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Final Project

FINANCIAL STATEMENT ANALYSIS


OF

BATA SHOES AND SERVIS SHOES

AND

A REPORT

SUBMITTED TO THE DEPARTMENT OF MANAGEMENT


SCIENCES,

SUPERIOR UNIVERSITY OF PAKISTAN

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR

THE DEGREE OF Bachelor IN BUSINESS ADMINISTRATION


Submitted By:

Submitted to:

Sir Luqman

Dedication

we would like to dedicate this


project to our parents who have
always encourage us throughout
in our academic career and make
possible for us to stand where we
today.
GROUP MEMBERS :
KASHIF ALI 9215
NAVEED-UL-HASSAN 9243
NAEEM SAJJAD 9212
PIRZADA ARSLAN 9234
ARSLAN GUJJAR 9229
M .IFTIKHAR 9218
We become able to complete this project by
blessing of our God and the help of our teacher
which give us guiding in every aspect of our
project. And sure us that he is available when we
need assistance. We would also like to thanks our
family as specially our parents for being a patent
and encouraging and motivating us. We dedicate
this project to our respected teacher Sir Luqman
Common Size Financial Statement discloses the
internal structure of the firm. It indicates the
existing relationship between sales and each
income statement account. It shows the mix of
assets that produce income and the mix of the
sources of capital, whether by current or long-
term debt or by equity funding.

The primary objective of financial analysis is to


forecast or determine the actual financial status
and performance of a project

TABLE OF CONTENT

Section I

a) Introduction……………………………………………………. 6
Introduction of Bata shoes ……………………………………. 8

Introduction of Serves shoes………………………………... 9

Project proceedings……………………………………………….
14

1. Ratio Analysis…………………………………………….…………. 14
a) Liquid Ratio…………………………………………………... 15

b) Leverage Ratio………………………………………………… 18

c) Profitability Ratio……………………………………………… 24

d) Activity Ratio………………………………….….………….. 32

e) Market Ratios…………………………………………………. 33

f) Statement of Cash Flow………………………………………. 38

Company’s introduction:

Introduction of Serves shoes company :

Serves e are in leather trade since last 25 years having a tannery. Now they started
manufacturing of shoes of various kinds for men, women, sports, softy shoes, boots and
much other kind of shoes under the choice of buyers

Vision:

“Enabling people to advance with confidence and success”

Mission:
“To make our customer prosper, our staff excels and creates value for shareholders”

Introduction of Bata Shoes Company

Bata Ltd. is a privately owned global shoe manufacturer and retailer headquartered in
Ontario, Canada. The company is led by a third generation of the Bata family. With
operations in 68 countries, Bata is organized into four business units. Bata Canada,
based in Toronto, serves the Canadian market with 250 stores. Based in Paris, Bata
Europe serves the European market with 500 stores. With supervision located in
Singapore, Bata International boasts 3,000 stores to serve markets in Africa, the Pacific,
and Asia, Finally, Bata Latin America, operating out of Mexico City, sells footwear
throughout Latin America. All told, Bata owns more than 4,700 retail stores and 46
production facilities. Total employment for the company exceeds 50,000

VISION
To be the premier organization operating locally and internationally that provided the
complete range of financial services to all segment under one roof

MISSION
To develop and deliver the most innovative products manage customer experience deliver
quality services that contribute to brand strength establish a competitive advantage and
enhance profitability , thus providing value to stake holder of the bank.

Data Processing and Analysis:


We can use several tools to evaluate a company, but we will use one of the most valuable
tool that is “financial ratios Ratios are useful both to internal and external analysts of
the firm. For internal purposes: ratios can be useful in planning for the future, setting
goals, and evaluating the performance of managers. External analysts use ratios to
decide whether to grant credit, to monitor financial performance, to forecast financial
performance, and to decide whether to invest in the company we will use Microsoft Word
and Microsoft Excel work sheets to compute the different ratios and analysis.

