................................................................. 1
ACKNOWLEDGEMENTS ................................................................................................................................. 3
DECLARATION STATEMENT: ......................................................................................................................... 4
Executive Summary....................................................................................................................................... 5
Introduction .................................................................................................................................................. 9
2. Common size Statements: ....................................................................................................................... 10
Vertical Balance sheet............................................................................................................................. 10
Vertical Income statement ...................................................................................................................... 12
Horizontal Balance Sheet ........................................................................................................................ 13
Horizontal Income Statement: ................................................................................................................ 15
Pro-forma Balance sheet ......................................................................................................................... 16
Pro-forma Income Statement .................................................................................................................. 18
3.Ratio Analysis: ......................................................................................................................................... 19
Liquidity Ratio: ....................................................................................................................................... 19
Industry analysis: ................................................................................................................................ 19
AMCL: ................................................................................................................................................ 19
Graphs & Interpretation: ..................................................................................................................... 20
Debt Management Ratio: ........................................................................................................................ 24
Industry Average:................................................................................................................................ 24
AMCL: ................................................................................................................................................ 24
Graphs & Interpretation: ..................................................................................................................... 25
Asset Management Efficiency: ............................................................................................................... 27
Industry Average ................................................................................................................................. 27
AMCL ................................................................................................................................................. 27
Graphs & Interpretation: ..................................................................................................................... 28
Profitability ratio: .................................................................................................................................... 33
Industry Average ................................................................................................................................. 33
AMCL ................................................................................................................................................. 33
Graph &Interpretation:........................................................................................................................ 34
6|Page

Stock Ratio:............................................................................................................................................. 40
Industry Analysis: ............................................................................................................................... 40
AMCL ................................................................................................................................................. 40
Graphs &Interpretation: ...................................................................................................................... 41
Du-Pont equation: ................................................................................................................................... 44
Extended Du-Pont Equation: .................................................................................................................. 44
4. Risk and Return Analysis ......................................................................................................................... 45
5. Market return for the period .................................................................................................................... 49
Beta for AMCL ....................................................................................................................................... 49
Cost of financing debt: ............................................................................................................................ 51
Weighted Average Cost of Capital: ........................................................................................................ 52
6. Optimal Capital Structure ....................................................................................................................... 53
7. Literature review ..................................................................................................................................... 54
How the CAPM Helps Corporate Managers............................................................................................ 54
Abstract ............................................................................................................................................... 54
The Manager's Problem ...................................................................................................................... 55
The Classic Solution............................................................................................................................. 55
The CAPM's Role ................................................................................................................................. 56
Beta coefficient: ...................................................................................................................................... 57
8. Intrinsic Value......................................................................................................................................... 60
Non-Constant Model............................................................................................................................... 60
Corporate Valuation Model: ................................................................................................................... 61
Price to Earnings Multiple Approaches: ................................................................................................. 62
Analysis of the Stock price ..................................................................................................................... 62
9. Dividend Policy: ..................................................................................................................................... 63
DIVIDEND PAYOUT PLANS .............................................................................................................. 64
Practice in AMCL ................................................................................................................................... 64
Which dividend policy to follow ............................................................................................................ 64
Appendix ..................................................................................................................................................... 65
Vertical Balance Sheet ................................................................................................................................ 66
Vertical Income Statement ......................................................................................................................... 68
Horizontal Income Statement ..................................................................................................................... 71
7|Page

Sales growth rate calculation: ..................................................................................................................... 72

1st method ............................................................................................................................................... 72
2nd method .............................................................................................................................................. 72
Retained Earnings Calculation: ................................................................................................................... 72
Pro-Forma Balance Sheet............................................................................................................................ 73
Pro-forma Income Statement ..................................................................................................................... 75
Ratio analysis .............................................................................................................................................. 77
Liquidity Ratios ........................................................................................................................................ 77
Industry average ................................................................................................................................. 77
AMCL ................................................................................................................................................... 78
Debt Management ratio: ........................................................................................................................ 79
Industry Analysis: ................................................................................................................................ 79
AMCL: .................................................................................................................................................. 79
Asset Management Efficiency:................................................................................................................ 80
Industry analysis: ................................................................................................................................ 80
AMCL ................................................................................................................................................... 81
Profitability Ratio: ................................................................................................................................... 82
Industry Analysis: ................................................................................................................................ 82
AMCL ................................................................................................................................................... 83
Stock Market ratio: ................................................................................................................................. 84
Industry Analysis: ................................................................................................................................ 84
Dividend growth rate calculation: .............................................................................................................. 85
1st method: .............................................................................................................................................. 85
2nd method: ............................................................................................................................................. 85
3rd method: ............................................................................................................................................. 85
Dividend Payout Ratio calculation: ..................................................................................................... 85
Retention Ratio calculation: ................................................................................................................ 85
Return on Equity (ROE): ...................................................................................................................... 85
Growth rate:........................................................................................................................................ 86
FCF Calculation: ........................................................................................................................................... 86
FCF Growth Rate: .................................................................................................................................... 86
2nd method:........................................................................................................................................ 86
8|Page

Introduction
PRAN is the largest agro food processor and agro food exporter of Bangladesh. Bangladesh has
an economy based on agriculture. So, their view is to enrich our agriculture sector. Keeping this
view in mind, they look forward to creating more demand for agro product made by our native
farmer and we help to produce more agro products by giving proper training and financial
support to our poor farmers. They want our contract farming to be larger to the largest. Again,
for processing this food, employment is created. By this way, their view is to create more
employment. their view is to make this product available to every hook and corner of our country
so that every consumer gets the right to consume.

Besides this, they are now presenting Bangladesh to more than 77 countries and our view is to
generate more foreign currencies to our country fund. Our view is to thrive into global market
more vigorously. We want our company as the first multinational company from Bangladesh.

We wish thousands of our products to be consumed every second of the day either in our country
or foreign country!

9|Page

2. Common size Statements:

Vertical Balance sheet
Details

2008

2009

2010

2011

2012

Average

Standard
Deviation

ASSETS
Non - Current Assets
25.45%

43.94%

37.86%

35.46%

31.66%

34.88%

6.90%

Investment at(cost)

1.62%

2.10%

0.00%

0.00%

0.00%

0.74%

1.03%

Current Assets

72.93%

93.51%

62.14%

64.54%

68.34%

72.29%

12.54%

Inventories

52.45%

67.35%

44.08%

43.90%

46.95%

50.94%

9.80%

Account Receivables

4.79%

5.22%

3.70%

4.75%

5.23%

4.74%

0.62%

Advance, Deposit and

13.93%

15.21%

11.76%

12.89%

12.83%

13.33%

1.31%

1.00%

5.73%

25.36%

3.01%

3.33%

7.69%

10.02%

100.00% 100.00% 100.00% 100.00%

100.00%

0.00%

Property, Plant and

Equipment

Pre-payments
Cash and Cash
Equivalents
Total Assets

100.00%

Financed By
Share Holders Equity

37.12%

50.35%

34.07%

34.22%

37.51%

38.66%

6.73%

Issued Share

8.67%

11.19%

7.17%

6.82%

7.03%

8.18%

1.84%

Share Premium

4.33%

5.60%

3.59%

3.41%

3.51%

4.09%

0.92%

Reserve & Surplus

21.70%

30.32%

21.16%

21.88%

26.97%

24.40%

4.06%

Proposed Dividend

2.43%

3.25%

2.15%

0.21%

0.00%

1.61%

1.43%

Deferred Tax Liabilities

2.02%

3.11%

2.41%

2.46%

2.45%

2.49%

0.39%

Long Term Debt

10.02%

19.08%

17.23%

12.85%

9.93%

13.82%

4.18%

Current Liabilities

50.84%

67.01%

46.29%

50.46%

50.11%

52.94%

8.07%

Current Portion of

2.35%

3.12%

1.28%

3.54%

3.31%

2.72%

0.92%

44.33%

58.07%

38.38%

39.86%

38.08%

43.75%

8.39%

Capital

Long Term Loans

Short term Loans
10 | P a g e

from Banks(Secured)
1.37%

0.85%

0.55%

0.36%

0.30%

0.69%

0.44%

Accrued Expenses

0.93%

1.63%

0.41%

0.37%

0.71%

0.81%

0.51%

Other Finance

0.00%

0.00%

3.45%

3.10%

2.36%

1.78%

1.67%

Interest Payable

0.04%

0.03%

0.39%

0.54%

0.82%

0.36%

0.34%

Workers profit &

0.53%

0.96%

0.82%

1.01%

1.39%

0.94%

0.31%

Income Tax Payable

1.05%

1.94%

0.72%

1.36%

2.78%

1.57%

0.81%

Unclaimed Dividend

0.23%

0.40%

0.29%

0.33%

0.36%

0.32%

0.07%

Net Current Assets

22.09%

26.50%

15.84%

14.08%

18.23%

19.35%

5.00%

Creditors and Other

Payables

participation &
welfare fund

11 | P a g e

Vertical Income statement

Details

2008

2009

2010

2011

2012

Average

Standard
Deviation

Sales

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

0.00%

Cost of Goods

77.26%

77.61%

77.64%

78.21%

77.84%

77.71%

0.31%

Gross Profit

22.74%

22.39%

22.36%

21.79%

22.16%

22.29%

0.31%

Expenses

18.58%

17.85%

17.76%

17.38%

17.42%

17.80%

0.43%

Administrative

9.39%

8.95%

8.89%

8.75%

8.25%

8.85%

0.37%

9.19%

8.90%

8.87%

8.63%

9.16%

8.95%

0.21%

4.16%

4.54%

4.60%

4.41%

4.74%

4.49%

0.20%

Other Income

0.00%

0.00%

0.08%

0.02%

0.03%

0.02%

0.03%

Contribution

0.21%

0.23%

0.23%

0.22%

0.24%

0.23%

0.01%

3.95%

4.32%

4.45%

4.21%

4.53%

4.29%

0.20%

0.30%

0.71%

0.83%

0.75%

1.00%

0.72%

0.23%

Current Tax

0.32%

0.38%

0.44%

0.60%

1.07%

0.56%

0.27%

Deferred Tax

0.02%

0.33%

0.39%

0.15%

0.06%

0.19%

0.14%

Profit After

3.65%

3.61%

3.62%

3.46%

3.53%

3.57%

0.07%

18.84%

3.61%

3.62%

3.46%

3.53%

6.61%

6.11%

Sold

& Selling
Expenses
Financial
Expenses
Operating
Profit

to WP&WF
Profit Before
Taxation
Provision for
Income Tax

Taxation
Total
comprehensive
income of the
year

12 | P a g e

Horizontal Balance Sheet

Details

2008

2009

2010

2011

2012

ASSETS
Non - Current Assets
100.00%

133.71%

179.82%

177.00%

153.43%

Investment at(cost)

