TABLE OF CONTENTS

TABLE OF FIGURES.................................................................................................................. 3
EXECUTIVE SUMMARY .......................................................................................................... 5
1. INTRODUCTION .................................................................................................................... 6
1.1 Origin of the Report: ...................................................................................................................................... 6
1.2 Rational of the Study: ..................................................................................................................................... 6
1.3 Objective of the Report: ................................................................................................................................. 6
1.3.1 Broad Objective of the Report: ........................................................................................................................6
1.3.2 Specific Objective: ...........................................................................................................................................6
1.4 METHODOLOGY: ........................................................................................................................................ 7
1.4.1 Data Design ......................................................................................................................................................7
1.4.2 Methods of Data Collection .............................................................................................................................7
1.5 Scope of the Study........................................................................................................................................... 8
1.6 Data Analysis .................................................................................................................................................. 8
1.7 Limitations of the Study ................................................................................................................................. 8

2. BRIEF OVERVIEW OF 5 SELECTED COMPANIES ....................................................... 9

2.1 BATA SHOES .............................................................................................................................................. 11
2.1.1 Liquidity Ratios: .............................................................................................................................................11
2.1.2 Capital Structure & Solvency Ratio: ..............................................................................................................13
2.1.3 Profitability Ratio: ..........................................................................................................................................13
2.1.4 Efficiency Ratio..............................................................................................................................................14
2.1.5 Earning Per Share: ..........................................................................................................................................15
2.1.6 P/E Ratio: .......................................................................................................................................................16
2.2 Observation from Notes ................................................................................................................................ 16
2.2 Legacy Footwear ........................................................................................................................................... 20
2.2.1 Liquidity .........................................................................................................................................................20
2.2.2 Capital Structure & Solvency Ratio ...............................................................................................................22
2.2.3 Profitability Ratio ...........................................................................................................................................23
2.2.4 Return on Investment .....................................................................................................................................24

2.2.5 Efficiency Ratio..............................................................................................................................................24

2.2.6 Earning Per Share (EPS) ................................................................................................................................25
2.2.7 Price To Earning Ratio ...................................................................................................................................26
2.2.8 Observation from Notes of Legacy Footwear ................................................................................................26
2.3 Apex Adelchi Footwear ................................................................................................................................ 28
2.3.1 Liquidity..................................................................................................................................................... 28
2.3.2 Cash Ratio:.....................................................................................................................................................29
2.3.3 Cash flow ratio:..............................................................................................................................................30
2.3.4 Capital Structure & Solvency Ratio: ..............................................................................................................30
2.3.5 Profitability Ratios .........................................................................................................................................31
2.3.6 Efficiency Ratio..............................................................................................................................................32
2.3.7 Earnings ratios ................................................................................................................................................33
2.3.8 Observation from Notes of Apex Adelchi Footwear ......................................................................................34
2.4 Apex Tannery ............................................................................................................................................... 37
2.4.1 Liquidity .........................................................................................................................................................37
2.4.2 Debt to Capital: ..............................................................................................................................................39
2.4.3 Profitability Ratios .........................................................................................................................................40
2.4.4 Return on Investment Ratios ..........................................................................................................................41
2.4.5 Earnings ratios ................................................................................................................................................42
2.5 SAMATA LEATHER COMPLEX LTD ...................................................................................................... 44
2.5.2 Capital Structure & Solvency Ratio ...............................................................................................................46
2.5.3 Profitability Ratio ...........................................................................................................................................46
2.5.4 Efficiency Ratio..............................................................................................................................................47

3. COMPARATIVE ANALYSIS............................................................................................... 51
3.1 Current Ratio................................................................................................................................................ 51
3.2 Debt to capital ratio ...................................................................................................................................... 52
3.3 Profitability Ratio ......................................................................................................................................... 53
3.5 Efficiency Ratios ........................................................................................................................................... 54
3.6 Earnings per share ........................................................................................................................................ 54
3.7 Price to earnings ratio .................................................................................................................................. 56

4. CONCLUSION ....................................................................................................................... 57

Table of Figures
Figure 1: Current Ratio-Bata Shoes ............................................................................................................. 11
Figure 2: Cash Flow Ratio- Bata Shoes ........................................................................................................ 12
Figure 3: Debt to Capital Ratio- Bata Shoes ................................................................................................ 13
Figure 4: Profitability Ratio- Bata Shoes ..................................................................................................... 14
Figure 5: Efficiency Ratio- Bata Shoes ......................................................................................................... 15
Figure 6: Earnings per Share- Bata Shoes ................................................................................................... 15
Figure 7: P/E Ratio- Bata Shoes................................................................................................................... 16
Figure 8: Current Ratio- Legacy Footwear .................................................................................................. 20
Figure 9 : Cash Ratio- Legacy Footwear ...................................................................................................... 21
Figure 10: Cash flow Ratio- Legacy Footwear ............................................................................................. 21
Figure 11: Debt to Capital Ratio- Legacy Footwear .................................................................................... 22
Figure 12Profitability Ratio- Legacy Footwear ............................................................................................ 23
Figure 13: Return on Investments- Legacy Footwear ................................................................................. 24
Figure 14: Efficiency Ratio- Legacy Footwear ............................................................................................. 25
Figure 15Basic Earnings per Share- Legacy Footwear................................................................................. 25
Figure 16: P/E Ratio- Legacy Footwear ...................................................................................................... 26
Figure 17: Current Ratio-Apex Footwear .................................................................................................... 29
Figure 18: Cash Ratio-Apex Footwear......................................................................................................... 29
Figure 19: Cash Flow Ratio-Apex Footwear ................................................................................................ 30
Figure 20: Debt to Capital Ratio-Apex Footwear ........................................................................................ 31
Figure 21: Profitability Ratio-Apex Footwear ............................................................................................. 32
3

Figure 22: Efficiency Ratio-Apex Footwear ................................................................................................. 33

Figure 23: Earning per share-Apex Footwear ............................................................................................. 34
Figure 24: P/E Ratio-Apex Footwear ........................................................................................................... 34
Figure 25: Current Ratio-Apex Tannery ...................................................................................................... 38
Figure 26: Cash Ratio--Apex Tannery .......................................................................................................... 38
Figure 27: Cash Flow Ratio--Apex Tannery ................................................................................................. 39
Figure 28: Debt to capital Ratio-Apex Tannery ........................................................................................... 40
Figure 29: Profitability Ratios-Apex Tannery .............................................................................................. 41
Figure 30: Return Over Investment-Apex Tannery ..................................................................................... 42
Figure 31: Price Earning Ratio-Apex Tannery ............................................................................................. 43
Figure 32: EPS-Apex Tannery ...................................................................................................................... 43
Figure 33: Current Ratio-Samata Leather ................................................................................................... 44
Figure 34: Cash Ratio-Samata Leather ........................................................................................................ 45
Figure 35: Cash Flow Ratio-Samata Leather ............................................................................................... 45
Figure 36: Debt to Capital Ratio-Samata Leather ....................................................................................... 46
Figure 37: Profitability Ratio-Samata Leather............................................................................................. 47
Figure 38: Efficiency Ratio-Samata Leather ................................................................................................ 48
Figure 39: EPS & P/E Ratio-Samata Leather................................................................................................ 48
Figure 40: To Nos. of Share-Samata Leather .............................................................................................. 50
Figure 41: Sales change-Samata Leather .................................................................................................... 50
Figure 42: Current Ratio Comparison ......................................................................................................... 51
Figure 43: Debt to Equity Ratio Comparison .............................................................................................. 52
Figure 44: EPS Comparison ......................................................................................................................... 55

