Introduction

PREFACE

BBA is a four year academic program where students are instructed how to maintain a company, analyzing a firm & its activity, how to do a business and also to be a successful business executive. It is also an arrangement where students are introduced with the practical life style in a corporate world. To be a successful corporate person it is must to implement your knowledge, experience in your life, not to gain and study only. Dhaka City College is the center of excellence where students are make their lifestyle in a shape to face the struggles outside the college with the help of college instructors. Department of Business Administration of this college does not work on the different policy. As students of BBA Program of this college, here we learn how to be a successful one. Making of reports are also a step to gather practical knowledge that helps to get forward. Instructors of the department are so much supportive and interested about reports and they influenced plus help students to do different term paper, reports on different companies and firms. This report is also a crop of their support and our effort. We make a financial analysis report on Agricultural Marketing Company Limited, a concern of PRAN GROUP as the course of Principle of Finance. We tried our best to make this report as our knowledge supports us. We hope our report can make a face of the company which can help you to get better information about the company. Thank you.

1

Introduction

OBJECTIVE

We were instructed from our finance course lecturer Ms. Jafrin Sultana to submit a financial report on a public company that has a membership on Dhaka Stock Exchange (DSE). We choose Agricultural Marketing Company Limited (PRAN) which fulfill all the demand of our instructor, to make a financial analysis report on it. We had some objectives behind making the report. These are … To know how to make a financial report. To gather practical knowledge on analyzing a company financially. To be experienced on calculating and making analysis on ratio, risk, scenario, DuPoint System, Peer-to-Peer and others. To arrange an overall financial idea against a company.

We believe that we were successful to fulfill most of our objectives. Thanks Allah to bless on us.

2

Introduction

METHODOLOGY

Agriculture Marketing Company Limited (PRAN) is a well known and leading food company in Bangladesh. So, to make a financial report on this company we have to give our full effort. It is not an easy job to analyze AMCL (PRAN)’s financial performance. We tried our best. We collect information from website, reference book from Bangladesh, yearly annual report of AMCL (PRAN) and from other sources. To collect further information, we have to go to the head office of AMCL (PRAN). We tried to meet with the head of finance department and head of accounting department. But they were to busy on their job. Beside this, the head office didn’t provide us such information that can help us making the report. We have to go to Dhaka Stock Exchange to collect the annual reports of AMCL (PRAN) and after a lot of straggle we got that. We take information from the book of “Balance Sheet of Joint Stock Companies (2000-2004)” published by the Statistics Department of Bangladesh Bank. We also have collected (www.pranfoods.net). information from the PRAN GROUP website

Besides this we have collected as many information we can collect from outside source.

Thank You.

3

Introduction

LMITATIONS

It would be a book if we start to narrate our problems and struggles. We have to face lots of problem to complete this report. As the date of submission was too close when we learned a little about make a financial report. We have to take preparation for our 2nd midterm exam with the makings of report. We feel lack of latest financial and accounting information when we constructing the report. We have to base on the old information in maximum time. But anyhow we tried to attach latest information about AMCL (PRAN). On the annual report got a lot of problem. The balance sheets were puzzled us. Besides this there was not sufficient information to make further calculation. AMCL (PRAN)’s website is not so much informatics. They do not attach or upload any kind of information that can help us in further financial calculation. The head office of AMCL (PRAN) was not supportive. They don’t give us any kind of information & instruction that can help us. We have to face a lot of hazards on collecting information. But we believe that we have succeeded to make a standard report at last. Thank You.

4

Company at a Glance

COMPANY NAME Agricultural Marketing Company Limited (PRAN) YEAR OF ESTABLISHMENT 1980 KEYWORD IN DSE & CSE AMCL(PRAN) CORPORATE MISSION Poverty and Hunger are curses COMPANY AIM To generate employment and earn dignity and self-respect from compatriots through Profitable enterprises COMPANY POLICY To market products of consistent quality at home and abroad as per world standards produced hygienically in accordance with good manufacturing practices in state of the art plants & process, packed in appropriate packaging and remain committed to these objectives at all the times CORPORATE HEAD OFFICE Property Heights, 12 R K Mission Road, Dhaka – 1203 LOCATION OF PRODUCTION Ghorashal, Palash, Narshingdi PRODUCT CATAGORIES Juice, Drinks, Beverage, Culinary, Snacks, Confectionary, Dairy MAJOR EXPORTING PRODUCTS Fruit Juices, Fruit Drinks Instant Powdered Drinks, Pickles , Canned Fruits & Vegetables, Extruded & Fried Snacks, Tea, Aromatic Rice, Puffed Rice, Flattened Rice, Jam & Jelly, Plain Spices, Blended Spices, Mustard Oil, Mineral Water, Dehydrated Fruits, Tomato Ketchup / Sauce, Toffees, Candies, Bubble Gum, Biscuits & other confectionery etc. MAJOR EXPORTING COUNTRIES India, KSA, UAE, Kuwait, Bahrain, Qatar, Djibouti ,Angola, Australia, Austria,, Belgium, Benin, Brunei, Burkina Faso, Bhutan, Cameroon, Canada, Capo Verde Islands, Chad, Congo Eritrea, Equatorial Guinea, Ethiopia, France, Gabon, Gambia, Germany, Ghana, Greece Guinea, India, Italy, Ivory Coast, Japan, Korea, Lebanon, Malaysia, Mali, Mauritania Mauritius, Myanmar, Mayo tee, Nederland Antilles, Nepal, Niger, Oman, Pakistan Palestine, Qatar, RCA, Reunion Islands, Senegal, Sierra Leone, Singapore, Sri Lanka Sudan, Sweden, Switzerland, Togo, UK, USA & Yemen.

