BUS635.

03

MD ROWSHAN ALI 151 2716 660

KHAN
George Frank Nelson 1512821660

Ayatullah Siddiqui 1512845660

Submitted To:
Professor, Dr. M. Masud Rahman
 BUS635.03

Submitted To:
Professor, Dr. M. Masud Rahman
School of Business
North South University

Submitted By:
GROUP MEMBERS NAME ID NUMBER
MD ROWSHAN ALI KHAN 151 2716 660
George Frank Nelson 1512821660
Ayatullah Siddiqui 1512845660

NORTH SOUTH UNIVERSITY

DATE: 1st December, 2015
Letter of Transmittal
Professor, Dr. M. Masud Rahman
Faculty of Business Administration,
School of Business,
North South University

Subject: A letter of submission of the Term Paper.

Dear Sir,

We have a great pleasure to submit this term paper on “Apex Tannery ltd.” In preparing this
report we had the unique opportunity to express ourselves. It has been prepared according to
your authorization, instruction, formation and suggestion provided.
Our aim has been to find out & understand different aspects related to Managerial finance in
the real world. We tried to visualize the real picture of Apex Tannery ltd that will hopefully
give the readers an opportunity to know about Apex Tannery ltd condition, as well as their
performance condition in there market. We hope that this report despite its many limitations
will be a gateway to understand the present aspects related to the Managerial finance.

Finally we are grateful to you for giving us a nice opportunity to work on this report which
we have considered as a great chance for us to develop our analytical skills.

Yours sincerely,

SL NO NAME ID Sig.

1. Md. Rowshan Ali Khan 151-2716-660

2. George Frank Nelson 1512821660

3. Ayatullah Siddiqui 1512845660

 Acknowledgments

We would like to thank Professor, Dr. M. Masud Rahman, Faculty of Business

Administration, School of Business, North South University, from the bottom of our heart for
guiding us all through in the preparation of this report. Without his support this report would
not have been possible.

We are also grateful to those people without whom it was quite impossible for us to continue
the report. During our work we did not face any difficulty rather we enjoyed our each &
every moment.

All of the group members were really co-operative. We had done group work and came to
understand many events and gain some experiences which is really helpful for our future life.

Finally we thank our almighty Allah to give us all the resources to prepare this report.
 Table of Content
Content Page No
Chapter One: Introduction and Methodology
   
  Introduction  
  Company Overview  
  Purpose of The Report  
  Scope of The Report  
  Objectives  
  Methodology  
  Limitation of The Report  
     
CHAPTER TWO: Analysis and Interpretation of Income Statement and Balance Sheet
   
  Income Statement Analysis  
  Balance Sheet Analysis  
     
CHAPTER THREE: Cash Flow Analysis
   
  Cash Flow Analysis  
  Cash flow from operating activity:  
  Cash flow from Investment Activity:  
  Summary of Cash Flow Analysis:  
     
CHAPTER FOUR: Ratio Analysis
   
  Liquidity Ratio  
  Asset Management Ratio  
  Debt Management Ratio  
  Profitibility Ratio  
  Market Value ratio  
     
CHAPTER FIVE: Findings & Conclusion
   
  Findings  
  Conclusions  
  Bibliography  
CHAPTER ONE: Introduction and Methodology
INTRODUCTION
To determine the past, present and future performance of the company, evaluating financial
analysis is very important. It shows the overall financial scenario of the company. To analysis
the scenario, several methods can be used. Among all, common size statement analysis, ratio
analysis and trend analysis are most useful and significant. From these analyses, investors can
get an idea on the financial state of the company and can take a proper decision to invest on
that company. This report will give a clear idea about the financial analysis and trend analysis
of Apex Tannery Limited. Here will be shown the different types of ratio analysis, conditions
of Total asset, Total liability, equity conditions and cash flow conditions over Eight years
period. This analysis is very important for management, creditors and investor/shareholder.
Management can take decision based on the financial condition of the company and creditors
can make decision for providing loan based on the overall condition of the company.
Shareholder/investor will see if they like to invest. By considering all these issues, we have
decided to do analysis of Eight year (2008 to 2015) of Apex Tannery Limited.