Executive Summary
Leather industry developed in Bangladesh on a large scale basis from the 1970s. The leather
industry is now reasonably well established in Bangladesh, with about 200 Government recognized leather plants processing raw hides and skins into wet - blue, crust or finished leather,
and over 2,000 leather footwear and leather - goods units (over 90% employing less than 9)
leather footwear and other leather products such as garments, ladies bags, suitcases, wallets and
some fancy items.
It is, however, the processing of raw hides and skins into some form of crust, finished or semiprocessed (wet-blue) leather which has dominated the industry in Bangladesh, as high as 85 per
cent of the total output being exported from this sub-sector. The manufacture of crust/finished
leather and that of wet -blue, both for exports, is the dominant activity of the industry .The value
of exports from leather goods is negligible, although this sub-sector is dominant in the domestic
market especially in leather footwear, as almost the entire demand in this regard is satisfied
through local production. Another Important item of output of the leather sector is vegetable
tanned leather, made of buffalo hides. The entire output is locally used for shoe -soles and
industrial

Bangladesh produces between 2% and 3% of the worlds leather. Most of the livestock base for
this production is domestic, which is estimated as comprising 1.8 % of the worlds cattle stock
and 3.7 % of the goat stock. The hides and skins (average annual output is 15m sq.) have a good
international reputation. Foreign direct investment in this sector along with the production of
tanning chemicals appears to be highly rewarding due to this presence of basic raw materials for
leather goods including shoes, a large pool of low cost, trainable labor, and a tariff concession
facility to major importing countries under Generalized System of Preferences (GSP) coverage.
Thus Bangladesh is an ideal offshore location for leather and leather products manufacturing
with low cost but high quality. The government is in the process of setting up a separate Leather
zone, relocating the existing industry sites to a well-organized environment. Footwear is more
important in terms of value addition. This is the fast growing sector for leather products.

1. INTRODUCTION
1.1 Origin of the Report:
Financial Information Analysis (FIA) in is one of the vital courses of Finance for the students of
IBA, University of Dhaka. This course requires to submit a comprehensive report on Ratio
Analysis of a particular industry of Bangladesh. We have thoroughly worked on 5 enlisted
companies of Tannery sector and accumulated our findings in this report.
The topic of the report is "A COMPARATIVE FINANCIAL PERFORMANCE ANALYSIS
AND FINANCIAL RATIO ANALYSIS OF TANNERY SECTOR OF BANGLADESH. And
the report topic was selected by the faculty Ms. Rafia Afrin, Lecturer, Institute of Business
Administration, University of Dhaka.
1.2 Rational of the Study:
Over the last decades Tannery sector in Bangladesh has experienced a tough competition and
experienced tremendous growth. The industry has now a number of key players and hence it is
important to assess the profitability and financial performance of companies operating as they
are playing a very vital role in the economy. Assessing the financial performance is becoming
important to investors-customer so that they can take a prudent decision in choosing the best
company in this sector.
1.3 Objective of the Report:
1.3.1 Broad Objective of the Report:
The comparative financial performance analysis and financial ratio analysis of tannery sector of
Bangladesh.
1.3.2 Specific Objective:
The specific objectives of the report are as follows:
a.

To provide an overview of the financial performance of the companies of tannery

of Bangladesh - know about different ratios of financial standard of different
companies of tannery sector of Bangladesh.

b. To conduct the comparative performance analysis of all companies of tannery

sector of Bangladesh Limited with all other competitors with the help of financial
ratios.

1.4 METHODOLOGY:
Methodology includes designing samples, selection of the organizations as source of data,
collection procedure of data, analysis of the data, etc. These are stated in the following subheadings.

1.4.1 Data Design

Research work requires designing of samples. The process of designing samples in the report
consists of selection of institution, selection of study year and the duration of the study.
The researcher has selected all 05 (five) companies of tannery sector of Bangladesh Limited for
is research. There are 01 (one) multinational company and 04 (four) local companies present in
the industry. The researchers have selected all companies of tannery sector of Bangladesh based
market share, profitability and market portfolio and availability of data. They are- Apex
Footwear Limited, Apex Tannery, Bata Shoe, Legacy Footwear, Samata Leather Complex
Limited. The selected companies have been studied in terms of their financial behavior for last
10 years.

1.4.2 Methods of Data Collection

Data has been collected from both from primary source and secondary sources.
Secondary Sources
All data are secondary and have been collected from Internet, annual report of the companies
from the annual report. The data has been collected from mostly Dhaka Stock Exchange (DSE)

1.5 Scope of the Study

The researcher has conducted only the comparative performance analysis of the tannery industry
of Bangladesh considering all the companies of this sector in Bangladesh, with major focus on
analyzing different financial ratios.
The report will help to compare different companies in tannery sector of Bangladesh and will
give an essence of profitability, long term financial performance and how it contributes to the
industry and in the economic development of the country by proper utilization of capital and
other resource.

1.6 Data Analysis

We have use excel in order to compare all the ratios and generate respective graphs for them. In
our first section of analysis we have analyzed individual organization and in later part of the
report we have carried out a comparative performance analysis.

1.7 Limitations of the Study

It was difficult to analyze all the financial reports as each one had different formats, and
few data were not available due to confidential issues.

Since the report has to be made at the time of final exams tough the report was asked to
prepare earlier, it was difficult to complete all the formalities within this time.

2. Brief Overview of 5 Selected Companies

Bata Shoes
Bata is the no. 1 footwear brand in Bangladesh the Bata Shoe Organization was founded in 1894
by Czech businessman Tomas Bata in the city of Zlin, what was then Czechoslovakia. Coming
from a family of shoemakers with a long heritage of eight generations and over three hundred
years, Tomas Bata capitalized on knowledge, expertise and skills to propel his newly founded
company forward. The introduction of factory automation, long distance retailing and
modernized shoe making ensured the profitability of the company from the very beginning. It is
now the worlds largest manufacturer and marketer of footwear operating across the globe.

Apex Adelchi Footwear

Apex Footwear Limited (AFL) is the leading manufacturer and exporter of leather footwear from
Bangladesh to major shoe retailers in Western Europe, North America and Japan. The company
earned revenues of USD 145 million in 2015. AFL pioneered the export of value added finished
products export in the leather sector of Bangladesh and is also involved in the local footwear
retail business with the second largest shoe retail network in the country. Public listed and traded
since 1993, AFL is professionally managed, currently employs over 9,000 persons and is in full
compliance with Corporate Governance Compliance Report.
Apex is the local manufacturing and retail wing of Apex Footwear Limited. While AFL has
predominantly earned both critical and commercial fame through export of high quality leather
footwear in the international arena, Apex has sought to adeptly make use of that expertise to
provide high quality, fashionable footwear to the Bangladeshi consumers. With over 191 own
retail outlets and 380 authorized resellers, Apex ensures nationwide coverage of its diverse range
of footwear for its consumers. Through its nine in-house brands, namely Venturini, Apex, Sprint,
Maverick, Moochie, Nino Rossi, Sandra Rosa, Twinkler and SchoolSmart and one international
brand i.e. Dr. Mauch - Apex carries a huge selection of shoes, sandals and non-footwear items,
ensuring that each of our valued customer finds the right product for them.

