Bata Shoe Company

Introduction:

As a part of the assignment Program of BBA course requirement, we were assigned to do our
assignment in Bata Shoe Company (Bangladesh) Limited.

Company
Information

Company Secretary Legal Advisers

Md. Hashim Reza Malik Law Associates

Auditors Bankers
Rahman Rahman Huq Eastern Bank Ltd.
Chartered Accountants Dutch Bangla Bank Ltd.
9, Mohakhali C/A (11th Floor) HSBC Ltd.
Dhaka-1212 Islami Bank (Bangladesh) Ltd.

Factories Tannery
1. Tongi Industrial Area Dhamrai, Dhaka
Tongi, Gazipur
2. Dhamrai, Dhaka

Registered Office Share Liaison Office

Bata Shoe Company (Bangladesh) Limited 6, B. B. Avenue (2nd Floor)
Tongi Industrial Area Dhaka
Tongi, Gazipur
 Bata Shoe Company
Board of Directors:
Fernando Garcia Restrepo Muhammad Qayyum
Chairman Vice Chairman & Managing Director
Present Position Previous Positions
Group Managing Director, Bata Emerging Market Retail Manager, Futura Footwear Limited,
(WEST) South Africa
Previous Positions Retail Manager, Bata Pakistan Limited
President Director, Bata Indonesia Area Manager, Bata Pakistan Limited
Managing Director, Bata Kenya Merchandise Planning & Budget Control
Managing Director, Bata India Manager, Bata Pakistan Limited
Vice President, Wholesale & Marketing, Bata Ltd, Mike Middleton
Toronto, Canada Director
Managing Director, Bata Bangladesh Current Positions

Rokanuddin Moahud Bar-at-law CFO, Bata Emerging Markets Limited,

Bangladesh
Independent Director
Director, Bata Pakistan Limited
Senior Advocate in the Supreme Court in Bangladesh
Director, Bata Shoe of Thailand Public
Rashidul Hasan Company Limited
Director, Bata Malaysia Limited
Independent Director
Director, Bata Shoe Company of Ceylon
Current Positions Limited
Chairman, Uttara Finance & Investments Ltd. Commissioner, P.T. Sepatu Bata Tbk,
Independent Director, Reckitt Benckiser Bangladesh Indonesia
Ltd Previous Positions
Independent Director, Monno Group of Industries Finance Manager, Shoe Company
Trustee, Kumudini Welfare Trust of Bangladesh Ltd (Malawi) Limited

Previous Positions Company Secretary, The Zimbabwe Bata

Shoe Company Limited
Founder Chairman of IDLC the first joint venture
leasing company of Bangladesh Finance Manager, Bata Shoe Company
(Kenya) Limited
CEO & Managing Director of IPDC the first joint
venture investment company of Bangladesh Director of Finance, Bata Limited,
Toronto, Canada
Director General, Department of Industries of the
 Bata Shoe Company
Executive Summary

In leather and foot wear sector, Bata Shoe Company (Bangladesh) Ltd. is one of the growing

companies in Bangladesh. In our opinion the financial statement, the prepared in accordance with

Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standard (BFRS),

give a true and fair view of the stat of the companys affairs as at 31 December 2010 and of the

result of its operations and its cash flows for the year then ended and comply with the Companies

Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations.

During the year 2010 Bata Shoe Company (Bangladesh) Ltd. recorded a profit before tax of taka

743 million, an impressive increase of taka 113 million against 2009. In 2010 your company

achieved a turnover of taka 5,663 million representing an increase of more than 10% against 2009.

The Company currently has nearly 1000 independent dealers throughout the country.

In this assignment we have tried to highlight the companys current financial situation and ratio

analysis (cross sectional analysis) of Bata Ltd which is one of the growing companies in

Bangladesh. We have also tried to provide recommendation according to each identified problem

on the basis of each ratio.

Vision:
 Bata Shoe Company
We see Business as a means to the well being of the shareholders and all other stakeholders,
society at large keeping in line with the Nations interest.

Mission Statement:
Our Mission is to provide world-class products to our valued Customers, Maintaining high Ethical
Standard business.

Objective:
Our primary objective is to conduct transparent business operation within legal and social
framework with aims to attain the mission with qualitative & quantitative target in business
operation.

Objective of the Study

General Objective:

The Broad objective of this assignment is to analysis Financial Performance evaluation of Bata
Company Bangladesh Ltd.