Apex Tannery has a good news; their market price per share has increased as compared to
book value per share.
 COMPANY OVERVIEW
Apex Tannery is the largest tannery in Bangladesh and also one of the largest in south Asia. It
was incorporated as a private limited company on 26 th day of July 1976 under companies
Act 1913. it was converted into a public limited company in 1986. The shares of the company
are publicly traded on the force of the Dhaka Stock Exchange and Chittagong Stock
Exchange Limited. It is holding as an ‘A’ category share in the stock market.

The company is a privately owned firm engaged in processing and finishing cow and goat
leather for export. It conducts its business from its registered head office located in Dhaka
1000, Bangladesh. It was established in the year 1976.
The company export cow and goat finish leather approximately 25 million sq. ft. per year in
more than 20 countries in the world. Such as Hong Kong, Italy, Japan, Brazil, Spain, India,
Korea, Mexico, Australia, Vietnam, Germany, United States, China, Myanmar, Taiwan,
Thailand, Philippines, Netherlands, and Egypt. It employs approximately 150 employees and
670 workers, who are professionally managed and is fully compliant with Corporate
Governance Compliance Report under Section 2CC of the Securities & Exchange
Commission Notification Order. It has 18 leather technologist involved with the company
along with the state of the art laboratories for sampling. Apex Tannery is also the first
tannery in Bangladesh to be ISO 9001-2000 certified.

Registered Office: 127 Hazaribagh T/A, Dhaka-1209

Stock Exchange Listing Factories:

Unit I: 127 Hazaribagh T/A, Dhaka-1209

UnitII: Shafipur, Kaliakoir, Gazipur.
 PURPOSE OF THE REPORT

The purpose of this report is to know the financial condition of Apex Tannery Limited. over
the eight years; 2008 to 2015.

SCOPE OF THE REPORT

This report is based basically on financial report. We have done common size statement
analysis, ratio analysis and trend analysis to recognize the financial performance of Apex
Tannery Limited. In the ratio analysis, five major types of ratios had been measured. These
are:-

 common size statement

 Liquidity ratio
 Asset Management ratio
 Profitability ratio
 Debt Management ratio
 Market value ratio

OBJECTIVES:

There are some objectives below:

 Analysis the Liquidity position of the company

 Analysis the Asset management Scenario of the Company
 To show the Debt management condition of the company
 To identify the solvency of the company
 Compare the profitability ratio of the company
 To show the trend analysis of different years of the company

METHODOLOGY

This report is mainly based on Secondary data. We have collected data from balance sheet
and income statement from the annual reports of 2008 to 2018. We also collected data from
company’s website as well. We did trend analysis to identify company’s financial
performance. We have used MS EXCEL along with Bar and Line chart to illustrate company
trend and it also helped to calculate value which is mentioned in the annual report. Finally we
tried to give description and explanation of the trend analysis of eight years of Apex Tannery
Limited.

LIMITAION OF THE REPORT

 Many information was not available in the financial statement of the company
 Because of time constraint, primary data could not be collected, which might have
helped to understand the condition better and to identify the actual scenario of the
company.
 We only had to rely on the financial report and website which was not sufficient to
analysis the complete financial performance of the company.
CHAPTER TWO: Analysis and interpretation of
income statement and balance sheet
 Income statement analysis:

Sales (in thousand)

Sales

3793167 3771638

3248799
3067208

2535432 2515867

1625358 1723639

2008 2009 2010 2011 2012 2013 2014 2015

Fig.1 Sales

 Trade and other receivables in 2015 was 180,835,000 taka, and in 2008 163,829,000
taka. Due to credit sale we can see the increasing in sales. And also they have
introduced many product line for example they exported leather to china as they
found a growing leather shoe industry in china.
 They explored new growing market for their export in Europe and Asia like china,
japan and Belgium.

