report on ratio analysis

© All Rights Reserved

14 views

report on ratio analysis

© All Rights Reserved

- Savings Document
- Annual Report 2013
- winfieldpresentationfinal-130212133845-phpapp02
- Tata Steel Share Analysis
- Janis G Jack Financial Disclosure Report for 2009
- Annual Report PTC
- 8357
- 6. Slide Presentation
- Dr.Zakaria Hegazy: Investment lecture 2
- Project Report Synopsis 2
- Couche Tard- Annual -2011
- ASE 3902 _IAS_
- 2bsources of Long Term Finance
- Baes Article
- IEA Report 27th March
- Lecture-8DividendsPolicy.ppt
- Key Financial Ratio
- 133 Chapter 182002
- Final Romy 786 (2)
- CIR v. Manning (Aug. 6, 1975)

You are on page 1of 30

OF BEXIMCO SYNTHETICS LTD.

2

Group profile:

Name

Roll no.

Sanzida Rahman Liza

18-010

Rahima Nazat Ara

18-074

Fowziah Nahid Priya

18-096

Hamida Akter

18-146

Sneharthi Ghosh

18-152

3

LETTER OF TRANSMITTAL

16

th

February, 2014

Shehub Bin Hasan

Lecturer

Department of Finance

University of Dhaka

Subject: Submission of report on A comprehensive analysis Of Beximco synthetics ltd.

Dear Sir

We are obliged to submit the report entitled A comprehensive analysis of Beximco synthetics

ltd., as a partial requirement of the course Financial management under your instruction.

This report highlights the financial ratio analysis and dividend policy analysis of Beximco

Synthetics Ltd. To prepare this report we have tried to implement our theoretical knowledge with

practical experiences.

We are extremely grateful to you for your valuable guidance, diligent effort & inspiring words.

We have tried our best to follow your instructions, schedule and discipline obediently.

Sincerely,

On behalf of all group members

Sanjida Rahman Liza.

4

We express our thanks to our dear course teacher Shehub Bin Hasan for assigning us a report

dealing with real financial statements of a manufacturing company. In this regard, we would also

like to thank ourselves as our good teamwork and successful team spirit. Without cooperation

and the support from each other, it would not be possible to prepare such a resourceful report.

The presentation of this report is of a great expectation in our BBA program and we are quite

happy to submit it. Theoretical knowledge is valued when it is successfully applied in practical

scenario. In this respect we found this report a great opportunity to deal with some special

concentrations of real world problems.

So lastly we would again like to express our heartfelt thanks to our course teacher for providing

such scope to gain practical knowledge and enrich our study with realistic implication of

knowledge.

ACKNOWLEDGEMENT

5

Financial management is one of the most important courses and is very helpful to our study and

real life. Our honorable course teacher Shehub Bin Hasan vested us with the responsibility to

prepare a report on the topic A comprehensive analysis of Beximco Synthetics Ltd., a

responsibility that we tried our best to fulfill properly.

The company we selected for this purpose is Beximco Synthetics Ltd. We have collected the

annual reports Beximco Synthetics ltd of consecutive five years and calculated the important

ratios of the company to analyze the financial position of the company.

We have also analyzed the dividend policy of Beximco Synthetic ltd. We have showed the

company profile & calculated the liquidity ratios, efficiency and profitability ratios, debt ratios

and market ratios of the company for the last 5 years. We showed the graphical analysis and also

interpreted the calculations clearly in this report. This analysis helped us very much to gather

knowledge about the financial statements of a manufacturing company which will help us in our

future life.

EXECUTIVE SUMMARY

6

Serial

No.

Content Page No.

01. Chapter 01: Introduction

Introduction:

7-8

Origin of the

report:

07

Objective of the

report:

07

Methodology:

07

Scope of the

report:

07

Limitation of the

report:

08

02. Chapter 02:

S Company Introduction

Company Profile:

09

Beximco Synthetics

09

Mission

09

Corporate

governance

09

04. Chapter 03:

Ratio analysis of

financial statements

Liquidity ratios

10-12

Activity ratios

13-17

Profitability ratios

18-21

Debt ratios

22-24

Market ratios

25-26

05. Chapter 04:

Analysis of Dividend

policy

Dividend policy

27-29

Bibliography

30

TABLE OF CONTENT

7

Chapter: 1

Introduction

ORIGIN OF THE REPORT:

This report is a part of a requirement of B.B.A for our Financial Management course (F-206) we

have been assigned at February 05, 2014 & will be submitted at February 16, 2014. While

preparing the report, we gave our best effort to emphasize on the practical implementation of the

knowledge that we learned in our course of Financial Management.