Project proceedings:

RATIO ANALYSIS:

(1) PROFITABILITY RATIO’S

(2) Debt & Leverage Ratio’s

(3) Liquidity & Working Capital Ratio’s

(4) shareholder ratio’s

(1)Liquidity & Working Capital Ratio’s

(a) Current Ratio


(b) Quick Ratio
(c) Avg. Inventory Turnover Period
(d) Accounts Receivable Collection Period
(e) Accounts Payable Payment Period
(a) Current Ratio

Current Ratio = Current Assets / Current Liabilities

Current assets normally include cash, marketable securities, accounts receivables, and
inventories. Current liabilities consist of accounts payable, short-term notes payable,
current maturities of long-term debt, accrued taxes, and other accrued expenses

BATA SHOES

Year 2007 2008


Current 1398003 1652271
Current
Assets 808720 734907
Current
Liabilities 1.73 2.25
ratio

SERVIS SHOES

Year 2007 2008


Current 159136 242708
Current
Assets 1
189657 2
189657
Current
Liabilities 1
0.840 1
1.280
ratio
Interpretation

BATA SHOES

The current ratio for the year, 2007 & 2008 is 1.73 & 2.25 respectively this1.73 ratio is
lower which shows low short term.

SERVIS SHOES

The ratios for the last 2 years are 0.840, & 1.280,

(b)Quick Ratio:

Quick ratio=current assets-stock/current liabilities

The debt to equity ratio is the most popular leverage ratio and it provides detail around
the amount of leverage (liabilities assumed) that a company has in relation to the monies
provided by shareholders

BATA SHOES

Year 2007 2008


Current 62 377982
assets-
Current 8007
808720 734907
Quick
liabilities 0.78 0.51
ratio

SERVIS SHOES

Year 2007 2008


Current 892505 2308826
Current
assets- 1896571 1896571
Quick
liabilities 0.471 1.218
ratio
Interpretation

BATA SHOES

We can see from the above calculations that this ratios continuously decreasing in the
last two years.

SERVIS SHOES

Calculating this debt ratio we can see that it was 0.471 & 1.218 the year, 2007 & 2008
respectively. This shows increasing the ratio of the company

(c)Avg. Inventory Turnover Period:

Avg inventory period = inventory / cost of sales*365

BATA SHOES

Year 2007 2008


Inventory 76 1274289
Cost of 9996232 2942432
Avg
sales 120.78
7134 158.08
inventory

SERVIS SHOES

Year 2007 2008


Inventory 69855 118256
Cost of 38096
6 535517
6
Avg
sales 66.92
33 80.60
0
inventory
Interpretation

BATA SHOES

We can see from the above calculations that this ratios continuously decreasing in
the last two years. In 2007 it was 1.66 and in 2008 it was 1.33.

SERVIS SHOES

Analysis shows that this ratio was as high as 1.2 among two years. However, it
declined to 1.15 in the year 2008. In 2007 the ratio somewhat increased to 1.85.

(d)Accounts Receivable Collection Period:

Avg account receivable period=trade receivable/sales*365

The capitalization ratio measures the debt component of a company's capital structure,
or capitalization (i.e., the sum of long-term debt liabilities and shareholders' equity) to
support a company's operations and growth. Long-term debt is divided by the sum of
long-term debt and shareholders' equity. This ratio is considered to be one of the more
meaningful of the "debt" ratios - it delivers the key insight into a company's use of
leverage.

BATA SHOES

Year 2007 2008


Trade 3482 893
Sales
receivable 3964187 51065
Avg account 0.321 780.064
receivable
SERVIS SHOES
Year 2007 2008
Trade 1904 2844
Sales
receivable 45211 639323
Avg account 0.15
47 1.62

receivable

Interpretation

BATA SHOES

It is obvious from the above calculations that there is a gradual fall in this ratio over
the years.

SERVIS SHOES

The ratios for the last 2 years are, 0.65 and 0.52. Shows below standard of 2:1

(e)Accounts Payable Payment Period:


Profit Ability Ratio’s

(a) Gross Profit Margin


(b) Net Profit Margin
(c) Assets Turnover Ratio
(d) ROCE

(a)Gross Profit Margin:

Gross profit = gross profit/sales*100

Sales to working capital give an indication of the turnover in working capital per year. A
low working capital indicates an unprofitable use of working capital.

BATA SHOES
Year 2007 2008
Gross 1637053 216
Sales
profit 3964187 5106578
4116
Gross 41.29 42.37
profit
SERVICE SHOES

Year 2007 2008


Gross 711514 103
profit
Sales 4521147 8153
6393323
Gross 15.73 16.24
profit

Interpretation:

BATA SHOES

This liquidity ratio for the years, 2007 & 2008 is, 41.29& 42.37 compared to standard
ratio this ratio is lower which shows low short term liquidity efficiency at the same time
holding less than sufficient current assets mean inefficient use of resources

SERVIS SHOES

The ratios for the last 2 years are, 15.73 &16.24 shows the ratio

(b)Net profit margin:

Net profit margin= PBIT/sales*100

Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable to meet its
short-term liabilities with its current assets (cash, accounts receivable and inventory).
Also known as "net working capital", or the "working capital ratio".

