Assignment On

Financial Analysis of PRAN Course Title: Principles of Accounting Course Code: ACT 101 Section: 06

Submitted To:
Anup Chowdhury, Assistant Professor, Department of Finance and Banking Jahangirnagar University and Visiting Faculty, East West University

Submitted By: Riadus Saleheen Md.Ahsan Sarwar Nawreen Ferdous Afrina Atique Afroza Ganim 2010-1-10-195 2010-1-10-057 2010-2-10-023 2010-2-10-256 2010-1-13-034

Submission Date: 17-08-2011

Introduction

PRAN is the pioneer in Bangladesh to be involved in contract farming and procures raw material directly from the farmers and processes through state of the art machinery at our several factories into hygienically packed food and drinks products. The brand PRAN has established itself in every category of food and beverage industry and can boost a product range from Juices, Carbonated Drinks, Confectionery, Snacks, and Spices to even Dairy products. PRAN is in testimony to our convictions. It stands for: Programmed for Rural Advancement Nationally, or in Bangla:

Company Overview
PRAN is currently the most well known household name among the millions of people in Bangladesh and abroad also. Since its inception in 1980, PRAN Group has grown up in stature and became the largest fruit and vegetable processor in Bangladesh. It also has the distinction of achieving prestigious certificate like ISO 9001:2000, and being the largest exporter of processed agro products with compliance of HALAL & HACCP to more than 70 countries from Bangladesh. Today, our consumers not only value PRAN for its authentic refreshing juice drinks products , but also for its mouth watering quality confectionery products with high visual appeal and exciting texture. We intend to expand our presence to every corner of the world and strive to make PRAN a truly international brand to be recognized globally.

Tools of Analysis

We use various tools to evaluate the significance of financial statement data. Three types of tools we are using. These are:

1. Horizontal Analysis: It evaluates a series of financial statement data over a period of time. It is also called trend analysis. Horizontal analysis is used primarily in intracompany comparison. Its purpose is to determine the increase or decrease that has taken place. 2. Vertical Analysis: It evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount. It is also called the common-size analysis. Vertical analysis is used in both intra and inter-company comparison. 3. Ratio Analysis: It expresses the relationship among selected items of financial statement data. A ratio also expresses the mathematical relationship between one quantity and another. The relationship is expressed in terms of a percentage, a rate, or a simple proportion. Ratio analysis is used in all three types of comparisons.

Vertical analysis

Vertical Analysis evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount. It is also called the common-size analysis. Vertical analysis is used in both intra and inter-company comparison.

Common Size Vertical Analysis Statement Analysis 30 June, 2010 Sales VC 1,205,155,338 935,681,509 30 June, 2009 1,106,659,846 585,841,641 247,818,205 96,876,382 2,139,211 _ 148,802,612 98,510,327 50,292,285 7,807,868 42,484,417 30 June,2010 100% 77.64% 22.34% 8.74% 0.14% 0.08% 13.55% 8.87% 4.68% 0.83% 3.85%

CM = 269,473,829 Fixed Cost Depreciation Non Operating Income 105,384,093 1,737,473

+ 916,500

EBIT = 163,268,763 Interest 106,856,364

EBT = 56,412,399 Tax Net Income 9,998,055 46,414,344

Income statement
Income Statement:

Revenue: Sales Revenue Total Revenue Expenses: Administrative & Selling Expenses =

269,473,829 269,473,829

105,384,093

Total Expenses Net Income

= =

105,384,093 164,089,736

Balance Sheet

Balance Sheet At 30 June, 2010 Liabilities Current Liabilities: A/C payable Notes payable Current Portion of long Term Loan Short Term loan from bank Interest payable Workers Profit Participation Fund Income Tax Payable Unclaimed Dividend Deferred Tax Liabilities Long-term Liabilities: Long Term Debt Equity: Share Capital Proposed Dividend Reserve And Surplus Share Premium Total Liabilities: Assets Current Assets: Cash A/C receivable Stock Advance & Deposits

6,179,656 4,557,302 14,296,711 428,240,957 4,341,763 9,185,523 8,020,506 3,184,915 26,895,333

28,979,762 41,282,366 491,757,780 131,231,172

230,697,123 80,000,000 24,000,000 236,083,391 40,000,000 1,115,683,180

Fixed Assets: Plant

422,432,100

Total Assets:

1,115,683,180

Ratio Analysis
Ratio Analysis expresses the relationship among selected items of financial statement data. A ratio also expresses the mathematical relationship between one quantity and another. The relationship is expressed in terms of a percentage, a rate, or a simple proportion. Ratio analysis is used in all three types of comparisons.

