Financial Statement Analysis

Of
Premiere Cement Mills Limited
Term Paper on “Financial Statement Analysis of Premier Cement Mills
Limited”

Submitted to
Dr. H. M. Mosarof Hossain
Faculty of MBA Program
North South University

Submitted by
Group: 3

Name ID
Tamhidul Islam Nafi 132 1400 660
Nusrat Jahan 141 1615 060
Armina Hossain 143 0778 660
Syeda Shotorupa Zafar 151 2772 660
Istiaque Ahmed 133 0973 060

MBA- BUS 635: Managerial Finance

Section: 4, North South University

Date of Submission: 30 November 2015

Letter of Transmittal:

30 November 2015

Professor Dr. H. M. Mosarof Hossain

Course Instructor
School of Business
North South University

Subject: Regarding submission of term paper on Financial Statement Analysis of Premier

Cement Mills Limited.

Dear Sir,

We want to thank you for giving us such opportunity to submit the term paper on “Financial
Statement Analysis of Premier Cement Mills Limited” for the course Managerial Finance
(BUS- 635), which had been a great experience for us to work with such a real life issue. We
tried utmost to make and let it look like a professional one. Any shortcomings are expected to
have a kind view for our encouragement. Thank you for your sincere & honest try to let us make
easy and get familiar with the terms and facts of this analysis to help us make the paper a
successful one.

Our efforts will be valued; if this report serves the purpose for what it’s been assigned.

Thank You.

Sincerely,

Name ID Signature
Tamhid Ul Islam Nafi 132 1400 660
Istiaque Ahmed 133 0973 060
Nusrat Jahan 141 1615 060
Armina Hossain 143 0778 660
Syeda Shotorupa Zafar 151 2772 660

i
Acknowledgement:

The whole report was based on the “Financial Statement Analysis of Premier Cement Mills
Limited” in the light of the course Managerial Finance (BUS- 635), results from considerable
intellectual and moral support given by our honorable course teacher, Professor Dr. H. M.
Mosarof Hossains, School of Business in North South University. Over the last three months,
he has been our guide from whom we got the inspiration and guidance to learn “Managerial
Finance”. We strongly believe works like this one will surely help us to develop & make us
better adapted as well as capable to cope with the issues & practical exposures in this field as
well as to the whole of the Legislative tools that are being extensively exploited in today’s world.

Also, we would like to remember the almighty Allah for blessing us with the strength, ability and
patience to do this task.

Finally, we want to thanks all our team members and each other, to share personal expertise,
struggled with difficulties, passed away many awaked night to design the report and to collect
the information.
Executive Summary:

Premier Cement Mills Limited is one of the most innovative cement manufacturers in
Bangladesh. It manufactures products with the best quality raw materials and technical
excellence for ensuring dependability and premium quality.

Premier Cement Mills Limited incorporated in Bangladesh on 14 October 2001 as a Private

Limited Company, 700 employees in operation at home and abroad- Bangladesh, India,
Myanmar, etc., annual production capacity of 2.4 million tons (8,000 tons per day). Premier
Cement Mills Limited enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

Inventory Turnover Ratio measures how many times average inventory is "turned" or sold during
a period. In 2013 Inventory Turnover in Premier Cement Mills is highest 7.94 times. And in
2015 it is 5.13 times. It is lower compare to other years. It indicates that sales performance of
2015 is not so good compare to other years.

In 2014 Premier cement limited maintained almost 18.07% net profit over shareholders equity it
ended up in 7.72% net profit over common equity in 2012. The increase rate of shareholders
equity and net profit was quite alike.

In 2012 net sales is increased than the previous year but gross profit is decreased. For that
reason, Gross profit margin is decreased 6.15%. In 2013 and 2014 Gross Profit Margin is almost
at same percentage. In 2015, net sales are increased than the previous year but profit margin is
decreased. As a result, the gross profit margin is decreased 1.9%.