Apex Tannery Ltd.

Apex Tannery has been setting industry standards in the Bangladesh leather export industry since
1976, equipped with the state of the arty Italian modern machinery and maintaining high quality
strictness. Through the years its production has been progressively entailing a constant expansion
9

of building and machinery. Annual production amounts to over US$30 million, thus creating and
exemplary model for corporate development in the tannery sector. This growth is a result of
precise strategic decision and constant improvements in the service of its customers. Which has
led to its presence in the global arena plying an attractive role in the major leather market of the
world.
Legacy Footwear
Legacy Footwear Limited is one of the leading manufacturer and exporter of leather footwear
from Bangladesh to major shoe retailers. Main target customer of this company are China, India,
Vietnam, and Cambodia
Samata Leather
Samata Leather Complex Ltd. is a public limited company incorporated on 4 October 1990 under
the Bangladesh Companies Act having its register office at 120 Sher-e- Bangla Road,
Hazaribagh; Dhaka-1209.The Company was initially registered as a private limited company and
subsequently converted into a public limited company on 30 January 1997. The company has
been engaged in the business of hides and skin processing industry to produce exportable crust
and finished leather.

10

2.1 BATA SHOES

Bata is the no. 1 footwear brand in Bangladesh the Bata Shoe Organization was founded in 1894
by Czech businessman Tomas Bata in the city of Zlin, what was then Czechoslovakia. Coming
from a family of shoemakers with a long heritage of eight generations and over three hundred
years, Tomas Bata capitalized on knowledge, expertise and skills to propel his newly founded
company forward. The introduction of factory automation, long distance retailing and
modernized shoe making ensured the profitability of the company from the very beginning. It is
now the worlds largest manufacturer and marketer of footwear operating across the globe.

2.1.1 Liquidity Ratios:

Under liquidity ratio, Current ratio and Cash flow are calculated.

Year
Current Ratio
Cash
Ratio

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1.70

1.54

1.42

1.45

1.44

1.45

1.47

1.49

1.62

1.71

0.35

0.40

0.38

0.46

0.45

0.49

0.46

0.51

0.55

0.49

Flow

Current Ratio:

Figure 1: Current Ratio-Bata Shoes

11

Comment : Current ratio kept falling till 2007 due to increase in current liabilities. Though
current assets are also increasing but comparatively current liabilities has increased more. As the
assets comparatively increased more than liabilities in 2013 and 2014, current ratio improved. As
a whole, the liquidity position is moderate with ratios around 1. Despite the fact the Current
Ratio is healthy well above average.

Cash Flow Ratio

Figure 2: Cash Flow Ratio- Bata Shoes

Comment : To understand the liquidity condition of Bata Shoe Company Ltd, since the Current
Ratio seems a bit misleadinng , Cash Flow Ratio was chosen to provide a better understanding of
the liquidity positoin.
Though in 2011 & 2014 the ratio went decresing, depicting there was more cash outflow.In 2012
& 2013, the ratio went above .50. In general a ratio of 0.4 or higher is considered healthy . So
Cash Flow Ratio was more or less substantially in a safe zone according to our understanding.

12

2.1.2 Capital Structure & Solvency Ratio:

Debt to Capital Ratio

Figure 3: Debt to Capital Ratio- Bata Shoes

Comment: The structure of debt and capital of Bata Shoe are distinctively same in two group of
periods. In 2005-2009 the ratio was close to 60% whereas after 2009, it started decreasing upto
2014 as equity capital is increasing year to year.
The ratio was highest in 2005 whereas lowest in 2014. Exhibiting the tendency of the
organization to be less dependent on debt, this might be a good indication for the investors
encouraging them to invest more in the organization.

2.1.3 Profitability Ratio:

Year
Gross Margin
Operating
Profit
Margin
Net Profit Margin

13

2005
37.31%
11.04%

2006
39.82%
11.09%

2007
41.50%
10.85%

2008
34.43%
14.02%

2009
37.02%
12.77%

2010
36.12%
13.62%

2011
35.52%
12.80%

2012
36.10%
13.62%

2013
38.35%
15.32%

2014
38.77%
13.16%

6.92%

7.15%

7.13%

9.72%

8.74%

9.60%

8.73%

9.09%

10.32%

8.67%

Figure 4: Profitability Ratio- Bata Shoes

Comment: All the three Profitablity Ratios were stable in the last ten years. Though in 2013 the
performance was the best in last ten years but decresed in 2014 as Income from operations
decreased along with comparatively less Gross profit to net revenue.

2.1.4 Efficiency Ratio

Particulars 2005
Return on Assets 0.4%
Return on Equity 5.4%

14

2006
1.4%
4.0%

2007
2.5%
7.2%

2008
2.3%
7.2%

2009
3.0%
3.7%

2010
3.0%
5.8%

2011
3.8%
7.3%

2012
1.8%
3.6%

2013
1.7%
3.2%

2014
1.9%
3.7%

Figure 5: Efficiency Ratio- Bata Shoes

Comment: Both ROE and ROA had multiple changes between 2005-2014. No particular trend
could be indentified from both ROA and ROE. In 2008, both of them were in highest peak
among 10 years but in 2014 both of them were decresed because net income decresed in 2014
inspite of incresing average assets and equity capital.

2.1.5 Earning Per Share:

Figure 6: Earnings per Share- Bata Shoes

Comment: EPS of Bata Shoe was highest in 2013, whereas it was lowest in 2005. From 20052013 the EPS was incresing but decresed in 2014 as net income decreased in that year.

15

2.1.6 P/E Ratio:

Figure 7: P/E Ratio- Bata Shoes

Comment: P/E ratio randomly decreased and increased from 2005 to 2013. P/E ratio increased
in those year when EPS had decreased in those year. But in 2014, decreasing EPS made P/E ratio
too increases.

2.1.7 Observation from Notes

Statement of compliance
These financial statements have been prepared in accordance with Bangladesh Financial
Reporting Standards (BFRS), the Companies Act 1994, the Securities and Exchange Rules 1987
and other applicable laws and regulations. These financial statements were authorised for issue
by the Board of Directors at its 221st meeting held on 27 April 2015.

Basis of measurement
These financial statements have been prepared on historical cost basis except for land at Tongi in
the statement of financial position which was revalued in 1979.

16

Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of the
Company at exchange rates on the date of the transactions. Monetary assets and liabilities
denominated in foreign currencies on the reporting date are retranslated to the functional
currency
at
the
exchange
rate
at
that
date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair
value are retranslated to the functional currency at the exchange rate on the date that the fair
value was determined. Nonmonetary items in a foreign currency that are measured based on
historical cost are translated using the exchange rate on the date of the transaction. Foreign
currency differences arising on translation are recognised in profit or loss.
Recognition and measurement
Items of property, plant and equipment excluding land are measured at cost less accumulated
depreciation and accumulated impairment losses. Land is measured at amount revalued in 1979.
Cost includes expenditures that are directly attributable to the acquisition of assets. The cost of
self-constructed
assets
includes
the
following:
the
cost
of
materials
and
direct
labour;
- any other cost directly attributable to bringing the asset to a working condition for the intended
use;
- when the Company has an obligation to remove the asset or restore the site, an estimate of the
costs of dismantling and removing the items and restoring the site on which they are located; and
capitalised
borrowing
costs.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment. Any gain
or loss on disposal of an item of property, plant and equipment (calculated as the difference
between
the
net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.
Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in profit or loss
over the estimated useful lives of each component. Land is not depreciated. Addition during the
year of property, plant and equipment are depreciated for full year irrespective of date of
acquisition, while no depreciation is charged in the year of disposal.