OBJECTIVE OF THE REPORT:

The purpose of preparing the report is to learn about the manufacturing companies financial

statements, their financial position and how they calculate the ratios to highlight their position.

We calculated the important ratios, such as liquidity ratios, activity ratios, efficiency ratios and

profitability ratios to make sure about whether the company is running successfully and whether

its financial position is stable or not. By preparing this report we have learned in depth about the

financial statements of manufacturing companies and their various activities theoretically and

practically.

Scope of the report:

Everything has some advantage which helps that work to be completed thoroughly we get some

scope which helps us to make a standard report. Major of them are:

Enough time: we have got enough time to prepare a report so that we could gather information

with much tension free mind.

Easy excess: we have a very smooth access to collect information by the guidelines of our

honorable teacher, by using our text book and by internet. So, we did not face any kind of trouble

in this sector.

LIMITATIONS:

Every study has some limitations. We faced some usual constraints during the course of our

preparation for the report. The major limitations are as follows:

8

Problems in collecting data: Financial Management is an important subject which gives us

enough knowledge to deal with real life trend and procedures of preparing and analyzing

financial statements of a firm. But in case of collecting the annual reports of consecutive 5 years

of the firm we face a lot of problems as they are not available always.

Lack of knowledge: We dont have sophisticated knowledge about how to prepare a report. So

we have to face some problems by this side.

Many terms were unknown to us.

No prior study has been done in any section, so very less number of documents is

available.

The time was very short to do this report.

METHODOLOGY:

At first, we have made a working plan. Then we have made a discussion with all of our group

members and our course teacher, made a list of task. Information for the report has been

obtained both from primary and secondary source. We have used annual reports of Beximco

Synthetics Limited for preparing this report. We have collected consecutive 5 years annual

reports from 2008 to 2012 of Synthetics limited. We have analyzed 5 years financial statements

of Beximco Synthetics limited and shown change in financial position over 5 years.

9

Chapter: 2

Company profile

Beximco Synthetics Limited a member of the BEXIMCO Group, was incorporated in

Bangladesh as a public limited company. It went for public issue of shares and debentures in

1993 and commenced commercial operation in July 1994.

The shares of the Company are listed in the Dhaka and Chittagong stock exchanges of

Bangladesh and the debentures of the Company are listed in the Dhaka Stock Exchange of

Bangladesh. The registered office of the Company is located at House No.17, Road No.2,

Dhanmondi Residential Area, Dhaka-1205. The industrial unit is located at Kabirpur, Savar,

Dhaka..

Mission:

Each of our activities must benefit and add value to the common wealth of our society. We

firmly believe that, in the final analysis we are accountable to each of the constituents with

whom we interact; namely: our employees, our valued customers, our business associates, our

fellow citizens and our shareholders.

Corporate governance:

The maintenance of effective corporate governance remains a key priority to the board of

beximco synthetics ltd. recognizing the importance of it, the board and other senior management

remained committed to high standards of corporate governance. To exercise about clarity of

directors responsibilities towards the shareholders, corporate governance must be dynamic and

focus to the business objectives of the company and create a culture of openness and

accountability. Keeping this in mind, clear structure and accountabilities supported by well

understood policies and procedures to guide the activities of companys management both in its

day to day business and in the areas associated with internal control have been instituted.

10

Chapter: 3

Ratio analysis of financial statement of beximco synthetics ltd

Analysis of Liquidity Ratios

Liquidity means a firms ability to satisfy its short term obligations as it becomes due.