5

Highlights of Five Years (2001-2006)

HIGHLIGHTS OF PRAN GROUP (2001-06)

Company Data
(Figure in taka)

DESCRIPTION Authorized Capital Paid Up Capital Gross Profit Net Profit Before Tax Total Asset Net Asset Current liabilities Shareholder Equity Long Term Debt Current Ratio Quick Ratio Total Asset Turnover Net profit After Taxation Net Profit margin Return on Total Asset (ROA) Return on Total Equity (ROE) Inventory Turnover Ratio Earning Per Share Proposed Dividend Unclaimed Dividend Stock Trade Debtors Investment Administrative & Selling Expenses

2006 500,000,000 80,000,000 199,231,970 31,228,166 990,644,654 673,783,245 500,364,804 337,687,792 152,592,058 1.35 0.36 88% 28,947,713 3.34% 2.92% 9% 1.35 BDT 36.18 20,800,000 1,580,230 496,023,771 45,504,079 16,480,000 86,359,063

2005 500,000,000 80,000,000 204,813,078 42,534,943 995,607,375 660,584,792 499,627,981 330,037,953 165,941,504 1.32 0.34 80% 40,771,757 5.11% 4.10% 12% 1.21 BDT 50.96 20,800,000 2,706,690 491,608,049 42,501,462 18,210,000 82,485,540

2004 500,000,000 80,000,000 200,779,694 41,652,958 968,368,328 622,251,899 503,199,292 309,015,238 156,153,798 1.24 0.26 80% 40,309,163 5.20% 4.16% 13% 1.16 BDT 50.39 19,200,000 1,224,623 493,278,897 29,956,569 18,880,000 81,356,529

2003 500,000,000 80,000,000 196,041,728 46,150,166 943,907,412 580,472,010 464,013,742 293,913,711 185,979,959 1.25 0.27 80% 44,386,931 5.90% 4.70% 15% 1.22 BDT 55.48 19,200,000 1,003,600 456,605,572 15,220,740 18,680,000 81,048,447

2002 500,000,000 80,000,000 182,647,753 44,166,962 813,749,612 509,202,925 391,729,576 270,253,283 151,766,753 1.30 0.39 88% 43,410,767 6.06% 5.33% 16% 1.50 BDT 54.26 20,000,000 913,719 357,347,834 17,431,470 17,950,000 81,624,756

2001 500,000,000 80,000,000 171,112,426 42,985,692 691,098,642 445,812,934 334,673,215 247,679,451 108,745,976 1.33 0.35 93% 41,935,472 6.54% 6.07% 17% 1.43 BDT 52.42 20,000,000 580,316 328,013,450 19,136,408 2,600,000 79,355,071

6

COMPERATIVE INCOME STATEMENT (2001-06)

COMPERATIVE INCOME STATEMENT (2001-06)

             
2005 797,683,342 (592,870,264) 204,813,078 (160,039,454) 82,485,540 77,553,914 44,773,624 (2,238,681) 42,534,943 (1,763,186) 40,771,757 BDT 50.96 2004 775,131,774 (574,352,080) 200,779,694 (156,934,476) 81,356,529 75,577,947 43,845,218 (2,192,260) 41,652,958 (1,343,795) 40,309,163 BDT 50.39 2003 752,710,227 (556,668,499) 196,041,728 (147,462,606) 81,048,447 66,414,159 48,579,122 (2,428,956) 46,150,166 (1,763,235) 44,386,931 BDT 55.48

       
2002 716,883,310 (534,235,557) 182,647,753 (136,156,214) 81,624,756 54,531,458 46,491,539 (2,324,577) 44,166,962 (756,195) 43,410,767 BDT 54.26

 
(Figures in Taka)

FISCAL YEARS Sales Cost of Goods Sold Gross Profit Expenses: Administrative & Selling Expenses Financial Expenses Operating Profit Contribution to Workers' Participation & Welfare Funds Net profit before Taxation Provision before Income Tax Net profit After Taxation Basic Earnings Per Share (EPS)

2006 867,000,825 (667,768,855) 199,231,970 (166,360,216) 86,359,063 80,001,153 32,871,754 (1,643,588) 31,228,166 (2,280,453) 28,947,713 BDT 36.18

2001 640,747,605 (469,635,179) 171,112,426 (125,864,329) 79,355,071 46,509,258 45,248,097 (2,262,405) 42,985,692 (1,050,220) 41,935,472 BDT 52.42

7

COMPERATIVE BALANCE SHEET (2001-06)

COMPERATIVE BALANCE SHEET (2001-06)
2006 NET ASSETS Property, Plant & Equipment Investment Current Assets Stock Trade Debtors Advance & Deposits Cash & Cash Equivalents Current Liabilities Current Portion of long-term Loan Short Term Loan from Bank (Secured) Liabilities for Goods Liabilities for Expenses Liabilities for Other Finance Interest Payable Worker Profit Participation Fund Income tax payable Unclaimed Dividend Net Current Assets 300,381,409 16,480,000 673,783,245 496,023,771 45,504,079 92,771,180 39,484,215 500,364,804 44,209,923 424,111,655 12,891,489 6,304,038 169,468 4,471,647 2,582,715 4,043,639 1,580,230 173,418,441 490,279,850 Financed By : Share holder Equity Share Capital Share Premium Reserve & Surplus Proposed Dividend Long Term Debt 337,687,792 80,000,000 40,000,000 196,887,792 20,800,000 152,592,058 490,279,850 330,037,953 80,000,000 40,000,000 189,237,953 20,800,000 165,941,504 495,979,457 309,015,238 80,000,000 40,000,000 169,815,238 19,200,000 156,153,798 465,169,036 293,913,711 80,000,000 40,000,000 154,713,711 19,200,000 185,979,959 479,893,670 270,253,283 80,000,000 40,000,000 130,253,283 20,000,000 151,766,753 422,020,036 247,679,451 80,000,000 40,000,000 107,679,451 20,000,000 108,745,976 356,425,427 316,812,646 18,210,000 660,584,792 491,608,049 42,501,462 93,291,132 33,184,149 499,627,981 46,533,312 418,762,505 10,816,582 8,413,189 76,119 5,210,687 2,238,681 4,870,216 2,706,690 160,956,811 495,979,457 327,236,429 18,880,000 622,251,899 493,278,897 29,956,569 76,235,298 22,781,135 503,199,292 41,875,000 417,645,508 13,609,529 20,263,963 109,713 3,443,926 … 5,027,030 1,224,623 119,052,607 465,169,036 … 4,468,825 1,003,600 116,458,268 479,893,670 344,755,402 18,680,000 580,472,010 456,605,572 15,220,740 90,619,101 18,026,597 464,013,742 45,625,000 386,748,095 8,276,626 16,246,147 1,645,449 286,596,687 17,950,000 509,202,925 357,347,834 17,431,470 102,406,341 32,017,280 391,729,576 35,624,333 328,399,834 6,165,434 15,233,293 1,332,000 1,355,373 … 2,705,590 913,719 117,473,349 422,020,036 242,685,708 2,600,000 445,812,934 328,013,450 19,136,408 79,106,537 19,556,539 334,673,215 19,916,667 299,178,721 5,587,769 5,807,492 1,124,960 527,895 … 1,949,395 580,316 111,139,719 356,425,427 2005 2004 2003 2002 2001