The estimated useful lives for the current and comparative years of property, plant and
equipment
are
as
follows:
17

ITEMS

AFTER 2011

BEFORE 2011

Building

40 %

20%

Plant and machinery

13.33%

15%

Motor vehicles

5%

20%

and 13.33%

10%

Furniture,
equipment

fixtures

Changes in depreciation
Items

2012

2011

Difference

73,187,139

24,371,318

BuildingPlant and Machinery

Motor Vehicles
Furniture, fixtures and 97,558,457
Equipment

As only Furniture and Equipment were existed in 2011 and 2012, so changes are applicable for
that part only. And As expense increased, so income went down by that amount. Asset should
also went down, Taxes on income also went down.
The useful lives and depreciation method of certain type of property, plant and equipment were
revised in 2011.
Depreciation
No depreciation is charged on land and capital work in progress. Depreciation is charged on all
other items of property, plant and equipment of Tongi factory on reducing balance method while
straight line method is followed in respect of Dhamrai factory. The rates of depreciation are as
follows:

18

Tongi,Dhamrai
Building - Factory 20% 2.5%
General 10% 2.5%
Plant and machinery 15% 7.5%
Motor vehicles 20% 20%
Furniture, fixtures and equipment 10% 10%
Tax-tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
s-ubstantivelymenacted at the reporting date, and any adjustment to tax payable in respect of
previous years. Bata qualifies as a Publicly Traded Company"; hence the applicable tax rate is
27.50 % It enjoys 10% rebate on income tax payable for declaring dividend at more than 30% of
paid up capital. But before 2008, the rate was 30%.

19

2.2 Legacy Footwear

Legacy Footwear Limited is one of the leading manufacturer and exporter of leather footwear
from Bangladesh to major shoe retailers. Main target customer of this company are China, India,
Vietnam, and Cambodia
2.2.1 Liquidity
Particulars
Current Ratio
Cash Ratio
Cash Flow Ratio

2005
4.81
0.05
2.56

2006
8.61
0.07
0.78

2007
22.97
1.49
-2.70

2008
28.46
0.11
-5.82

2009
28.57
0.13
0.52

2010
23.76
0.04
0.34

2011
33.83
0.00
0.21

2012
38.75
0.12
2.43

2013
37.48
0.16
0.23

2014
34.80
0.19
0.21

Current Ratio : The Current Ratio for Legacy Footwear has some dicripencies , the current
assets of the company is abnormally high compare to its current liabilities. Despite the fact the
Current Ratio is healthy well above average.

Figure 8: Current Ratio- Legacy Footwear

Cash Ratio : The cash ratio on the other hand is a more stringent measure of liquidity, though it
is unusual to expect organization to maintain too much of cash as to cover its short term
liabilities. In the case of Legacy Footwear , in 2007 the cash ratio was infact more than 1 which
might be the consequence of other internal isssues. But overall, the cash ratio remained almost
same over the ten years.

20

Figure 9 : Cash Ratio- Legacy Footwear

Cash Flow Ratio : To understand the liquidity condition of Legacy Footwear, since the Current
Ratio seems a bit misleadinng , Cash Flow Ratio was chose to provide a better understanding of
the liquidity positoin.
In 2007 & 2008 the ratio went negative, depicting there was more cash outflow in operating
activities than inflow.In 2005 & 2012, the ratio went above 2.0. In general a ratio of 0.4 or higher
is considered healthy . Apart from the years 2007 and 2008, Cash Flow Ratio was more or less
substantially in a safe zone according to our understanding.

Figure 10: Cash flow Ratio- Legacy Footwear

21

2.2.2 Capital Structure & Solvency Ratio

Particulars

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Debt to Capital

1.98

1.97

2.06

2.15

0.84

0.89

1.04

1.07

1.00

0.80

Figure 11: Debt to Capital Ratio- Legacy Footwear

Comment: The structure of debt and capital of Legacy Footwear are distinctively same in two
group of periods. Between 2005-2008 the ratio was close to 2.0 whereas after 2008, between
2009-2014 the ratio came down close to 1.0 on an average.

The ratio was highest in 2008 whereas its lowest in 2014. Exhibiting the tendency of the
organization to be less dependent on debt, this might be a good indication for the investors
encouraging them to invest more in the organization.

22

2.2.3 Profitability Ratio

Particulars
Gross Margin
Operating Profit Margin
Net Profit Margin

2005
0.27
0.06
0.05

2006
0.23
0.04
0.03

2007
0.30
0.07
0.06

2008
0.21
0.06
0.05

2009
0.23
0.08
0.07

2010
0.28
0.11
0.09

2011
0.27
0.11
0.09

2012
0.28
0.06
0.05

2013
0.29
0.07
0.05

2014
0.27
0.07
0.06

Figure 12Profitability Ratio- Legacy Footwear

All the three Profitablity Ratios were stable in the last ten years. Though in 2010,2011 & 2012
the performance were best in last ten years.

23

2.2.4 Return on Investment

Particulars 2005
Return on Assets 0.4%
Return on Equity 5.4%

2006
1.4%
4.0%

2007
2.5%
7.2%

2008
2.3%
7.2%

2009
3.0%
3.7%

2010
3.0%
5.8%

2011
3.8%
7.3%

2012
1.8%
3.6%

2013
1.7%
3.2%

2014
1.9%
3.7%

Figure 13: Return on Investments- Legacy Footwear

Both ROE and ROA had multiple changes between 2005-2014. No particular trend could be
indentified from both ROA and ROE. Over the last three years between 2012-2014 both
ROAaand ROE weree increasing at a steady rate.

2.2.5 Efficiency Ratio

Particulars

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Asset Turnover Ratio

0.091 0.096 0.099 0.115 0.088 0.081 0.100 0.087 0.079 0.077
Inventory Turnover Ratio 0.553 0.616 0.466 0.499 0.423 0.361 0.359 0.287 0.253 0.259

24

Figure 14: Efficiency Ratio- Legacy Footwear

Turover over asset remain almost steady over the years. Whereas Inventory Turnover shows a
decline. This may be due to the operating inefficency of the organizaton. In 2006 Inventory
Turnover was the highest whreas in 2013 its been the lowest.
2.2.6 Earning Per Share (EPS)
Particulars
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Basic Earnings Per Share 0.33 4.3
0.51 0.52 0.73 1.14 1.38 0.66 0.65 0.57
P/E Ratio
0.072 1.162 0.084 0.027 0.022 0.021 0.034 0.031 0.015 0.021

Figure 15Basic Earnings per Share- Legacy Footwear

25

EPS of Legacy Footweaar was highest in 2006, whereas it was lowest in 2005. In recent years
between 2012-2014 the EPS was stable and had little changes. Between 2009-2011 the EPS was
comparably healthier.
2.2.7 Price To Earning Ratio

Figure 16: P/E Ratio- Legacy Footwear

P/E ratio remained around average apart from the years 2005,2006 annd 2008. Showing the
performance expectation from Investors didnt change much.
2.2.8 Observation from Notes of Legacy Footwear
Basis of Accounting:
For the last 10 years the Financial Statements have been prepared in accordance with Bangladesh
Accounting Standard (BAS) and Companies Act 1994 and Securities and Exchange Rules 1987
consistently applied under historical cost convention
The elements of the financial statements have been measured on historical cost basis which are
most commonly adopted bases as provide in the "Framework" for the preparation and
presentation of Financial Statement issued by the International Accounting Standard Board
(IASB) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB).
Valuation of Inventories:
Inventories are valued at lower of cost and estimated net realizable value in accordance with lAS
2 which include overhead that related to bringing the inventories to their present condition and
location.
Costs are determined with the weighted average cost method.

