RATIO ANALYSIS OF ACI LIMITED

“ACI limited”
 Reports on
Ratio Analysis of ACI Company

Prepared for:
Instructor: Mozaffar Alam Chowdhury
CBA- College of Business Administration
FIN-302(Corporate Finance)

Prepared by:

Serial Name ID Program Signatures

1. Md. Abu Rayhan 13102325 BBA
2. Taslima Akter Bakul 13102329 BBA
3. Amena Akter Mishu 13102076 BBA
4. Fahima Nasrin Pinky 13102076 BBA
5 Md Saiful Islam Khan 13302130 BBA

Date of submission: 14.07.2016

“ACI limited”
 Letter of Transmittal

August 1, 2016
Mozaffar Alam Chowdhury
Faculty
College of Business Administration- CBA
IUBAT- International University of Business Agriculture and Technology.

Subject: Letter of Transmittal

Dear Sir,
We are very much grateful to you for giving us the amazing opportunity to work on our FIN-302
course. We are very much pleased to submit our group report on “Ratio Analysis of ACI
Limited” We have gathered information and tried to put in the report as much as possible within
limited time. Actually the entire duration of preparing this report has been immensely helpful to
us. A lot of lessons were learnt, lots of general knowledge was gathered about Ratio analysis and
lots of experiences were gained. Truly this will help us not only in rest university life but also in
our future life.

We enjoyed working on this report and hope you will find it creative.

Yours Sincerely

Serial Name ID Program Signatures

1. Md. Abu Rayhan 13102325 BBA
2. Taslima Akter Bakul 13102329 BBA
3. Amena Akter Mishu 13102076 BBA
4. Fahima Nasrin Pinky 13102076 BBA
5 Md Saiful Islam Khan 13302130 BBA

“ACI limited”
 ACKNOWLEDGEMENTS

We take this opportunity to express our profound gratitude and deep regards to our guide ‘ Mozaffar
Alam Chowdhury’ sir for his exemplary guidance and constant encouragement throughout the course
(Corporate Finance; FIN-302) of this report. The blessing, help and guidance of us given by you
(honorable Instructor) time to time shall carry us a long way in the journey of life on which we are about
to embark.

We also take this opportunity to express a deep sense of gratitude to our group member one
another for their cordial support, valuable information which helped us in completing this report
through various stages.

Lastly, we thank almighty, my parents, brother, sisters and friends for their constant
encouragement without which this report would not be possible.

Yours faithfully

Serial Name ID Program Signatures

1. Md. Abu Rayhan 13102325 BBA
2. Taslima Akter Bakul 13102329 BBA
3. Amena Akter Mishu 13102076 BBA
4. Fahima Nasrin Pinky 13102076 BBA
5 Md Saiful Islam Khan 13302130 BBA

“ACI limited”
 Student Declaration

We are the students of Bachelor of Business Administration (BBA) at IUBAT-International

University of Business Agriculture and Technology and declaring that, this report on the given
topic of “Ratio Analysis of ACI Limited)” has only been prepared for the fulfillment of the
course of FIN- 302 Corporate Finance.

Thanking You:

Serial Name ID Program Signatures

1. Md. Abu Rayhan 13102325 BBA
2. Taslima Akter Bakul 13102329 BBA
3. Amena Akter Mishu 13102076 BBA
4. Fahima Nasrin Pinky 13102076 BBA
5 Md Saiful Islam Khan 13302130 BBA

“ACI limited”
 Table of contents:

“ACI limited”
 Executive Summary
This paper is mainly an analytical outcome of financial ratio analysis of ACI Limited. Ten (10)
ratios are selected to judged the various aspects of efficiency of the company, including –
Current ratio, quick/acid test ratio, inventory turnover ratio, days sales outstanding ratio, debt
ratio, times interest earned ratio, net profit margin, return on total assets, earning per share, price
earnings ratio, book value ratio- market/book ratio. Formula used for calculating these ratios are
presented in the annexure – 1. For formulating the industry average weighted average (on equity
portion) of all the four pharmaceuticals companies listed in the stock exchange are considered.
Before presenting the core ratio analysis part some key financial information of the company like
– turnover, net profit, assets, EPS and operating cash flows of past few years are analyzed. From
the analyzed data we found that Square Pharmaceuticals Limited perform better in all materials
aspects from the industry, except it’s liquidity position. Although Square Pharmaceuticals is
performing well in the industry, still it has some room for improvements, like – improving the
liquidity position, looking for expansion of business in new market both inside and outside the
country.

“ACI limited”
 Chapter-1: INTRODUCTION

1.1. Introduction:

“ACI limited”
ICI Bangladesh Manufacturers Limited was a subsidiary of world renowned multinational ICI
Plc and was a listed public limited company under Dhaka Stock Exchange. In 1992 ICI Plc
divested its shareholding through a management buyout and the company name was changed
from ICI Bangladesh Manufacturers Limited to Advanced Chemical Industries (ACI) Limited.
ACI Formulations Limited, a subsidiary of ACI, became a public listed company through direct
listing. ACI's mission is to achieve business excellence through quality by understanding,
accepting, meeting and exceeding customer expectations. ACI follows International Standards on
Quality Management System to ensure consistent quality of products and services to achieve
customer satisfaction. ACI also meets all national regulatory requirements relating to its current
businesses and ensures that current Good Manufacturing Practices (cGMP) as recommended by
World Health Organization is followed properly. ACI has been accepted as a Founding Member
of the Community of Global Growth Companies by the World Economic Forum which is the
most prestigious business networking organization. (Corporate: ACI Limited Bangladesh)

History:

Advanced Chemical Industries (ACI) Limited is one of the leading and largest local
conglomerates in Bangladesh. ACI consists of different business groups namely:
Pharmaceuticals, Consumer brands, Agro-Business. ACI is the first company in Bangladesh who
achieved both the ISO9001 certification of Quality Management System in 1995 and the
ISO14001 Certification for Environment Management System in 2000. ACI is a public limited
company listed in DSE and CSE. Beside this, the company has a large list of international
associates and partners with trade and business agreement. Today ACI is one of the fastest
growing companies in Bangladesh. ACI was so named in 1992. But the history of ACI dates
back to 1926, when Imperial Chemical Industries (ICI) was incorporated in the United Kingdom
as four companies namely Novel Industries Limited, British Dyes tarts Corporation, Brunner
Mond and Company 5 Limited and United Alkali Company merged. Since then ICI plc has been
operating worldwide as a multinational company. In the year of formation ICI started operation

“ACI limited”
in the Indian subcontinent in the name of ICI (India) limited. After separation of the India and
Pakistan in 1947, the Karachi office of ICI (India) Limited renamed to be ICI (Pakistan) Limited.

Mission

ACI‟s mission is to enrich the quality of life of people through responsible application of
knowledge, skills and technology. ACI is committed to the pursuit of excellence through world-
class products, innovative processes and empowered employees to provide the highest level of
satisfaction to its customers.

Vision

 Endeavor to attain a position of leadership in each category of its businesses.

 Attain a high level of productivity in all its operations through effective and efficient use of
resources, adoption of appropriate technology and alignment with our core competencies

.  Develop its employees by encouraging empowerment and rewarding innovation.

 Promote an environment for learning and personal growth of its employees

.  Provide products and services of high and consistent quality, ensuring value for money to its
customers.

 Encourage and assist in the qualitative improvement of the services of its suppliers and
distributors.

 Establish harmonious relationship with the community and promote greater environmental
responsibility within its sphere of influence.

“ACI limited”
 Chapter- 2: Ratio Analysis

Current Ratio:

“ACI limited”
Its measures a company’s ability to meet short term obligations with short term asset, a useful
indicator of cash flow in the near future.