iii
Table of Contents
Letter of Transmittal:........................................................................................................................i
Acknowledgement:..........................................................................................................................ii
Executive Summary........................................................................................................................iii
Chapter 1- Introduction....................................................................................................................1
1.1. Background of the Report:................................................................................................2
1.2. Objectives of the Report:..................................................................................................2
1.3. Methodology of the Report:..............................................................................................2
1.4. Scope of the Report:..........................................................................................................3
1.5. Limitations:.......................................................................................................................3
Chapter 2: Organizational Profile....................................................................................................4
2.1. Premier Cement Mills Limited:............................................................................................5
2.2. Mission of Premier Cement Mills Limited:..........................................................................5
2.3. Vision of Premier Cement Mills Limited:............................................................................5
2.3. Core Values of Premier Cement Mills Limited:...................................................................5
Chapter 3- Literature Review..........................................................................................................6
3.1. Financial Statement Analysis................................................................................................7
3.2. Techniques of Financial Statement Analysis........................................................................7
3.3. Ratio Analysis.......................................................................................................................7
3.4. Liquidity Ratio:.....................................................................................................................8
3.4.1. Current Ratio:.................................................................................................................8
3.4.2. Quick Ratio:...................................................................................................................8
3.5. Asset Management Ratio:.....................................................................................................9
3.5.1. Inventory Turnover Ratio:..............................................................................................9
3.5.2. Account Receivable Turnover Ratio:.............................................................................9
3.5.3. Total Assets Turnover Ratio:.......................................................................................10
3.5.4. Fixed Asset Turnover Ratio:........................................................................................10
3.6. Debt Management Ratio/ Leverage Ratio:..........................................................................10
3.6.1. Debt Ratio: 10
3.6.2. Debt Equity Ratio:........................................................................................................11
3.6.3. Equity Multiplier..........................................................................................................11
 3.7. Profitability Ratio:...............................................................................................................11
3.7.1. Gross Profit Margin:.....................................................................................................11
3.7.2. Net Profit Margin:........................................................................................................12
3.7.3. Return on Assets (ROA):.............................................................................................12
3.7.4. Return on Equity (ROE):..............................................................................................13
3.7.5. Earnings per Share (EPS):............................................................................................13
3.7.6. Dividend Payout Ratio:................................................................................................13
3.7.7. Retention Ratio:............................................................................................................14
3.7.8. Operating Expense Ratio:.............................................................................................14
3.7.9. Operating Profit Margin Ratio:....................................................................................14
3.7.10. Times Interest Earned:................................................................................................14
3.8. Market Value Ratio:............................................................................................................15
3.8.1. Book Value per Share...................................................................................................15
3.8.2. Market Value per Share................................................................................................15
3.8.3. Price/Earnings Ratio (P/E):..........................................................................................15
Chapter 4- Ratio Analysis..............................................................................................................16
4.1. Liquidity Ratio:...................................................................................................................17
4.1.1. Current Ratio................................................................................................................17
4.1. 2.Quick Ratio...................................................................................................................18
4.2. Asset Management Ratio....................................................................................................19
4. 2.1. Inventory Turnover Ratio............................................................................................19
4.2.2. Average Collection Period:..........................................................................................20
4.2.3. Accounts Receivable Turnover Ratio:..........................................................................21
4.2.4. Fixed Asset Turnover Ratio:........................................................................................22
4.2.4. Total Asset Turnover Ratio..........................................................................................23
4.3. Debt Management Ratio.....................................................................................................24
4.3.1. Debt ratio (debt to assets ratio).....................................................................................24
4.3.2. Debt - Equity Ratio.......................................................................................................25
4.3.3. Equity Multiplier..........................................................................................................26
4.4. Profitability Ratio:...............................................................................................................27
4.4.1. Return on Asset............................................................................................................27
 4.4.2. Return on Equity..........................................................................................................28
4.4.3. Operating Expense Ratio:.............................................................................................29
4.4.4. Operating Profit Margin Ratio:....................................................................................30
4.4.5. Times Interest Earned Ratio:........................................................................................31
4.4. 6. Gross Profit Margin.....................................................................................................32
4.4.7. Net Profit Margin.........................................................................................................33
4.4.8. Earnings per Share (EPS).............................................................................................34
4.5. Market Value Ratio:............................................................................................................35
4.5.1. Book Value per Share...................................................................................................35
4.5.2. Market value to Book Ratio:........................................................................................36
Chapter 5: Conclusion and Recommendations..............................................................................37
5.1. Conclusion:.........................................................................................................................38
5.2. Recommendations:..............................................................................................................39
Chapter 6- References....................................................................................................................40
References from Book:..............................................................................................................41
References from Internet............................................................................................................41
Chapter 1- Introduction

Financial Statement Analysis of Premier Cement Mills Limited Page 1

1.1. Background of the Report:

This term paper has been prepared as a part of the Managerial Finance course of North South
University. The Term Paper titled, “Financial Statement Analysis of Premier Cement Mills
Limited” is being assigned by our course instructor. We have collected all the required
information from the annual report of Premier Cement Mills Limited for the year 2015, 2014,
2013, 2012 & 2011. We have tried our best to combine and relate the information with the
concept of the report, but due to time limitation and restricted access to information there still
remains some limitations.

1.2. Objectives of the Report:

 The main objective of this report is to analyze the financial statements of Premier Cement
Mills Limited within the time period of 2011 to 2015.

Others:

 To identify the future growth and current position of Premier Cement Mills Limited
 To Provide recommendations to improve Premier Cement Mills Limited’s performance

1.3. Methodology of the Report:

Four sources are highly used to collect the data for calculating the ratios:

 Internet.

 Text Books

 Lecture Sheets and Slides

 Annual Report of Premier Cement Mills Limited

1.4. Scope of the Report:

This report is being conducted to know the attitude toward the companies finance and financial
conditions from different point of view.
But, Premier Cement Still Mills Limited is a Large Organization. So, it is unattainable to work
on the whole financial condition from the beginning of this organization at a time. As a result, we
have chosen only 2011 to 2015 annual reports to do this analysis.

1.5. Limitations:

 Restricted access in Internet

 Difficult to ensure the accuracy of the entire Term Paper.

 It was hard to identify the exact reason of the variations.

 The time frame for this Term Paper was restricted to a single semester. If it was allowed

more time, surely the analysis will be more accurate and viable.
Chapter 2: Organizational Profile
2.1. Premier Cement Mills Limited:

Premier Cement Mills Limited is one of the most innovative cement

manufacturers in Bangladesh. It manufactures products with the best quality raw
materials and technical excellence for ensuring dependability and premium
quality.

 Incorporated in Bangladesh on 14 October 2001 as a Private Limited Company.