Table of liquidity ratios

Year 2008 2009 2010 2011 2012 Evaluation

Current

ratio(times)

2.09 2.01 1.92 1.83 1.72 Poor

Quick

ratio(times)

0.98 0.93 0.77 0.87 0.86 Poor

Cash ratio 0.003 0.006 0.007 0.016 0.003 Ok

NWL-CL

ratio (%)

10.9 10.1 9.2 8.3 7.2 Poor

Current ratio:

Current ratio measures a firms ability to pay its current liability.

Current ratio=

From the above table we can see that Beximco synthetics current ratio has been decreasing over

the five years. It has happened due to increase in current liability of Beximco synthetics over the

five years.

Quick ratio:

Quick ratio is a measure of liquidity calculated by dividing the firms current assets minus the

inventory by its current liabilities.

Quick ratio=

Here we can see that Beximco synthetics quick ratio is less than one and the value is decreasing

over the 5 years.

11

Cash ratio:

Cash ratio measures the amount of available cash and cash equivalents relative to current

liability. It measures the ability of a business to repay its current liabilities by only using its cash

and cash equivalents and nothing else.

Cash ratio=

Beximco synthetics has less amount of cash and cash equivalents compared to its debt in all the

five years. Its cash ratio has increased from 2008 to 2011 and decreased in 2012.

NWC-CL ratio:

NWC-CL measures the net working capital relative to a firms current liability.

NWC-CL ratio=

Here Beximco synthetics NWC-CL ratio has decreased from 2008 to the subsequent years. It has

happened due to the increase in current liability.

From the above analysis we can say that Beximco synthetics overall liquidity position has

deteriorated from 2008 to the subsequent years. Its current ratio, quick ratio, NWC-CL ratio has

decreased over the five years which indicate lower liquidity over the five years. It indicates that

Beximco synthetics does not have enough liquidity to cover its current liability.

Graphical presentation of liquidity ratios

Chart:Liquidity Ratios(Times)

0

0.5

1

1.5

2

2.5

2008 2009 2010 2011 2012

T

i

m

e

s

o

f

L

i

q

u

i

d

i

t

y

R

a

t

i

o

s

Current ratio

Quick ratio

Cash ratio

12

Chart: Liquidity Ratios (Percentage)

0

2

4

6

8

10

12

2008 2009 2010 2011 2012

P

e

r

c

e

n

t

a

g

e

o

f

n

e

t

w

o

r

k

i

n

g

c

a

p

i

t

a

l

Net working Capital to Current liability Ratio

Net working Capital to

Current liability Ratio

13

Analysis of Activity Ratios

Activity ratios measure the speed with which various accounts are converted into sales or cash-

inflows and outflows. Sometimes measures of liquidity, in respect of current accounts are not

adequate. Because there may be difference in the composition of a firms current assets and

current liabilities and this difference can significantly affect its actual liquidity. For this, the firm

should calculate and analyze the activity ratios to assess the actual liquidity efficient.

Table of activity ratios

Names of Ratios 2008 2009 2010 2011 2012 Evaluation

Inventory turnover

(Times)

1.01 .87 1.05 1.52 1.23 Good

Days in Inventory

(Days)

361.38 419.54 347.62 240.13 296.75 Ok

Accounts Receivable

turnover

(Times)

1.81 1.50 2.09 2.14 1.57 Ok

Average collection period

(Days)

201.66 243.33 174.64 170.56 232.48 Ok

Accounts Payable turnover

(Times)

14.49 9.01 10.51 17.12 17.57 Poor

Average Payment period

(Days)

25.19 40.51 34.73 21.32 20.77 Poor

Total Asset turnover

(Times)

.31 .27 .35 .50 .43 Ok

Fixed Asset turnover

(Times)

.62 .53 .69 1.06 .99 Ok

Inventory turnover ratio:

Inventory turnover generally measures the activity or liquidity of a firms inventory. It is

calculated as follows.

14

Inventory turnover =

From the above table we can see that the inventory turnover ratios of Beximco Synthetics

Limited for the past five years from 2008 to 2012 are 1.01, 0.87, 1.05, 1.52 and 1.23

respectively. As this firm is a manufacturing firm, the inventory turnover ratio is not satisfactory.

But, the ratio is stable over the years.