Specific objectives:

The following objectives can be listed as the specific objectives of study.

To identify and assess the present financial performance of Bata Company

Bangladesh Ltd.
To calculate the financial ratios and identify the areas of concern.
To understand the implications in analyzing and interpreting the financial ratios.
To identify the findings and raise possible recommendations for Bata Ltd.
 Bata Shoe Company
Sources of data:

Sources of secondary data of this report are:

Annual Report of Bata Ltd.

Different text book and journals.
Various reports and articles related to study.
Some of my course elements as related to this assignment.
Web base support from the internet.

Marketing Operations:

Retail
In 2010 our Retail channel sold 8.6 million pairs of shoes with a turnover of taka 3.5 billion which
is 109% growth against last year. To achieve this outstanding growth in spite of global recession,
company took different initiatives like product innovation, aggressive marketing programmers,
market expansion, human resource development, operational efficiency, team work etc.

Non Retail
Non Retail business played a vital role in the companys total turnover in 2010. This business
channel includes 5 different divisions namely Dealers Support Program (DSP), Wholesalers, Rural
Sales, Department Stores and Industrial & Institutions. The Company discontinued business with
low volume dealers and focused on the high contribution dealers to minimize business risks and
operating expenses. In addition, emphasis was given to open new dealers. Around 71 new dealers
were opened during the year which contributed around Tk. 88 million in
turnover. Currently, the company has 562 DSPs and 393 wholesalers running under a sound
meaningful business policy focused on development of good relationship.

Bata Industrials
The company has established a new business channel under the brand Bata Industrials to serve
the industrial growth. After launching Bata Industrials shoes and we received very encouraging
feedback from different industrial groups who focus on quality and safety such as petrochemicals,
food Industries, machineries, automobile parts, electrical equipments etc.

Manufacturing
The company operates two manufacturing facilities one in Tongi and the other in Dhamrai. With
a production capacity of 110,000 pairs of shoes daily, the company also has a modern tannery
facility with an output of 3.4 million square feet of leather annually. In 2010 company produced
 Bata Shoe Company
over 24.9 million pairs. Currently company continues producing quality & fashionable shoes to
respond to customers demand.

Human Resources
Bata Shoe Company (Bangladesh) Ltd. organized a day long Workshop on COSTEF (Costing &
Efficiency) on June 01, 2010 at the Human Resources Training Center, Tongi. A total of 30
participants from Merchandising, Product Development and Distribution department participated
in the workshop. The main topics were Concept of BSO Costing/Standard Cost, Material
Calculation, Practical Session - One Pair Area Drawing & Paper Skin Tracing, Labour Cost &
Concept of SPM, Production Expenses, Capacity Utilization, Prodeffcost, Negotiation with
Supplier and Pricing & Gross Margin Establishment.

Data Collection Procedure:

Conducting this report secondary data are used. Data regarding the Performance Evaluation of The
Bata Company Bangladesh Ltd. were collected from secondary sources like: Annual Reports,
journals, official website. I also collect some information by using internet.

Instruments Used for Analysis:

Ratio analysis

Time series (Trend) analysis:

Time-series analysis evaluates performance over time. Comparison of current to past performance,
using ratios, allows the firm to determine whether it is progressing as planned. Additionally, time-
series analysis is often helpful in checking the reasonableness of a firms projected financial
statements.

Cross- sectional analysis:

Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same
point in time.

Ratio Analysis:
Involves methods of calculating and interpreting financial ratios of average and monitor the firms
performance.

Liquidity Ratio:
Liquidity means ability to satisfy its short-term obligations as they come due. Liquidity refers to
the solvency of the firms overall financial position the ease with which it can pay its bills. The
two basic measures of liquidity are the current ratio and the quick ratio.
 Bata Shoe Company
Current ratio:
A measure of liquidity which is calculated by dividing the firms current assets by its current
liabilities

Current Ratio = Current Asset/Current Liabilities

Year 2006 2007 2008 2009 2010

Current Ratio 1.54 1.42 1.45 1.44 1.45

Graphically show:

1.55

1.5 2006
2007
1.45
2008
1.4
2009
1.35 2010
Current ratio

Comments:

Quick (Acid-Test) Ratio:

A measure of liquidity calculated by dividing the firms current assets minus inventory by its
current liabilities

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Year 2006 2007 2008 2009 2010

Quick Ratio 0.62 .40 .41 .47 .38

 Bata Shoe Company
Graphically show:

Comments:

Debt Ratio:

The debt ratio measures the proportion of total assets provided by the firms creditors.