26

Fixed Assets:
Written down value / book value is arrived after deduction of accumulated depreciation from
cost.
Depreciation:
No Depreciation is charged on Land Development. Depreciation is charged on all other Fixed
Assets using diminishing balance method. The rates at which the assets are depreciated per
annum depending on the nature and estimated life of the each assets. The rate of depreciation
varies from 5% to 20% which are given
Building & Civil Work 5%
Plant & Machinery 7.50%
Equipment 10%
Furniture & Fixture 20/
Motor Vehicles 10%
The depreciation rate is maintained over the last 10 years.
Taxation
In 2006 The Company qualifies as a Public Traded Company and accordingly the rate of Income
Tax Applicable for the Company is 40%.
In 2009 Tax applicable for the Company is 37.5%, Being 100% export oriented industry, 50% of
its income is exempted from the Tax as per Sixth Schedule Part A, Paragraph 28 of IT Ordinance
1984 as such provision for Tax is made at the rate of 18.75%.
Revaluation of Fixed Assets:
In 2009 The Company revalued its fixed assets during the year under review. The Board of
Directors of the Company felt that some of the assets of the Company has been undervalued and
under stated in the accounts and decided to revalue the Cost of Land and Building. Total increase
in value of Land and Building was BDT 87,065,108 after the revaluation.
In 2010 the physical verification of inventory was conducted for the first time by the
Management of the Company at the close of business on December 31, 2010.

27

2.3 Apex Adelchi Footwear

Apex Footwear Limited (AFL) is the leading manufacturer and exporter of leather footwear from
Bangladesh to major shoe retailers in Western Europe, North America and Japan. The company
earned revenues of USD 145 million in 2015. AFL pioneered the export of value added finished
products export in the leather sector of Bangladesh and is also involved in the local footwear
retail business with the second largest shoe retail network in the country. Public listed and traded
since 1993, AFL is professionally managed, currently employs over 9,000 persons and is in full
compliance with Corporate Governance Compliance Report.
Apex is the local manufacturing and retail wing of Apex Footwear Limited. While AFL has
predominantly earned both critical and commercial fame through export of high quality leather
footwear in the international arena, Apex has sought to adeptly make use of that expertise to
provide high quality, fashionable footwear to the Bangladeshi consumers. With over 191 own
retail outlets and 380 authorized resellers, Apex ensures nationwide coverage of its diverse range
of footwear for its consumers. Through its nine in-house brands, namely Venturini, Apex, Sprint,
Maverick, Moochie, Nino Rossi, Sandra Rosa, Twinkler and SchoolSmart and one international
brand i.e. Dr. Mauch - Apex carries a huge selection of shoes, sandals and non-footwear items,
ensuring that each of our valued customer finds the right product for them.

2.3.1 Liquidity
Particulars
Current Ratio
Cash Ratio
Cash Flow Ratio

2006
1.009
0.057
1.73

2007
1.01
0.0256
1.765

2008
1.03
0.0236
2.018

2009
1.07
0.0235
2.19

2010
1.077
0.0245
1.71

2011
1.13
0.0455
2.03

2012
1.19
0.0373
1.96

2013
1.185
0.031
1.72

2014
1.166
0.023
1.32

Current Ratio:
The current ratio of Apex is extra-ordinarily consistent. In 2006-2008, Apex considered their
position a success because of disruptive external conditions. But the upward swing in the
economy in the later years had little impact on their current ratio. It remains consistent.

28

Figure 17: Current Ratio-Apex Footwear

2.3.2 Cash Ratio:

The cash ratio shows us the liquidity of the company. At the year 2006, Apex footwear was in a
very good position cash-ratio wise. Then there was a huge jump in both cash and current
liquidity. But the ratio shows that liquidity became lower from that year. The situation again
changed in the year 2011 and 2012 when Apex had a larger cash and cash equivalents in hand.
But other current assets became lower to compensate for it. The cash ratio again became
stabilized after those 2 years.

Figure 18: Cash Ratio-Apex Footwear

29

2.3.3 Cash flow ratio:

The cash flow ratio of Apex footwear shows a cleared picture. The cash flow ratio never fell
under 1 from 2006-2014. This shows the company always got more cash from its operating
activities than its liabilities.
But the recent year of 2014 is a bit alarming because of the large fall in ratio compared to before.

Cash flow ratio

2.5
2

1.5
1
0.5

0
2006

2007

2008

2009

2010

2011

2012

2013

2014

Cash flow ratio

Figure 19: Cash Flow Ratio-Apex Footwear

2.3.4 Capital Structure & Solvency Ratio:

Debt to Capital:
Particulars
Debt
capital
ratio

2006

2007

2008

2009

2010

2011

2012

2013

2014

to 0.858

0.87

0.827

0.789

0.845

0.708

0.72

0.739

0.784

The debt to capital ratio is a measurement of a companys leverage. If we take a look at how
Apex operates, we see their debt-to-capital ratios have always been consistently below 1. The
company has been using debt financing more than equity financing. In recent years, the ratio has
slightly decreased but its still how Apex footwear operates.

30

Debt to capital ratio

1
0.9
0.8

0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2006

2007

2008

2009

2010

2011

2012

2013

2014

2011

2012

Debt to capital ratio

Figure 20: Debt to Capital Ratio-Apex Footwear

2.3.5 Profitability Ratios

Particulars

2006

2007

2008

2009

Gross Margin

0.091

0.117

0.117

0.1559 0.1575 0.143

0.1586 0.1568 0.1585

0.0417

0.0446 0.0413 0.079

0.086

Operating Profit Margin 0.0215 0.048

Net Profit Margin

0.017

2010

0.0385 0.03376 0.0363 0.033

2013

0.0788 0.075

0.0275 0.0265 0.0243 0.0177

The profitability ratios show almost the same picture as every other ratios. While net profit
margin has gone down in the 2011-2014 periods, the upward climb of the gross margin and
operating profit margin show that the company is still in the right track. The increasing operating
profits are the indicators of the success of its core competencies.
The decreasing net profits for this period is the result of the increasing difficulties Apex has
faced in the international field due to negative image of Bangladesh RMG sector.

31

2014

Figure 21: Profitability Ratio-Apex Footwear

2.3.6 Efficiency Ratio

Particulars

2006

2007

2008

2009

2010

2011

6.06%

4.88% 3.63%

2012

2013

2014

Return on Assets

2.8%

6.06% 5.8%

3.17%

2.77%

1.66%

Return on Equity

19.9% 46.5% 33.7% 28.77% 31.4% 12.56% 11.32% 10.64% 7.7%

The asset and shareholders equity of Apex footwear has continued to increase in the 2011-2014
period while their net profit has remained relatively the same. This is something Apex has to
lookout for as they cannot continue to grow while their net profit doesnt match the growth rate
of asset and shareholders equity.