Current ratio= Current Assets/Current Liabilities

2012 = 834671204 / 7101682744

= 1.17 times
2013 = 9461772496 / 8101494869
= 1.17 times
2014 = 9927161551 / 8358791057
= 1.19 times

Times 2012 2013 2014

Ratio 1.17 1.17 1.19

Current Ratio
1.2

1.19

1.19

1.18
Current Ratio
1.18

1.17

1.17

1.16

1.16
2012 2013 2014

Interpretation:

“ACI limited”
Over the years ACI Limited’s Current ratio has been increasing. For
2012 to 2014 Current ratio of ACI Ltd. was 1.17. In 2014 it became 1.19. So the current ratio
increases.

Quick Ratio:
The quick ratio or acid test ratio is calculated by deducting inventories from current assets and
dividing the result by current liabilities. The quick ratio is a variation of the current ratio.

Quick Ratio = Quick Assets / Current Liabilities

2012 = (8334671204-2128984396) / 7101682744

= 0.87 time
2013 = (9461772496-255330342) / 8101494869
= 0.85 time
2014 = (9927161551-296475971) / 8358791057
= 0.83 time

Times 2012 2013 2014

Quick Ratio 0.87 0.85 0.83

“ACI limited”
 Quick ratio
0.88

0.87

0.86

0.85 Quick ratio

0.84

0.83

0.82

0.81
2012 2013 2014

2.5

1.5 ACI
GCI

0.5

0
2012 2013 2014

Interpretation:

“ACI limited”
Over the years ACI Limited’s Quick ratio has been decrease. In
2012 it was .87. In 2013 Quick ratio of ACI Ltd. was decreases to .85. Again in 2014 it became .
83. So, the current ratio decreases.

Fixed Asset Turnover:

The fixed asset turnover ratio measures how effectively the firm uses its plant and equipment to
help generate sales.

Fixed Assets turnover =

2012 = 12318723190 / 5599031232

=2.20 times
2013 = 10683600712 / 523140478
=2.04 times
2014 = 9680061562 / 4871795802
= 1.99 times

Times 2012 2013 2014

Fixed Asset 1.99 2.04 2.20
turnover

“ACI limited”
 Fixed Asset turnover
2.25
2.2
2.15
2.1
Fised Asset turnover
2.05
2
1.95
1.9
1.85
2012 2013 2014

2.5

1.5

ACI
GCI
1

0.5

0
2012 2013 2014

Interpretation:

“ACI limited”
Over the years ACI Limited’s fixed asset turnover ratio has been increasing. In
2012, Fixed Asset turnover ratio was 1.99. In 2013 turnover ratio has been increased to 2.04.
Again in 2014 it increases to 2.20. So the fixed asset turnover ratio increases.

Asset turnover ratio:

Asset Turnover Ratio is the company's total revenue, the invoice, cash payments and other
revenues. Total Asset Turnover Ratio represents the value of goods and services provided to
customers during a specified time period -usually one year. How efficiently a business generates
sales on each currency of assets. An increasing ratio indicates a company is using its assets more
productively.

Assets turnover:

2012 = 9680061562 / 13206467006

= 0.73 time
2013 = 10683600712 / 14693912974
= 0.73 time
2014 = 12318723190 / 15526192783
= 0.79 time

Times 2012 2013 2014

Asset turnover ratio 0.73 0.73 0.79

“ACI limited”
 Asset turnover ratio
0.8
0.79
0.78
0.77
0.76
Asset turnover ratio
0.75
0.74
0.73
0.72
0.71
0.7
2012 2013 2014

0.9

0.8

0.7

0.6

0.5
ACI
0.4 GCI

0.3

0.2

0.1

0
2012 2013 2014

“ACI limited”
Interpretation:

Over the years ACI Limited’s Current ratio has been increasing. For
2012 to 2014 Current ratio of ACI Ltd. was 0.73. In 2014 it became 0.79. So the Asset Turnover
Ratio increases.