Growth of sales
60.00%
45.96%
40.00%

21.91%
20.00% 16.76%
6.05% 5.92%
Axis Title 0.00%
2009 2010 2011 2012 2013 2014 2015
-0.57%

-20.00%

-40.00% -37.02%

-60.00%

Fig.2 Growth of Sales

  The growth of sale has gone down in 2009 and 2015. In 2009, they used to export to
Italy, but because of European recession, they anticipated that they would lose that
market. So they started exporting to India and china. In 2011, their business boomed
due to high export in India and china.
 But it also gradually decreased as for more governmental restrictions from India and
china. So it decreased in 2015.
 However, Apex tannery is hopeful about the growing lather industry in china as for
new leather shoes demand.

Cost of goods sold

Cost of goods sold

94.05%

92.75%
91.05% 91.16% 92.20%

89.54%

85.29%

2009 2010 2011 2012 2013 2014 2015

Fig.3 Cost of Goods Sold

 In 2010, the cost is had gone down as their sales also decreased in that particular year.
But it gradually increased as they were exploring different markets like India and
china. In 2014, COGS is highest as for more governmental restrictions and charges on
trades or tariffs on export to china. It also increased for political instability in 2014 of
Bangladesh, the transportation cost got higher.
 And again it went down in 2015 as the company became more efficient in their
inventory management also got facilities of lower restrictions and political stability
give them access to lower transportation cost.
 Gross profit
Gross profit

14.71%

10.46%
8.95% 8.84%
7.80%
7.25%
5.95%

2009 2010 2011 2012 2013 2014 2015

Fig.4 Gross Profit

 In 2010, it was highest as their COGS were lowest. As a result, their management was
more efficient in making profits and gross profit went up.
 They maintained stable gross profit from 2011 to 2013 for their established market in
Europe and Asia like Italy, china and India.
 Having a fluctuating gross profit over time but in 2014, it was lowest as their COGS
increased and they got to face a lot of economic uncertainty.
 In 2015, it increased as they entered leather shoe industry of china. They got
advantage of liberated trade facilities for exporting leather in different Asian markets
like japan.

Operating expenses
Operating expenses

8.8%
7.8%

4.8% 4.7%
4.3% 4.1%
4.0%

2009 2010 2011 2012 2013 2014 2015

Fig.5 Operating Expenses

  They took a lot of debt (long term loan and short term loan). So they had to pay a high
amount of interests to the bank. As a result, Bank interest expenses & charges caused
higher operating expense. (29,954,000) taka 2013, (53,433,000) taka 2012.
 In 2014 and 2015, they have lowered their debt and got subsidiary for government as
a low interest charges. So operating expense decreased.
 In 2015, it increased a little bit as they were taking a short term loan for investing in
future markets like Srilanka, Mayanmer.

Operating Profit
12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2009 2010 2011 2012 2013 2014 2015

Fig.6 Operating Profit

 We can see that operating Profit in 2010 is higher; this is because they had low COGS
in that year and also the expense was less. But in 2014 and 2015 operating profit went
down due to higher COGS and other Expenses.
 There was new product line formed in Apex Tannery.
 Income Statement Analysis Fig.7
100.00%
90.00% Income
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2009 2010 2011 2012 2013 2014 2015
Statement Analysis

 We can see that COGS is higher in every year, as a result their profit is lower.
 We can see that their Net profit going down from 2008 to 2015 due to high
cost of production and expenses.
 Their operating is almost similar in every year, but in 2012 and 2013 it was
increased due to marketing expense to target china, India.

Net profit after tax

10.00%
9.03%
9.00% 8.29%
8.00%
7.00%
6.00%
5.00%
3.85%
4.00% 3.51%
3.08%
3.00% 2.53%
2.22%
2.00%
1.00%
0.00%
2009 2010 2011 2012 2013 2014 2015

Fig.8 Net Profit after Tax

 We can see that their Net profit after tax is going down from 2008 to 2015 due
to high cost of production and expenses.

