Assignment: Financial Report Analysis

Submitted To:

Syeda Shaharbanu Shahbazi

Senior Lecturer

FIN301.

Submitted By:

Ashfaqur Rahman Shemanto- 13104117

Md. Hasan-Al-Yakut-13104113

Navid Abdullah Gofran- 13104045

Date: 27.10.2014
Letter ofTransmittal
27 , 2019

To
MD. Zahidur Rahman Senior
Assosiate professore
Khulna University Management
And BusinessAdministration
Decipline University

Subject: Submission of financial report analysis on BPBL. Dear

Madam,
With high reverence we want to state that we have finished our report on Berger Paints
Bangladesh Limited about their financial performance of the past two years. The report
helped us to gain knowledge on how BPBL is doing financially in Bangladeshi market
and highlight some vital points about their growth. We got the opportunity to do research
on many available sources on BPBL’s financial policies and on their annual reports. This
report is valuable and a necessity to complete our course FIN301.

In this report, all the team members contributed with the best they could do. We faced
some challenges in working as a team but due to everyone's collective efforts we
overcame them and tried to produce this report for you. It was a great opportunity given
to us to experience the vibe of the financial world, and we will like to take this platform
to thank you. To end, we would like you to kindly accept our report and to acknowledge
our devotion and efforts.

Thanking you in anticipation.

Executive Summary

Berger Paints Bangladesh limited is one of the leading paints company in our country. At
the time of foundation the company name was Jenson & Nicholson. Their corporate head-
office is situated in Uttara, Dhaka. BPBL is taking strides in fulfilling their vision to be the
most preferred brand in the industry ensuring consumer delight. Their mission is to
increase the turnover by 100 percent in every five years which seems very much
challenging and encouraging. Being a responsible corporate citizen, BPBL has been
contributing to several social causes to bring positive changes in the society.

Berger in Bangladesh has successfully been able to position themselves at the minds of
their targeted customers. They accelerated in bringing innovation in products for the
users to enable them a service of great quality and showing that they are very cautious
about customer’s demand and always tries to fulfill their requirements.

We had the opportunity to work with the Financial Reports of Berger Paints Bangladesh
Limited and prepare a financial analysis report. The report has been started with the basic
overview of BPBL then the discussion has moved to the main topic of “Financial
Performance Analysis of Berger Paints Bangladesh Limited.” The first section under this
topic contains five years financial data analysis of BPBL. After that the fundamental
ratios and market ratios are analyzed from year 2012 to 2013. Findings are the outcomes
of the analysis which includes both positive and negative factors. Later on,
recommendations have been provided to improve the areas where it is needed.

Objective of the Report

 Main Objective
To evaluate the financial performance of Berger Paints Bangladesh Limited based on
 treasury management procedures.
 Specific Objectives
 To understand the financial performance of BPBL on different areas such as
liquidity,
 Profitability,
 To assess the company’s effectiveness and weakness in these segments.
Vision
“To be the most preferred brand in the industry ensuring consumer delight”

Mission
“We shall increase our turnover by 100 percent in every five years. We shall remain
socially committed ethical company”

Financial Performance Analysisof Berger Paints Bangladesh

Limited
BPBL’s 2016 to 2018 Financial Data Taka in “000”

Particulars 2018 2017 2016

Turnover 8,796,778 7,611,213 6,321,274

Gross Profit 3,317,127 2,524,361 2,129,242

Profit Before Tax 1,228,511 1,022,343 894,799

Profit After Tax 860,939 752,790 721,163

Shareholder’s Equity 2,767,153 2,323,615 1,988,226

Total Assets 4,282,362 3,568,101 3,424,689

Total Current Assets 2,826,670 2,291,222 2,264,647

Total Current 1,382,275 1,146,112 1,333,642

Liabilities

Growth Rate of TO 15.6% 20.4% 15.3%

Growth Rate PAT 14.36% 4.38% 2.35%

Growth Rate of SE 19.08% 16.87% 18.03%

Table 1: Last Three Years Financial Data of BPBL

The table above indicates that changes occurred gradually during last five years in
Turnover, Profit before and after tax, Shareholders equity, Current assets and liabilities of
BPBL. Turnover has an increasing trend but the percentage fluctuates from 2009 to 2013
and in 2013 the percentage decreased by 4.8%. BPBL‟s mission is to increase turnover by
100% in every five year where the actual results are very far from that. (Annual Report,
 2009-2013)

Fundamental Ratio Analysis of BPBL

 Short-Term Solvency or Liquidity Ratios
The key concern of the liquidity ratios is the firm’s ability to meet the short-term
financial obligation without undue pressure. These ratios emphasize on the current assets
and current liabilities to quickly convert the assets to cash.
However, we will be focusing mainly on the financial data of BPBL of
2016 to 2018 in terms of our financial analysis.
Current Ratio
The current ratio compares a company’s liquid assets with short-term liabilities. That
means the ability of the company to pay the short term liabilities with the current assets
such as accounts receivables, cash etc. The higher the current ratio, the more liquid the
company is. The ideal current ratio is 2:1.