32

Figure 22: Efficiency Ratio-Apex Footwear

2.3.7 Earnings ratios

Particulars

2006

2007

2008

2009

2010

Basic Earnings Per Share

66.56

225.81 168.74 188.03 202.87

P/E Ratio

5.764

2.3985 13.114 12.48

2011

2012

2013

2014

232

23.01

23.61

18.06

13.1953 17.67

12.836 9.8674 25.765

Apex started using Tk10 as a basis of calculation of earnings per share instead of Tk100 from
2012. So, their number of shares has gone up by 10 times and earnings per share has gone down.
P/E ratio reflect the same changes. Otherwise, we see that Apex footwear has recovered their
weak P/E ratio in year 2014.

33

Figure 23: Earning per share-Apex Footwear

Figure 24: P/E Ratio-Apex Footwear

2.3.8 Observation from Notes of Apex Adelchi Footwear

Nature of Business:
At 2006, Apex was 100% export oriented footwear manufacturer according to their reports. They
just started selling through Gallery Apex in BD in 2006. Fast forward to 2014, they now claim to
be mostly export oriented. So, their focus has become to be a leader of the local market in recent
years.
Statement of Compliance:
The Financial Statements have been prepared in accordance with Bangladesh Accounting

34

Standard (BAS) and Companies Act 1994, Securities and Exchange Rules 1987, the listing
regulations of Dhaka and Chittagong stock Exchange and other relevant laws. They have also
followed Bangladesh Financial Reporting Standards (BFRS).
So, Apex has followed all the necessary rules applicable in Bangladesh while creating their
financial statements.
Basis of Measurement:

Financial statements has been done on historical cost basis except land revalued on 30 October
2011. It does not take effect of inflation into consideration.
They have followed the generally accepted accounting principles (GAAP) in all their dealings
from 2006 to 2014.
They also follow accrual basis of accounting where expenses are reported when it occurs, not
when the cash is paid.
The Accrual basis provides a clearer picture of the situation of the company compared to cash
basis and as such Apex followed the superior strategy in my opinion.

Reporting Period:
Apex has consistently chosen January1 to December 31 for a year.
Revenue Recognition:
Apex recognizes revenue when the customer the customer has already got the product and so it
maintains a better revenue recognition system among the companies
Property Measurement:
Apex revalued its land in 2011. Original cost was 103,051,290 which was mostly bought in
1990-1991.
Depreciation:
Land is not depreciated for Apex and this follows standard rules. For all other assets depreciation
rate vary from 10% to 33.33%

35

Building
Plant & machinery
Vehicles
Office Equipment
Computer
Furniture
Outlet

10%
15%
20%
20%
33.33%
20%
33.33%

Their depreciation rate has varied over the years. Initially, they had much lower depreciation rate
for office equipments and furnitures at 10% and 15% respectively. Their current depreciation
rate is much more reasonable.
Inventory
Cost of Inventory is assigned by average weighted cost.

36

2.4 Apex Tannery

Apex Tannery has been setting industry standards in the Bangladesh leather export industry since
1976, equipped with the state of the arty Italian modern machinery and maintaining high quality
strictness. Through the years its production has been progressively entailing a constant expansion
of building and machinery. Annual production amounts to over US$30 million, thus creating and
exemplary model for corporate development in the tannery sector. This growth is a result of
precise strategic decision and constant improvements in the service of its customers. Which has
led to its presence in the global arena plying an attractive role in the major leather market of the
world.
2.4.1 Liquidity
Particulars
Current
Ratio

2005
1.679

0.014
Cash Ratio
Cash Flow 0.0043
Ratio

2006

2007

2008

2009

2010

2011

2012

2013

2014

1.779

1.66

1.54

1.845

4.76

2.498

3.57

3.67

0.047

0.0144

0.0026

0.375

0.224

2.14
0.50
3

0.414

1.14

1.17

0.212

0.016

0.021

0.375

1.76

-.104 0.27

1.52

0.24

Current Ratio:
The current ratio of Apex is consistent. There was a bump in 2010. But after that, it has come
into previous mode.

37

Figure 25: Current Ratio-Apex Tannery

Cash Ratio:
The cash ratio shows us the liquidity of the company. Up to 2008, the cash ratio was very low.
Then it bumped in 2009 and after that there is about steady rise.

Figure 26: Cash Ratio--Apex Tannery

Cash flow ratio:

The cash flow ratio of Apex footwear shows a cleared picture. The cash flow ratio was under 0.5
from up to 2009. Then there has been rapid decline and rapid fall.
38

The year 2014 is an alarming because of the large fall in ratio.

Figure 27: Cash Flow Ratio--Apex Tannery

Capital Structure & Solvency Ratio:

2.4.2 Debt to Capital:

Particulars

2005 2006 2007 2008 2009 2010 2011 2012 2013

Debt to capital ratio 0.6

0.53

0.55

0.58

0.51

0.21

0.43

0.37

2014

0.263 0.264

The debt to capital ratio is a measurement of a companys leverage. If we take a look at how
Apex operates, we see their debt-to-capital ratios have always been consistently below 1. The
company has been using debt financing more than equity financing. In recent years, the ratio has
slightly decreased .

39

Figure 28: Debt to capital Ratio-Apex Tannery

2.4.3 Profitability Ratios

Particulars

2005

0.084
Gross Margin
Operating
Profit 0.086
Margin
0.018
Net Profit Margin
9

2006
0.07
4
0.08
0
0.01
9

2007

2008

0.059

0.064

0.064
0.010
6

0.071
0.009
5

2009
0.48
0.05
6
0.09

2010
0.14
7
0.10
4
0.08
3

2011
0.08
9
0.05
0
0.03
8

2012
0.08
8
0.04
9
0.04
6

2013
0.07
7
0.03
1
0.03
0

2014
0.05
9
0.01
8
0.02
5

The profitability ratios show almost the same picture as every other ratios. All profit margins
have gone down in the 2012-2014 periods
The decreasing profits for this period is the result of the increasing difficulties Apex has faced in
the international field due to negative image of Bangladesh RMG sector.

40

Figure 29: Profitability Ratios-Apex Tannery

2.4.4 Return on Investment Ratios

Particul
ars
Return
Assets
Return
Equity

2005

on 2.13
%
on 5.31
%

2006
3.19
%
6.81
%

2007
1.84
%
4.08
%

2008
1.58
%
3.78
%

2009

2010
13.10
9.65% %
19.67 16.66
%
%

2011

2012

2013
6.83
6.00% 8.91% %
10.57 14.05 9.28
%
%
%

2014
6.46
%
8.78
%

The asset and shareholders equity is decreasing since 2012

The ROA had a rapid rise in 2009 & 2010 and a rapid fall in 2011. Since 2013, it has become
stable (as it seems from the table).ROE also followed the same pattern.

41

Figure 30: Return Over Investment-Apex Tannery

2.4.5 Earnings ratios

Particulars

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Basic Earnings Per Share

21.3

28.08

17.56

16.21

96.32

93.74

63.5

7.07

6.57

5.51

P/E Ratio

11.73

10.65

35.31

73.35

15.42

1.58

21.45

14.58

13.19

25.88

42

Figure 31: Price Earning Ratio-Apex Tannery

Figure 32: EPS-Apex Tannery

Apex started using Tk10 as a basis of calculation of earnings per share instead of Tk100 from
2012. So, their number of shares has gone up by 10 times and earnings per share have gone
down. P/E ratios also reflect the same changes. Otherwise, we see that Apex Tannery has
recovered their weak P/E ratio in year 2014.