Return on Asset
It’s a measurement of the ability of a company to turn the assets into profit. This is a very useful
measure of comparison within an industry. A low ratio compared to industry may mean that your
competitors have found a way to operate more efficiently. After tax interest expense can be
added back to numerator since ROA measures profitability on all assets whether or not they are
financed by equity or debt.

ROA = Net Income / Total Assets

2012 = (54545273 / 13203206 ) * 100

=4%
2013 = (764187906 / 14693912994) * 100
= 5%
2014 = (950713609 / 15526192783) * 100
= 6%

“ACI limited”
Return On Asset 2012 2013 2014

Percentage 4% 5% 6%

Return on Asset
7%

6%

5%

4% Return on Asset

3%

2%

1%

0%
2012 2013 2014

7%

6%

5%

4%
ACI
3% GCI

2%

1%

0%
2012 2013 2014

“ACI limited”
Interpretation:

Over the years ACI Limited’s Quick ratio has been decrease. In
2012 it was 4%. In 2013 Quick ratio of ACI Ltd. became decreases to 5%. Again in 2014 it
became 6%. So the Return on Asset ratio increases

Return on equity:
The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates with
the money shareholders have invested. This is one of the most important ratios to investors. How
does this return compare to less risky investments like bonds.

ROE= Net Income / Shareholders Equity

2012 = (282815672 / 415538042) * 100

=7%
2013 = (103239402 / 4040414788) * 100
= 3%
2014 = (479115177 / 4274198745) * 100
= 11%
RETURN ON 2012 2013 2014

“ACI limited”
 EQUITY

PERCENTAGE 7% 3% 11%

RETURN ON EQUITY
12%

10%

8%
RETURN ON EQUITY
6%

4%

2%

0%
2012 2013 2014

12%

10%

8%

6% ACI
GCI

4%

2%

0%
2012 2013 2014

“ACI limited”
Interpretation:

Over the years ACI Limited’s Quick ratio has been decrease. In
2012 it was 7%. In 2013 Quick ratio of ACI Ltd. became decreases to 3%. Again in 2014 it
became 11%. So the Return on equity ratio increases.

Inventory Turnover Ratio

Inventory turnover ratio indicates how well the company managed its inventory. High value of
the ratio reflects good management of inventory. In 2014 the ratio was 4.16 times and the ratio is
slightly decreasing from 2010. Inventory turnover ratio was the highest, 4.81 times, in 2011.

Times 2012 2013 2014

Inventory 4.55 4.18 4.16
Turnover Ratio

“ACI limited”
 Inventory Turnover Ratio
4.6

4.5

4.4

4.3 Inventory Turnover Ratio

4.2

4.1

3.9
2012 2013 2014

3 ACI
GCI

0
2012 2013 2014

Interpretation:

“ACI limited”
Over the years ACI Limited’s Quick ratio has been decrease. In
2012 it was 4.55. In 2013 Quick ratio of ACI Ltd. became decreases to 4.18. Again in 2014 it
became 4.16. So the Inventory turnover ratio decreases.

Earning per share:

The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serve as an indicator of a company's profitability.

TIMES 2012 2013 2014

EARNING PER 22.93 26.74 27.64

SHARE

“ACI limited”
 EARNING PER SHARE
30

25

20
EARNING PER SHARE
15

10

0
2012 2013 2014

30

25

20

15 ACI
GCI

10

0
2012 2013 2014

Interpretation:

“ACI limited”
Over the years ACI Limited’s Quick ratio has been increase. In
2012 it was 22.93. In 2013 Quick ratio of ACI Ltd. became increases to 26.74. Again in 2014 it
became 27.64. So the Earnings per share ratio increase.

