1

Running Head: Financial Statement Analysis

Financial Statement Analysis

Course Title:

Course Code:

Submitted To:

Md. Ali Ashraf

Submitted By:

Faiza Rabbi Khan

Army Institute of business Administration, Sylhet

 Financial statement Ratio analysis 2

Current Ratio

Interpretation
● For 1 tk liabilities against Reneta have
assets1.233008,1.126176 and 1.146703

For 1tk liabilities beximco have 1.61648,1,796703

and 1.948068

Year 2006 2007 2008

Reneta

1.233008 1.126176 1,146703

Beximco

1.328387 1.795961 1.099868

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-
term obligations.
 Financial statement Ratio analysis 3

Current Ratio

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2006 2007 2008

Reneta Beximco

Comparing the three years of two companies. The current ratio decrease Apex Company &
current ratio increase Bata Company.

Problem: The liabilities had increased of Apex Company.

Recommendations: The Apex Company should have to reduce short terms, accounts and others
payable liabilities.
 Financial statement Ratio analysis 4

Acid test Ratio

Interpretation
For 1 Tk. Liabilities against Apex have and 0.48078,
0.43181 & 0.351877

For 1 Tk. Liabilities against Bata have 0.633218,

0.679521 & 0.865758

Year 2006 2007 2008

Reneta 0.43181 0.351877

0.4807
8
Beximco 0.633218 0.679521 0.865758
 Financial statement Ratio analysis 5

The acid-test ratio is a strong indicator of whether a firm has sufficient short-term assets to cover
its immediate liabilities.

In graph we can understand The Acid test ratio of Apex decrease from 2013 to 2015 and Bata
have increase from 2013-2015

Problem: The inventories Apex Company had increased a lot from the last.

Recommendations: Apex Company should have to reduce inventories like raw materials.

Year 2006 2007 2008

Reneta 4.835778 4.697024 4.99303

Beximco 2.043012 1.815132 1.766131

Debt-to-Equity

Interpretation
For 1Tk. Equity Apex have liabilities
4.835778, 4.697024 and 4.99303.

For 1 TK. Equity Bata have 2.043012,

1.815132 and 1.766131 liabilities.

Debt-to- Equity Ratio: calculated by dividing a company’s total liabilities by its stockholders'
equity, is a debt ratio used to measure a company's financial leverage. The D/E ratio indicates
how much debt a company is using to finance its assets relative to the value of shareholders’
equity. 
 Financial statement Ratio analysis 6

Debt-to-Equity
6

0
2013 2014 2015

Apex Bata

Though the comparing Apex with Bata. Apex company debt-to equity increase and Bata
company debt-to-equity ratio decrease. You are known standard value 0.50:1.These two
company crossed standard value. These two companies are facing financial risk.

Problem for: This two company are using more liabilities then Owner equity.

Recommendation for: This two company reduce using current liabilities .More using
shareholder equity and they should collect more shareholder equity issuing new share. Especially
Apex Company.

Interest Coverage

Year 2006 2007 2008

Reneta 1.85075 1.586057 1.27415

Beximco 191.6947 206.3492 281.0876

Interpretation
For 1Tk. Interest against Apex has 1.85075,
1.586057and 1.27415 TK.

For 1 TK. Interest against Bata has 191.6947,

206.3492 and 281.0876 TK.
 Financial statement Ratio analysis 7

Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a
company can pay interest on its outstanding debt.

Interest Coverage
300
250
200
150
100
50
0
2013 2014 2015

Apex Bata

The interest coverage ratio of Apex falls downward from 2013 to 2015, and the interest coverage
ratio of Bata rising upward from 2013 to 2015 and Bata has higher ratio than Apex. You are
known standard value 5 bar. Apex Company didn’t fulfill standard value. Apex Company facing
problem interest payment.

Problem for: High interest rate, High expenses.

Recommendation for: Apex Company reduce their expenses and try to loan low interest rate.

Debt-to-total assets

Year 2006 2007 2008

Reneta 0.739297 0.787099 0.795889

Beximco 0.510527 0.449076 0.433791

Interpretation
 Financial statement Ratio analysis 8

For 1Tk. assets Apex has 0.739297, 0.787099 and 0.795889

TK.

For 1 TK. assets Bata has0.510527, 0.449076 and 0.433791

TK.

You are known standard value 0.25:1.These two company crossed standard value. These two
company are facing financial risk.

Problem for: This two company are using more liabilities then assets

Recommendation for: This two company reduce using liabilities .More using assets. Especially
Apex Company.

Debt-to-total assets
0.8
0.6
0.4
0.2
0
2013 2014 2015

Apex Bata

Net Profit

Year 2006 2007 2008

Reneta 2.428083 1.771602 0.461198

 Financial statement Ratio analysis 9

Beximco 10.319696 8.674886 9.75905

Interpretation

For 1Tk. Sales Reneta have 2.428083, 1.771602 and

0.461198 Net profit.

For 1Tk sales Beximco have 10.319696, 8.674886, and

9.75905 net profit
Net Profit Ratio: expresses the relationship between net profit after taxes and sales. This ratio is
measures of the overall profitability net profit is arrived at after taking into account both the
operating and non-operating items of incomes and expenses.

By comparing reneta with Beximco we can see that the net profit ratio of beximco increased
upward but in term of reneta fall downward.

Problem for: Though reneta's net profit is going on decrease day by day so we can say that it has
problem.

Recommendation for: Reneta should reduce utilities amd try turning down heating and cooling
outside of business hours.They need to reduce insurance premiums.

Operating profit

Year 2006 2007 2008

 Financial statement Ratio analysis 10

Reneta 7.877353 7.503073 6.316012

Beximco 15.31504 13.15587 14.62037

From the table we can see that beximco is in good position. Reneta couldn’t maintain their
operating profit properly.

Problem: Reneta didn’t get their operating profit properly.

Recommendation: Reneta should concentrate on increasing operating profit. They should

increase utility. They can sell its assets and then lease them back.

Interpretation

For 1Tk. Sales Reneta have7.877353, 7.503073 and 6.316012 net

profit.

For 1Tk sales Beximco have 15.31504,13.15587,14.6 net profit