Average age of inventory:

Inventory turnover can be easily converted into an average age of inventory by dividing it into

365. It represents how quickly the inventory of an organization is liquidated or cleared or sold.

The average age of inventory is calculated as follows.

Average age of inventory =

From the table stated above, it is visible that the average age of inventory for the last five years

from 2008 to 2012 is 361.38 days, 419.54 days, 347.62 days, 240.13 days and 296.75 days.

There are some fluctuations in the graph of average age of inventory. But the overall result is ok.

Average collection period:

The average collection period is useful to evaluate credit and collection period. It is calculated by

dividing the average days of sales into the accounts receivable. The average collection period is

calculated as follows:

Average collection period =

Here, we can see from the table that the average collection period of Beximco Synthetics limited

from the year 2008 to 2012 is 201.66 days, 243.33 days, 174.64 days, 170.56 days and 232.48

days respectively. The average collection period is increasing day by day and it is not good for

the organization. It indicates a poorly managed credit or collection department, or both.

15

Average payment period:

Average payment period is the average amount of time needed to pay accounts payable. The

average payment period is derived by dividing the average purchases per days into the accounts

payables. It is calculated as follows:

Average payment period =

Here, from the table stated above we can see that the average payment period of Beximco

Synthetics Limited for the last five years from 2008 to 2012 is 25.19 days, 40.51 days, 34.73

days, 21.32 days and 20.77 days respectively. The average payment period is decreasing over the

years, which is also not a good sign. It indicates that the firm is making payment to its creditors

more quickly which the firm could retain for a greater period to earn more profit.

Total asset turnover:

Total asset turnover measures the efficiency with which the firm uses its assets to generate sales.

The higher the firms total asset turnover, the more efficiently its assets have been used. Total

asset turnover is calculated as follows:

Total asset turnover =

From the table it is visible that the Total asset turnover from 2008 to 2012 is .31 times, .27 times,

.35 times, .50 times and .43 days respectively. There are several fluctuations in the ratio. But the

average ratio is ok. It indicates that the firms operations have been financially efficient.

Fixed asset turnover:

Fixed asset turnover measures the efficiency with which the firm uses its fixed assets to generate

sales. The higher the firms fixed asset turnover, the more efficiently its fixed assets have been

used. Fixed asset turnover is calculated as follows:

Fixed asset turnover =

16

From the table it is visible that the fixed asset turnover from 2008 to 2012 is .62 times, .53 times,

.69 times, 1.06 times and .99 days respectively. The fixed asset turnover ratio is increasing over

the years. It indicates that the firms operations have been financially efficient.

Overall analysis of Activity ratios:

Beximco Synthetics Limiteds inventory appears to be in good shape. Its inventory management

seems to have improved over the years. The firm may be experiencing some problems with its

accounts receivable. The average collection period is increasing over the years. But Beximco

Synthetics limited appears to be very swift in paying its bills. The management of receivables

and payables should be examined. Beximco Synthetics limiteds total asset turnover reflects an

increase in the efficiency of total asset utilization between 2008 and 2012. Although there are

several fluctuations in the total asset turnover ratio, the average financial efficiency is good.

Graphical presentation of activity ratios

Chart: Activity Ratios (Times)

0

2

4

6

8

10

12

14

16

18

20

2008 2009 2010 2011 2012

A

x

i

s

T

i

t

l

e

Inventory turnover Ratio

Accounts receivable

turnover

Accounts Payable turnover

17

Chart: Activity Ratios (Days)

Chart: Activity Ratios (Times)

0

50

100

150

200

250

300

350

400

450

2008 2009 2010 2011 2012

D

a

y

s

o

f

a

c

t

i

v

i

t

y

r

a

t

i

o

s

Days in Inventory

Average collection period

Average payment period

0

0.2

0.4

0.6

0.8

1

1.2

2008 2009 2010 2011 2012

A

x

i

s

T

i

t

l

e

Total asset turnover

Fixed asset turnover

18

Analysis of Profitability ratios

These ratios indicate how to evaluate the firms profits with respect to a given level of sales, a certain

level of assets, or the owners investment.

Table of Profitability Ratios

Gross Profit Margin:

It measures the percentage of each sales dollar remaining after the firm has paid for its goods.