Types Ratio:
There are five types ratio. These are 1) Liquidity Ratio i. ii. Current Ratio Quick Ratio

2) Asset Utilization Ratio i. ii. iii. Receivable Turnover Inventory Turnover Total Asset Turnover

3) Profitability Ratio i. ii. iii. Profit Margin Return on Assets Return on Equity

4) Debt Utilization Ratio i. ii. Debt to Equity Interest Coverage Ratio

5) Market Base Ratio i. ii. Earning Per Shares Dividend Per Shares

4.1 Liquidity Ratio

(i) 2009 Current Ratio = Current Assets/ Current Liabilities 2010

668,461,522/479,012,783 = 1.40 times

693,251,080/478,007,333= 1.45 times

Comments: For each taka of current liabilities, the current assets were 1.40 times in 2009 and 1.45 times in 2010. Thus, the liquidity in 2010 was better than that in 2009. (ii) 2009 187,011,687/479,012,783=0.39 times Quick Ratio = Quick Assets/Current Liabilities 2010 201,493,300/478,007,333=0.42times

Comments: For each taka of current liabilities, the quick assets were 0.39 times in 2009 and 0.42times in 2010. Thus, the liquidity in 2010 was better than that in 2009.

4.2 Asset Utilization Ratio

(i) 2009 1,106,659,846 / 37,284,380=29.68 times Receivables Turnover = Net Credit Sales / Account Receivables 2010 1,205,155,338 / 41,282,366= 29.20 times

Comments: The company collected receivables 29.68 times during 2009 and 29.20 times in 2010. Thus, the receivables turnover of 2009 was better than that of 2010.

(ii) 2009

Inventory Turnover = Cost of goods sold / Inventory 2010 935,681,509 / 491,757,780 = 1.90 times

858,841,641 / 481,449,835= 1.78 times

Comments: The inventory was sold on an average of 1.78 times during 2009 and 1.90 times during 2010. Thus, the inventory turnover of 2010 was better than that of 2009.

(iii) 2009

Total Assets Turnover = Net sales / Total Assets 2010 =1,205,155,338/1,115,683,180 =0.99 times

1,106,659,846 /997,590,888 = 1.11 times

Comments: For each taka of investment in assets, net sales generated in 2009 were 1.11 times and in 2010 was 0.99. Thus, the assets turnover of 2010 was better than that of 2009.

4.3 Profitability Ratios

(i) 2009 42,484,417 / 1,106,659,846=0.04% Profit Margin = Net Income / Net Sales 2010 46,414,344 / 1,205,155,338 = 0.04%

Comments: For each taka of net sales, the percentage of net income generated in 2009 was 0.04% and in 2010 was 0.04%. Here, the profit margin of 2010 was same to 2009.

(ii) 2009

Return on Assets = Net Income / Total Assets 2010 46,414,344 /1,115,683,180 =0 .04%

42,484,417 /997,590,888 =0.04%

Comments: For each taka of investment in assets, net income generated in 2009 was 0.04% and in 2010 was 0.04%. Here, the return on assets of 2010 was same to 2009.

(iii) 2009

Return on Equity = Net Income / Total Equity 2010 46,414,344 / 380,083,391=0.12%

1,303,022,832 / 359,966,920=0.12%

Comments: For each taka invested by the owners, net income generated was 0.12% in 2009 and 0.12% in 2010. So, the return on equity of 2009 was same to 2010.

4.5 Debt Utilization Ratios

(i) Debt of Equity Ratio = Total Debt / Total Equity 2009 136,397,769/ 359,966,920= 0.38 % 2010 230,697,123/ 380,083,391= 0.61%

Comments: For every taka of total equity, debt used was 0.38% in 2009 and 0.61% in 2010. Thus, the debt to equity ratio was better in 2010 than that of 2009.

(ii) Interest Coverage Ratio = Earnings before Interest and Tax (EBIT) / Interest Expense

2009 148,802,612 / 98,510,327 = 1.51 times

2010 163,268,763 / 106,856,364 = 1.53 times

Comments: Interest expense is covered 1.51 times during 2009 and 1.53 times during 2010. Thus, interest coverage ratio of 2010 is better than that of 2009.

4.4 Market based Ratios

(i) 2009 42,484,417 / 800,000 = Tk.53.11 Earning per Share(EPS) = Net Income / Number of outstanding Shares 2010 46,414344 / 800,000 = Tk.58.02

Comments: For every share of common stock, the income earned was Tk.53.11 in 2009 and Tk58.02 in 2010. Thus, the earning per share of 2010 was better than that of 2009.

(ii) 2009

Dividend per Share(DPS) = Cash Dividend / Number of outstanding Shares 2010 22,878,807 / 800,000 = Tk.28.60

21,627,200 / 800,000 = Tk.27.03

Comments: For every share of common stock, the cash dividend generated was Tk.27.03 in 2009 and Tk. 28.60 in 2010. Thus, the dividend per share of 2010 was better than that of 2009.