EPS
EPS

96.32 93.74

63.55

7.07 6.57 5.51 6.25

2009 2010 2011 2012 2013 2014 2015

Fig.9 EPS

 Earnings per share in 2009 and 2018 were very high due to in that period the
face value of the share was 100 taka. Then in between 2012 to 2015 face value
of the share went down to 10 taka. This is the reason for the major difference.
 Market Value per share
160

140

120

100
Market Value per share
80

60

40

20

0
2009 2010 2011 2012 2013 2014 2015

Fig.10 Market value per share

 Market value is greater than book value; this is the good news for the company
and also for the shareholders. So as a result whatever the company is doing we
need to see the market value is greater than book value.
 Higher market value per share will make invertor invest in Apex Tannery.
 Balance sheet analysis:

Total Assets (in thousand)

Total Assets
1752941
1568380 1568380 1613300 1596575
1436147 1485024

1090410

2008 2009 2010 2011 2012 2013 2014 2015

Fig.11 Total Assets

 In 2015 total Asset is higher due to Capital work-in-progress of 223,074,000 taka. It’s
a non-current asset for the company.
 In 2010 Inventory was less as compared to other years. And also their cash in hand
was less.

CURRENT ASSET-Inventories
80.00%
73.91% 73.91%
70.00%

60.00%
50.67% 49.48%
50.00% 46.65%

40.00%
30.34% 29.99%
27.97%
30.00%

20.00%

10.00%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015

Fig.12 Inventories
 Inventory is going down due to apex tannery is purchasing small number of inventory
as in 2015, but before company use to purchase inventory in bulk in 2008 and 2009 so
the inventory was high.

Inventory growth vs sales growth

60.0%
46.0%
40.0% 36.2%

21.9%
20.0% 16.8% 16.7%
12.2%
6.0% 5.0% 5.9%
0.0% -52.3% -49.1%
0.0%
2009 2010 2011 2012 2013 2014 2015
-0.6%

-20.0%

-40.0% -37.0%

-60.0%

Fig.13 Inventory growth vs sales growth

 Higher inventory growth brings higher sale growth. But in 2010 and 2013 scenario
was different, because they had less inventory at the closing year. This made their
sales increase as showed earlier.
 CURRENT
400000 ASSET-cash (in thousand)
333932
300000

200000
109957
100000
32965
0
2009 2010 2011 2012 2013
-12103 2014 2015
-41465
-100000
-136992
-200000

-300000 -283924
-400000

Fig.14 Cash

Cash increase or decrease: This is the changes from previous year. As we can see in 2015
cash has gone very high and so on. This is because they kept cash for regular managing the
inventories and productions process of the company.
 They are more focused on cash sales rather than credit sales.

CURRENT ASSET
CURRENT ASSET-Trade and other receivables Advances, deposits and prepayments
23.2%

12.9%
11.5% 11.5% 12.1% 11.9%
11.1% 10.9%
8.8% 9.3%
7.7% 7.4% 8.0%
6.9%

3.6% 3.6%

2008 2009 2010 2011 2012 2013 2014 2015

Fig.15 Current Asset

  Current asset in 2010 was 23.2% where account receivables are very high, because
this year sale was very high. So they went more on credit sales.
 Apex tannery can reduce their receivables because it brings higher risk to the
company for collecting the debts.
 In 2015 receivables was 9.35% and which they reduce their receivables which is
good, they are more focused on cash sales. It brings more liquidity to the company.

NON-CURRENT ASSET
40.0%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%
2008 2009 2010 2011 2012 2013 2014 2015
Fig.16 Non-Current Asset

 In 2015 there was purchase of more property, plant and equipment which made non-
current increase.
 In 2008 and 2009 there was less property and equipment so the percentage is less.
 CURRENT LIABILITIES
CURRENT LIABILITES-Short-term loan Working capital loan

30.1% 30.1%
27.1%
25.1% 24.2%

14.9%
11.1% 11.1% 10.9%
9.2% 9.4%
6.1%

0.0% 0.0% 0.0% 0.0%

2008 2009 2010 2011 2012 2013 2014 2015
Fig.17 Current Liabilities

 This is a comparison between short term loan and working capital loan. As we can see
that in 2015 working capital loan was taken more than short term loan. They did not
go for long period of loan. So if they needed loan they went for working capital loan.
 As we can see every year working capital loan was higher than short term loan.
 In some years for example 2010, 2012, 2015 there was no short term loan taken.