100.00%

100.00%

0.00%

0.00%

0.00%

Current Assets

100.00%

99.29%

102.97%

112.41%

115.54%

Inventories

100.00%

99.43%

101.56%

106.31%

110.38%

Account Receivables

100.00%

84.27%

93.31%

125.89%

134.52%

Advance, Deposit

100.00%

84.54%

102.01%

117.46%

113.53%

100.00%

444.30%

3068.89%

382.45%

410.56%

100.00%

77.44%

120.85%

127.02%

123.30%

100.00%

105.03%

110.90%

117.10%

124.58%

100.00%

100.00%

100.00%

100.00%

100.00%

Share Premium

100.00%

100.00%

100.00%

100.00%

100.00%

Reserve & Surplus

100.00%

108.21%

117.86%

128.06%

153.24%

Proposed Dividend

100.00%

103.57%

107.14%

11.07%

0.00%

Deferred Tax

100.00%

119.37%

144.53%

155.13%

149.99%

Long Term Debt

100.00%

147.47%

207.84%

162.94%

122.20%

Current Liabilities

100.00%

102.05%

110.03%

126.08%

121.53%

Current Portion of

100.00%

102.90%

65.85%

191.31%

173.54%

100.00%

101.43%

104.64%

114.22%

105.92%

Property, Plant and

Equipment

and Pre-payments
Cash and Cash
Equivalents
Total Assets
Financed By
Share Holders
Equity

Issued Share
Capital

Liabilities

Long Term Loans

Short term Loans
from
Banks(Secured)
13 | P a g e

100.00%

47.97%

48.79%

33.11%

26.74%

Accrued Expenses

100.00%

135.17%

52.88%

49.77%

93.90%

Other Finance

100.00%

0.00%

123109.76%

116229.29%

73.93%

Interest Payable

100.00%

54.55%

1190.25%

1729.93%

2549.61%

Workers profit &

100.00%

139.18%

186.05%

240.87%

320.27%

Income Tax Payable

100.00%

143.37%

82.75%

164.20%

326.96%

Unclaimed Dividend

100.00%

136.96%

152.32%

185.12%

196.04%

Creditors and Other

Payables

participation &
welfare fund

14 | P a g e

Horizontal Income Statement:

Details

2008

2009

2010

2011

2012

Sales

100.00%

112.30%

122.29%

133.58%

150.09%

Cost of Goods

100.00%

112.81%

122.90%

135.22%

151.23%

Gross Profit

100.00%

110.57%

120.24%

127.99%

146.23%

Expenses

100.00%

107.86%

116.84%

124.93%

140.68%

Administrative

100.00%

106.96%

115.72%

124.42%

131.90%

100.00%

108.78%

118.00%

125.45%

149.67%

100.00%

122.69%

135.38%

141.64%

171.00%

100.00%

122.69%

137.62%

141.64%

171.00%

100.00%

122.69%

137.62%

142.16%

172.15%

100.00%

260.98%

334.19%

329.86%

495.35%

Current Tax

100.00%

132.45%

167.51%

248.79%

497.09%

Deferred Tax

100.00%

1982.23%

2574.79%

1085.03%

525.85%

Profit After

100.00%

111.18%

121.26%

126.54%

145.25%

Sold

& Selling
Expenses
Financial
Expenses
Operating
Profit
Other Income
Contribution
to WP&WF
Profit Before
Taxation
Provision for
Income Tax

Taxation

15 | P a g e

2. (c) To forecast the Balance sheet of 2013 and 2014; we used the percentage of sales method.
The sales growth rate is determined to be 10.69% calculation is shown in the appendix. The
calculation of retained earnings is shown separately in the appendix.

Pro-forma Balance sheet

Details
ASSETS

2012

2013

2014

2012

2013

2014

360436499.00

360436499.00

360436499.00

777882302.00

861046476.79

953101816.67

534462767.00

591602715.88

654851553.84

59516831.00

65879834.92

72923113.95

146045134.00

161658965.32

178942086.96

37857570.00

41904960.67

46385061.92

1138318801.00

1221482975.79

1313538315.67

426965832.00

426965832.00

426965832.00

80000000.00

80000000.00

80000000.00

40000000.00

40000000.00

40000000.00

306965832.00

351833714

438889952

Deferred Tax Liabilities

27912119.00

27912119.00

27912119.00

Long Term Debt

113025000.00

113025000.00

113025000.00

570415850.00

631399578.94

698903139.32

37675000.00

41702871.93

46161367.67

433509429.00

479856355.56

531158278.39

3386997.00

3749104.24

4149924.72

Non - Current Assets

Property, Plant and
Equipment
Investment at(cost)
Current Assets
Inventories
Account Receivables
Advance, Deposit and
Pre-payments
Cash and Cash
Equivalents
Total Assets
Financed By
Share Holders Equity

Issued Share Capital

Share Premium
Reserve & Surplus
Proposed Dividend

Current Liabilities
Current Portion of
Long Term Loans
Short term Loans
from Banks(Secured)
Creditors and Other
16 | P a g e

Payables
Accrued Expenses
Other Finance
Interest Payable

8092634.00

8957825.59

9915515.69

26848332.00

29718714.02

32895971.46

9300352.00

10294661.93

11395274.53

15812132.00

17502622.84

19373845.76

31692006.00

35080230.05

38830692.53

4098968.00

4537192.77

5022268.58

Workers profit &

participation &
welfare fund
Income Tax Payable
Unclaimed Dividend

17 | P a g e

To forecast the income statement of 2013 and 2014, we used the percentage of sales method.

Pro-forma Income Statement

Details

2012

2013

2014

Sales

1,479,083,463

1637213755

1812249915

Cost of Goods Sold

1,151,350,648

1277026729

1413554934

Gross Profit

327,732,815

360,187,026

398,694,981

Expenses

257,636,014

266,515,032

280,517,925

Administrative &

122,098,082

130977100.4

144979993.2

Financial Expenses

135,537,932

135,537,932

135,537,932

Operating Profit

70,096,801

93,671,994

118,177,056

Other Income

445290

445290

445290

3,504,840

3,504,840

3,504,840

Profit Before Taxation

67,037,251

90,612,444

115,117,506

Provision for Income

14,819,644

20,025,350

25,440,969

Current Tax

15,775,841

21293924.27

27052613.93

Deferred Tax

956197

1268574.212

1611645.085

Profit After Taxation

52,217,607

70,587,094

89,676,537

Total comprehensive

52,217,607

70,587,094

89,676,537

Selling Expenses

Contribution to
WP&WF

Tax

income of the year

18 | P a g e

3.Ratio Analysis:
Liquidity Ratio:
Industry analysis:
Bangas
.

Rahima
Foods

Apex
Foods

Meghna
Condens
ed Milk

CVO
Petroch
emical

Pran

IA

Current
Ratio

1.95
times

1.00
times

1.39

0.70
times

0.40
times

1.36
times

1.13

Acid Test
Ratio

0.85
times

1.00
times

0.42
times

0.39
times

0.43
times

Ratios

Formula

times

0.58
times

Working
Capital

BDT
18.75
Mil

BDT
3.32
Mil

BDT
344.90
Mil

BDT
-237.96
Mil

BDT
-89.53

BDT
207.47
Mil

Cash
Conversion
Ratio

161
days

Days

11 days

361
days

10
days

183
days

times
0.62

times
BDT
41.16
Mil

146
days

AMCL:

Ratios
Current
Ratio

Formula

2008
1.43
times

2009

2010

2011

2012

IA.

1.40
times

1.34
times

1.28
times

1.36
times

times

0.43
times

0.62
times

1.13

Acid Test
Ratio

0.40
times

0.39
times

0.39
times

0.41
times

Working
Capital

BDT
203.89
Mil

BDT
189.45
Mil

BDT
176.78
Mil

BDT
165.07
Mil

BDT
207.47
mil

BDT
41.16

Cash
Conversion
Cycle

243
days

216
days

216
days

197
days

183
days

146
days

19 | P a g e

Mil

Graphs & Interpretation:

Current Ratio
2.5
2
1.5
1
0.5

Current Ratio

Current Ratio
1.45
1.4
1.35
Current Ratio

1.3
1.25
1.2
2008

2009

2010

2011

2012

In 2012, AMCLs current assets were 1.36 times of its current liabilities.
Current ratio of AMCL was 1.43 times in 2008 and decreased a little to1.40 times for the year
2009. Then it again decreased slightly to 1.34 times in 2010 and again decreased in 2011 to 1.28
times. After this current ratio has increased by a small margin in 2012 to 1.36 times which
implies that there has been an increasing trend in current ration of AMCL i.e. the performance
has gone up. The industry average was 1.13 times, which was a bit lower than AMCL
maintained in 2012 and therefore, AMCLs performance was satisfactory in 2012.
AMCLs current ratio was higher in 2012 than 2011 because, current assets increased by quite a
margin while current liabilities decreased in 2012 from 2011.