BATA SHOES
Year 2007 2008
PBIT 503999 663822
sales 3964 5106578
Net profit 12.71
187 12.99
margin
SERVICE SHOES

Year 2007 2008


PBIT 236180 878203
sales 4521147 6393323
Net profit 5.23 13.74
margin

Interpretation:

BATA SHOES

It is very clear from the above calculations that the working capital of the Bata is
gradually increasing over the years, which shows good short term liquidity efficiency.

SERVIS SHOES

This ratio increased to a great extent in 2007, almost double of the year 2008

(e) Assets turnover ratio:

Assets turnover ratio=sales/cap employment


The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have.

BATA SHOES
Year 2007 2008
sales 39641 510657
Cap 8720633 8 191251
Assets
employed 4 19.21 26.70
turnover

SERVICE SHOES

Year 2007 2008


sales 4521147 6393323
Cap 576630 5239
Assets
employed 7.85 0112.21
turnover

Interpretation

BATA SHOES

We can see from this ratio analysis that, this company has covered their interest expenses
19.21 times in 2007 and 26.70 times in 2008. It means they have performed pretty much
same in 2007 and 2008.

SERVIS SHOES

We can see that, this company has covered their interest expenses 7.85 times in 2007 and
12.21 times in 2008.

(d)Return on capital employed:

Return on capital employed=PBIT/capital employed*100


The ratio of total debt to total assets, generally called the debt ratio, measures the
percentage of funds provided by the creditors. The proportion of a firm's total assets that
are being financed with borrowed funds.

BATA SHOES

Year 2007 2008


PBIT 503999 663822
Capital 191251 2063
employed
Return cap 2.64 34 3.22
employed

SERVIS SHOES

Year 2007 2008


PBIT 236 478203
Capital 576630
180 523901
Return
employed 0.41 0.913
cap

Interpretation:

BATA SHOES

Calculating the debt ratio, we came to see that this company is highly leveraged one

SERVIS SHOES

Calculating the debt ratio, we came to see that this company is highly leveraged one.
Earning Per Share- EPS:

Earning Per Share = Profit after Taxation

Number of Shares

The portion of a company's profit allocated to each outstanding share of common


stock. Earnings per share serve as an indicator of a company's profitability. Earnings
per share are generally considered to be the single most important variable in
determining a share's price. It is also a major component used to calculate the price-to-
earnings valuation ratio.

BATA SHOES

Year 2007 2008


Profit 10084 156140
Number
after of 69000
037 759000
20
Shares
Earning 14.61 20.57
0
Per Share
SERVIS SHOES

Year 2007 2008


Profit 3130229 1301301
Number
after of 650000 799500
Shares
Earning 4.815 1.627

Per Share
Price / Earning Ratio:

Price / Earning Ratio = Stock Price Per Share

Earning Per Shares

The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS). (Earnings per share are calculated by dividing net
income by the number of shares outstanding.)

BATA SHOES

Year 2007 2008


Stock 10 10
EPS
price per 14.61 20.57
Price / 0.68 0.49
Earning

SERVIS SHOES

Year 2007 2008


Stock 10 10
EPS
price per 4.815 1.627

Price / 2.07 6.14

Earning Interpretation

BATA SHOES
The P/E ratio was 0.54 times in 2006 and increased further to as high as 0.68 times in
the following year. However, in 2008 it declined to 0.49 times which is an alarming
signal for the potential investors.
SERVIS SHOES

The P/E ratio was 2.83 times in 2006 and decreased a little bit in 2007. However, in
2008 it increased as much higher than before to 6.14 times.

Dividend cover:

Dividend Payout Ratio = Earning per share

Dividends per shrare

The percentage of earnings paid to shareholders in dividends.

BATA SHOES

Year 2007 2008


DPS 2.0014 3.597
EPS 14.61 20.57
Dividend 0.137 0.175
Payout
SERVIS SHOES

Year 2007 2008


DPS 00 1.21
EPS 4.815 1.627

Dividend 00 0.74

Payout

Conclusion

Financial Statement Analysis is a method used by interested parties such as investors,


creditors, and management to evaluate the past, current, and projected conditions and
performance of the firm. This report mainly deals with two companies. It is required by
law that all private and public limited companies must prepare the financial statements
like, income statement, balance sheet and cash flow statement of the particular
accounting period. The management and financial analyst of the company analyze the
financial statements for making any further financial and administrative decisions for the
betterment of the company