 Start commercial production on 12th March 2004.
 First Export of cement on 26th April 2008.
 Converted to Public Limited Company on 16th April 2010.
 700 employees in operation at home and abroad- Bangladesh, India, Myanmar, etc.
 Nature of Business: Manufacturing and Marketing.
 Annual production capacity of 2.4 million tons (8,000 tons per day).
 Enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

2.2. Mission of Premier Cement Mills Limited:

Work towards the development of the society through sustainable growth and excellence in
performance

2.3. Vision of Premier Cement Mills Limited:

To become a Leader in the Cement industry by satisfying our existing as well as potential
customers through production excellence, competitive Pricing and also by creating value for the
stakeholder.

2.3. Core Values of Premier Cement Mills Limited:

The core values of Premier Cement Mills Limited lies on ensuring highest standards of Ethics in
business integrity and process for the best interests of all our stakeholders - not just the
customers - But also the shareowners, workforce and external parties.
Chapter 3- Literature Review
3.1. Financial Statement Analysis:

Financial Statement Analysis is defined as the process of identifying financial strengths and
weaknesses of the firm by properly establishing relationship between the items of the balance
sheet and the profit and loss account.

The process of reviewing and evaluating a company’s financial statements (such as the balance
sheet or profit and loss statement), thereby gaining an understanding of the financial health of the
company and enabling more effective decision making.

3.2. Techniques of Financial Statement Analysis:

1. Common-size or vertical analysis

2. Horizontal analysis
3. Trend percentage analysis
4. Ratio analysis
5. Statement in changes in financial position (Cash flow statement and funds flow
statement)

This report is based on Ratio Analysis. So, only Ratio Analysis is described broadly in the
literature review.

3.3. Ratio Analysis:

Single most important technique of financial analysis in which, quantities are converted into
ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or
different industries. Ratio analysis determines trends and exposes strengths or weaknesses of a
firm.

(http://www.businessdictionary.com/definition/ratio-analysis.html)
3.4. Liquidity Ratio:

Ratios that show, the relationship of a firm’s cash and other current assets to its current liabilities
is called liquidity ratio.

A class of financial metrics that is used to determine a company's ability to pay off its short-
terms debts obligations is liquidity ratio. Generally, higher the value of the ratio, larger
the margin of safety, that the company may cover its short-term debts.

(http://www.investopedia.com/terms/l/liquidityratios.asp)

3.4.1.Current Ratio:

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-
term obligations. The current ratio is called “current” because, unlike some other liquidity ratios,
it includes all current assets and liabilities. The current ratio is also known as the working
capital ratio.

(http://www.investopedia.com/terms/c/currentratio.asp)

Current Ratio is calculated by dividing the current assets of a company by current liability

(Besley and Brigham, 2012-2013)

3.4.2.Quick Ratio:

The quick ratio is a measure of how well a company can meet its short-term financial liabilities.
It’s also known as the acid-test ratio.

(http://www.investinganswers.com/financial-dictionary/ratio-analysis/quick-ratio-924)
 Quick (Acid Test) Ratio is calculated by subtracting the inventory from current assets then
dividing by the current liabilities.

(Besley and Brigham, 2012-2013)

3.5. Asset Management Ratio:

A set of ratios that measures how effectively a firm is managing its assets is called asset
management ratio.

3.5.1.Inventory Turnover Ratio:

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

(http://www.investopedia.com/terms/i/inventoryturnover.asp)

Inventory Turnover Ratio is calculated by dividing the cost of goods sold by the inventory.

(Besley and Brigham, 2012-2013)

3.5.2.Account Receivable Turnover Ratio:

Accounts receivable turnover is the number of times per year that a business collects its average
accounts receivable. The ratio is intended to evaluate the ability of a company to efficiently issue
credit to its customers and collect funds from them in a timely manner.

(http://www.accountingtools.com/accounts-receivable-turnover)
3.5.3.Total Assets Turnover Ratio:

Total Assets Turnover Ratio measures the turnover of all of the firm’s assets.

Fixed Asset Turnover Ratio is Calculated by dividing the sales by total assets.

(Besley and Brigham, 2012-2013)

3.5.4.Fixed Asset Turnover Ratio:

Fixed Asset Turnover Ratio measures how effectively the firm uses its plant and equipment to
help generate sales.

It is calculated by dividing the sales by net fixed assets.

(Besley and Brigham, 2012-2013)

3.6. Debt Management Ratio/ Leverage Ratio:

The Debt Management Ratio/ Leverage Ratio measures how much of a company’s operation
comes from debt instead of other forms of financing like stock and personal savings.

(http://financial-dictionary.thefreedictionary.com/debt+management+ratio)

3.6.1.Debt Ratio:

The Debt Ratio measures the percentage of the firm’s assets financed by creditors (Borrowing).

Debt Ratio is Calculated by dividing the total liabilities by total assets.

(Besley and Brigham, 2012-2013)

3.6.2.Debt Equity Ratio:

Debt Equity Ratio compares a company's total liabilities to its total shareholders' equity. This is
a measurement of how much suppliers, lenders, creditors and obligors have committed to the
company versus what the shareholders have committed.

(http://www.investopedia.com/university/ratios/debt/ratio3.asp?no_header_alt=true)

Debt Equity Ratio is Calculated by dividing a company’s total liabilities by its stockholders' equity.