20 | P a g e

Quick Rato
1.2
1
0.8
0.6
Quick Rato

0.4
0.2
0
Bangas

Rahima
Foods

Apex
Foods

Meghna
CVO
Condensed Petrolium
Milk

Pran
(AMCL)

I/A

Quick Ratio
0.44
0.43
0.42
0.41
Quick Ratio

0.4
0.39
0.38
0.37
2008

2009

2010

2011

2012

In 2012, AMCLs current assets excluding inventories were 0.43 times of its current liabilities.
Quick ratio of AMCL was 0.40 times in 2008, then it decreased to 0.39 times in 2009. It
remained constant, as in 2010 it was also 0.39 times. It increased by a small margin to 0.41 times
in 2011 and again increased by a slight margin to 0.43 times in 2012. In general, there had been
an increasing trend in AMCLs quick ratio from year 2008 to 2012 implying that AMCLs
performance has been good. In 2012, industry average was 0.62 times, which is much higher
than AMCLs, which is not at all satisfactory for AMCL.
AMCLs quick ratio was higher in 2012 than 2011 because, current assets excluding inventories
increased by a huge margin while current liabilities decreased in 2012 from 2011.
21 | P a g e

Working Capital (Mil)

400

300
200
100
Working Capital (Mil)

0
-100

-200
-300

Working Capital (Mil)

250
200
150
Working Capital (Mil)

100
50
0
2008

2009

2010

2011

2012

In 2012, AMCLs working capital was BDT 207.47 million.

In 2008, AMCLs working capital was BDT 203.89 million; in 2009 it has decreased to BDT
189.45 million. We can a decreasing trend in AMCLs working capital later years. Working
Capital of AMCL had decreased by quite a margin in 2010, BDT 176.78 million. And it again
decreased to BDT 165.07 million in 2011, i.e. AMCLs performance was not satisfactory during
the years 2008 to 2011. Surprisingly the Working Capital jumped to BDT 207.47 million in
2012. In 2012, industry average was BDT41.16 million while AMCL was well above, showing
that working capital was really favorable.
AMCLs working capital was much higher in 2012 than 2011 because, current assets increased
by a huge margin while current liabilities decreased in 2012 from 2011.
22 | P a g e

Cash Conversion Cycle (Days)

400
350
300
250
200
150
100
50
0

Cash Conversion Cycle (Days)

Cash Conversion Cycle (Days)

300
250
200
150

Cash Conversion Cycle (Days)

100
50
0
2008

2009

2010

2011

2012

In 2012, AMCL on average took 183 days to complete the process of converting invested capital
into cash.
Looking at the past few years performance, we can see that there is a decreasing trend in the
Cash Conversion Cycle of AMCL .In 2008 it was 243 days, and decreased to 216 days in 2009.
It remained same i.e. 216 days in 2010, but fell slightly in 2011 to 197 days. AMCLs Cash
Conversion Cycle followed its decreasing trend as it fell to 183 days in 2012, which showed
signs of improvement. But it is significantly below the Industry average of 146 days. Therefore,
AMCL is in a poor position regarding the cash conversion cycle.
AMCLs cash conversion cycle improved from 243 days to 183 days, the reasons for this can be
attributed to lower average collection period but same average payment period.

23 | P a g e

Debt Management Ratio:

Industry Average:
Bangas

Rahima
Foods

Apex
Foods

Meghna
Condens
ed Milk

CVO
Petroch
emical

Debt
Ratio

0.59
times

0.92
times

0.65

times

1.22
times

0.39
times

Times
Interest
Earned

3.50
times

3.36
times

times

-0.23
times

67.30
times

Ratios

Formula

0.21

Pran

0.60
times
1.52
times

IA
0.73

times
12.61

times

AMCL:

Ratios

2008

2009

2010

2011

2012

Debt
Ratio

0.61
times

0.62
times

0.64
times

0.63
Times

0.60
times

Times
Interest
Earned

1.45
times

1.51
times

1.52
times

1.50
times

1.52
times

24 | P a g e

Formula

IA.
0.73
times
12.61

times

Graphs & Interpretation:

Debt Ratio
1.4
1.2
1
0.8
0.6
0.4
0.2
0

Debt Ratio

Debt Ratio
0.65
0.64
0.63
0.62
Debt Ratio

0.61
0.6
0.59
0.58
2008

2009

2010

2011

2012

In the year 2012, 60% of AMCLs total assets were financed by debt.
There is a fluctuating trend in using debt to finance the assets of the company all throughout
years, 2008 to 2012. In 2008 the Debt Ratio was 0.61, but it increased to 0.62 in 2009. The
company had an increased Debt Ratio of 0.64 for the next year i.e. 2010. In 2011 it again fell to
0.63. Finally in 2012 the debt ratio was 0.60 which is below the Industry Average of 0.73 that
year. This shows that AMCLs recent performance is poor.
In 2012 60% of AMCLs total assets were financed by debt, while in 2011 it was 63%.. The
reason for this is, debts contributed less to AMCLs total assets, while total assets increased
proportionately.
25 | P a g e

Times Interest Earned

80
70
60
50
40
30
20
10
0
-10

Times Interest Earned

Times Interest Earned

1.54
1.52
1.5
1.48
Times Interest Earned

1.46
1.44
1.42
1.4
2008

2009

2010

2011

2012

In 2012, the AMCLs EBIT was 1.52 times of their interest expense.
We can see a increasing trend in this ratio and it has constantly increased during years 2008 and
2012. In 2008 it was 1.45 times, and then it jumped to 1.51 times in 2009. In 2010 it again
jumped to 1.52 times, but slightly to, 1.50 times in 2011. In 2012 it increased again to 1.52 times,
but was way below the industry average of 12.61 times. So AMCL was not in a healthy position.
It had a poor performance.
In 2012, AMCLs Times Interest Earned Ratio was 1.52 times, while in 2011 it was 1.50 times.
The reason for this is AMCLs interest expense increased; while its EBIT (Operating Profit)
increased more.

26 | P a g e

Asset Management Efficiency:

Industry Average

Ratio
name

Formula

Inventory
Trunover
Ratio
Total
Asset
Trunover
Ratio
Fixed
Asset
trunover
Ratio
Average
Collection
Period
Average
Payment
Period

Bangas

3.15
times

Rahima
Foods

3304.50
times

Apex
Foods

Meghna
Condens
ed Milk

CVO
Petroch
emical

Pran

IA

5.07
times

1.08
times

98.80
times

2.15
times

569.13

times
1.20

1.54
times

1.10
times

2.50
times

0.24
times

0.54
times

1.30
times

times

4.37
times

11.50
times

11.27
times

0.49
times

0.64
times

4.10
times

times

56 days

298
days

8 days

26
days

11
days

15
days

69 days

1 day

3
days

5 days

2 days

5
days

11 days

5.40

AMCL

Ratios

2008

2009

2010

2011

2012

Inventory
Turnover
Ratio

1.57
times

1.78
times

1.82
times

2.00
times

2.15
times

Total Asset
Turnover
Ratio

1.07
times

1.11
times

1.08
times

1.12
times

1.30
times

Fixed Asset
turnover
Ratio

3.94
times

3.36
times

2.85
times

3.17
times

4.10
times

Average
Collection
Period

17 days

13 days

17 days

16 days

15 days

27 | P a g e

Formula

IA.
569.13
times
1.2
times
5.40
times
69
days

Graphs & Interpretation:

Inventory Turnover Ratio

3500
3000
2500
2000
1500
1000

Inventory Turnover Ratio

500
0

Inventory Turnover
2.5
2

1.5
Inventory Turnover

1
0.5
0
2008

2009

2010

2011

2012

AMCL sold out and re-stocked 2.15 times in 2012.

In 2008 the Inventory Turnover Ratio was 1.57 times. In the following year i.e. 2009, it jumped
sharply to 1.78 times. After that there has been an increasing trend in the Inventory Turnover
Ratio of AMCL. In 2010 it was 1.82 times, and 2.00 times in 2011. In 2012, it increased again to
2.15 times continuing its increasing trend, but that was surprisingly below Industry Average of
569.13 times. This shows a very poor performance of AMCL in 2012.
AMCLs Inventory Turnover Ratio has climbed up in 2012 because relative change in COGS
was more than relative change in inventory.
28 | P a g e

Total Asset Turnover

3
2.5
2
1.5
Total Asset Turnover

1
0.5
0
Bangas

Rahima
Foods

Apex
Foods

Meghna
CVO
Pran
Foods Petrolium (AMCL)

I/A

Total Asset Turnover

1.4
1.2
1
0.8
Total Asset Turnover

0.6
0.4
0.2
0
2008

2009

2010

2011

2012

Every one taka worth of total asset of AMCL generated around 1.30 taka in sales in 2012.
This ratio has followed a increasing trend from 2008-2012. In 2008, AMCLs Total Asset
Turnover was 1.07 times. After this year it has been continuously rising, as in 2009 it was 1.11
times, but it fell slightly, to 1.08 times in 2010, but it again rose to 1.12 times in 2011. In 2012 it
rose further, to 1.30 times, and was also above Industry Average of 1.20 times, for the same year.
This shows satisfactory performance of AMCL in 2012.
AMCLs Total Asset Turnover ratio has increased in 2012 because relative increase in sales was
more than relative increase in total assets.

29 | P a g e

Fixed Asset Turnover

14
12
10
8
6
4
2
0

Fixed Asset Turnover

Fixed Asset Turnover

4.5
4
3.5
3
2.5
Fixed Asset Turnover

2
1.5
1
0.5
0
2008

2009

2010

2011

2012

AMCL had generated BDT 4.10 taka of sales for every taka of their fixed asset.

This ratio experienced a fluctuating trend between 2008 and 2012. In 2008 Fixed Asset Turnover
Ratio of AMCL was 3.94 times. In 2009 it fell to 3.36 times, and continued its decreasing trend
in 2010, as the ratio was 2.85 times that year. In 2011 it jumped to 3.17 times. In 2012 it rose
sharply to 4.10 times, but was below the Industry Average of 5.40 times, for the same year. This
shows poor performance of AMCL in 2012.

30 | P a g e

Average Collection Period (Days)

350
300
250
200
150
100
50
0

Average Collection Period

(Days)

Average Collection Period (Days)

20
15
10

Average Collection Period

(Days)

5
0
2008

2009

2010

2011

2012

AMCL took around 15 days to collect their dues from debtors in 2012.