Gross profit margin=

Although gross profit margin was increasing from 2008 to 2009 but decreasing in 2010,after that

the ratio has increased till 2012

Operating Profit Margin:

It measures the percentage of each sales dollar remaining after all costs and expenses othert than

interest, taxes and preferred stock dividends are deducted.

Operating profit margin=

The overall aspect is good in case of operating profit margin.

Net profit margin:

It measures the percentage of each sales dollar remaining after all costs & expenses, including

interest, taxes, and preferred dividends, have been deducted.

Name of ratios 2008 2009 2010 2011 2012 Evaluation

Gross profit margin(%) 14.6 16.1 13.2 15.8 18.6 Good

Operating profit margin(%) 13.1 14.4 11.7 14.6 17.2 Good

Net profit margin(%) 2.0 1.5 2.7 7.0 5.6 Ok

Return on asset(%) 0.63 0.4 0.96 3.5 2.4 Ok

Return on equity(%) 0.9 0.57 1.4 5.1 0.37 Poor

Earnings per Share 3.92 2.10 4.61 1.58

1.02 Poor

19

Net profit margin=

Changes in operating expenses & finance cost from 2008 to 2012 appear to have caused the

fluctuations of net profit margin, such as lower levels of operating expenses & finance cost are

liable for the increase of net profit margin in 2011,the opposite direction is caused for decreasing

net profit margin in 2012.

Return on assets:

It measures the overall effectiveness of management in generating profits with its available

assets.

Return on assets=

The firms return on asset behaved much as its net profit margin did over the 2008-2012.

Return on Equity:

It measures the return earned on the common stockholders investment in the firm.

Return on equity=

The exceptionally high 2011 level of return on equity is the result of increasing net profit margin,

total asset turnover & equity multiplier. But the low percentage of return on equity in 2012 is the

result of low net profit margin, total asset turnover & high equity multiplier. That means it

depends more on debt to finance its assets in 2012.So we can say that it is more risky

Earnings per share:

It indicates the number of dollars earned during the period on behalf of each outstanding share of

common stock.

Earnings per share=

20

Earnings per share was in a high level in 2008 & 2010,but after 2010 it has decreased

continuously because after 2010, number of outstanding share has increased in a large number

for bonus share.

BEXIMCO SYNTHETICS LTD profitability relative to sales from 2008 to 2012 is overall not

good.

Graphical Presentation of Profitability Ratios

Chart: Profitability ratios in percentage

0

2

4

6

8

10

12

14

16

18

20

2008 2009 2010 2011 2012

P

e

r

c

e

n

t

a

g

e

o

f

E

f

f

i

c

i

e

n

c

y

r

a

t

i

o

s

Profitability ratio

Gross Profit

Operating Profit

Net Profit

Return on Asset

Return on Equity

21

Chart: Earning per shares

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2008 2009 2010 2011 2012

T

k

o

f

E

a

r

n

i

n

g

p

e

r

S

h

a

r

e

Earning per share

Earning per share

22

Analysis of debt ratio

Debt investment ratios of a firm measure the amount of other peoples money being used to

generate profit. The more debt a firm has the greater its risk of being unable to meet its

contractual debt payments. Since the claim of creditors must be satisfied before the payment to

the stockholders current and prospective shareholders pay close attention to the firms ability to

repay debts.

Table of Debt investment ratios

Name of ratios 2008 2009 2010 2011 2012 Evaluation

Debt to equity

ratio (%)

.48 .43 .42 .45 .51 Ok

Times interest

earning

ratio(times)

1.23 1.20 1.38 2.63 1.76 Good

Cash coverage ratio

(times)

1.51 1.55 1.77 3.03 2 Ok

There are different types of debt investment ratios, some of them are given below:

23

Debt to equity ratio:

Debt to equity ratio measures how much debt a firm holds against its stockholders equity. Lower

the debt equity ratio, the lower the risk of the firm. It is calculated as follows:

Debt to equity ratio =

From the table stated above we can see that the debt investment ratio of Beximco Synthetics

Limited from 2008 to 2012 is 48, 43, 42, 45 and 51 percent respectively. The ratio is increasing

over the years, which indicates that day by day the firm is becoming riskier.