8

SWOT Analysis

SWOT ANALYSIS

As far we know SWOT analysis is a combination of analysis of a company which includes Strength, Weakness, Opportunity, and Threat of that company. Let’s make SWOT Analysis of “Agricultural Marketing Company Limited (PRAN)”.

Strength of Agricultural Marketing Company Limited (PRAN) As far we know Agricultural Marketing Company Limited (PRAN) is one of the leading food producing and food exporting company in Bangladesh. “PRAN Juice”, “PRAN Mango Bar”, “PRAN Badam Vaja”, “PRAN Squash” are the well known and well consumed product in Bangladesh produced by them. Besides this they have produced more than 50 verities of products. Besides this, Agricultural Marketing Company Limited (PRAN) is also export their products more then 45 countries. Their product chain is too large. Though in recent years, their profitability is in downward position, their foods become a brand. If they take care more about it, they will be a best company.

Weakness of Agricultural Marketing Company Limited (PRAN) Though Agricultural Marketing Company Limited (PRAN) is a leading food company, it is not a well profitable company now. In year 2006, the company becomes collapse. All the lines and bars of the graph of profitability are declining. YEAR 2006 is the year, where company made the worst performance that they ever do before. As the condition of Bangladesh in year 2006 is not suitable for doing business, all the businessmen are in vain. So nothing to be done by the company. Besides this, Agricultural Marketing Company Limited (PRAN) is a too much fluctuating company. All the activity ratios, liquidity ratios say that in last 5 years the company performance is jumping. It makes the firm risky for the investors to invest. AMCL (PRAN) prefer short term loan, but it increase the interest expenditure. Maximum products of Agricultural Marketing Company Limited (PRAN) are not at that quality level which customers want. They should try to maintain the quality. A market research is important to take decision about it

9

SWOT Analysis Opportunity of Agricultural Marketing Company Limited (PRAN) Agricultural Marketing Company Limited is a concern of PRAN GROUP is famous for their food products. Besides this, their mission is to make Bangladesh hunger and poverty free, aim is to producing quality food. They have the opportunity to fulfill their mission. If AMCL (PRAN) tries to increase their food quality more that the customers want, their sales will be increased at a surrounded rate. The efficiency of Agricultural Marketing Company Limited (PRAN) is at a good look. They tries to increase their productivity. It’s a good sign of development. And by make time series analysis of AMCL (PRAN), they are improving.

Threat of Agricultural Marketing Company Limited (PRAN) There lies a lot of thereat for AMCL (PRAN). The competitors of AMCL (PRAN) are strong enough to produce quality goods. They produced maintain better quality then AMCL (PRAN). Square Consumers Products, Akiz Foods Bangladesh Limited, BDFoods Limited, Arku Ltd. Cocola foods ltd., are becomes threat for the company. AMCL (PRAN) is not aware of creating a branding image of their products. Their marketing policy in too old and not suitable with today’s world.

10

Ratio Analysis

RATIO ANALYSIS

As the definition of ratio analysis we know that it involves method of calculating and interpreting financial ratios to analysis and monitor the firm’s performance. The basic inputs to ratio analysis are the firm’s income statement and balance sheet. In this report, financial ratio analyses are conducted for wishing and evaluating the operating performance of the company AMCL (PRAN). We analyze the ratio under the following categories:-

A. Profitability Ratio - Gross Profit Margin - Operating Profit Margin - Net Profit Margin - Earnings per Share
- Return of Total Assets (ROA) - Return on Stockholders Equity Ratio (ROE)

B. Liquidity Ratio - Current Ratio - Quick Ratio C. Activity Ratio - Inventory Turnover - Total Asset Turnover - Average Payment Period

11

Ratio Analysis

A. PROFITABILITY RATIO An indication of good financial health and how effectively the firm is being managed is the company’s ability to earn a satisfactory profit and return on investment. Investors will be reluctant to associate themselves with an entity that has poor earning potential since the market price of stock and dividend potential will be adversely affected. Some major ratios that measure its operating results are summarized below:

Gross Profit Margin The gross profit margin reveals the percentage of each dollar left over after the business the business has paid for its goods. The higher the gross profit earned the better. Gross profit equals net sales less cost of goods sold.