43

2.5 SAMATA LEATHER COMPLEX LTD

Company Overview:
SAMATA LEATHER COMPLEX limited is a 100% export oriented leather company which is
incorporated as a private company on 4th October1990 and converted into public company on
30th january 1990. The company was listed in DSE on 5th October 1998 and CSE on 6th October
1998. The company has total authorized capital of 500,000,000 BDT and has market lot of
500nos of share. The company is rated as z-category.

2.5.1 Liquidity
Particulars

2005 2006 2007

2008

2009

2010

2011

2012

2013

2014

Current Ratio

0.98

0.92

0.89

0.84

0.84

0.85

0.86

0.86

6.51

6.08

Cash Ratio

0.04

0.04

0.09

0.09

0.08

0.10

0.11

0.11

1.76

1.86

Cash Flow Ratio

-0.05 0.00

-0.01

-0.03

-0.01

0.00

0.00

-0.01

8.53

0.46

Current Ratio : The Current Ratio for SAMATA LEATHER shows very poor since the year
2005 which represents its acute shortage of working capital. However from the year 2013 there is
noticable incraase in current ratio which is due to reduced currents liabilites and asset. Due to its
poor performance one of its creditor (Janata Bank) sold its mortgaged land as an adjustment of
liability against its short term finance.

Figure 33: Current Ratio-Samata Leather

44

Cash Ratio : The cash ratio also follows the current ratio with very value and in the year of 2013
there is rise of cash which is due to selling of mortgaged asset to meet its liability.

Figure 34: Cash Ratio-Samata Leather

Cash Flow Ratio : Alligned with current and cash ratio

Figure 35: Cash Flow Ratio-Samata Leather

45

2.5.2 Capital Structure & Solvency Ratio

Particulars

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Debt to Capital

0.62

0.63

0.65

0.68

0.68

0.67

0.83

0.83

0.09

0.10

Figure 36: Debt to Capital Ratio-Samata Leather

Comment: The structure of debt and capital of SAMATA LEATHER are distinctively same in
two groups of periods. Between 2005-2012 the ratio was close to 60% to 80% whereas after
2012 it decreased sharply and reduced its debt, the company mostly depends on short term debt
and after adjusting its current liability on 2013 which changed its capital structure drastically.
2.5.3 Profitability Ratio
Particulars

201
2005 2006 2007 2008 2009 2010 2011 2012 3
0.08 0.04 0.12 0.11 0.10
0.08 0.25 0.17 0.15

201
4
0.10

Gross Margin
Operating
Margin

Net Profit Margin

46

Profit 0.18

0.38

0.28

0.27

0.02

0.15

0.04

0.01

0.03

0.01

0.60

0.49

0.37

0.54

0.05

0.13

0.05

0.03

0.01

0.01

Figure 37: Profitability Ratio-Samata Leather

Profitability of the company is althrogh poor since the year 2012. It has been running on loss
over the period and observed a slight positive gross margin in the year 2014. Main reason of its
poor performance because of its less working capital over the years. At the same time compan is
fully rely on exporting product only which squeezed its sales largely. At the same time
dependency on inventroy played a vital role as local raw materials availablity is not ensured.
2.5.4 Efficiency Ratio
Particulars

2005
-5%

2006
-4%

2007
-3%

2008
-4%

2009
-1%

2010
-1%

2011
0%

2012
0%

2013
1%

2014
0%

-2%

-2%

-2%

1%

0%

Return on Assets
-12% -10% -9%
Return on Equity

47

-13% -2%

Figure 38: Efficiency Ratio-Samata Leather

Both ROE and ROA had multiple changes is negative from 2005 to 2012 and at the year of 2013
it was slightly positive from when financing cost reduced highly.
Particulars
Basic Earnings Per Share

2005
-18.65

2006
-14.76

2007
-11.86

2008
-15.47

2009
-2.13

2010
-2.51

2011
-1.26

2012
-0.10

2013
0.22

2014
0.05

P/E Ratio

-1.13

-1.28

-2.38

-3.83

-45.07

-47.10

-155.56

-144.33

56.82

540.16

EPS of the company is althrogh negative and started improving since 2013 and P/E of the
company is also negative. Overall performance of the company represets that its a very risky
company to invest.

Figure 39: EPS & P/E Ratio-Samata Leather

48

2.5.5 Observations
Basis of Accounting:
The Financial statements of the company have been prepared on going concern basis under
historical cost convention.The Accounting Principles have been consistently followed in
accordance with International Accounting Standard(IAS)/International Financial Reporting
Standard (IFRS) as adopted in Bangladesh.

Valuation of Inventories:
Inventories are valued at lower of cost (under FIFO method).
Fixed Assets:
These include revaluation adjustment of Land, Building, Plant & Machinery, Office Equipment,
Furniture & Fixtures , etc. as on 31 January 1997.
Depreciation:
Depreciation is charged on reducing balance method on all fixed assets excepting for Land &
Land Development and the sum of Revaluation thereof at varying rates as shown in the Fixed
Assets Schedule. Depreciation on addition is charged when it is available for use.
Income Tax:
Matters related to Taxation are dealt with as per provision of the Income Tax Ordinance 1984
and there is no Deferred Taxation are introduced as yet
Revaluation of Fixed Assets:
This represents the sum of addition due to revaluation in respect of Land, Building, Plant &
Machinery, Office Equipments, Furniture & Fixture, etc. as on 31 January 1997, revalued by GK
Adjusters of Chand Mansion (5th floor),66 Dilkusha C/A, Dhaka 1000 vide survey report #
086617697. Calculation of depreciation was made after deducting the portion of revaluated
figure
from
1997.

49

Other Observations :
Share value changed from 100 to 10 thus total number of share increases 10 times that
impact EPS

Figure 40: To Nos. of Share-Samata Leather

Sales for the year 2013 includes the sum of Tk. 122,248,567 mortgaged/hypothecated
against Bank Loan

Figure 41: Sales change-Samata Leather

50

3. Comparative Analysis

3.1 Current Ratio

Organization

2006

2007

2008

2009

2010

2011

2012

2013

2014

Bata Shoes

1.54

1.42

1.45

1.44

1.45

1.47

1.49

1.62

1.71

Apex Adelchi Footwear

1.01

1.01

1.03

1.07

1.08

1.13

1.19

1.19

1.17

Apex Tannery

1.78

1.66

1.54

1.85

4.76

2.14

2.50

3.57

3.67

Samata Leather

0.92

0.89

0.84

0.84

0.85

0.86

0.86

6.51

6.08

Legacy Footwear

8.61

22.97

28.46

28.57

23.76

33.83

38.75

37.48

34.80

Industry Average

2.77

5.59

6.66

6.75

6.38

7.89

8.96

10.07

9.48

Figure 42: Current Ratio Comparison

If we take a look at the current ratios of the 5 different companies, we see that the top 2 footwear
manufacturing companies, Bata and Apex has comparatively close current ratios. Apex tannery
has increased their current asset in recent years due to land revaluation and that resulted in the
increasing current ratios. Samata leather has a sudden jump in their current ratios in the year
2013 and 2014, which come from the increased asset. The real outlier in this field is Legacy
51

Footwear. Their current ratio is way too high to be believable and it shows no sign of going
down. So, the industry average has gone up only for this company.
Capital Structure and Solvency Ratios
3.2 Debt to capital ratio
Organization