Average Collection Period of AMCL fluctuated between the years, 2008 and 2012. In 2008 it
took AMCL 17 days to collect its receivables. Though it slightly fell to 13 days in 2009, it
quickly rose to 17 days again in 2010. In 2011 it fell slightly to 16 days and fell again to 15 days
for the following year, 2012. This value is well below the industry average of 69 days, for the
same year, indicating the AMCLs efficiency in 2012.

Average Collection Period of AMCL fell in 2012 than in 2011 because proportionate increase in
receivables was less than proportionate increase in sales.

31 | P a g e

Average Payment Period (Days)

12
10
8
6
4
2
Average Payment Period (Days)

Average Payment Period (Days)

8
7
6
5
4

Average Payment Period

(Days)

3
2
1
0
2008

2009

2010

2011

2012

On an average AMCL took 2 days to pay its creditors in 2012.

This number also fell gradually between the years 2008 to 2012. It was 7 days in 2008. Then it
experienced a rather sharp decrease in 2009, as the period became 3 days. It remained same i.e.2
days for the following years. Average Payment Period for AMCL was 2 days in 2012, and lies
below that of the Industry Average of 5 days indicating efficiency and good performance.

Average Payment Period of AMCL remained same for the last 3 years.

32 | P a g e

Profitability ratio:
Industry Average:

Bangas

Rahima
Foods

Apex
Foods

Meghna
Condense
d Milk

CVO
Petroch
emical

Pran

IA

Gross
Profit
Margin

23.01 %

2.47%

7.72%

17.73%

28.87
%

22.16
%

16.99%

Operating
Profit
Margin

8.57%

1.84%

3.20%

-7.57%

Net Profit
Margin

7.23%

1.07%

4.05%

-39.11%

22.65
%

3.50%

Operating
Return on
Assets

13.20%

2.03%

8.02%

-1.84%

13.96
%

18.06
%

Return on
Assets

11.13%

1.18%

10.14
%

-9.51%

12.31
%

4.59%

Return on
Equity

44.45%

13.95
%

28.90
%

-42.44%

20.01
%

12.23
%

12.85%

2008

2009

2010

2011

2012

IA

22.27%

22.39%

22.36%

21.97%

22.16%

16.99
%

13.35%

13.44%

13.47%

Ratio
name

Formula

25.68
%

13.90
%

7.60%

-0.10%

8.91%
4.97%

AMCL

Ratio
name
Gross
Profit
Margin
Operating
Profit
Margin

Formula

Net Profit
Margin

3.65%

Operating
Return on
Assets

14.25%

Return on
Assets

3.79%

Return on
Equity

10.49%

33 | P a g e

3.61%

13.04%

13.90%

3.62%

3.46%

14..92%

14.55%

14.64%

18.00%

4.01%

3.90%

3.90%

4.59%

11.47%

11.83%

11.10%

3.50%

12.23%

7.60%

-0.10%

8.91%

4.97%

12.85%

Graph &Interpretation:

Gross Profit Margin (%)

35
30
25
20
15
10
5
0

Gross Profit Margin (%)

Gross Profit Margin (%)

22.5
22.4
22.3
22.2
22.1

Gross Profit Margin (%)

22
21.9
21.8
21.7
2008

2009

2010

2011

2012

In 2012, AMCLs gross profit margin was 22.16%. This infers that for every BDT100 of sales,
BDT 22.16 of gross profit was generated.
Throughout the last five years, 2008 to 2012 AMCL has maintained a fluctuating trend in Gross
Profit Margin. In 2008 it was 22.27%. It maintained a steady growth in the following year i.e.
2009, as it rose to 22.39% in 2009. In 2010 it fell slightly to 22.39%, and again declined to
21.97% in2011. But it again jumped up to 22.16% in 2012.The Gross Profit Margin of AMCL
rose in 2012; it was also above Industry Average of 16.99%, for the same year, indicating a
strong performance.
The reason as to why the gross profit margin increased was because the relative increase in Gross
Profit of AMCL was more than its relative rise in net sales.
34 | P a g e

Operating Profit Margin (%)

30
25
20
15
10
5
0
-5
-10

Operating Profit Margin (%)

Operating Profit Margin (%)

14
13.8
13.6
13.4
Operating Profit Margin (%)

13.2
13
12.8
12.6
2008

2009

2010

2011

2012

In 2012, the AMCLs operating profit margin was 13.90%. Thus, for every BDT100 of sales,
BDT 13.90 of Operating Profit was generated.
There is an increasing trend in the Operating Profit Margin of AMCL between the years 2008 to
2012. In 2008 it was 13.35%. It continued to increase in 2009 to 13.44%, followed by another
slight rise to 13.47% in 2010. In 2011 it fell slightly to 13.04%, but carried on its steady growth
in 2012, as it climbed to 13.90%. This value is placed well above Industry Average of 7.60%,
showing a promising performance of AMCL in 2012.
In 2012, Operating Profit Margin of AMCL rose to 13.90%, from that of 13.04% in 2011. The
reason for this increase can be explained by fact that AMCL experienced a larger relative
increase in its EBIT, than the relative increase in Net Sales.
35 | P a g e

Net Profit Margin (%)

30
20
10
0
-10

Net Profit Margin (%)

-20

-30
-40
-50

Net Profit Margin (%)

3.7
3.65
3.6
3.55
Net Profit Margin (%)

3.5
3.45
3.4
3.35
2008

2009

2010

2011

2012

AMCLs Net Profit Margin in 2012 was 3.65%. Thus, for every BDT100 of sales, BDT 6.65 of
net profit was generated.
This has been a steady decrease throughout the five years, 2008 to 2012. The Industry average
stands at -0.10% which shows that the company has performed very well compared to its rival
firms in the industry, concerning the Net Profit Margin ratio. Over the 5 years there was a
decreasing rate of the Net Profit Margin of AMCL.
In 2012 the Net Profit Margin decreased slightly to 3.50%, from that of 3.46% in 2011. This
decrease in Net Profit Margin ratio is due to the relative fall in net profit, followed by a
proportionate rise in net sales.

36 | P a g e

Operating Return on Assets (%)

20

15
10
5

Operating Return on Assets (%)

0
-5

Operating Return on Assets (%)

20
15
10

Operating Return on Assets

(%)

5
0
2008

2009

2010

2011

2012

In 2012, AMCLs Operating Return on Assets was 18.00%. This infers that for every BDT100
worth of assets, BDT 22.33 of operating income (EBIT) was generated.
This was a rise from2008s 14.25%. The Industry average stands at 8.91% which shows that
AMCL is in a satisfactory position with what the average company in the industry has achieved
in terms of the operating return on assets ratio.
The trends over the last 5 years show that the Operating ROA fluctuated between 14.25% 14.64% from 2008-2011. It then rose in 2012 to 18%. Over the 5 years there was a huge increase
in the rate.
The operating return on assets increased as the relative rise in operating income was relatively
more compared to the increase in the total assets from 2011 to 2012.
37 | P a g e

Return on Assets (%)

15
10
5

Return on Assets (%)

Bangas

-5

Rahima
Foods

Apex
Foods

Meghna
CVO
Pran
Foods Petrolium (AMCL)

I/A

-10
-15

Return on Assets (%)

5
4
3
Return on Assets (%)

2
1
0
2008

2009

2010

2011

2012

In 2012 AMCLs Return on Assets was 4.59%, thus for every BDT100 worth of total assets,
BDT 4.59 was generated.
This is a little rise from 2011s 3.90%. When compared to the industry AMCL is in a poor state
in terms of its Return On Assets; as the average of the rival firms in the industry is comparatively
more at the 4.97%. Trend analysis of AMCL shows there were slight rises (around 0.20%) from
2008-2011. It then increased to 4.59% in 2012.
The Return on Assets of AMCL increased from 3.90% of 2011 to 4.59% in 2012, as the relative
rise in the net income was significantly higher compared to the proportionate rise in total assets.

38 | P a g e

Return on Equity (%)

60
40
20
0

Return on Equity (%)

-20
-40

-60

Return on Equity (%)

12.5
12
11.5
11

Return on Equity (%)

10.5
10
9.5
2008

2009

2010

2011

2012

In 2012, the shareholders return on equity of AMCL was 12.23%. Thus, shareholders have
earned BDT 12.23 for every BDT 100 investment in the company.
This was a slight increase from 2008s 10.49%. The Industry average stands at 12.85% which
shows that the shareholders are getting a fruitful return on their investments in comparison of the
shareholders of AMCLs rival firms in the industry which the Return on Equity ratio shows. The
5 year trend from 2008 to 2012 shows that, the Return on Equity was constant at around 11.50%.
It rose slightly in 2011 to 11.83% and in 2012 it finally rose to 12.23%.
The increase in the ROE of AMCL in 2012 from that of 2011 was due to the fact that the relative
increase in net income was more than the relative increase in the total equity.

39 | P a g e

Stock Ratio:
Industry Analysis:

Stock
Market
Ratio
Earnings
Per
Share
(EPS)
PriceEarnings
Ratio
(P/E)
Marketto-Book
Ratio

Formula

Bangas

BDT
4.44/
share

Rahima
Foods

BDT
0.62
/share

Apex
Foods

Meghna
Condense
d Milk

CVO
Petroch
emical

Pran

IA

BDT
27.95
/share

BDT6.88
/share

BDT
3.19
/share

BDT
6.53
/share

BDT
5.98
/share

26.85

32.25

2.28

-2.01

78.15

19.61

7.20
times

4.48
times

0.66
times

0.85
times

15.94
times

2.40
times

5.26
times

2008

2009

2010

2011

2012

IA.