Gross Profit Margin =

Gross Profit × 100 Net Sales

Calculation of Gross Profit Margin of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Net Sales Gross Profit Gross Profit Margin

2001
TK. 640,7 TK. 171,1 26.71%

2002
TK. 716,8 TK. 182,6 25%

2003
TK. 752,7 TK. 196,0 26.04%

2004
TK. 775,1 TK. 200,7 25.90%

2005
TK. 797,6 TK. 204,8 25.68%

2006
TK. 867,0 TK. 199,2 22.97%

Gross Profit Margin
27.00% 26.00% Percent 25.00% 24.00% 23.00% 22.00% 21.00% 2001 2002 2003 2004 2005 2006 Years AMCL (PRAN) INDUSTRY AVERAGE

Comment: The graph shows a fluctuating situation. Here the industry average is 25.38%. Though the profit condition was good enough, but now it is in alarming position.
12

Ratio Analysis

Operating Profit Margin Operating profit margin is an indication of the firm’s profitability from current operations without regard to the interest charge accruing from the capital structure. The formula is –

Operating Profit Margin =

Profit Before Tax & Interest Sales

Calculation of Operating Profit Margin of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Net Sales Profit Before Tax & Interest Operating Profit Margin

2001
TK. 640,7 7.06%

2002
TK. 716,8 6.49%

2003
TK. 752,7 6.45%

2004
TK. 775,1 5.66%

2005
TK. 797,6

2006
TK. 867,0

TK. 45,24 TK. 46,49 TK. 48,57 TK. 43,84

TK. 44,77
5.61%

TK. 32,87
3.79%

Operating Profit margin
8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2001 2002 2003 2004 2005 2006 Years

Percent

AMCL (PRAN)
INDUSTRY AVERAGE

Comments: As the industry average is 5.84%, the situation of the firm is not admirable. It looses its standards. As we see YEAR 2001 was the golden period for firm, but YEAR 2006 is profit decreases abut 3%. Beside this profit are fluctuating.

13

Ratio Analysis

Net Profit Margin This ratio measures the relationship between net profits and sales of a firm. Depending on the concept of net profit employed. Basically the net profit to sales expresses the cost price effectiveness of the operation. The formula is:

Net Profit Margin =

Profit After Tax & Interest Sales

Calculation of Net Profit Margin of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Net Sales Profit After Tax & Interest Net Profit Margin

2001 2002 2003 2004 2005 TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 6.54% 6.06% 5.90% 5.20% 5.11%

2006 TK. 867,0 TK. 28,94 3.34%

Net Profit Margin
7.00% 6.00% 5.00% Percent 4.00% 3.00% 2.00% 1.00% 0.00% 2001 INDUSTRY AVERAGE AMCL (PRAN)

2002

2003 Year

2004

2005

2006

Comment: From the above table and graph we got that the situation is alarming. We take the base or industry average is 5.36%.As the line of net profit margin of AMCL (PRAN), Year 2006 is so much bad for the firm. It will be better for company to take care of their earning and expenditure.

14

Ratio Analysis

Earnings per Share Earnings per share indicate the amount of earnings for each common share held. When preferred stock is included in the capital structure, net income must be reduced by the preferred dividends to determine the amount applicable to common stock.

Earning per Share =

Profit after taxes Total Number of Share

Calculation of Earning Per Share of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Total number of share Profit After Tax & Interest Earning Per Share (EPS)

2001 800,000 TK. 41,93 52.42

2002 2003 2004 2005 800,000 800,000 800,000 800,000 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 54.26 55.48 50.39 50.96

2006 800,000 TK. 28,94 36.18

Earning Per Share
60 50 40 Taka 30 20 10 0 2001 2002 2003 2004 2005 2006 Year AMCL (PRAN) INDUSTRY AVERAGE

Comment: Let’s have a look on the graph. As the industry average of AMCL (PRAN) is TK. 49.95 or TK. 50, the situation is not good at all. The graph represents that bar of EPS of AMCL (PRAN) is downward.

15

Ratio Analysis

Return of Total Assets (ROA) The return on total asset (ROA) indicates the efficiency with which management has used its available resources to generate income. The formula of calculation of ROA is –

Return of Total Assets (ROA) =

Profit after taxes Total Asset

Calculation of Return of Total Assets (ROA) of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Total Asset Profit After Tax & Interest

2001 TK. 6910 TK. 41,93 Return of Total Assets (ROA) 6.07%

2002 2003 2004 2005 TK. 8137 TK. 9439 TK. 9683 TK. 9956 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 5.33% 4.70% 4.16% 4.10%

2006 TK. 9906 TK. 28,94 2.92%

Return on Total Assets (ROA)
7.00% 6.00% 5.00% Percent 4.00% 3.00% 2.00% 1.00% 0.00% 2001 2002 2003 2004 2005 2006 Year AMCL (PRAN) INDUSTRY AVERAGE

Comment: In the year 2005, the company has made highest utilization of assets. But this year it is the downward situation. Besides this the overall situation is not satisfactory. The line of industry average is on 4.55%.

16

Ratio Analysis

Return on Stockholders Equity Ratio (ROE) ROE measures the rate of return on the common stockholders or shareholders’ investment. The formula for measurement is –

Return on Stockholders Equity Ratio (ROE) =

Profit after taxes Total Stockholders Equity

Calculation of Return on Stockholders Equity Ratio (ROE) of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Total Stockholders Equity Profit After Tax & Interest
ROE

2001 TK. 2476 TK. 41,93 16.93%

2002 2003 2004 2005 TK. 2702 TK. 2939 TK. 3090 TK. 3300 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 16.06% 15.10% 13.04% 12.35%

2006 TK. 3376 TK. 28,94 8.57%

Return on Stockholders Equity Ratio (ROE)
18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2001 2002 2003 2004 2005 2006 Year

Percent

AMCL (PRAN) INDUSTRY AVERAGE

Comment: From the above data table and line chart, we can easily imagine where the ROE line goes to. As the industry average is 13.68%, the expected return goes on a half position on this 6 year calculation. The firm must have follow up it.