Current Ratio = (Current Assets / Current Liabilities) times

BPBL’s 2016 to 2018 Current Ratio Taka in “000”

Particulars 2016 2017 2018

Current Assets 5,405,802.00 5,466,737.00 5,596,682.00

Current Liabilities 2,891,590.00 2,916,422.00 2,744,985.00
Current Ratios 1.87 1.87 2.04

Table 2: Current Ratio

 Chart Title
2.05
2
1.95
1.9
1.85
1.8
1.75
Year-2016 Year-2017 Year-2018

Interpretation
BPBL’s current ratio was 2.04 times in 2018. Liquid assets increased 2018 but short term
liabilities went down in 2018 from 2017 may be because of reduction in accounts
payables and short term debts. Current ratio decreased in 2017 in comparison to 2018, as it
stood at 1.87:1. The current liabilities has increased from the previous year but as the
current assets experienced a little increase as the current liabilities, the impact on the
current ratio was negative. Current ratio decreased in 2016 in comparison to 2017, as it
stood also at 1.87:1. The impact on the current ratio was negative. And it was in 2018 that
BPBL reached the ideal current ratio of 2:1, which is regarded as desirable for a healthy
business.

Quick Ratio
A reliable test of liquidity is the quick ratio test that excludes inventory from current
asset. It considered the ability to use its quick assets to pay its current liabilities. This
approach can be acceptable since inventory of many companies cannot be quickly
converted into cash. The ideal quick ratio is 1:1.

Quick Ratio = ((Current Assets-Inventory) / Current Liabilities) times

BPBL’s 2016 to 2018 Quick Ratio Taka in “000

Particulars 2016 2017 2018

Current Asset 5,405,802.00 5,466,737.00 5,596,682.00
Inventory 1,513,733.00 2,075,005.00 2,393,316.00
Current Liabilities 2,891,590.00 2,916,422.00 2,744,985.00
Quick Ratio 1.35 1.16 1.17
Table 3: Quick Ratio

1.35

1.3

1.25

1.2

1.15

1.1

1.05
Year-2016 Year-2017 Year-2018

Chart 2: Quick Ratio

Interpretation
The ratio was 1.35:1 in 2016. However, in 2017 and 2018 BPBL‟s quick ratio
were almost close to the ideal quick ratio1:1, which indicates BPBL was not
highly dependent to pay their liabilities on inventory and they were efficient to
manage their cash.
 Long-Term Solvency or Financial Leverage Ratios

Long-term solvency ratio caroused to assess the firm’s long-term ability to meet the
long term debt obligations such as interest payments on debt, the final principal
payment on debt, and fixed obligations like lease payments.
 Financial Leverage Ratios:
Debt to Equity Ratio
The debt to equity ratio compares company's totalliabilitiest other total
shareholders' equity. This is same amusement to fhowmuchsuppliers, lender sand
credit or shave committed to the company against the shareholders have committed.
The standard debt to equity ratios is 1:1. The lower the ratio, lower the debt and
higher the equity of shareholders.

Debt to Equity Ratio = (Total Debt / Total Shareholders’ Equity) times

BPBL’s 2016 to 2018 debt to Equity Ratio Taka in “000”

Particulars 2016 2017 2018

Total Debt 2,186,313 2,916,422 2,744,985

Total Shareholder’s
Equity 4,322,816 5,785,887 6,588,251

Debt to Equity Ratio 0.51 0.5 0.42

Table 4: Debt to Equity Ratio

0.6

0.5

0.4

0.3

0.2

0.1

0
Year-2016 year-2017 year-2018

Chart 3: Debt to Equity Ratio

Interpretation
The table shows that the debt to equity ratio of BPBL had quite same from year 2016
to 2017 which are respectively 0.51 and 0.50 times. Both the debt and shareholder’s
equity went up in these years but there were great improvement in shareholder’s
equity compare to debt in year 2018. That means BPBL had been efficient in
financing its growth with its obligations in year 2018.
 Debt to Asset Ratio
Debt to asset ratio shows the proportion of the assets that are financed with short
term and long term debt rather than equity and the ideal ratio in percentage is 0.4 to
0.5 times. Long term debt can be deferred tax liabilities and short term debts are
trade and other payables, bank overdraft, provision for royalty etc. Lower the ratio,
lower the amount of debt and most of the financing are being covered by equity.