CURRENT LIABILITIES
Trade payables Provision for income-tax

12.5% 12.5%

4.4% 4.1% 4.0%

3.8%
3.3%
2.1% 2.4%
1.9%
1.3% 1.3% 0.9% 1.3%
0.8%
0.4%

2008 2009 2010 2011 2012 2013 2014 2015

Fig.18 Current Liabilities

  In 2015 provision for income tax and trade payables was less as compared to 2008
and 2009 data. This means Apex Tannery did not delay to pay the debt on time.
 But there is other advantage keeping the liabilities because the company will have
money/ capital with them to invest in future.

Non Current liabilities-Retirement benefit obligations

Non Current liabilities-Retirement benefit obligations

5.4%
5.2%
4.7%

3.6%
3.4%
2.8%

1.7% 1.7%

2008 2009 2010 2011 2012 2013 2014 2015

Fig.19 Non-current liabilities-Retirement benefit obligation

 In 2015 we can see long term loan is 5.2% and in 2008 its 1.7%, so we can say that
Apex tannery has a long term loan on employee’s benefits which they have to pay.
 Every year this percentage has being increasing due to hire of new employees and
older employees are more own able to the company.
 Shareholders’ equity
16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%
2008 2009 2010 2011 2012 2013 2014 2015

Fig.20 Shareholders’ equity

 Over the years their equity has been decreased in comparison of total liabilities and
equities. The company mostly focuses on long term borrowing loans for their
investment.

For the last six years the company paid cash dividends of 44,888,000 taka. It gives 45% cash
dividend to their shareholders and retained most of their earnings in future investment
purpose.
CHAPTER THREE: Cash Flow Analysis
 CASH FLOW ANALYSIS

Cash flow is a statement reporting the change in net cash position, from the beginning to the
ending affected by firms operating, investing and financing activities. It is designed to show
how the firm's operations have affected its cash position by examining the investment (use of
cash) and financing decisions (sources of cash) of the firm. It helps to identify whether the
firm is generating sufficient cash to purchase additional fixed assets for growth, whether the
firm has excess cash flows to repay debt or to invest in new products. This information is
useful for both financial managers and investors.

Closing Cash Balance

581,455

365,265 363,765
335,744
276,575

50,819
2010 2011 2012 2013 2014 2015

Fig.21 Closing Cash Balance

From the above consecutive six year cash of Apex Tannery Limited it is found that the
ending cash balance was positive throughout the whole six years. From the graph we see that
the cash holding position of the company was increasing positively during the 2010-2015
period and in 2015 it had the most amounts of cash in hand. This is a good sign as Apex
Tannery has enough cash to run its day to business, pay bills and give out dividends etc.
Cash flow from operating activity:

Cash from operating activities focuses on the cash inflows and outflows from a company’s
main business activities of buying and selling merchandise, providing services etc. It is
important to note that cash flow is not the same as net income which includes transactions
that did not involve actual transfers of money.

The following table shows cash flow from Operating Activity of Apex Tannery (Taka in
thousands):

Cash flow from operating activities: 2010 2011 2012 2013 2014 2015
net income 142,853 96,843 107,676 100,157 84,024 95,269
Add: Depreciation 4,573 6,394 6,044 5,771 6,300 6,187
Changes in Current Asset/Liabilities:
Change in Accounts receivble -74,554 22,165 118,866 -50,213 23252 7,230
Change in Inventory 277550 -199988 -37503 388278 -48862 -75161
Change in Accounts Payable -546837 455852 -125853 -214375 1596 229319
cash inflow/outflow from operations: -196,415 381,266 69,230 229,618 64,714 262,844

cash inflow/outflow from operations:

12

10

0
0 2 4 6 8 10 12

Fig.22 cash inflow/outflow from operations

In year 2010 they had negative Operating Cash flow because they increased their sales by
selling more on credit (28% increase in Accounts receivables compared to yr. 2009). They
also paid off their payables (bills, interest payables etc) and by doing so they decreased their
accounts payables significantly (73.62% decrease in Accounts payables compared to yr.
2009). However on yr. 2011 Apex Tannery had the highest amount of cash from operations.
They did this by holding off on payables. They also had a short term trade note payable
(Tk.175,761) that was not present in previous yr. In summary we see that, in 2015 the
company tried to increase their cash flow from operations by buying more on credit.