17

Ratio Analysis

B. LIQUIDITY RATIO Liquidity is a company’s ability to meet its maturing short-term obligation. Liquidity is essential to conducting business activity, particularly in times of adversely. In fact, liquidity is a pre-requisite for the survival of the firm. Here we interpret the firm’s liquidity with the help of some major ratios.

Current Ratio
This ratio, which is subject to seasonal fluctuations, is used to measure the ability of an enterprise to meet its current liabilities out of current assets. Current Ration is a measure of margin of safety to creditors. The formula for the calculation of current ratio is –

Current Ratio =

Current Assets Current Liabilities

Calculation of Current Ratio of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Current Assets Current Liabilities
Current Ratio

2001 TK. 4458 TK. 3346 16.93%

2002 TK. 5092 TK. 3917 16.06%

2003 TK. 5804 TK. 4640 15.10%

2004 TK. 6222 TK. 5031 13.04%

2005 TK. 6605 TK. 4996 12.35%

2006 TK. 6737 TK. 5003 8.57%

Current Ratio
1.40 1.35 Times 1.30 1.25 1.20 1.15 2001 2002 2003 2004 2005 2006 INDUSTRY AVERAGE AMCL (PRAN)

Year

Comment: As the data table and line chart, overall position is quite well. Here we take industrial average as 1.30.

18

Ratio Analysis

Quick Ratio The acid-test ratio or quick ratio is the ratio between quick current assets and quick current liabilities. The term quick asset refers to current assets which can be converted into cash immediately or at a short notice without diminution of value. The current assets which are excluded are; prepaid expenses and inventory. The exclusion of inventory is based on the reasoning that is it is not easily and readily convertible into cash.

Quick Ratio =

Current Assets - Inventory Current Liabilities

Calculation of Quick Ratio of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Current Assets Inventory Current Liabilities
Quick Ratio

2001 TK. 4458 TK. 3280 TK. 3346 16.93%

2002 TK. 5092 TK. 3573 TK. 3917 16.06%

2003 TK. 5804 TK. 4566 TK. 4640 15.10%

2004 TK. 6222 TK. 4932 TK. 5031 13.04%

2005 TK. 6605 TK. 4916 TK. 4996 12.35%

2006 TK. 6737 TK. 4960 TK. 5003 8.57%

Quick Ratio
0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 2001 2002 2003 2004 2005 2006 Year

AMCL (PRAN) INDUSTRY AVERAGE

Comments: Though the graph show a good improve, but the data table says something different. There are huge amounts of inventory of the firm and this makes the firm risky. Here the industry average is 0.33 times.
19

Times

Ratio Analysis

C. ACTIVITY RATIO Activity ratio measures the speed with which various accounts are converted into sales or cash – inflows or outflows. Here we measure the firm’s activity with the help of some major ratios.

Inventory Turnover Inventory turnover commonly measures the activity, or liquidity, of a firm’s inventory. It calculated as – Cost of Goods Sold Inventory

Inventory Turnover =

Calculation of Inventory Turnover of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Cost of Goods Sold Inventory
Inventory Turnover

2001 TK. 4696 TK. 3280 1.43

2002 TK. 5342 TK. 3573 1.50

2003 TK. 5566 TK. 4566 1.22

2004 TK. 5743 TK. 4932 1.16

2005 TK. 5928 TK. 4916 1.21

2006 TK. 6677 TK. 4960 1.35

Inventory Turnover
1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2001 2002 2003 2004 2005 2006 Year

AMCl (PRAN) INDUSTRY AVERAGE

Comment: In the comparison with the industry average (1.310), we see there are a lot of fluctuations in the graph. In Year 2002, company was on a better position then other one.

Times

20

Ratio Analysis

Average Collection Period The average collection Period, or average age of accounts receivable, is useful in evaluating credit and collection policies. It is arrived at by dividing the average daily sales into accounts receivable balance. The formula of calculation of average Collection Period is –

Average Collection Period =

Accounts Receivable Average Sales Per Day

Calculation of Average Collection Period of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Accounts Receivable Sales
Average Collection Period

2001 TK. 191
TK. 640,7 10.75

2002 TK. 174
TK. 716,8 8.75

2003 TK. 152
TK. 752,7 7.28

2004 TK. 299
TK. 775,1 13.91

2005 TK. 425
TK. 797,6 19.18

2006 TK. 455
TK. 867,0 18.89

Average Collection Period
25 20 Days 15 10 5 0 2001 2002 2003 Years AMCL (PRAN) INDUSTRY AVERAGE 2004 2005 2006

Comments: As the graph, the overall situation is not satisfactory, but it is on a normal level. Here the industry average is 13.13 days

21

Ratio Analysis

Total Asset Turnover The total asset turnover is helpful in evaluating a company’s ability to use its base efficiency to generate revenue. The total asset is calculated as follows;

Total Asset Turnover =

Sales Total Asset

Calculation of Return of Total Assets (ROA) of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Sales Total Asset Total Asset Turnover

2001
TK. 640,7

2002
TK. 716,8

2003
TK. 752,7

2004
TK. 775,1

2005
TK. 797,6

2006
TK. 867,0

TK. 6910
0.93

TK. 8137
0.88

TK. 9439
0.80

TK. 9683
0.80

TK. 9956
0.8012

TK. 9906
0.875

Total Asset Turnover
0.95 0.90 Time 0.85 0.80 0.75 0.70 2001 2002 2003 Year AMCL (PRAN) INDUSTRY AVERAGE 2004 2005

Comment: The table and the graph say the asset turnover line make fluctuation. But it is good news that firms tries to become efficient. In 2003-05 the company was not in bad position. The industry average is 0.85