Debt to Asset Ratio = (Total Debt / Total Asset) times

BPBL‟s 2016 to 2018 Debt to Asset Ratio Taka in “000”

Particulars 2016 2017 2018

Total Debt 2,186,313 2,916,422 2,744,985

Total Asset 6,379,256 8,437,826 9,642,590

Total Debt to
0.34 0.35 0.28
Asset Ratio
Table 4: Debt to Asset Ratio

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Year-2016 Year-2017 Year-2018

Chart 4: Debt to Asset Ratio

Interpretation
Like every other company BPBL’s debt to asset ratio includes both long-term and short-
term debt. It also contains the company’s tangible assets and intangible assets. Property &
plants, inventories etc. are tangible assets and software, trademarks etc. are the intangible
assets of BPBL. From 2016 to 2018 the ratios were respectively 0.34, 0.35 and 0.28 times
which has a fluctuating trend due to continuous improvement in assets value and irregularity
in debt. The debt to asset ratio remained constant from 2016 to 2018. However, the debt to
asset ratio is close to the standard ratio.
 Debt to Capitalization Ratio
In addition to the two previous debt ratios, we may wish to compute the following ratio,
which deals with only the long term capitalization of the firm:
Debt to Capitalization Ratio = (Long-term Debt / Total capitalization)
times

Particulars 2016 2017 2018

Total long Debt 2,186,313 2,916,422 2,744,985
Total Capital 6,214,647 8,702,309 9,333,236

Debt to
Capitalization 0.35 0.34 0.29
Ratio
Table 5: Debt to Capitalization Ratio

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Year-2016 Year-2017 Year-2018

Chart 5: Debt to Capitalization Ratio

Interpretation
BPBL’s debt to asset ratio includes only long-term and debt. And Capitalization is
combination of debt and equity of the company. From 2016 to 2018 the ratios were
respectively 0.35, 0.34 and 0.29 times which has a fluctuating trend due to continuous
improvement in Capitalization value and irregularity in debt. The debt to Capitalization
ratio remained constant from 2016 to 2018. However, the debt to Capitalization ratio is close
to the standard ratio.

 Asset Management or Turnover Ratios

1 The turn over ratios describe how effectively a firm uses assets to generate sales
revenue. High asset turn over ratios is desirable since they mean that the company
is utilizing their assets strongly to produce sales. The higher the asset turnover
ratios, the more revenues the company can generate from the assets. On the other
hand, low asset turnover ratios mean assets of the company is not properly utilized.

InventoryTurnoverRatio
 Inventory turnover ratio measures how many times a company's inventory is sold
and replaced over a period. This ratio evaluates the liquidity of the firm's inventory.
It also helps to determine how sales can be increased through inventory control.
The standard inventory turnover ratio is 4:1. Generally, a low turnover ratio
involves poor sales therefore end up with excess inventory. On the contrary, a high
turnover ratio implies company is very strong in selling inventory or in effective
buying.

Inventory Turnover Ratio = (Sales / Inventory) times

BPBL’s 2012 to 2013 InventoryTurnover Ratio
Taka in “000”
Particulars 2016 2017 2018
Sales 14,963,300 14,622,448 16,483,497
Inventory 1,513,733 1,916,288 2,250,601
Inventory
Turnover 9.89 7.63 7.32
Ratio
Table 6: Inventory Turnover Ratio

10

0
Year-2016 Year-2017 Year-2018

Chart 6: Inventory Turnover Ratio

Interpretation
Furthermore, the turnover ratio was to 9.89,7.63 and 7.32 times in 2016,2017 and 2018 due
to effective sales of the inventory they bought. Over the last three years the inventory
turnover ratios were shifting from the standard ratio.
Accounts Receivable Turnover Ratio
Accounts receivable ratio is an activity ratio that measures how many times a firm can
turn account receivable into cash during a period .It measures how many times a
company can collect average account receivable during a year . Inefficient company’s
collection period is 30 days .The lower the amount of un collected cash, the higher this
ratio will be and if a company has more of the proceeds a waiting receipt ,the lower the
ratio will be.