Times interest earning ratio:

Times interest earning ratio measures the firms ability to make contractual interest payments

current earnings. The higher the value, the better able the firm is to fulfill its interest obligations.

Times interest earning ratio is calculated as follows:

Times interest earning ratio =

From the table stated above we find that times interest earning ratio of Beximco Synthetics Ltd.

from 2008 to 2012 is 1.23, 1.20, 1.38 and 1.76. The ratio is increasing over the years, which

indicates that the firm is growing its efficiency of paying interest day by day.

Cash coverage ratio:

Cash coverage ratio measures the amount of cash the firm has to cover its interest expense. The

higher the cash coverage ratio the larger amount of cash the firm holds for its interest payment. it

is a better measurement of interest payment with earning than times interest earning ratio. It is

calculated as follows:

Cash coverage ratio =

From the year 2008 to 2012 Beximco Synthetics Ltd has cash coverage ratio of 1.23, 1.20, 1.38,

2.63, 1.76 times respectively. So, we can say that this firm has enough cash to cover its interest

expense.

24

Overall analysis:

Beximco synthetics ltds indebtedness has increased over the period of five years from 2008 to

2012. But the firms times interest earning ratio and cash coverage ratio are also high which

means that the firm has enough earning and cash to cover the interest expense. So, lastly we can

assume that though the firm has higher debt but it is not in risky position

Graphical presentation of debt ratios

Chart: Debt Ratio (Percentage)

0

0.1

0.2

0.3

0.4

0.5

0.6

2008 2009 2010 2011 2012

P

e

r

c

e

n

t

a

g

e

o

f

d

e

b

t

t

o

e

q

u

i

t

y

r

a

t

i

o

debt to equity ratio

debt to equity ratio

25

Chart: Debt Ratios (Times)

Analysis of market ratios

Market ratios relate the firms market value, as measured by its current share price, to certain

accounting values. These ratios indicate how well investors in the market feel the firm is doing

in terms of risk and return. These ratios also reflect the common stockholder assessment of the

firms past and expected future performance

Table of market ratios

Name of

ratios

2008 2009 2010 2011 2012 Evaluation

Book value

of share

418.49 366.01 338.10 30.98 27.96 Poor

Market to

book value

ratio(times)

.39 1.01 1.52 11.89 .87 Ok

Price

earnings

ratio(times)

3.92 2.10 4.61 1.58 1.02 Poor

0

0.5

1

1.5

2

2.5

3

3.5

2008 2009 2010 2011 2012

A

x

i

s

T

i

t

l

e

times interest earning ratio

cash coverage ratio

26

Here we considered two market ratios:

Market to book value ratio:

It measures how investors view the firms performance. It relates the market value of the firms

shares to their book value. At first we have to calculate the book value per shares to calculate the

market to book value ratio. The formula is as follows:

Market to book value ratio =

Market to book value ratio for Beximco synthetics ltd from the year 2008 to 2012 is .39, 1.01,

1.52, 11.89 and .87 times respectively. Here we can see that though the ratio was increasing until

2011, but it fell in 2012.

Price earnings ratio:

It measures the amount that investors are willing to pay for each dollar of a firms earnings. The

higher the P/E ratio, the greater the confidence that investors have in the firms future

performance. The formula is as follows:

Price earnings ratio =

Price earnings ratio for Beximco Synthetics Ltd from 2008 to 2012 is 3.92, 2.10, 4.61, 1.58 and

1.02 respectively. Here we can see a decreasing trend in price earnings ratio. So the performace

of the firm is not so good according to this ratio. And the investors dont have the enough

confidence on the future performance of the firm.

Overall analysis of market ratios:

27

According to our analysis investors has lower confidence in the firm in 2012 than in the prior

four years. So the overall market risk has increased according to market to book value and price

earning ratio.