22

SUMMARY OF RATIO ANALYSIS

SUMMARY OF RATIO ANALYSIS

DESCRIPTION/ YEARS LIQUIDITY Current Ratio Quick Ratio ACTIVITY Inventory Turnover Average Collection Period Average Payment Period Total Asset Turn Over DEBT Debt Ratio Times Interest Earned Ratio PROFITABILITY Gross Profit Margin Operating Profit Margin Net Profit Margin Earnings Per Share Return of Total Assets Return of Common Stock Ratio MARKET Price/Earnings (P/E) Ratio Market/Book (M/B) Ratio

2001

2002

2003

2004

2005

2006

Time Series

1.33 0.35

1.30 0.39

1.25 0.27

1.24 0.26

1.32 0.34

1.35 0.36

Improving Improving

1.43 10.75 4.66 0.93

1.50 8.75 4.88 0.88

1.22 7.28 5.51 0.80

1.16 13.91 9.95 0.80

1.21 19.18 9.76 0.8012

1.35 18.89 8.23 0.875

Improving Fluctuating Fluctuating Improving

64% 97%

67% 92%

69% 73%

68% 62%

66.85% 56.81%

65.90% 40.86%

Improving Declining

26.71% 7.06% 6.54% BDT 52.42 6.07% 16.93%

25% 6.49% 6.06% BDT 54.26 5.33% 16.06%

26.04% 6.45% 5.90% BDT 55.48 4.70% 15.10%

25.90% 5.66% 5.20% BDT 50.39 4.16% 13.04%

25.68% 5.61% 5.11% BDT 50.96 4.10% 12.35%

22.97% 3.79% 3.34% BDT 36.18 2.92% 8.57%

Declining Declining Declining Declining Declining Declining

7.62 1.29

6.75 1.08

7.43 1.12

10.39 1.36

10.19 1.26

10.67 0.91

Declining Declining

23

DuPoint Analysis

DuPoint Analysis

DuPont System of analysis is an analysis of profitability that breaks down return on assets between the profit margin and asset turnover. The second or modified version show how return on asset is translated into return on equity. Let see the DuPoint analysis of AMCL (PRAN).

DuPoint Analysis of AMCL (PRAN)
(Figure in Taka)

FISCAL YEAR 1. Sales 2. Cost of Goods Sold 3. Operating Expenses 4. Interest Expenses 5. Taxes 6. Earnings Available For Common Stock Holders (1-23-4-5) 7. Net Profit Margin ((6÷1)*100) 8.Total Assets 9. Total Asset Turn Over (8÷1) 10. Return on Asset (ROA) (7*9) 11. Total Liabilities 12. Share holder Equity 13. Financial Leverage Multiplier (FLM) (11/12)

2001 640,747,605 469,635,179 81,617,476 46,509,258 1,050,220

2002 716,883,310 534,235,577 83,949,333 54,531,458 756,195

2003 752,710,227 556,668,499 83,477,403 66,414,159 1,763,235

2004 775,131,774 574,352,080 83,548,789 75,577,974 1,343,795

2005 797,683,342 592,870,264 84,724,221 77,553,914 1,763,186

2006 867,000,825 667,768,855 88,002,651 80,001,153 2,280,453

41,935,472

43,410,747

44,386,931

40,309,136

40,771,757

28,947,713

6.54% 691,098,642 0.93

6.06% 813,749,612 0.88

5.90% 943,907,412 0.80

5.20% 968,368,328 0.80

5.11% 995,607,375 0.80

3.34% 990,644,654 0.88

0.061 691,098,642 247,679,451 2.79

0.053 813,749,612 270,253,283 3.01

0.047 943,907,412 293,913,711 3.21

0.042 968,368,328 309,015,238 3.13

0.041 995,607,375 330,037,953 3.02

0.029 990,644,654 337,687,792 2.93

14. RETURN ON COMMON EQUITY (ROE) (10*13)

0.17

0.16

0.15

0.13

0.12

0.09

** Please go to annexure to get detailed analysis & flowchart of DuPoint Analysis

24

Peer to Peer Comparison

PEER GROUP COMPARISON FOR YEAR 2004

To make peer to peer comparison we choose Yusuf Flower Mills LTD (YOUSUFLOUR) and Fu-Wang Ltd. Lets have a look on the comparisons.

DESCRIPTION Current Ratio Quick Ratio ACTIVITY Inventory Turnover Average Collection Period (DAYS) Average Payment Period (DAYS) Total Asset Turn Over DEBT Debt Ratio Times Interest Earned Ratio Fixed Payment Coverage Ratio PROFITABILITY Gross Profit Margin Operating Profit Margin Net Profit Margin Earnings Per Share (BDT) Return of Total Assets Return of Common Stock Ratio MARKET Price/Earnings (P/E) Ratio Market/Book (M/B) Ratio

FU-WANG 1.22 0.88

EVALUATION Better Worst

AMCL (PRAN) 1.24 0.26

EVALUATION Better Better

YOUSUFLOUR 0.73 0.11

7.03 76.4 25.17 1.06

Worst Better Better Worst

1.16 13.91 9.95 0.80

Worst Worst

6.2 (not available) (not available) 4.47

35% 12.6 (not available)

Better Worst -

68% 62% (not available)

Better Worst -

0 (not available) (not available)

22.30% 14.20% 8.73% 1.63 9.20% 14.20%

Better Worst Worst Better Worst Worst

25.90% 5.66% 5.20% 50.39 4.16% 13.04%

Better Better Better Better Worst Better

7% 3% 2% 0.16 15% -43%

7.63 1.08

Better Better

10.39 1.36

Worst Better

68.75 -8.66

25

Risk Analysis

RISK ANALYSIS

Risk is the chance that an outcome other then expected will occur. Generally the terms risk is used interchangeable with uncertainty to refer to variability of return associated with a given assets. More finally, risk is a measure of uncertainty about the outcome from a given event. This greaten the variability of possible outcomes, on both the high side and the low side, the grater the risk. There are two types of risk:

1. Business Risk 2. Financial Risk

Business Risk

The chance that the firm will be unable to cover operating costs level is driven by the firm’s revenues stability and the structure of its operating cost.