Debt Ratio:
It is a financial ratio that measures the extent of a company’s or consumer’s leverage. The debt
ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be
interpreted as the proportion of a company’s assets that are financed by debt. The higher this
ratio, the more leveraged the company and the greater its financial risk.
Debt ratio = Total Liabilities / Total Equity

2012 = (8125180846 / 13206407006) * 100

= 62%
2013 = (9050060723 / 14693912974) * 100
= 62%
2014 = (8019507381 / 15526192783) * 100
= 79%

DEBT RATIO 2012 2013 2014

PERCENTAGE 62% 62% 79%

“ACI limited”
 DEBT RATIO
90%

80%

70%

60%

50% DEBT RATIO

40%

30%

20%

10%

0%
2012 2013 2014

90%

80%

70%

60%

50%
ACI
40% GCI

30%

20%

10%

0%
2012 2013 2014

Interpretation:

“ACI limited”
Over the years ACI Limited’s Current ratio has been increasing. For
2012 to 2014 Current ratio of ACI Ltd. was 62. In 2014 it became 79. So the Debt Ratio
increases.

Debt to equity ratio:

The Debt to Equity ratio is calculated by total liabilities total share holder equity.

Debt to equity = Total Liabilities / Total Equity

2012 = 8125180846 / 5081286160

= 1.59 times
2013 = 9056600723 / 5636252857
= 1.69 times
2014 = 8919507381 / 660668402
= 1.59 times

TIMES 2012 2013 2014

DEBT TO EQUITY 1.59 1.69 1.35
RATIO

“ACI limited”
 DEBT TO EQUITY RATIO
1.8

1.6

1.4

1.2

1 DEBT TO EQUITY RATIO

0.8

0.6

0.4

0.2

0
2012 2013 2014

2.5

1.5 ACI
GCI

0.5

0
2012 2013 2014

Interpretation:

Over the years ACI Limited’s Quick ratio has been decrease. In
2012 it was 1.59. In 2013 Quick ratio of ACI Ltd. became increases to 1.69. Again in 2014 it
became 1.35. So the Debt to Equity t ratio decreases.

“ACI limited”
Chapter-3: ENDING

“ACI limited”
 Conclusion

From the data analyzed and presented above it can be conclude that Square Pharmaceuticals

Limited performs better in all materials aspects from the industry. Though its financial strength

is higher than the most of the company, its’ liquidity Position is below the industry. This may

create financing problem for the company. Other than that its’ strong financial position, higher

margin on sales, capabilities of Managing debt, accounts receivables and inventories make it an

attractive company to The investors who make informed decision.

“ACI limited”
 Recommendations

Although ACI Limited is performing well in the industry, still it has some room for
improvements, as it’s’ performance is not so much higher than the industry.

For improving its operational and financial efficiency Square Pharmaceuticals can –

1. Increase its liquidity position slightly to make it equal to the industry.

2. Setup benchmarking in some key categories, (i.e. - turnover), and try to achieve them as fast as
possible.

3. Searching for new finances to expand its business to maintain an equivalent or more growth to
the industry.

4. Looking for new market segment within the country as well as outside the country to expand
its market.

“ACI limited”
 References

1. Annual Paper, March 2011, Square Pharmaceuticals Limited.

2. Annual Paper, December 2010, Ranata Pharmaceuticals Limited.

3. First Quarter Financial Statement, March 2011, Ranata Pharmaceuticals Limited.

4. Annual Paper, December 2010, Beximco Pharmaceuticals Limited.

5. First Quarter Financial Statement, March 2011, Beximco Pharmaceuticals Limited.

6. Annual Paper, June 2010, Beacon Pharmaceuticals Limited.

7. Third Quarter Financial Statement, March 2011, Beacon Pharmaceuticals Limited.

8. Financial Statement Analysis, Second Edition, Prentice-Hall International Inc., George Foster,
Stanford University, 1986. 9. Accounting Principles, 7th Edition, John Wiley & Sons Inc.,
Weygandt, Kieso, Kimmel, 2007.

“ACI limited”