Accounts Receivable Turnover Ratio = (Sales /Average Accounts Receivables) times

BPBL‟s 2016 to 2018 Accounts Receivable Turnover Ratio Taka in “000”
Particulars 2016 2017 2018
Sales 14,963,300 14,622,448 16,483,497
Average Accounts
Receivables 939,573 1,091,553 1,580,048

Accounts Receivable
15.93 13.40 10.43
Table7: Accounts Receivable Turnover Ratio

16
14
12
10
8
6
4
2
0
Year-2016 Year-2017 Year-2018

Chart 7: Accounts Receivable Turnover Ratio

Now,
Receivable Turnover in days is calculated as
Receivable Turnover in days= (Days in the year/Receivable turnover)days
Year-2016: (365/15.93)= 23 days
Year-2017: ( 365/13.40)= 27 days
Year-2018: (365/10.43)= 35 days
Interpretation
BPBLs account receivable turnover has changing trend year to year .In 2016 BPBLs account receivable
ratio was 23 days that means it was very efficient in collecting outstanding sales and reinvested the sale
proceeds .Collection period increased during 2017 to 2018 and the ratio respectively 27 and 35 days. It
might be happened because of the change in cash collection process that leads to an increase in average
accounts receivables every year .Yet, the collection period is below the standard ratio which is a positive
factor for the company.

Accounts Payable Turnover Ratio

Accounts payable turnover ratio measure the speed of any company to pay it
suppliers .The ideal accounts payable ratio is between 45 to 65 days .On the
contrary ,if the turnover ratio drops from one period to the next, this indicates that
the company is paying its suppliers more slowly which can badly affect the
company’s financial position.

Accounts Payable Turnover Ratio = (Purchases / Average Accounts Payable) times

BPBL‟s 2012 to 2013 Accounts Payable Turnover Ratio Taka in “000”
Particulars 2016 2017 2018
Purchases 8,944,570 10,611,181 12,482,679

Average Accounts
1,747,146 2,080,812 2,428,559
Payable
Accounts Payable
5.12 5.1 5.14
Turnover

Table 8: Accounts Payable Turnover Ratio

5.14
5.13
5.12
5.11
5.1
5.09
5.08
Year-2016 Year-2017 Year-2018

Chart 8: Accounts Payable Turnover Ratio

 Now,
Receivable Turnover in days is calculated as
Receivable Turnover in days= (Days in the year/Receivable turnover)days
Year-2016: (365/5.12)= 71 days
Year-2017: ( 365/5.10)= 72 days
Year-2018: (365/5.14)= 71 days

Interpretation
The ratio improved in 2016,2017 and 2018 which were respectively 71,72 and
71days.That may indicates BPBL were paying their suppliers few late timely and
they were taking days in 2016, 2017 and 2018 maybe because of delay in payments.

Inventory Turnover ratio

nventory turnover is a ratio showing how many times a company has sold and
replaced inventory during a given period. A company can then divide the days in the
period by the inventory turnover formula to calculate the days it takes to sell the
inventory on hand. Calculating inventory turnover can help businesses make better
decisions on pricing, manufacturing, marketing and purchasing new inventory. The
ideal Inventory Turnover ratio is between 10times.

Inventory Turnover Ratio = (Cost of goods sold/ Inventory) times

BPBL‟s 2012 to 2013 Accounts Payable Turnover Ratio Taka in “000”

Particulars 2016 2017 2018

Cost of goods sold 8,611,386 7,516,421 9,129,356

Inventory
1,513,733 2,075,005 2,393,316

Inventory
5.7 3.62 3.81
Turnover Ratio

Table 9: Inventory Turnover ratio

20
 6

0
Year-2016 Year-2017 Year-2018

Chart 9: Inventory Turnover ratio

Interpretation
The Inventory Turnover ratio is respectively 5.7, 3.62 and 3.81 in 2016,2017 and
2018.That may indicates BPBL were a company has sold and replaced inventory
during a given period. But in 2017 and 2018 Inventory turnover are very poor than
ideal ratio.

Total Asset Turnover Ratio:

Total assets turnover indicates income statement and balance sheet combination ratio.
Indicates the overall effectiveness of the firm in utilizing its assets to generate sales.
The median total turnover for the industrial ratio is 1.66. Less than ideal ratio is
regarded.