2006 2007 2008 2009 2010 2011 2012 2013

2014

Bata Shoes

0.60

0.63

0.61

0.59

0.57

0.56

0.53

0.51

0.48

Adelchi 0.86

0.87

0.83

0.79

0.85

0.71

0.72

0.74

0.78

Apex Tannery

0.53

0.55

0.58

0.51

0.21

0.43

0.37

0.26

0.26

Samata Leather

0.63

0.65

0.68

0.68

0.67

0.83

0.83

0.09

0.10

Legacy Footwear

1.97

2.06

2.15

0.84

0.89

1.04

1.07

1.00

0.80

Industry Average

0.92

0.95

0.97

0.68

0.64

0.71

0.71

0.52

0.48

Apex
Footwear

Figure 43: Debt to Equity Ratio Comparison

Industry average is a good picture of the overall position of the companies in this case. Bata and
Apex have comparatively lower debt to capital ratios. They show a clear sign of decreasing
dependence on debt for their operations. Apex tannery is in an even better position in this regard.
Once again, Samata leather shows a completely different picture after 2012. Their sudden
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increase in equity make them less reliant on debt. Legacy footwear has gradually shifted towards
equity financing from debt financing.
Overall, the industry average shows decreasing reliance on debt to finance the operations of the
companies.

3.3 Profitability Ratio

Net profit margin
Organization

2006

2007

2008

2009

2010

2011

2012

2013

2014

Bata Shoes

0.11

0.11

0.14

0.13

0.14

0.13

0.14

0.15

0.13

Apex Adelchi Footwear

0.02

0.05

0.04

0.04

0.04

0.08

0.09

0.08

0.08

Apex Tannery

0.08

0.06

0.07

0.06

0.10

0.05

0.05

0.03

0.02

Samata Leather

-0.38

-0.28

-0.27

-0.02

-0.15

-0.04

-0.01

0.03

0.01

Legacy Footwear

0.04

0.07

0.06

0.08

0.11

0.11

0.06

0.07

0.07

Industry Average

-0.02

0.00

0.01

0.06

0.05

0.07

0.07

0.07

0.06

The net profit margin shows an overall net positive for the industry. Bata is in the strongest
position compared to its competitors. Apex footwear has remained consistent over the years
while Apex tannery needs to get out its slump. Samata leather shows gradual increase in their net
profit and it finally managed to get overall net positive profit in 2013. Legacy footwear is close
to Apex in their net profit margin but it has slightly decreased in the last 3 years.
Overall, industry average was negatively impacted by the performance of Legacy footwear in the
initial period and then it became consistent in recent years.

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3.5 Efficiency Ratios

Inventory turnover ratio
Organization

2006

2007

2008

2009

2010

2011

2012

2013

2014

2.47

2.32

2.19

2.24

2.31

2.48

2.59

2.39

2.29

Apex Adelchi Footwear

3.70

3.67

4.44

3.89

3.25

3.21

2.65

2.27

1.80

Apex Tannery

2.28

2.625 2.256 1.463 2.126 3.511 3.625 5.027

8.37

Samata Leather

0.17

0.20

0.19

0.21

0.11

0.14

0.21

1.30

1.18

Legacy Footwear

0.62

0.47

0.50

0.42

0.36

0.36

0.29

0.25

0.26

Industry Average

1.85

1.86

1.91

1.65

1.63

1.94

1.87

2.25

2.78

Bata Shoes

A high inventory turnover is beneficial for the industry. Apex and Bata have strong inventory
turnover ratios that have remained mostly consistent over the years. Apex tannery has become
better than both of them in this regard with increasing inventory turnover ratios. Samata leather
has shown strong performance after weak early years. But Legacy is in a poor position in this
regard. Their inventory turnover is quite poor and it has only decreased in recent years.
Overall, the industry average is not fully showing the performance of the companies. The
performance varies way too much to make consistent judgments.

3.6 Earnings per share

Organization

2006

2007

2008

2009

2010

2011

2012

2013

2014

20.25

23.75

32.85

32.85

39.76

42.44

49.12

59.44

51.22

6.66

22.58

16.87

18.80

20.28

23.20

23.01

23.61

18.06

2.81

1.76

1.62

9.63

9.37

6.35

7.07

6.57

5.51

Bata Shoes

Apex Adelchi Footwear

Apex Tannery

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Samata Leather

Legacy Footwear

(14.76) (11.86) (15.47) (2.13) (2.51) (1.26) (0.10) 0.22

0.05

4.30

0.51

0.52

0.73

1.14

1.38

0.66

0.65

0.57

3.85

7.35

7.28

11.98

13.61

14.42

15.95

18.10

15.08

Industry Average

Figure 44: EPS Comparison

Bata is the clear winner in this category. The growth of their EPS compared to their competitors
is just astounding. They have reached as much as 5 times earnings per share. Compared to that,
Apex footwear is in a respectable position with Apex tannery close behind. Apex started
calculating EPS for share price Tk.100 after 2011 and it created some confusions while checking
the industry. Samata leather has gotten better in recent years after being in the red for a long
time. On the other hand, EPS of Legacy footwear shows clear sign of slowing down.
Overall, industry average is skewed due to the massive difference between Bata and the rest.
Otherwise, Apex footwear seems to be the closest in terms of value of EPS.

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3.7 Price to earnings ratio

Organization

2006

2007

2008

2009

2010

2011

2012

2013

2014

0.5

0.4

0.3

0.3

0.3

0.2

0.2

0.2

0.2

5.8

2.4

13.1

12.5

13.2

17.7

12.8

9.9

25.8

10.7

35.3

73.4

15.4

1.6

21.5

14.6

13.2

25.9

(1.3)

(2.4)

(3.8)

(45.1)

(47.1)

(155.6)

(144.3)

56.8

540.2

1.2

0.1

0.0

0.0

0.0

0.0

0.0

0.0

0.0

3.4

7.2

16.6

(3.4)

(6.4)

(23.2)

(23.3)

16.0

118.4

Bata Shoes

Apex
Footwear

Adelchi

Apex Tannery

Samata Leather

Legacy Footwear

Industry Average

The lower P/E ratio of Bata comes from their sudden jump in earnings per share in recent years.
The share price of Bata is currently undervalued compared to their massive growth. Both Apex
footwear and Apex tannery seem to be overvalued.
Their recent earning dont match with their share price and as such we can expect both to go
down. Samata leather once gain shows a drastically different picture after 2012 and became
extremely overvalued. At last, Legacy footwear has a very low P/E ratio (close to 0) that should
go up in the future.
Overall, the industry average is misleading due to the extreme change in P/E ratio of Samata
leather.

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4. Conclusion

From the comparative and individual analysis of companies what we can say BATA SHOES
among the 5 companies is clearly ahead in term of every aspect. With Legacy Footwear, the
current ratio is substantially misleading and may need further queries to decide what is the actual
scenario. Whereas on the other hand Samata Leather has been facing a negative return over a
long period of time ,this might be a scope of study to find out further whats going wrong with
Samata Leather. Both Apex Adelchi and Apex Tannery are well in shape, going well with the
industry

57

Reference
"My Accounting Course". My Accounting Course. N.p., 2016. Web. 3 June 2016.
Annual Report Bata Shoes 2005-2015
Annual Report Bata Shoes 2005-2015
Annual Report Apex Adelchi Footwear 2006-2015
Annual Report Apex Tannery 2005-2015
Annual Report Legacy Leather 2005-2015
Annual Report Samata Leather 2005-2015

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