Graphical presentation of market ratios

Chart: Market Ratios (times

0

2

4

6

8

10

12

14

2008 2009 2010 2011 2012

A

x

i

s

T

i

t

l

e

Market Ratios

market to book value ratio

price earnings ratio

28

Chapter : 4

Analysis of dividend policy

Dividend Policy

Dividend is that amount which is distributed to the stockholders from the earnings of a firm. The

firms dividend policy is based mainly on two basic objectives, providing for sufficient financing

& maximizing the wealth. A firm allows cash dividend ,stock dividend, stock split, stock

repurchase in case of dividend. Now the dividend policy which beximco synthetics are following

from 2008 to 2012 is described below.

Table of dividend policy

Particulars 2008 2009 2010 2011 2012

No of outstanding

shares

4821547 5544779 5960637 68547320 78829418

Cash dividend --- 7.50 --- --- ---

Stock

dividend(percentage)

15% 7.50% 15% 15% 10%

Stock dividend(amount) 723232 415858 894096 10282 7882942

Share price 164.50 373 514.80 368.25 24.30

29

policy the company follows:

From this table we find that, in this firm, directors have allowed to give stock dividend each year,

not cash dividend every year, they are interested to preserve cash, not to make cash out flow. The

firm has followed constant payout ratio dividend policy that means same percentage (15%) has

been continued from 2008 to 2011.After that the percentage is changed.

A stock dividend does not involve cash. Rather, it is the distribution of more shares of the

corporation's stock. Perhaps the corporation does not want to part with its cash, but wants to give

something to its stockholders. It is the procedure to shift of funds between stockholders equity

accounts rather than an outflow of funds. Since every stockholder received additional shares, and

since the corporation is no better off after the stock dividend, the value of each share should

decrease. In other words, since the corporation is the same before and after the stock dividend,

the total market value of the corporation remains the same.

After analyzing this companys dividend policy, it is clear that they have distributed small stock

dividend which is less than 25% from 2008 to 2012.In 2008, the percentage of stock dividend

was 15%, but in 2009 they allowed both cash and stock dividend in same percentage (equally

distributed in 7.5% in cash dividend & 7.5% in stock dividend).After that, the 15% stock

dividend was distributed in 2010.

In 2011 the total aspect has been changed, suddenly the number of shares has increased because

of stock splits. Although it is not a type of dividend, stock splits have an impact on share price

similar to that of stock dividends. It is used to reduce market price of the firms stock by

increasing the number of outstanding shares. It is nontaxable.

In 2011, the firm realized that its stock was priced too high and that lowering the market price

would increase trading activity. They reduced the price from 515 to 368.So they used 10 for 1

split, then number of shares has become 68547320.But the percentage of dividend has been

constant in 15%.In 2012,the stock dividend has been continued but in lower percentage.

30

Bibliography:

Principles of Managerial Finance, LAWRANCE J.GITMAN

www.GOOGLE .COM

- Savings DocumentUploaded bySwati Sharma
- Annual Report 2013Uploaded byAlex Wilson
- winfieldpresentationfinal-130212133845-phpapp02Uploaded bySukanta Jana
- Tata Steel Share AnalysisUploaded byArchit Jain
- Janis G Jack Financial Disclosure Report for 2009Uploaded byJudicial Watch, Inc.
- Annual Report PTCUploaded byNasir Iqbal
- 8357Uploaded byanam noor
- 6. Slide PresentationUploaded bynurul jannah
- Dr.Zakaria Hegazy: Investment lecture 2Uploaded byZakaria Hegazy
- Project Report Synopsis 2Uploaded byBalakrishna Chakali
- Couche Tard- Annual -2011Uploaded byThorHollis
- ASE 3902 _IAS_Uploaded byAcid Al-Jauzy
- 2bsources of Long Term FinanceUploaded bytamanna
- Baes ArticleUploaded byshahzeb khurshid
- IEA Report 27th MarchUploaded bynarnolia
- Lecture-8DividendsPolicy.pptUploaded byimranbacha89
- Key Financial RatioUploaded bychichung91
- 133 Chapter 182002Uploaded byOsama Khan
- Final Romy 786 (2)Uploaded byRomy Goyal
- CIR v. Manning (Aug. 6, 1975)Uploaded byCrizza Rondina
- 9706_s07_qp_4.pdfUploaded byNyasha Makona
- DDMUploaded byRaynaah
- Bacha F GudzarUploaded byAnkitaSingh
- Acc09 DividendsUploaded byrozele d
- 2011-ZA-EXC-CF (1)Uploaded byChloe Tham
- BUS103 AFM - 1T2016 - Group Assignment.pdfUploaded byJessilam
- Asset Class Shares 1010Uploaded bydianneb
- Budget at a GlanceUploaded byAvishek Ck Thakkur
- JURNAL AYU (Sementara) 1.docxUploaded bymerlambang
- Ch12 Show (1)Uploaded byAaron Kim