Earnings
Per Share

BDT
/44.94
share

BDT
/49.96
share

BDT
/54.49
share

BDT
/56.86
share

BDT
/6.53
share

BDT
/5.98
share

Market to
Book Value

2.67
times

3.03
times

3.49
times

3.04
times

2.40
times

5.26
times

Price to
earnings
ratio

25.41

27.28

26.19

AMCL

Ratios

40 | P a g e

Formula

30.42

26.86

19.61

26.19

Graphs &Interpretation:

Earnings Per Share (Taka)

30
25
20
15
10
5
0
-5
-10

Earnings Per Share (Taka)

Earnings Per Sahre (Taka)

60
50
40
30

Earnings Per Sahre (Taka)

20
10
0
2008

2009

2010

2011

2012

In 2012, shareholders of AMCL earned BDT 6.53 for each stock they hold.
AMCLs EPS were BDT 44.94, 49.96, 54.49, and 56.86 respectively for the years 2008, 2009,
2010 and 2011. Shareholders earning per share have increased significantly over the period. But
in 20101 shareholders of AMCL earned a very less amount (BDT 6.53) for each stock they hold.
Overall there had been an increasing trend in EPS. Even, shareholders of AMCL had earned
pretty much more than the industry average of 5.98 for the same year, i.e. overall performance of
was quite satisfactory.
Their number went down due to their increase of shares as it was converted from BDT100/share
to BDT 10/share.
41 | P a g e

Price to Earnings Ratio

90
80
70
60
50
40
30
20
10
0
-10

Price to Earnings Ratio

Price to Earnings Ratio

35
30
25
20
Price to Earnings Ratio

15
10
5
0
2008

2009

2010

2011

2012

In 2012 the shareholders of AMCL were willing to pay BDT 19.61 for every Taka of reported
earnings.
From 2008, shareholders tend to become less confident about AMCL. As a result the numbers
came down. It is also noticeable that they also have lower confidence form shareholders in terms
of the industry average, which is BDT 26.19. So performance of AMCL in 2012 was poor.
AMCLs P/E ratio has significantly decreased in 2012 (BDT 19.61) from that of 2011 (BDT
26.86) because relative increase in market price per share was much less than relative increase in
EPS.

42 | P a g e

Market to Book Ratio

18
16
14
12
10
8
6
4
2
0

Market to Book Ratio

Market to Book Ratio

4
3.5
3
2.5
2

Market to Book Ratio

1.5
1
0.5
0
2008

2009

2010

2011

2012

In 2012, the market to book ratio of AMCL was 2.40 times, whereas it was 2.67, 3.03, 3.49 &
3.04 times for the year 2008, 2009, 2010, and 2011 respectively.
From 2007 to 2011, their market to book ratio fluctuated unsteadily. Overall, a decreasing trend
has been observed in AMCLs market-to-book value ratio. Besides, AMCLs M/B ratio is less
than the Industry Average of 5.26, i.e. overall performance of AMCL was not quite satisfactory
in the year 2012.
The market value of AMCL shares in 2012 has decreased significantly from that of 2011, which
results lower value in terms of their market value of shares to book value of share

43 | P a g e

Du-Pont equation:
Return On Asset (ROA)= Net Profit Margin*Total Asset Turnover
=
Bangas

Rahima Foods

Apex Foods

7.23*1.54

1.07*1.10

4.05*2.50

Meghna
Condensed Milk

-39.11*0.24

CVO
Petrochemical

Pran

22.65*0.54

3.5*1.30

Extended Du-Pont Equation:

Return On Equity (ROE)= Net Profit Margin*Total Asset Turnover*Equity Multiplier
=
Bangas

Rahima Foods

Apex Foods

Meghna
Condensed Milk

CVO
Petrochemical

Pran

7.23 * 1.54 *
3.93

1.07 * 1.10
* 11.80

4.05*2.50*2.
85

39.11*0.24*3.
92

22.65*0.54*1.
63

3.5*1.30*2.67

44 | P a g e

4. Risk and Return Analysis

Here, we have calculated the monthly returns from January 2008 till December, 2012. Based on
the monthly returns, average monthly return is calculated for both DSE General Index & AMCL.
We used Microsoft Excel to calculate the monthly returns which is attached in the appendix
section
Year

DSE(Market)

AMCL

2008-2012

Monthly Return%

Monthly return%

January08

-3.38%

-0.47%

February08

1.42%

-0.35%

March 08

3.44%

45.88%

April08

1.56%

28.35%

May08

2.13%

27.54%

June08

-6.47%

-7.63%

July08

-8.85%

-17.52%

August08

3.76%

2.69%

September08

5.18%

10.54%

October08

-8.42%

-9.16%

November08

-8.04%

-11.14%

December08

11.06%

14.87%

January09

-5.63%

8.85%

February09

-3.41%

8.21%

March09

-6.83%

14.76%

April09

4.55%

-11.80%

May09

1.30%

-11.80%

June09

15.91%

5.29%

July09

-5.06%

11.25%

August09

0.01%

-0.09%

September09

4.53%

1.52%

October09

7.72%

8.38%

45 | P a g e

November09

29.15%

6.27%

December09

2.52%

3.50%

January10

17.48%

-7.45%

February10

2.01%

9.83%

March 10

0.27%

-5.27%

April10

1.08%

1.78%

May10

8.46%

13.33%

June10

0.02%

-2.14%

July10

2.02%

-5.04%

August10

3.44%

7.50%

September10

4.76%

8.51%

10.16%

-3.50%

November10

8.24%

-3.53%

December10

-4.96%

6.44%

January11

-9.88%

-11.34%

February11

-28.54%

-8.27%

March 11

13.40%

-28.17%

April11

-6.14%

36.78%

May11

-3.89%

-0.47%

June11

7.91%

-5.70%

July11

4.91%

4.73%

August11

-2.44%

3.59%

September11

-4.57%

-4.69%

-14.66%

0.62%

November11

1.22%

-15.75%

December11

0.40%

-0.74%

January12

-22.38%

-1.59%

February12

20.79%

17.23%

9.59%

12.36%

October10

October11

March 12

46 | P a g e

April12

-0.27%

-2.10%

May12

-8.93%

-9.09%

June12

-5.82%

1.83%

July12

-5.09%

-1.53%

August12

7.98%

3.90%

September12

2.06%

10.28%

October12

-2.08%

-3.87%

November12

-6.12%

-4.74%

December12

1.49%

-0.08%

Average Return

0.853%

1.575%

Standard Deviation

9.31%

12.65%

Coefficient of Variance

10.92

8.03

The average monthly return for AMCL is 1.575% whereas it is 0.853% in the market. In
comparisons, the average return is favorable for the company. But, the variability of AMCLs
return is higher than the market return, which satisfies that investors has to take higher risk to
take advantage of its higher return from that of the market risk. However, AMCL has lower risk
per unit than that of other companies in the market. So, AMCL is considered to be a better
investment than that of other companies in the market.

47 | P a g e

Scatter Diagram
0.5
0.4

y = 0.2269x + 0.0221
R = 0.0289

0.3
0.2

Axis Title

0.1

-0.4

Stock Return
0

-0.2

Linear (Stock Return)

0
-0.1
-0.2
-0.3
-0.4
Axis Title

48 | P a g e

0.2

0.4

5. Market return for the period

Beta for AMCL
The beta of AMCL is 0.1266
=0.1266
=0.66% Monthly
=7.92% Annually
=5%, as per course instructor suggested
So the required rate of return
=

+(

)*

=.05+ (.0792-.05)*.1266
=.05+ (.0292)*.1266
=.05+.003697
=.053697
=5.37% Annually

49 | P a g e

would be

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.169859
R Square
0.028852
Adjusted R
Square
0.012108
Standard
Error
0.12369
Observation
s
60
ANOVA
df
Regression
Residual
Total

Intercept
X Variable
1

50 | P a g e

SS
1

0.026362

58
59

0.887349
0.913711

Coefficien
ts

Standard
Error

0.022082

0.01601

0.226917

0.172865

MS
0.02636
2
0.01529
9

F
1.72313
4

t Stat
1.37929
2
1.31268
2

P-value
0.1731
0.19446
1

Significan
ce F
0.194461

Lower
95%
-0.00996
-0.11911

Upper
95%

Lower
95.0%

Upper
95.0%

0.05413
0.57294
3

0.00996
0.11911

0.05413
0.57294
3

Cost of financing debt:

Interest Expenses=134,778,793
Total Debt from Bank and Others=584,209,429
Before tax cost of debt=
=
=0.2307
=23.07%
After Tax Cost of Debt,

=Before Tax Cost of Debt*(1-T)

= 0.2307*(1-0.24)
=0.2307*0.76
=0.1753
=17.53%

51 | P a g e

Weighted Average Cost of Capital:

Price of Share at 30th June = 128
Number of Common Share Outstanding = 8,000,000
Market Value of Share Capital = (128*8000000)
= 1,024,000,000
Retained Earnings

= 306,952,832

Total debt of Bank & Others = 584,209,429

Total Capital

= 1,915,162,261

= 0.0535 = 53.60%

= 0.16 = 16%

= 0.305 =30.5%

Tax Rate = 24%

Since the flotation cost is unknown, the required rate of return, KE is equivalent to the cost of
issuing share capital.
Market Value for the Retained Earnings and Debt is equivalent to their Book Value
WACC = (Weight of Debt * After-Tax Cost of Debt) + (Weight of Share Capital * Cost of
Issuing Share Capital) + (Weight of Retained Earnings * Cost of Retained Earnings)
=(

)+(

)+(

= (0.305*0.1753) + (0.535*0.0537) + (0.16*.0537)

=0.091 =9.10%

52 | P a g e

6. Optimal Capital Structure

A Firms Value, V* = EBIT (1-T) / WACC
As at 31st December, 2011,
AMCLs EBIT = BDT 205,634,733
WACC = 9.10%
Tax Rate = 24%
So, AMCLs Value = {205634733*(1-0.24) }/ 0.0910
= BDT 1,717,388,979
As at 30th June AMCLs Capital Structure consists of 60.04% Debt and (1-0.6024) or 39.96%
Equity.
Now, well assume another 4 different combination of Debt and Equity portion of the company
and calculate the WACC for those different combinations. The after-tax cost of Debt and the cost
of Equity will remain the same, (17.53% and .0537% respectively) as the previous WACC
calculation. With those 4 different WACC for 4 different combinations, well analyze the best
combination for which the firms value is maximized. The analysis is shown below.