Debt Ratio = Total Liabilities / Total Assets

Year 2006 2007 2008 2009 2010

Debt Ratio 2.21 66.33 61.10 58.85 56.74

Graphically show:
 Bata Shoe Company
70
60
50 2006
40 2007
30 2008
20 2009
10 2010
0
Debt Ratio

Comments:

Time Interest Earned Ratio:

This ratio measures the ability to meet contractual interest payment that means how much the company
able to pay interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

Year 2007 2008 2009 2010

Time Interest 99.12 89.11 63.11 52.98

Earned Ratio

Graphically show:

Comments:

Total Asset Turnover:

The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate
sales.
Total Asset Turnover = Sales/ Total Asset
Year 2006 2007 2008 2009 2010

Total Asset 4.73 1.77 1.85 1.89 1.85

Turnover
Graphically show:
 Bata Shoe Company

Comments:

Inventory turnover:
A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover= Cost of goods sold/ Average Inventory

Year 2006 2007 2008 2009 2010

Inventory 2.36 2.02 2.08 2.26 2.13

Turnover

Graphically show:

2.4
2.3
2006
2.2
2007
2.1
2008
2
1.9 2009

1.8 2010
Inventory turnover

Comments:
 Bata Shoe Company
Average Collection Period:
The average amount of time needed to collect accounts receivable.

Average Collection Period=Accounts receivable/ (Credit sales/365)

Year 2006 2007 2008 2009 2010

Average 11 4 6 7 9
Collection Period

Graphically show:

Comments:

Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it
represents the number of days by the firm to pay its creditors. A high creditors turnover ratio or a lower
credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit
worthiness of the company. However a very favorable ratio to this effect also shows that the business is
not taking the full advantage of credit facilities allowed by the creditors. It can be calculated using the
following formula:

Average Payment Period=Accounts payable/ Average purchase per day

 Bata Shoe Company
Year 2006 2007 2008 2009 2010

Average Payment 138 155 153 118 113

Period

Graphically show:

Comments:

Operating Profit Margin:

Measures the percentage of each sales dollar remaining after all costs and expenses other then
interest, taxes and preferred stock dividends are deducted pure profits earned on each sales
dollar. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales

Year 2006 2007 2008 2009 2010

Operating Profit 10.54% 12.77% 14.02% 12.77% 13.62%

Margin

Graphically show:
 Bata Shoe Company

Comments:

Gross profit margin:

The gross profit margin measures the percentage of each sales dollar remaining after the firm has
paid for its goods. The gross profit margin is calculated as follows
Gross profit margin = Gross Profit / Sales

Year 2006 2007 2008 2009 2010

Gross profit 39.82 33.27 34.45 37.02 36.12

margin

Graphically show:
 Bata Shoe Company
Comments:

Net profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including
taxes, have deducted. The higher the net profit margin is better. The net profit margin is calculated as
follows:
Net profit Margin = Net profit after Taxes / Sales

Year 2006 2007 2008 2009 2010

Net profit Margin 11.04% 8.17% 9.72% 8.74% 9.61%

Graphically show:

12
10
2006
8
2007
6
2008
4
2 2009

0 2010
Category 1

Comments:

Return on Asset (ROA):

Return on asset (ROA), which is often called the firms return on total assets, measures the overall
effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Asset (ROA) = Net profit after Taxes / Total Assets

 Bata Shoe Company
Year 2006 2007 2008 2009 2010

Return on Asset 0.52% 14.43% 17.98% 16.50% 17.79%

Graphically show:

Comments:

Return on Equity (ROE):

The Return on Equity (ROE) measures the return earned on the owners investment. Generally, the higher
this return, the better off the owners.

Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity

Year 2006 2007 2008 2009 2010

Return on Equity 52.2% 46.23% 39.49% 40.11% 41.13%

Graphically show:
 Bata Shoe Company

Comments:

Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share
relative to the income or profit earned by the firm per share.

P/E ratio - Price per share / earnings per share

Earnings per share (EPS):

EPS represents the dollar amount earned behalf of each outstanding share of common stock.

EPS= Net income/no. of common share outstanding

Year 2006 2007 2008 2009 2010

EPS 20.25 23.75 32.85 32.85 39.76

Graphically show:

Comments:
Bata Shoe Company