3.6.3.Equity Multiplier:

Equity Multiplier is the ratio of a company’s total assets to its stockholder’s equity. The
equity multiplier is a measurement of a company’s financial leverage. Companies finance the
purchase of assets either through equity or debt, so a high equity multiplier indicates that a larger
portion of asset financing is being done through debt.

(http://www.investopedia.com/terms/e/equitymultiplier.asp)

3.7. Profitability Ratio:

Profitability Ratio shows the combined effects of liquidity management, asset management, and
debt management on operating results.

(Besley and Brigham, 2012-2013)

3.7.1.Gross Profit Margin:

Gross profit margin is a profitability ratio that measures how much revenue from sales is left
over after paying cost of goods sold (COGS).
(http://www.investinganswers.com/financial-dictionary/ratio-analysis/gross-profit-margin-2076)

3.7.2.Net Profit Margin:

Net profit margin is the percentage of revenue remaining after all operating expenses,
interest, taxes and preferred stock dividends (but not common stock dividends) have been
deducted from a company's total revenue.

(http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/net-profit-
margin-2233)

Net Profit Margin is Calculated by dividing the net profit by the sales or total revenue.

(Besley and Brigham, 2012-2013)

3.7.3.Return on Assets (ROA):

ROA gives an idea as to how efficient management is at using its assets to generate earnings.

(http://www.investopedia.com/terms/r/returnonassets.asp)

ROA is calculated by dividing the net income by the total asset.

(Besley and Brigham, 2012-2013)

3.7.4.Return on Equity (ROE):

The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by enlightening how much profit a company generates with
the money shareholders have invested.

(http://www.investopedia.com/terms/r/returnonequity.asp)

ROE is calculated by dividing the net income available to common stockholders by the common
equity,

(Besley and Brigham, 2012-2013)

3.7.5.Earnings per Share (EPS):

EPS is the portion of a company's profit allocated to each outstanding share of stock.
Earnings per share serve as an indicator of a company's profitability. It tells an investor how
much of the company's profit belongs to each share of stock.

(http://www.investopedia.com/terms/e/eps.asp)

The equation is, EPS=Net income/ profit available to common stockholders divided by Number
of common shares outstanding.

3.7.6.Dividend Payout Ratio:

The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during the year. In other words, this ratio shows the portion
of profits the company decides to keep funding operations and the portion of profits that is given
to its shareholders.

(http://www.myaccountingcourse.com/financial-ratios/dividend-payout-ratio)
3.7.7.Retention Ratio:

Percentage of the earnings of a firm that are not paid out to stockholders (shareholders)

as dividends but are either reinvested in the firm or are kept as reserve for specified purposes. It

is the opposite of the payout ratio.

(http://www.businessdictionary.com/definition/retention-ratio.html)

3.7.8.Operating Expense Ratio:

An Operating Expense is a category of expenditure that a business incurs as a result of

performing its normal business operations.

(http://www.investopedia.com/terms/o/operating_expense.asp)

3.7.9.Operating Profit Margin Ratio:

The operating profit margin is a type of profitability ratio known as a margin ratio. Operating
income is often called earnings before income and taxes or EBIT.

(http://bizfinance.about.com/od/financialratios/f/Operating_Profit_Margin.htm)

3.7.10. Times Interest Earned:

The times interest earned ratio, sometimes called the interest coverage ratio, is a coverage ratio
that measures the proportionate amount of income that can be used to cover interest expenses in
the future. It measures a firm's ability to make interest and debt service payments.

(http://www.myaccountingcourse.com/financial-ratios/times-interest-earned-ratio)
3.8. Market Value Ratio:

Market Value Ratios relate the firm’s stock price to its earnings and book value per share. It
gives the management an identification of what investors think of the company’s future
prospects based on its past performance.

(Besley and Brigham, 2012-2013)

3.8.1.Book Value per Share:

Book value per share is a financial measure that represents a per share assessment of the
minimum value of a company's equity. More specifically, this value is determined by relating the
original value of a firm's common stock adjusted for any outflow (dividends and stock buybacks)
and inflow (retained earnings) modifiers to the amount of shares outstanding.

(http://www.investopedia.com/terms/b/bvps.asp)

3.8.2. Market Value per Share:

The market value per share or fair market value of a stock is the price that a stock can be readily
bought or sold in the current market place.

(http://www.myaccountingcourse.com/accounting-dictionary/market-value-per-share)

3.8.3.Price/Earnings Ratio (P/E):

P/E is a company's share price to its per-share earnings. The Price-to-Earnings Ratio or P/E ratio
is a ratio for valuing a company that measures its current share price relative to its per-share
earnings. (http://www.investopedia.com/terms/p/price-earningsratio.asp)
Chapter 4- Ratio Analysis
4.1. Liquidity Ratio:

4.1.1. Current Ratio

Year Current Current Current Ratio

Asset(million) Liability(million) (Times)
2011 1903.99 1944.89 0.98
2012 2202.56 3217.02 0.68
2013 3189.36 4273.97 0.75
2014 3858.36 5041.16 0.77
2015 4159.51 4802.83 0.87

Current Ratio
1.2
0.98
1 0.87
0.75 0.77
0.8 0.68
0.6
Current Ratio
0.4

0.2

0
2011 2012 2013 2014 2015

Interpretations:
Current ratio for premiere cement ltd was almost same in 2012, 2013 and 2014. It was little
higher in 2011. Only in 2014 current asset is comparatively higher than current liability.
However from 2011 to 2015 current asset is lower than current liability.
4.1.2.Quick Ratio