To find out risk of AMCL (PRAN) and Fu-Wang, we need the calculate –

-

Expected EBIT Standard Deviation Coefficient of Variation

* See appendixes for details formula and calculation

26

Risk Analysis

Calculation of Business risk of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS EBIT

2001

2002

2003

2004

TK. 429.86

TK. 441.67

TK. 461.50

TK. 416.53

After calculation we get…. The Expected EBIT* of AMCL (PRAN) is 414.53 The Standard Deviation* is 47.88 The Coefficient of Variation* is 0.1155 or 11.6%

Calculation of Business risk of Industry (FU-WANG)
(Figures in 00,000)

FISCAL YEARS EBIT

2001

2002

2003

2004

TK. 64

TK. 317

TK. 405

TK. 405

After calculation we get….

The Expected EBIT* of FU-WANG is 297.75 The Standard Deviation* is 53.625 The Coefficient of Variation* is 0.18 or 18%

Comments: From the above calculation we get that the coefficient of variation of sales of AMCL (PRAN) is lower then the industry as Fu-Wang Foods which means firm’s business risk is lower then the risk of industry.

* See appendixes for details formula and calculation

27

Risk Analysis

FINANCIAL RISK

The chance that firm will be unable to cover its financial obligations level is driven by the predictability of the firms operating cash flows and its cost financial obligations.

DEBT TO ASSETS RATIO

It measures the extent to which borrowed funds has been used to finance the firm’s operation. Debt includes both short and long term debt. The formula for the calculation of this ratio is,

Formula:

Debt - To - Assets Ratio =

Total Debt Total Assets

Calculation of Debt – to – Asset Ratio of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Total Assets Total Liability/Debt Debt – to - Assets Ratio

2001 TK. 6911 TK. 4434 0.64

2002 TK. 8137 TK. 5435 0.67

2003 TK. 9440 TK. 6499 0.69

2004 TK. 9684 TK. 6593 0.68

2005 TK. 9956 TK. 6655 0.67

2006 TK. 9906 TK. 6529 0.66

Debt-To-Assets Ratio
0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 2001 2002 2003 2004 2005 2006 Year

Times

AMCL (PRAN) INDUSTRY AVERAGE

Comment: This ratio measures the share of the total assets financed by outside funds. We find that in comparison with the industry average (0.38) the firm posses a high debt to ratio. In that case the firm faces less financial risk then the industry.

28

Risk Analysis

DEBT TO EQUITY RATIO

Debt – To – Equity ratio shows the relationship between borrowed funds and owner’s capital. This ratio reflects the relative claims of creditors and shareholders against the assets of the firm.

Formula: Total Debt Total Share Holders Equity

Debt - To - Equity Ratio =

Calculation of Debt – To – Equity Ratio of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Total Liability/Debt Total Shareholders Equity Debt – To – Equity Ratio

2001 TK. 4434 TK. 2477 1.7901

2002 TK. 5435 TK. 2702 2.0115

2003 TK. 6499 TK. 2939 2.2113

2004 TK. 6593 TK. 3090 2.1337

2005 TK. 6655 TK. 3300 2.0167

2006 TK. 6529 TK. 3376 1.9339

Debt-To-Equity Ratio
2.5 2 Times 1.5 1 0.5 0 2001 2002 2003 2004 2005 2006 AMCL (PRAN) INDUSTRY AVERAGE

Year

Comment: Here the industry average is (0.48) and we see that the ratio of firm is increasing over the year. In 2003, the ratio was highest (2.2113). It implies that for taka 2.2113 of outside liability the firm has taka 1 of owner’s capital which indicates that the owners are putting up relatively less for their own. It is danger signal for the creditors. If the firm should fail financially, the creditors will loss heavily.

29

Risk Analysis

TIME INTEREST EARN RATIO

It is also known as “Interest Coverage Ratio”. The ratio measures the debt serving capacity of a firm insofar as fixed interest on long-term loan is concerned. Here is the formula –

Formula: Earning Before Interest & Tax Total interest Charge

Time Interest Earn Ratio =

Calculation of Time Interest Earn Ratio of AMCL (PRAN)
(Figures in 00,000)

FISCAL YEARS Earning Before Interest& Tax Total Interest Charge Time Interest Earn Ratio

2001 TK. 894 TK. 465 1.9226

2002 TK. 988 TK. 546 1.8095

2003 TK. 1129 TK. 661 1.7080

2004 TK. 1171 TK. 756 1.5489

2005 TK. 1201 TK. 775 1.5497

2006 TK. 1112 TK. 800 1.390

Time Interest Earn Ratio
AMCL (PRAN) 12 10 TIMES 8 6 4 2 0 2001 2002 2003 2004 2005 2006 YEAR INDUSTRY AVERAGE

Comment: As we see here it is shocking news for AMCL (PRAN) that the difference between their ratio and the industry average (11.39) is very high. It indicates that the extent to which a fall in EBIT is tolerable in the sense that the ability of the firm to service its debt would be adversely affected. Here we got that the firm is loosing the ability to handle fixed charge liabilities and the assurance to payback of interest to the creditors is low.