- SWOT Analysis of Grameen PhoneUploaded byRoney Ahmed
- BA610162 Sabaj (Kibria) LSST BBE RevisedUploaded byFowziah Nahid Priya
- 18883-21356-1-PB (1)Uploaded byFowziah Nahid Priya
- edited-Copy-1.xlsxUploaded byFowziah Nahid Priya
- Contoh Proposal Bisnis PlanUploaded byHadianto Nugroho
- SMP Mission Report and Draft Regulations InstructionsUploaded bySiddiqur Rahman
- exchange rate volatilityUploaded byFowziah Nahid Priya
- Project Report on Technical AnalysisUploaded byvishalnabde
- Bangladesh Telecoms TigerUploaded byturjo987
- term paper of financial markets & institutionsUploaded byFowziah Nahid Priya
- Tele TalkUploaded byFowziah Nahid Priya
- Multiple Linear Regression.pptxUploaded byFowziah Nahid Priya
- External Audit PlanUploaded byFowziah Nahid Priya
- Entrepreneurship ReportUploaded byFowziah Nahid Priya
- StatisticsUploaded byFowziah Nahid Priya

- Corporate Governance and DirectorsUploaded bykiranaisha
- Hermitage FundUploaded byanurag
- Does the Adoption of IFRS Affect Corporate Social DisclosureUploaded byDiana Istrate
- Ranbaxy - Annual Report 2007Uploaded bySaurabh Chandra
- Representation of Mr. Cyrus P. Mistry under Section 169 of the Companies Act, 2013 [Company Update]Uploaded byShyam Sunder
- ar2012.pdfUploaded byDimas Cahyo Saputra
- IAS1revisedUploaded bySajid Baloch
- Corporate Governance and the Performance of Privatized Companies in Nigeria: Evidence from Ashaka Cement CompanyUploaded byinventionjournals
- Ashok Leyland Ltd-FY15Uploaded byGautam D
- Ethical Issues in Corp. GovernanceUploaded byGeetanshi Agarwal
- Pro Forma Compensation: Useful Insight or Window Dressing?Uploaded byBrian Tayan
- DemutualizationUploaded byWilliam Masterson Shah
- PHI Learning EEE Price List Oct 2014 Subject WiseUploaded byPHI Learning Pvt. Ltd.
- Spring Energy Annual Report 2009Uploaded byDooniya Ghori
- Corporate Governance GuidelinesUploaded byJeff Kandella
- Exit Liquidity and Majority Rule Appraisals Role in Corporate LawUploaded byashwin1596
- MNB1501 Study NotesUploaded byGhairunisa Harris
- Goodricke Annual Report 2010Uploaded bymanavc
- Corporate GovernanceUploaded bydwaynep
- Bj Assets 02Uploaded byPenjualBooxAndrooidBoox
- Corporate LawUploaded byAnkur Chugh
- corp govUploaded bysathishyadav
- Nestle India Annual Report AnalysisUploaded byvipink1berwal
- ChallengerUploaded byapi-3817560
- Activist Investing in Europe October 2014 Skadden Special Report.pdfUploaded byArnaud Dumourier
- Family Bank Annual Report 2011Uploaded byPetro Obiero
- Arbitrage Trade Analysis of Stock Trading in NSE and BSE MBA ProjectUploaded byNipul Bafna
- EY Funding for Growth the EY Guide to Going PublicUploaded byAayushi Arora
- From Boardroom to C-Suite: Why Would a Company Pick a Current Director as CEO?Uploaded byStanford GSB Corporate Governance Research Initiative
- Transnet Annual Report 2003 - 2004Uploaded bycameroonwebnews