Combination

Firms value

WACC

Debt

Equity

Calculation

EBIT*(1-T)/ WACC

BDT

50%

50%

.50*.1753+.50*.0537

11.45%

205634733*.76/.1145

1364911765

55%

45%

.55*.1753+.45*.0537

12.06%

205634733*.76/.1206

1295873939

65%

35%

.65*.1753+.35*.0537

13.27%

205634733*.76/.1327

1177713111

70%

30%

.70*.1753+.30*.0537

13.88%

205634733*.76/.1388

1125953869

Here, we can observe that the cost of financing debt is much lower than the cost of equity. So,
the more the debt portion of the capital structure, the less the WACC. But too much debt can also
incur addition interest expense. So its better for the firm not to rely too much on debt.
We can see that for the combination of 60.04% Debt and 39.96% equity, the firms value is
maximized. So company should stick their current capital structure.

53 | P a g e

7. Literature review
How the CAPM Helps Corporate Managers
Abstract

In the article of The CAPM Debate by Ravi Jagannathan & Ellen R. McGrattan, it is stated that
the CAPM was developed, at least in part, to explain the differences in risk premium across
assets. According to the CAPM, these differences are due to differences in the riskiness of the
returns on the assets. The model asserts that the correct measure of riskiness is its measure
known as betaand that the risk premium per unit of riskiness is the same across all assets.
Given the risk-free rate and the beta of an asset, the CAPM predicts the expected risk premium
for that asset. In this section, we will derive a version of the CAPM. The CAPM is actually
consistent with the average return differences Models like the capital asset pricing model (the
CAPM) help corporate managers by providing them with a practical way to learn about how
investors judge the riskiness of potential investment opportunities. This helps managers use the
resources of their firms more efficiently. Models like the capital asset pricing model (the CAPM)
help corporate managers by providing them with a practical way to learn about how investors
judge the riskiness of potential investment opportunities. This helps managers use the resources
of their firms more efficiently.

54 | P a g e

The Manager's Problem

In modem industrial economies, managers don't easily know what the firm's owners want them
to do. Ownership and management are typically quite separate. Managers are hired to act in the
interests of owners, who hold stock in the corporation but are otherwise not involved in the
business. Owners send some general messages to managers through the stock market. If
stockholders do not like what managers are doing, they sell their stocks, and the market value of
the firm's stock drops. The representatives of stockholders on the firm's board of directors notice
this and turn to the managers for corrective action. In this way, therefore, stock prices act like an
oversight mechanism. They monitor the activities of managers by aggregating the opinions of the
stockholders. However, stock prices don't act fast enough. They don't give managers specific
directions ahead of time about which projects to pursue and which to avoid. Managers must
make these capital expenditure decisions on their own and then later find out, by the stock
market's reaction, whether or not the firm's owners approve.
Disapproval can be costly. In the United States in 1992, for example, capital expenditures by the
corporate business sector (excluding farming and finance) totaled $397 billion (or 6.6 percent of
the annual gross domestic product). These expenditures usually cannot be recovered if
stockholders disapprove of them.
The Classic Solution

In view of this, capital budgeting has a central role in both the theory and the practice of
managerial finance. Theory suggests one simple rule for corporate managers to follow when
making capital expenditure decisions: Maximize the value of the firm. Then, if some
stockholders disagree with management decisions, they can sell their stock and be at least as well
off as if management had made different decisions. This idea is the basis for the classic
theoretical recommendation that managers only invest in those projects which have a positive net
present value.
In practice, however, following that simple rule is not simple. It requires, among other things,
estimating the net present value of every project under consideration. Corporations thus spend a
substantial amount of resources evaluating potential projects.

55 | P a g e

A key input to that process is the cost to the firm of financing capital expenditures, known more
simply as the cost of capital. This is the expected rate of return that investors will require for
investing in a specific project or financial asset. The cost of capital typically depends on the
particular project and the risk associated with it. To be able to evaluate projects effectively,
managers must understand how investors assess that risk and how they determine what risk
premium to demand.
The CAPM's Role

Providing such an understanding is the focus of most research in the area of asset pricing. An
asset pricing model provides a method of assessing the riskiness of cash flows from a project.
The model also provides an estimate of the relationship between that riskiness and the cost of
capital (or the risk premium for investing in the project).
According to the CAPM, the only relevant measure of a project's risk is a variable unique to this
model, known as the project's beta. In the CAPM, the cost of capital is an exact linear function of
the rate on a risk-free project and the beta of the project being evaluated. A manager who has an
estimate of the beta of a potential project can use the CAPM to estimate the cost of capital for the
project.
If the CAPM captures investors' behavior adequately, then the historical data should reveal a
positive linear relation between the average return on financial assets and their betas. Also, no
other measure of risk should be able to explain the differences in average returns across financial
assets that are not explained by CAPM betas. Empirical studies of the CAPM have supported this
model on both of those pointsuntil recently, as the accompanying article describes.

56 | P a g e

Beta coefficient:
Numerous studies have been done in the field of market risk management. The measure of risk is
one of the most prominent topics in the investment community and it is because of the curiosity
among academicians and the investors concern of the degrading performance of previously
favored funds. Risk management of investing in corporate securities is under active and
extensive discussion among capital market operators. Risks being a integral part of business exist
everywhere from owning a company to owning a few common stocks of it.

Risk may be defined in terms of the uncertainty of rates of return. One characteristic that
measures risk in quantative terms is the variability of return (Robert A Levy, 1971). Evidence
collected over the years indicate that common stock investors demand and receive increased
variability of return which indicates that variability and risk are related. Works by Breeden,
Grossman and Shiller (1979), and others emphasizes the joint nature of the consumption decision
and the portfolio allocation decision. But regardless to portfolio allocation or diversification one
risk cannot minimized is the systematic risk of market or the beta coefficient.

It is agreed that the systemic risk or beta coefficient of a market is stationary but still there are
some theory which suggests the non-stationary assumes of beta. Betas are non-linear functions of
their market weights through which they are linked to the market return process. (T. Ziemba,
1983). This systematic risk or default risk serves as a deciding factor for numerous other
variables. One of which is the price and return from common stocks.

Minimizing the risks in investing is one of the biggest concern. It can be done with a few basic
steps. Investors should not to buy unlisted shares, as Stock Exchanges do not permit trading in
unlisted shares. (Grewal S.S & Grewall, 1984). They presented some basic rules of selling
shares. Rule that they specify is not to buy inactive shares, ie, shares in which transactions take
place rarely. The main reason why shares are inactive is because there are no buyers for them.
They are mostly shares of companies, which are not doing well. A third rule according to them is

57 | P a g e

not to buy shares in closely-held companies because these shares tend to be less active than those
of widely held ones since they have a fewer number of shareholders. They caution not to hold the
shares for a long period, expecting a high price, but to sell whenever one earns a reasonable
reward.

Avijit Banerjee28 (1998) reviewed Fundamental Analysis and Technical Analysis to analyze the
worthiness of the individual securities needed to be acquired for portfolio construction. The
Fundamental Analysis aims to compare the Intrinsic Value (I..V) with the prevailing market
price (M.P) and to take decisions whether to buy, sell or hold the investments. The fundamentals
of the economy, industry and company determine the value of a security. If the 1.V is greater
than the M.P., the stock is under priced and should be purchased. He observed that the
Fundamental Analysis could never forecast the M.P. of a stock at any particular point of time.
Technical Analysis removes this weakness. Technical Analysis detects the most appropriate time
to buy or sell the stock. It aims to avoid the pitfalls of wrong timing in the investment decisions.
He also stated that the modern portfolio literature suggests 'beta' value p as the most acceptable
measure of risk of a scrip. The securities having low P should be selected for constructing a
portfolio in order to minimize the risks.

David.L.Scott and William Edward4 (1990) reviewed the important risks of owning common
stocks and the ways to minimize these risks. They commented that the severity of financial risk
depends on how heavily a business relies on debt. Financial risk is relatively easy to minimise if
an investor sticks to the common stocks of companies that employ small amounts of debt. They
suggested that a relatively easy way to ensure some degree of liquidity is to restrict investment in
stocks having a history of adequate trading volume. Investors concerned about business risk can
reduce it by selecting common stocks of firms that are diversified in several unrelated industries.

Carter Randal7 (1992) offered to investors the underlying principles of winning on the stock
market. He emphasized on long-term vision and a plan to reach the goals. He advised the
58 | P a g e

investors that to be successful, they should never be pessimists. He revealed that though there
has been a major economic crisis almost every year, it remains true that patient investors have
consistently made money in the equities market. He concluded that investing in the stock market
should be an un-emotional endeavor and suggested that investors should own a stock if they
believe it would perform well. He observed that risk measurement and estimation problems
constrain the speed of up-gradation. Also, inadequate availability of skills in using quantitative
risk management models and lack of risk hedging investments for the domestic investors are
major constraints. He concluded that with the beginning of a derivative market, new instruments
of risk hedging would become available

59 | P a g e

8. Intrinsic Value
Non-Constant Model
We assumed that AMCL will follow a non-constant super-normal growth till 2014, and then it
will gauge using a 5% constant growth rate.
The super-normal growth rate till 2013 is 4.67%. (This Dividend Growth Rate calculation is
shown in appendix part.)
Given,
=

= BDT 3.07

= 5.37%
g=5%

=3.07*(1+.0467) =4.50
=4.50*(1+.0467) =6.60
=6.60*(1+.0467) =9.68
Now,
=
=
= 2616.32
=

+
+

=4.29+5.99+2372.99
=2383.27

60 | P a g e

Corporate Valuation Model:

We assumed that AMCL will follow a non-constant super-normal growth till 2014, and then it
will gauge using a 5% constant growth rate as well.
Free Cash Flows or FCFs are given below. The calculation and growth rate are shown in
appendix.
The super-normal growth till 2014 is 6.15%.
=115482341*(1+0.0615) = 122584505
=122584505*(1+0.0615) = 130123452
=130123452*(1+0.0615) = 138126044
Now,
=
=
=3733136330
=

=
=116337198+117198382+33623265540
=33856801120
So, Total Intrinsic value of the corporation =33856801120
Total Debt from bank and others

= 584209429

Total intrinsic value equity

=33272591690

Total number of common share outstanding=

Intrinsic value of stock

61 | P a g e

8000000
4159

Price to Earnings Multiple Approaches:

=

*EPS

=Industry PE ration* Company EPS

=26.19*6.53
=174.29

Analysis of the Stock price

The market price of AMCL was BDT 138.00 on 30th June, 2012. If the investors gauge the fair
price of the share only considering future expected flow of dividend, then the fair price is BDT
2383.27. As compared, the fair price is much higher than that of its market value, so the market
price is undervalued.
However, if investors measure the fair value based on the free cash flow that the company is
expected to generate, then the fair value is BDT 4159. On other hand, the market price was BDT
138. In comparison, the stock priced is undervalued.
On the contrary, if the investors measure the fair value based on P/E multiple approach, then the
fair value is BDT 174.2857, which is higher than the market price of BDT 138. In this case, the
market price is undervalued.