30

Scenario Analysis

Scenario Analysis

INCOME STATEMENTS FORCUSTING ( PRAN GROUP) FISCAL YEARS Sales Cost of Goods Sold Gross Profit Expenses: Administrative & Selling Expenses Financial Expenses Operating Profit Contribution to Workers' Participation & Welfare Funds Net profit before Taxation Provision before Income Tax Net profit After Taxation + 10% 2006 2007 2008 2009 2010 TK. 86,700,083 TK. 953,700,908 TK.1,049,070,998 TK.1,153,978,098 TK.1,269,375,908 TK.66,776,886 TK.19,923,197 TK.16,636,022 TK.8,635,906 TK.8,000,115 TK.3,287,175 TK.164,359 TK.3,122,817 TK.228,045 TK.2,894,771 TK. 734,545,741 TK.808,000,315 TK.219,155,167 TK.241,070,684 TK.182,996,238 TK.94,994,969 TK.88,001,268 TK.36,158,929 TK.1,807,947 TK.34,350,983 TK.12,709,864 TK.21,641,119 TK.201,295,861 TK.104,494,466 TK.96,801,395 TK.39,774,822 TK.1,988,741 TK.37,786,081 TK.13,980,850 TK.23,805,231 TK.888,800,346 TK.265,177,752 TK.221,425,447 TK.114,943,913 TK.106,481,535 TK.43,752,305 TK.2,187,616 TK.41,564,689 TK.15,378,935 TK.26,185,754 TK.977,680,381 TK.291,695,527 TK.243,567,992 TK.126,438,304 TK.117,129,688 TK.48,127,535 TK.2,406,377 TK.45,721,158 TK.16,916,828 TK.28,804,329

31

Scenario Analysis

INCOME STATEMENTS FORCUSTING ( PRAN GROUP) - 10% FISCAL YEARS Sales Cost of Goods Sold Gross Profit Expenses: Administrative & Selling Expenses Financial Expenses Operating Profit Contribution to Workers' Participation & Welfare Funds Net profit before Taxation Provision before Income Tax Net profit After Taxation 2006 2007 2008 TK. 86,700,083 TK. 780,300,743 TK. 702,270,668 TK. 66,776,886 TK. 600,991,970 TK. 540,892,773 TK. 19,923,197 TK. 179,308,773 TK. 161,377,896 TK. 16,636,022 TK. 149,724,194 TK. 134,751,775 TK. 8,635,906 TK. 8,000,115 TK. 3,287,175 TK. 164,359 TK. 3,122,817 TK. 228,045 TK. 2,894,771 TK. 77,723,157 TK. 72,001,038 TK. 29,584,579 TK. 1,479,229 TK. 28,105,349 TK. 2,052,408 TK. 26,052,942 TK. 69,950,841 TK. 64,800,934 TK. 26,626,121 TK. 1,331,306 TK. 25,294,814 TK. 1,847,167 TK. 23,447,648 2009 TK. 632,043,601 TK. 486,803,495 TK. 145,240,106 TK. 121,276,597 TK. 62,955,757 TK. 58,320,841 TK. 23,963,509 TK. 1,198,176 TK. 22,765,333 TK. 1,662,450 TK. 21,102,883 2010 TK. 568,839,241 TK. 438,123,146 TK. 130,716,096 TK. 109,148,938 TK. 56,660,181 TK. 52,488,756 TK. 21,567,158 TK. 1,078,358 TK. 20,488,800 TK. 1,496,205 TK. 18,992,594

32

Findings

FINDINGS

After we finished all the calculations and comparisons, we got something about the company which can be noted down.

-

In most of the cases, the company’s position is fluctuating. On an expanded way, all the ratios, percentages are well in first two years and on the last year 2006, company improving. But in these middle 3 years the position is down the standards. The graph line of profitability and earnings or the company is declining. The gap between Current Ratio and Quick Ratio is huge. The inventory position of the company is increasing year by year. As we know that the economy of Bangladesh, the price of raw-materials are fluctuating. In this situation huge amount of inventory make the company risky. Company’s inventory is staying on 70% - 75% of current assets all the year. Companies “Processing of goods” related costs are increasing. Selling and administrative expenses are on control. Company is not interested in long term lone. They prefer short term lone. So the interest expenses of the company increasing. The EPS (Earning per Share) of the company is in alarming position in year 2006. The Return on Equity (ROE) is in a bad position in recent year. Company’s management efficiencies are admirable. Company’s amounts of exporting food are increasing. Importers of AMCL (PRAN) are also increasing

-

-

-

33

Recommendation

RECOMMENDATION

We recommend company to follow up about some situations that will help company to go further up.

-

Sales of the company are goes down. Marketing department should follow-up about the matter. The cost of processing goods should be reduced. Company can use new machinery or techniques.

-

Company should take care about inventory Interest rates of long term loan are low; company should avoid taking short-term loan. Company should decrease its business risk more. Company has to stop the production of low demanded food product of the company. They should increase food quality and also marketing quality.

34

DuPoint Analysis Flowchart

Sales COGS Operating Expenses Contribution at Wale fare Fund Interest Taxes Return On Common Stock Equity (ROE) Sales Current Assets + Net Fixed Assets Current Liabilities + Long-term Debt Total Liabilities + Total Liabilities & Stockholder Equity = Total Asset ÷ Common Stock Equity Financial Average ratio ÷ Total Assets Total Asset Turnover × Earning Available for Common Stockholder ÷ Net Profit Margin

Sales Return on Total Asset (ROA)

×

Stockholders Equity

35

Risk Analysis Formula

RISK ANALYSIS FORMULA

To make calculation on business risk analysis, The formulas are… For Expected EBIT:

Expected EBIT =

∑ EBIT of Last Four Years
Number of years

For The Standard Deviation:

Standard Deviation =

∑ EBIT Per Year - Expected EBIT
Number of years

For Co-efficient of Variation:

Co - efficient of Variation =

Standard Deviation × 100 Expected EBIT

36

References

REFERENCES

+ Annual reports of Agricultural Marketing Company Limited (PRAN) 2001-2006 + Balance Sheet of Joint Stock Companies 2000-04” published by Statistics Department of Bangladesh Bank. + Agricultural Marketing Company Limited (PRAN)’s website + Different Finance Related Books + http://www.dsebd.org + www.pranfoods.net + www.investopedia.com + www.wikipedia.com + www.finance.yahoo.com + www.weeklyindustry.com

37