Total Asset Turnover Ratio = (Net sales/ Total assets) times

Particulars 2016 2017 2018

Net Sales 14,963,300 14,622,448 16,483,497
Assets
6,379,256 8,437,826 8,994,215

Asset Turnover
2.35 1.73 1.83
Ratio
Table 10: Total Asset Turnover ratio

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 2.5

1.5

0.5

0
Year-2016 Year-2017 Year-2018

Chart 10: Total Asset Turnover ratio

Interpretation
The Total Asset Turnover ratio is respectively 2.35, 1.73 and 1.83 in 2016,2017 and
2018.That may indicates BPBL were a company has the overall effectiveness of the
firm in utilizing its assets to generate sales.. But in 2018 Asset turnover are very high
than ideal ratio because of large sales than total asset. But in 2016 and 2017 the ratio
are quite similar to ideal ratio.

 Profitability Ratios

Profitability ratios evaluate a firm’s overall efficiency and performance.

Profitability ratios are of two types, one is margin and another is return. A higher
value Is desirable than a lower on bandit indicates company is making profit from
their operations.

Net Profit Margin

The net profit margin ratio directly indicates what percentage of sales is made up of
net income. This ratio also evaluates how well a company manages the

22
expenditures relative to the net sales. The standard ratio is 10% to 20%. Companies can
achieve higher ratios either by producing more incomes while keeping expenditures
constant or keep revenues constant and low erexpenditures.

Net Profit Ratio = (Net Profit / Sales)

BPBL‟s 2016 to 2018 Net profit Margin Taka in “000”

Particulars 2016 2017 2018

Net Income 1,708,289 1,809,192 1,669,928

Sales
14,963,300 14,622,448 16,483,497

Net profit Margin 11.42% 12.37% 10.13%

Table 10: Net Profit Margin

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
Year-2016 Year-2017 Year-2018

Chart 10: Net Profit Margin

Interpretation

The net profit margin of BPBL was 11.42%, 12.37% and 10.13% from 2016 to

23
2018 respectively. It rose by 1% in 2017 compare to 2016 may be because they minimize
their expenses and generated more revenues. Yet, the ratio decreased in 2018 Than 2017.
The reason of this fact either might be high selling and administrating expenses, high tax
rates and other operating expenses or low income from operations. BPBL had perfect net
income margin in all year compare to ideal or industrial ratio.

Profitability in Relation to Investment:

Return on Asset(ROA)
The return on assets ratio measures the net income produced by total
assets during a period. In Other words, ROA measures how efficiently
a company can manage their assets to generate incomes during a
period.

BPBL‟s 2016 to 2018 ROA Taka in “000”

Particulars 2016 2017 2018

Net profit After
1,708,289 1,809,192 1,669,928
Tax
Total Assets
6,379,256 8,437,826 8,994,215

Return on Assets 26.79% 21.44% 18.57%

Table 11: ROA

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
Year-2016 Year-2017 Year-2018

Chart 11: ROA

Interpretation

From year 2016 to 2018 BPBL‟s ROA percentage were

26.79%,21.44% and 18.57% respectively which remained almost 24
constant. That implies BPBL earned Tk.0.267,0.214 and 0.185 for
each to assets from 2016 to 2018. Berger is an asset-in sensitive
company and needs expensive plants and machineries to generate
revenues. Thus the high return on assets in suggests BPBL was more
care alto investing assets and use their assets efficiently. BPBL‟s
asset management should be revised the policies and procedures to
avoid unfavorable situation in upcoming days otherwise it can affect
the profitability of the company.
Return on Equity (ROE)
The ROE ratio suggest show profitable accompany is in comparison to
the net income with the shareholders 'equity. In otherworld, ROE
measures the ability of a firm to generate profits from the
shareholder’s investment in the company .The higher the ratio is ,them
or eefficientthe company is in utilizing the equity and the better return
they can provide to the investors.

Return on Equity = (Net Income /Total Shareholders’ Equity)

BPBL‟s 2016 to 2018 ROE Taka in “000”
Particulars 2016 2017 2018
Net income 1,708,289 1,809,192 1,669,928
Total
Shareholder’s
Equity 4,322,816 5,785,887 6,588,251

Return on Equity 39.52% 31.27% 25.35%

Table 12: ROE

0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Year-2016 Year-2017 Year-2018

Chart 12: ROE

25
Interpretation
BPBL‟s ROE indicates that from 2016 to 2018 the ratios were
39.52%,31.27% and 25.35% respectively. The ROE ratios showing a
decreasing trend which may not satisfactory for the investors to invest in
BPBL since they want high return. As a result they will reconsider to invest
in BPBL even they might choose another company. The major cause of this
reduction may be due to the increase in shareholder’s equity compare to the
net income.

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