62 | P a g e

9. Dividend Policy:
Dividend policy is a significant decision taken by the financial managers of any company and is
crucial in deciding keeping shareholders happy along with retaining the required income for
farther investment. For any company to be successful they have to make the right blend of how
much to give as dividend and how much to keep as retained earnings for farther investment. Till
date, researches have not drawn any one just conclusion for dividend policy. However,
researchers tend to follow 3 popular views about this matter.
View 1: Dividend Policy is Irrelevant:
Dividend irrelevancy theory asserts that a firm's dividend policy has no effect on its market value
or its cost of capital. When shareholders count their total income, they do not take into account
how much of their total income has come from capital gain yield or from dividend yield as they
only care how much they have received. However, this is on the assumption that
1) Perfect Capital markets exists and that there are no taxes, (corporate or personal), no
transaction costs on securities, investors are rational, information is symmetrical - all investors
have access to the same information and share the same expectations about the firm's future as its
manager.
2) The firm's investment policy is fixed and is independent of its dividend policy
Total Return= Capital Gain Yield +Dividend Yield
View 2: High Dividend Increases Stock Value:
This position is based on bird-in-the-hand theory, which argues that investors may prefer
dividend today as it is less risky compared to uncertain future capital gains. This implies a
higher required rate for discounting a dollar of capital gain than a dollar of dividend. Hence
investors are more concerned about the dividend yield of the total return and want to be certain
about it. When a company promises a particular dividend to be paid, then usually the dividend is
actually paid according to the promise. Also, it is possible for the investors to check for the
possibility of the dividends. Therefore, in the market, those shares with more dividend yield are
often the ones with higher prices, as they are more in demand by investors because more value is
put on the return that has more certainty.
View 3: Low Dividends Increase Stock Value:
The first propriety of people in any business is always to maximize their after tax income.
Dividend tax rate is quite high compared to that of capital gain. Therefore it is the capital gain
63 | P a g e

yield that ends up with higher income and is preferred by the investors. Along with it when
dividend is paid to investors it is actually devoid the tax meaning the tax is cut off from the
amount immediately. Whereas in capital gain yield the investor can actually defer the tax until
the yearly taxpaying date. Hence investors who are more concerned about after tax income are
more attracted to companies giving low dividends. This in return creates demand for shares with
higher capital gain and thereby raising the prices as well. So we can conclude that low dividends
increase stock value.

DIVIDEND PAYOUT PLANS

1) Stable Dollar Dividend: Usually companies try to represent their dividend in a partial basis in
a dollar format and also try to maintain a stable and steady dividend each and every year. For
example: $0.5/share,$2/share,$1.5/share.

2) Percentage Dividend Payment: The companies usually give cash dividend payment only. Such
as 20% cash dividends, this is usually converted to dollar value by multiplying the cash
percentage with the face value.

3) Stable/small Regular and Year End Extra: Companies usually try to give regular but small size
dividends every year. Any year if companies get higher profit they try to give some year end
extra premium.

Practice in AMCL
From the year 2008 onwards AMCL paid a stable and steady sum of dividend to its stockholders.
So it can be referred that they followed the stable dollar dividend and percentage dividend
payment. Looking the market to book ratio we can also refer that the market price has increased
continuously throughout from 2008 to 2010 but it decreased after that till the last year.

Which dividend policy to follow

If observed from 2008 it can be inferred that AMCL has been giving quite a high percentage of
dividend to their shareholders and it can be concluded that they have considered the view of
High dividend increases the share price as along with the high amount of dividend paid the
share price has also risen throughout the years.
High dividend increase the share price
64 | P a g e

Appendix

Below is the necessary appendix concerning the project. First, the

appendix contains the necessary calculation for the common size
statements. Please turn to the next page.

65 | P a g e

Vertical Balance Sheet

Details
ASSETS
Non - Current Assets
Property, Plant and Equipment
Investment at(cost)
Current Assets
Inventories
Account Receivables
Advance, Deposit and Pre-payments
Cash and Cash Equivalents
Total Assets
Financed By
Share Holders Equity

Issued Share Capital

Share Premium
Reserve & Surplus
Proposed Dividend
Deferred Tax Liabilities
Long Term Debt

Current Liabilities
Current Portion of Long Term Loans
Short term Loans from Banks(Secured)
Creditors and Other Payables
Accrued Expenses
Other Finance
Interest Payable

66 | P a g e

2008

2009

2010

2011

2012

Workers profit & participation &

welfare fund
Income Tax Payable
Unclaimed Dividend
Net Current Assets
**All the Values are multiplied by 100.

67 | P a g e

Vertical Income Statement

Details
Sales
Cost of Goods Sold
Gross Profit
Expenses
Administrative & Selling
Expenses
Financial Expenses
Operating Profit
Other Income
Contribution to WP&WF
Profit Before Taxation
Provision for Income Tax
Current Tax
Deferred Tax
Profit After Taxation
Total Comprehensive
Income for the year
**All the Values are multiplied by 100

68 | P a g e

2008

2009

2010

2011

2012

Horizontal Balance Sheet

Details
ASSETS
Non - Current Assets
Property, Plant and Equipment
Investment at(cost)
Current Assets
Inventories
Account Receivables
Advance, Deposit and Pre-payments
Cash and Cash Equivalents
Total Assets
Financed By
Share Holders Equity

Issued Share Capital

Share Premium
Reserve & Surplus
Proposed Dividend
Deferred Tax Liabilities
Long Term Debt

Current Liabilities
Current Portion of Long Term Loans
Short term Loans from
Banks(Secured)
Creditors and Other Payables
Accrued Expenses
Other Finance
Interest Payable

69 | P a g e

2008

2009

2010

2011

2012

Workers profit & participation &

welfare fund
Income Tax Payable
Unclaimed Dividend
Net Current Asset

**All the Values are multiplied by 100.

70 | P a g e

Horizontal Income Statement

Details
Sales

2008

Cost of Goods Sold

Gross Profit
Expenses
Administrative & Selling
Expenses
Financial Expenses
Operating Profit
Other Income
Contribution to WP&WF
Profit Before Taxation
Provision for Income Tax
Current Tax
Deferred Tax
Profit After Taxation
Total Comprehensive
Income for the year
**All the Values are multiplied by 100

71 | P a g e

2009

2010

2011

2012

Sales growth rate calculation:

1st method
2008
985454208
Growth rate

2009
1106659846
12.30%

2010
1,205,155,338
8.90%

Average of 1st method=10.69%

2nd method
2008
985454208

2012
1479083463

Growth rate= [{(985454208/1479083463) ^ (1/5)} -1]

=10.69%

Average growth rate: 10.69%

Retained Earnings Calculation:

2013
Beginning R/E

= 306965832

Net income

= 70587094

Dividend - (24571713*1.0467) = 25719212

Ending R/E

= 351833714

2014
Beginning R/E

=351833714

Net income -

= 89,676,537

Dividend - (25719212*1.0467) = 26920299

Ending R/E

72 | P a g e

=438889952

2011
1,316,345,576
9.23%

2012
1,479,083,463
12.36%

Pro-Forma Balance Sheet

2013

2014

360436499.00

360436499.00

360436499.00

Current Assets

777882302.00

861046476.79

953101816.67

Inventories

534462767.00

534462767.00*1. 11

591602715.88

Account Receivables

59516831.00

59516831.00*1.11

65879834.92*1.11

Advance, Deposit and Pre-payments

146045134.00

146045134.00*1.11

161658965.32*1.11

Cash and Cash Equivalents

37857570.00

37857570.00*1.11

41904960.67*1.11

1221482975.79

1313538315.67

Details

2012

ASSETS
Non - Current Assets
Property, Plant and Equipment
Investment at(cost)

Total Assets

1138318801.00

Financed By
Share Holders Equity

426965832.00

426965832.00

426965832.00

Issued Share Capital

80000000.00

80000000.00

80000000.00

Share Premium

40000000.00

40000000.00

40000000.00

Reserve & Surplus

306965832.00

Proposed Dividend
Deferred Tax Liabilities

27912119.00

27912119.00

27912119.00

Long Term Debt

113025000.00

113025000.00

113025000.00

Current Liabilities

570415850.00

631399578.94

698903139.32

Current Portion of Long Term Loans

37675000.00

37675000.00*1.11

41702871.93*1.11

Short term Loans from Banks(Secured)