Year Current Current Current asset- Quick

Asset Liability(million) inventory(million) Ratio
(million) (Times)
2011 1903.99 1944.89 1214.58 0.62
2012 2202.56 3217.02 1665.94 0.52
2013 3189.36 4273.97 2399.77 0.56
2014 3858.36 5041.16 2576.1 0.51
2015 4159.51 4802.83 2855.62 0.59

Quick Ratio
0.7
0.62
0.6 0.59
0.56
0.5 0.52 0.51
0.4
0.3
0.2
0.1 Quick Ratio
0

20112012201320142015

Interpretations:

In 2010 Premiere Cement Ltd had quick ratio is 0.78 which is highest. Gradually from 2011 their
quick ratio had been decreased. The industry average being show that Premiere Cement Ltd. is
facing difficulties to deal with the liquid assets without the inventories against the current
liabilities.
4.2. Asset Management Ratio

4. 2.1. Inventory Turnover Ratio

Year Cost of Goods Inventory(million) Inventory

Sold(million) Turnover
Ratio(Times)
2011 4260.55 689.41 6.18
2012 3289.54 536.63 6.13
2013 6269.42 789.60 7.94
2014 7732.03 1282.26 6.03
2015 6910.62 1303.89 5.3

Inventory Turnover Ratio

9 7.94
8
7
6 6.18 6.13 6.03
5 5.3
4
3 Inventory Turnover Ratio
2
1
0

20112012201320142015

Interpretations:

Inventory Turnover Ratio measures how many times average inventory is "turned" or sold during
a period. In 2013 Inventory Turnover in Premier Cement Mills is highest 7.94 times. And in
2015 it is 5.13 times. It is lower compare to other year. Low inventory turnover ratio is a signal
of inefficiency of sales of inventory. Means, sales performance of 2015 is not so good compare
to other years.
4.2.2. Average Collection Period:

Account Credit Sales Average Collection

Year Receivable*365 Period (days)

2011 178704.00 3425.2 52

2012 243418.5 4288.17 57
2013 386180.95 6411.66 60
2014 482606.65 7536.60 64
2015 507674.85 8094.98 63

Average Collection Period

70 64 63
57 60
60 52
50
40
30 Average Collection Period
20
10
0

20112012201320142015

Interpretations:

Average collection period of Account Receivable for the last 5 years was 59.20 days within 365
day, it is reasonable. Gradually collection period is increasing. In 2011 it was only 52 days, but
in 2014, it takes maximum 64 day, in 2015 it is again decreasing.
4.2.3. Accounts Receivable Turnover Ratio:

Credit Account Account Receivable Ratio

Sales Receivable (Times)
2011 3427.2 489.60 7.00
2012 4288.17 666.90 6.43
2013 6411.66 1058.03 6.06
2014 7536.60 1322.21 5.70
2015 8094.98 1390.89 5.82

Account Receivable Turnover Ratio

8
7
7 6.43
6 6.06 5.82
5.7
5
4
3 Account Receivable Turnover Ratio
2
1
0

20112012201320142015

Interpretations:

The graph shows that, In 2011 Account Receivable Turnover is 7 times, In 2012 in is decreased
by 6.43 times, In 2013 it is decreased again and the ratio is 6.06. After that in 2015 and 2014 it
is decreased all over again and the ratio is 5.82 times and 5.7 times. That means from 2011 to
2015 Accounts Receivable Turnover Ratio is decreased.
Whether the accounts receivable turnover ratio is good or bad depends on the company's past
ratios. So, its clear from the graph that, Accounts Receivable Turnover of Premier Cement Mills
Limited is good as it is increased in 2015 a little bit.
4.2.4. Fixed Asset Turnover Ratio:

Year Net Sales Fixed Assets Fixed Asset Turnover

Ratio (Times)

2011 3428.53 3428.53 1.54

2012 4288.14 4288.14 0.97
2013 6415.96 6415.96 1.21
2014 7538.86 7538.86 1.27
2015 8102.94 8102.94 1.37

Fixed Asset Turnover Ratio

2
1.54
1.5 1.37
1.21 1.27
0.97
1
Fixed Asset Turnover Ratio

0.5

0
2011 2012 2013 2014 2015

Interpretations:

The graph clearly indicates that, Fixed Asset Turnover Ratio is around 1.54 in 2011 and it goes
down to .97 in 2012 and gradually it is increasing from 2013 to 2015. In 2015 Fixed Asset
Turnover Ratio is around 1.37, almost closer to Fixed Asset Turnover Ratio of 2011.
4.2.4. Total Asset Turnover Ratio

Year Net Sales Total Asset Total Asset Turnover

Ratio(Times)
2011 3426.19 4127.94 .83
2012 4291.34 6602.06 .65
2013 6457.13 8496.23 .76
2014 7548.63 9803.42 .77
2015 807.15 10089.33 .08

Total Asset Turnover Ratio

0.9 0.83
0.8 0.76 0.77
0.7 0.65
0.6
0.5
0.4
0.3 Total Asset Turnover Ratio
0.2
0.1
0.08
0

20112012201320142015

Interpretations:

The graph clearly indicates that, Total Asset Turnover Ratio is around .83 in 2011 and it goes
down to .08 in 2015 and the lower the total asset turnover ratio as compared to historical data for
the firm and industry data, it is more slow-moving the firm's sales. This may indicate a problem
with one or more of the asset categories composing total assets - inventory, receivables, or fixed
assets.
4.3. Debt Management Ratio

4.3.1. Debt ratio (debt to assets ratio)

Year Total asset Total debt (million) Debt Ratio (%)

(million)
2011 4127.95 2080.48 50
2012 6602.06 4343.59 66
2013 8496.23 5278.25 62
2014 9803.42 6498.14 66
2015 10089.33 6691.48 66

Debt Ratio
70% 66%
62% 66% 66%
60%
50%
50%
40%
30%
20%
10% Debt Ratio
0%

20112012
2013
2014
2015

Interpretations:
Total asset and total debt needed to calculate debt ratio. It was almost same in year 2012 to 2015.
But in 2011 debt ratio was a bit less compare to other year.
4.3.2. Debt - Equity Ratio

Year Net equity Total debt Debt-equity ratio (times)

(million) (million)
2011 2039.67 2080.48 1.02
2012 2262.29 4343.59 1.92
2013 3218.45 5278.25 1.64
2014 3298.55 6498.14 1.97
2015 3397.84 6691.48 1.97

Debt Equity Ratio

2.5

2 1.92 1.97 1.97

1.64
1.5
1.02 Debt Equity Ratio
1

0.5

0
2011 2012 2013 2014 2015

Interpretations:
Debt equity ratio was higher and same in 2014 and 2015. Net equity and total debt needed to
calculate debt equity ratio. In 2011premier Cement ltd had debt ratio was 1.02. In 2012 to 2015
the debt went up a bit as we have seen in the previous ratio.
4.3.3. Equity Multiplier:

Year Total Asset Total Equity Equity Multiplier Ratio

(Times)

2011 4127.94 2047.46 2.02

2012 6602.06 2258.47 2.92
2013 8496.23 3217.97 2.64
2014 9803.42 3305.27 2.96
2015 10089.33 3397.84 2.97

Equity Multiplier Ratio

2.92 2.96 2.97
3 2.64
2.5 2.02
2
1.5
1 Equity Multiplier Ratio
0.5
0

20112012201320142015

Interpretations:

The graph clearly indicates that, Equity Multiplier Ratio is lower 2.02 in 2011 and highest 2.97
in 2015. It indicates that Equity Multiplier Ratios are in a up and down situation. Equity
Multiplier Ratio of Premier Cement Mills Limited is good as it is increased in 2015 a little bit.
4.4. Profitability Ratio:

4.4.1. Return on Asset

Year Net income(million) Total asset(million) Return on Asset

(%)
2011 326.52 4127.94 7.91
2012 174.29 6602.06 2.64
2013 499.57 8496.23 5.88
2014 508.79 9803.42 5.19
2015 408.62 10089.33 4.05

Return on Asset
9.00%
8.00%
7.91%
7.00%
6.00% 5.88%
5.00% 5.19%
4.00% 4.05%
3.00% Return on Asset
2.00% 2.64%
1.00%
0.00%

20112012201320142015

Interpretations:
Return on asset was almost same in 2013 and 2014. It is higher in 2011 and lower in 2012. The
only common rule is that the higher return on assets is the better, because the company is earning
more money on its assets. Here, compare to 2014 to 2015 it decreases 5.19 to 4.05 so it indicates
inefficient use of companies’ asset
4.4.2. Return on Equity

Year Net income Stock holder equity Return on Equity

(million) (million) (%)
2011 326.29 2103.74 15.51
2012 174.29 2257.64 7.72
2013 499.57 3134.07 15.94
2014 508.79 2815.66 18.07
2015 408.62 3396.67 12.03

Return on Equity
20.00% 18.07%
18.00% 15.94%
16.00% 15.51%
14.00% 12.03%
12.00%
10.00%
8.00% 7.72% Return on Equity
6.00%
4.00%
2.00%
0.00%

20112012201320142015

Interpretations:

Return on equity shows all positive figures.Net profit or loss and net equity are needed to
calculate return on equity. From the above figure we see that, in 2014 Premier cement limited
maintained almost 18.07% net profit over shareholders equity it ended up in 7.72% net profit
over common equity in 2012. The increase rate of shareholders equity and net profit was quite
alike.
4.4.3. Operating Expense Ratio:

Year Operating Net Sales Operating Expense ratio

Expense(Million) (%)
2011 137.55 3428.53 4.013
2012 202.77 4288.14 4.73
2013 301.45 6415.96 4.698
2014 374.55 7538.86 4.97
2015 442.85 8102.94 5.47

Operating Expense Ratio

6.00% 5.47%
4.73%4.70% 4.97%
5.00%
4.01%
4.00%
3.00%
2.00% Operating Expense Ratio
1.00%
0.00%

2011 2012 2013 2014 2015

Interpretations:
The graph clearly indicates that, Operating Expense Ratio is lower 4.01% in 2011 and highest
5.47% in 2015. It indicates that Operating Expense Ratios are increasing order. Operating
Expense Ratio of Premier Cement Mills Limited is increasing as well as sales is increasing, as a
result profit is maximizing.
4.4.4. Operating Profit Margin Ratio:

Year Operating Net Sales Operating Profit Margin

Expense(Million) Ratio (%)
2011 137.55 3428.53 4.013
2012 202.77 4288.14 4.73
2013 301.45 6415.96 4.698
2014 374.55 7538.86 4.97
2015 442.85 8102.94 5.47

Operating Profit Margin Ratio

6 5.47
4.97
5 4.73 4.698
4.013
4

3 Operating Profit Margin Ratio

2

0
2011 2012 2013 2014 2015

Interpretations:
The graph clearly indicates that, Operating Profit Margin Ratio is lower 4.013% in 2011 and
highest 5.47% in 2015. It indicates that Operating Profit Margin Ratios are increasing order. As
Operating Expense Ratio of Premier Cement Mills Limited is increasing, it creates impact on
Operating Profit Margin Ratio. As a result profit is maximizing.
4.4.5. Times Interest Earned Ratio:

Operating Interest Times Interest Earned

Year Profit(Million) Expense Ratio (Times)

2011 511.70 107.23 4.77

2012 482.84 142.33 3.39
2013 1125.99 299.04 3.77
2014 1106.10 386.62 2.86
2015 908.22 453.19 2.00

Times Interest Earned Ratio

6
4.77
5

4 3.77
3.39
2.86
3
Times Interest Earned Ratio
2
2

0
2011 2012 2013 2014 2015

Interpretations:
The graph clearly indicates that, Times Interest Earned Ratio is lower 2.00 in 2015 and highest
4.77 in 2011. It indicates that Times Interest Earned Ratios are decreasing order. Gradually from
2011 to 2015 it is decreasing, So, it’s clear from the graph that, Times Interest Earned Ratio of
Premier Cement Mills Limited is good as it is decreased in 2015 a little bit.
4.4.6. Gross Profit Margin

Year Gross Net Sales Gross Profit Margin (%)

Profit
2011 635.65 3428.53 18.54
2012 531.30 4288.14 12.39
2013 1153.59 6415.96 17.98
2014 1295.93 7538.86 17.19
2015 1238.94 8102.94 15.29

Gross Profit Margin

20.00% 18.54% 17.98%
18.00% 17.19%
16.00% 15.29%
14.00%
12.39%
12.00%
10.00%
8.00% Gross Profit Margin
6.00%
4.00%
2.00%
0.00%

2011 2012 2013 2014 2015

Interpretations:

The graph and chart shows that, In 2011 Gross Profit Margin is very high than the other years
though that time Gross Profit is low but Net Sales is very high. So, Gross Profit Margin is
increased. But in 2012 net sales is increased than the previous year but gross profit is decreased.
For that reason, Gross profit margin is decreased 6.15%. In 2013 and 2014 Gross Profit Margin
is almost at same percentage. In 2015, net sales are increased than the previous year but profit
margin is decreased. As a result, the gross profit margin is decreased 1.9%.
4.4.7. Net Profit Margin

Net Profit Net Sales Net Profit Margin (%)

2011 326.51 3428.53 9.52
2012 174.32 4288.14 4.06
2013 499.17 6415.96 7.78
2014 509.10 7538.86 6.75
2015 603.92 8102.94 5.04

Net Profit Margin

10.00% 9.52%
9.00%
8.00% 7.78%
7.00% 6.75%
6.00%
5.00% 5.04%
4.00% 4.06% Net Profit Margin
3.00%
2.00%
1.00%
0.00%

20112012201320142015

Interpretations:
The graph and chart shows that, the percentage of net profit margin is very much fluctuating. In
2011, Net Profit Margin is 9.52%. But in 2012 it is decreased (9.52-4.06) 5.46%. Because that
year net sales are increased but net profit is decreased. In 2013 both net sales and net profit are
decreased. So, net profit margin is decreased also. But In 2014 & 2015 both net sales and net
profit are increased. As a result, net profit margin is decreased at a series.
4.4.8. Earnings per Share (EPS)

Year Net income (million) Common stock EPS

outstanding (million)
2011 326.52 80.16 4.07
2012 174.29 93.20 1.87
2013 499.57 99.91 5.00
2014 508.79 106.44 4.78
2015 408.62 106.69 3.83

EPS
5
4.78
5 4.07
4 3.83
3
2
1 1.87 EPS
0

20112012201320142015

Interpretations:
In Premier Cement Mills Limited, the common stockholders were 80.16(millions) in 2011 and it
gradually increased in 2015 it is 106.69. Premier Cement Ltd’s EPS is higher in 2013 and lower
in 2012.
4.5. Market Value Ratio:

4.5.1. Book Value per Share:

Year No of Common Stock holder equity Book Value Per

Shares (million) Share(Taka)
2011 91.14 2103.74 23.08
2012 93.41 2257.64 24.17
2013 102.69 3134.07 30.52
2014 89.84 2815.66 31.34
2015 105.42 3396.67 32.22

Book Value Per Share

40
30.5231.34 32.22
30 23.0824.17
20
Book Value Per Share
10

0
2011 2012 2013
2014
2015

Interpretation:

Book value per share of Premier Cement Mill Limited in 2011 is tk.23.08. It increased in 2012 to
tk.24.17 and other 2015 book value per share is lower than tk. 32.22.
4.5.2. Market value to Book Ratio:

Year MV BVPS MV to BV Ratio (Times)

2011 53.8 23.08 2.33
2012 55.3 24.17 2.28
2013 71.45 30.52 2.34
2014 77.5 31.34 2.47
2015 81 32.22 2.51

MV to BV Ratio
2.55 2.51
2.5 2.47
2.45

2.4
2.34
2.35 2.33
2.3 MV to BV Ratio
2.25 2.28
2.2
2.15

20112012201320142015

Interpretation:

In 2011 market value was 2.33 times higher than the book value. Market value was almost 2.28
times higher than book value in 2012. Premier Cement Mill’s Book Value to Market value ratio
is increased consecutively from 2013 to 2015. Higher market to book value ratio is a good
indication for the company and emphasize that currently Premier Cement Mills Limited has a
great demand in the stock market.
Chapter 5: Conclusion and Recommendations
5.1. Conclusion:

Premier Cement Mills Limited is one of the most innovative cement manufacturers in
Bangladesh. It manufactures products with the best quality raw materials and technical
excellence for ensuring dependability and premium quality.

Premier Cement Mills Limited incorporated in Bangladesh on 14 October 2001 as a Private

Limited Company, 700 employees in operation at home and abroad- Bangladesh, India,
Myanmar, etc., annual production capacity of 2.4 million tons (8,000 tons per day). Premier
Cement Mills Limited enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

Inventory Turnover Ratio measures how many times average inventory is "turned" or sold during
a period. In 2013 Inventory Turnover in Premier Cement Mills is highest 7.94 times. And in
2015 it is 5.13 times. It is lower compare to other years. It indicates that sales performance of
2015 is not so good compare to other years.

In 2014 Premier cement limited maintained almost 18.07% net profit over shareholders equity it
ended up in 7.72% net profit over common equity in 2012. The increase rate of shareholders
equity and net profit was quite alike.

In 2012 net sales is increased than the previous year but gross profit is decreased. For that
reason, Gross profit margin is decreased 6.15%. In 2013 and 2014 Gross Profit Margin is almost
at same percentage. In 2015, net sales are increased than the previous year but profit margin is
decreased. As a result, the gross profit margin is decreased 1.9%.
5.2. Recommendations:

1. Premier Cement Mills Limited should increase its gross profit margin by increasing
selling price at a minimum level and according to customer’s demand without increasing
the cost of goods sold. For Example: Finding Lower Price Supplier, Cheaper by good
quality raw materials, the labor saving technology and so on.

2. Company should focus on most profitable customers to increase sales volume and cut
down the avoidable operating expenses to increase the net profit margin.

3. Company need to predict pending sales growth to improve its sales performance and
increase inventory turnover ratio from next year.

4. Premier Cement Mills Limited should increase its total asset turnover ratio by:

 Increasing its sales by more promotions and by quick movements of the finished
goods.
 Leasing assets, instead of buying them
 Fast collections of accounts receivable
Chapter 6- References
References from Book:

1. Scott Besley and Eugene F. Brigham (2012-2013), “Essential of Managerial Finance”,

Thomson Higher Education, USA; PP 52-62

2. Annual Report of Premier Cement, 2011-2015

References from Internet:

1. Investopedia-
 http://www.investopedia.com/terms/l/liquidityratios.asp
 http://www.investopedia.com/terms/c/currentratio.asp
 http://www.investopedia.com/terms/i/inventoryturnover.asp
 http://www.investopedia.com/university/ratios/debt/ratio3.asp?no_header_alt=true
 http://www.investopedia.com/ask/answers/040215/what-are-best-ways-company-
improve-its-net-margin.asp
 http://www.investopedia.com/terms/r/returnonassets.asp
 http://www.investopedia.com/terms/r/returnonequity.asp
 http://www.investopedia.com/terms/e/equitymultiplier.asp
 http://www.investopedia.com/terms/o/operating_expense.asp
 http://www.investopedia.com/terms/b/bookvalue.asp
 http://www.investopedia.com/ask/answers/183.asp
 http://www.investopedia.com/terms/b/bvps.asp
 http://www.investopedia.com/terms/p/price-earningsratio.asp

2. Business Dictionary-
 http://www.businessdictionary.com/definition/ratio-analysis.html
 http://www.businessdictionary.com/definition/retention-ratio.html
 http://www.myaccountingcourse.com/financial-ratios/dividend-payout-ratio
3. Investing Answers-
 http://www.investinganswers.com/financial-dictionary/ratio-analysis/quick-ratio-924
 http://www.investinganswers.com/financial-dictionary/ratio-analysis/gross-profit-margin-
2076
 http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/net-
profit-margin-2233

4. Website of Premier Cement Mills Limited-

 http://www.premiercement.com/

5. The Financial Dictionary-

 http://financial-dictionary.thefreedictionary.com/debt+management+ratio
 http://www.myaccountingcourse.com/financial-ratios/times-interest-earned-ratio
 http://www.myaccountingcourse.com/accounting-dictionary/market-value-per-share

6. Chron-Small Business:
 http://smallbusiness.chron.com/improve-gross-profit-56353.html

7. Efinance Management:
 http://www.efinancemanagement.com/financial-analysis/how-to-analyze-and-improve-
asset-turnover-ratio

8. Biz Finance:
 http://bizfinance.about.com/od/financialratios/f/Operating_Profit_Margin.htm