433509429.00

433509429.00*1.11

479856355.56*1.11

73 | P a g e

Creditors and Other Payables

3386997.00

3386997.00*1.11

3749104.24*1.11

Accrued Expenses

8092634.00

8092634.00*1.11

8957825.59*1.11

Other Finance

26848332.00

26848332.00*1.11

29718714.02*1.11

Interest Payable

9300352.00

9300352.00*1.11

10294661.93*1.11

Workers profit & participation &

15812132.00

15812132.00*1.11

17502622.84*1.11

Income Tax Payable

31692006.00

31692006.00*1.11

35080230.05*1.11

Unclaimed Dividend

4098968.00

4098968.00*1.11

4537192.77*1.11

229646897.85

254198677.35

welfare fund

Net Current Assets

74 | P a g e

207466452.00

Pro-forma Income Statement

Details

2012

2013

2014

Sales

1,479,083,463

1,479,083,463*1.11

1637213755*1.11

Cost of Goods Sold

1,151,350,648

1,479,083,463*.78

1637213755*.78

Gross Profit

327,732,815

1637213755-

1812249915-

1277026729

1413554934

130977100.4+

144979993.2+

135,537,932

135,537,932

122,098,082

1637213755*.08

1812249915*.08

Financial Expenses

135,537,932

135,537,932

135,537,932

Operating Profit

70,096,801

360,187,026-

398,694,981-

266,515,032

280,517,925

Expenses

Administrative & Selling

257,636,014

Expenses

Other Income

445290

445290

445290

Contribution to WP&WF

3,504,840

3,504,840

3,504,840

93,671,994+

118,177,056+

93,671,994-

445290-

3,504,840

3,504,840

21293924.27-

27052613.93-

1268574.212

1611645.085

Profit Before Taxation

Provision for Income Tax

75 | P a g e

67,037,251

14,819,644

Current Tax

15,775,841

90,612,444*.21

115,117,506*.21

Deferred Tax

956197

90,612,444*.014

115,117,506*.014

Profit After Taxation

52,217,607

90,612,444-

115,117,506-

20,025,350

25,440,969

70,587,094

89,676,537

Total Comprehensive
Income for the year

76 | P a g e

52,217,607

Ratio analysis
Liquidity Ratios
Industry average
Ratios

Formula

Bangas Limited

RahimaFoods

Apex Foods

CVO Petrochemical

Meghna Condensed
milk

550025322/787981
308

Current
Ratio

Acid
Test
Ratio

(3840991621710123)/19655936

(952922907339196)/949604640

Working
Capital

Cash
Conversi
on Cycle

AP not found

77 | P a g e

(1222369260715872045)/877473962

(603745041521892)/149908058

(550025322215422017)/787981
308

60374504-149908058

550025322787981308

365/98.80 + 11 -5

365/1.08 + 26 - 3

AMCL

Ratios

Formula

Current
Ratio

2008

670260852/
46937441

Acid
Test
Ratio

(673260852
484200145)
/469374341

Working
Capital

Cash
Conversi
on Ratio

78 | P a g e

673260852469374341

(365/1.57) +
17 - 7

2009

2010

2011

2012

668461522/
479012783

693251080/
516471746

756842149/
591768483

777882302/
570415850

(668461522
481449835)/
479012783

(693251080
491757780)/
516471746

(756842149
514774187) /
591768483

668461522 479012783

693251080 516471746

756842149
591768483

777882302 570415850

(365/1.78) + 13 -3

(365/1.82) +
17 - 2

(365/2) + 16 2

(365/2.15) + 15 2

(777882302
534426767) /
570415850

Debt Management ratio:

Industry Analysis:
Ratios

Formula

Bangas
Limited

Rahima Foods

Apex Foods

Mehgna
Condensed
Milk

CVO
Petrochemical

Debt to
Asset Ratio

1417305523/11527
29650

Times
Interest
Earned

21331221/9184714
9

AMCL:

Ratios
Debt Ratio

Times Interest
Earned

79 | P a g e

Formula

2008

2009

561863178/
923186537

615410550/
997590888

131550816/

148802612/
98510327

90559523

2010

2011

2012

708704456/
1115683180

742468482/
1172667837

683440850/1
138318801

55495899/
106856364

171670512/
113610450

205634733/
135537932

Asset Management Efficiency:

Industry analysis:
Ratios

Formula

Bangas
Limited

Rahima
Foods

Apex Foods

CVO
Petrochemical

Meghna Condensed Milk

Inventory
Turnover
Ratio

231713120/215422017

Total Asset
Turnover
Ratio

281638028/1157729650

Fixed Asset
Turnover
Ratio

281638028/569521899

Average
Collection
Period

19571140/(281638028/365)

Average
Payment
Period

80 | P a g e

AP not
found

1708205/(231713120/365)

AMCL

Ratio
name
Inventory
Turnover
Ratio
Total Asset
Turnover
Ratio
Fixed Asset
Turnover
Ratio
Average
Collection
Period

Formula

2008

2009

2010

2011

2012

761332926/
484200145

858841641/
481449835

935681509/
514774178

1029503278/
514774187

1151350648/
534426767

985454208/

1106659846/
997590888

1205155338/
1115683180

1316345576/
1172667837

1479083463/
1138318801

1106659846/
329129366

1205155338/
422432100

1316345576/
415825688

1479083463/
360436499

37284380/
(1106659846
/365)

55696124/
(1205155338
/365)

55696134/
(1316345576
/365)

59516831/
(1479083463
/365)

6075973/
(858841641
/365)

4193964/(9
35681509
/365)

4193904/
(1029503278
/365)

3386997/
(1479083463
/365)

923186537

985454208/
249925685
44242900/
(98545420
8/ 365)

Average
Payment
Period

12666636/
(761332826/
365)

81 | P a g e

Profitability Ratio:
Industry Analysis:
Ratios

Formula

Bangas
Limited

Rahima
Foods

Apex Foods

CVO
Petrochemical

Meghna Condensed Milk

Gross
Profit
Margin

(49924908/281638028)*100

Operating
Profit
Margin

(-21331321/281638028)*100

Net Profit
Margin

(-110151443/281638028)*100

Operating
Return on
Assets

(-21331321/1157729650)*100

Return on
Assets

(110151443/1157729650)*100

Return on
Equity

82 | P a g e

*
100

(-110151443/259575873)*100

AMCL

Ratio Name
Gross Profit
Margin

Operating
Profit Margin

Formula

2008

2010

2011

2012

(247818205/

(269473829/
1205155338
) *100

(286842298/
1316345576)
*100

(327732815/
1479083463) *100

(162352263/
1205155338)
*100

(171670512/
1316345576)
*100

(205634733/
1479083463) *100

(43593724/
1205155338)
*100

(45490177/
1316345576)
*100

(52217607/
1479083463) *100

(162352263/
1115683180)
*100

(171670512/
1172667837)
*100

(205634733/
1138318801) *100

(43593724/
1115683180)
*100

(45490177/
1172667837)
*100

(52217607/
1138318801) *100

(43593724/
380083391)
*100

(45490177/
401331039)
*100

(52217607/
426965832)*100

(224121282/
985454208)
*100

1106659846)

(131550816/

(148802612/

985454208)*

1106659846)

100

Net Profit
Margin

2009

*100

*100
(39969803

(35949959/
98545420)
*100

/1106659846)

Operating
Return on
Assets

(131550816/

(148802612/

923186537)*

997590888)

Return on
Assets

(35949959/

(39969803/

923186537)*

997590888)

100

100

Return on
Equity

(35949959/
342174361)*

*100

*100

*100
(39969803/
359966920)
*100

100

83 | P a g e

Stock Market ratio:

Industry Analysis:
Ratio

Formula

Bangas
Limited

Rahima
Foods

Apex
Foods

CVO
Petrochemical

Meghna
Condensed
Milk

Earnings
Per Share

Market to
Book Ratio
Price
Earnings
Ratio

AMCL:
Ratio
Name
Earnings
Per
Share
(EPS)
PriceEarnings
Ratio
(P/E)
Marketto-Book
Ratio

84 | P a g e

Formula

2008

2009

2010

800000

39969803/
800000

43593724/
800000

45490177/
800000

1142/ 44.94

1363/49.96

1657.50/54.4
9

1527/56.86

1363/449.96

1657.50/
475.10

1527/501.66

35949959/

1142/ 428.39

2011

2012
52217607/
800000

128/6.53

128/53.37

Dividend growth rate calculation:

1st method:
2008
20519795
Growth rate

2009
21627200
5.40%

2010
22878807
5.80%

2011
23314234
1.90%

2012
24571713
5.39%

Average growth rate for 1st method= 4.62%

2nd method:
2008
20519795

2012
24571713

Growth rate= [{(24571713/20519795) ^ (1/5)} -1]

=4%

3rd method:
Dividend Payout Ratio calculation:

2008

2009

2010

2011

2012

57.08%

54.11%

52.48%

51.25%

47.06%

2010
(1-.5248)%
47.52%

2011
(1-.5125)%
48.75%

2012
(1-.4706)%
52.94%

2010
11.47%

2011
11.33%

2012
12.23%

Retention Ratio calculation:

2008
(1-.5708)%
42.98%

2009
(1-.5411)%
45.89%

Return on Equity (ROE):

2008
10.49%

85 | P a g e

2009
11.10%

Growth rate:

Year
Retention
Ratio*ROE
Growth rate

2008
.4298*.1049

2009
.4589*.1110

2010
.4752*.1147

2011
.4875*.1133

2012
.5294*.1223

4.51%

5.09%

5.45%

5.52%

6.47%

Average growth rate in 3rd method= 5.41%

Average between 3 methods = (

)%

=4.67%

FCF Calculation:
FCF=EBIT (1-T)+Depreciation-Change in Working Capital-Change in Capital Spending
2008
2009
2010
2011
2012

131550816*.92+2289384-23688709-0
148802612*.92+1547553-14437772-0
171670152*.90+1737473-25795008-0
171670512*.86+1942862+11705668-0
2056334733*.76+1592729-42392785-0

99627425
152883728
122059502
161285170
115482341

FCF Growth Rate:

1st method:

2008
99627425
Growth rate

2009
152883728
53.46%

2010
122059502
-20%

Average growth rate of 1st method=9.3%

2nd method:

2008
99627425
115482341
2012
Growth rate= [{(115482341-99627425)/99627425}^1/5]
=3 %
Average of two method= (

86 | P a g e

) % = 6.15%

2011
161285170
32.14%

2012
115482341
-28.40%

87 | P a g e