Cash flow from Investment Activity:

An item on the cash flow statement that reports the aggregate change in a company's cash
position resulting from any gains (or losses) from investments in the financial markets and
operating subsidiaries, and changes resulting from amounts spent on investments in capital
assets such as plant and equipment.

The following table shows cash flow from Investing Activity of Apex Tannery (taka in
thousands):

APEX TANNERY LIMITED

CASH FLOW STATEMENT
F O R T H E YEAR ENDED J U N E 3 0 , 20 10

cash Inflow/outflow from investments:

12

10

0
0 2 4 6 8 10 12

Fig.23 Cash flow from Investment Activity:

In observing the cash outflow of the company we notice a steady stream of investing
activities are being undertaken. Apex Tannery had invested in fixed assets like land,
buildings and other properties. ATL also had other investments that shows a negative cash
outflow from the company. The company is investing in expansionary projects which means
it thinks its business is quite sustainable in the future. As an investor the company’s investing
activities looks promising because fixed assets like Land, building etc. has higher resale value
in our country. Investment in other companies (like Apex Adeichi Footwear Limited &
Central Depository Bangladesh Limited etc) also signifies that they have a wider portfolio.

Cash flow from financing Activity:

Cash Flows from Financing Activities are a measure of the money that a company took in or
paid out to finance its activities. It represents the flow of cash between a company and its
owners and creditors. Typically included in this calculation are the issuances or repurchase of
common stock, the issuance or repayment of debt and the dividends paid out to shareholders.

The following table shows Cash flow from Financing Activity of Apex Tannery (taka in
thousands):

APEX TANNERY LIMITED

CASH FLOW STATEMENT
F O R T H E YEAR ENDED J U N E 3 0 , 20 10

cash inflow/outflow from financing:

12

10

0
0 2 4 6 8 10 12
 Fig. 23 Cash Flow From financing activity

Apex Tannery has taken long term loans for its expansionary projects and to give dividends.
They consistently gave out dividends and increased each yr. which looks very attractive to a
potential investor. As an investor Apex Tannery looks to be more attractive as it is giving an
increasing amount of dividend. Apex Tannery Ltd has also slowly increased its debt
obligations to finance future projects. The company is generating enough cash to give out
dividends each yr.

Summary of Cash Flow Analysis:

During the years from 2010-2015 the company has had a steady growth of Cash at hand. In
2015 they had the most amounts of Cash on hand. They can use this cash to finance their day
to day operations or invest in short term investments. We have seen that the company has
investments in shares of Apex Adelchi Footwear Limited and Central Depository Bangladesh
Limited.

The Company looks attractive to the ordinary investor as it has enough cash to pay off
necessary payables or give out dividend; as we have seen the company has done over the
years. The future outlook of the company also looks positive due to their consistent cash
growth.
 CHAPTER Four: Ratio Analysis

LIQUIDITY RATIO
Current ratio (A/L ratio):
A liquidity ratio measures a company's ability to pay short-term obligations. The ratio is
mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt
and payables) with its short-term assets (cash, inventory, receivables). The higher the current
ratio, the more capable the company is of paying its obligations. A ratio under 2 suggests that
the company would be unable to pay off its obligations if they came due at that point. The
current ratio can give a sense of the efficiency of a company's operating cycle or its ability to
turn its product into cash. Also known as "liquidity ratio", "cash asset ratio" and “Cash ratio”.

Current ratio = Current Assets / Current Liabilities

The following table shows A/L ratio of ATL:

Current
Ratio 2008 2009 2010 2011 2012 2013 2014 2015
ATL 1.54 1.85 4.76 2.14 2.5 3.57 3.54 2.11
DGL 0.52 0.44 0.47 0.44 0.46 0.57 0.56  

Current Ratio
5 4.76
4.5
4
3.57 3.54
3.5
3
2.5
Tim e s

2.5
2.14 2.11
2 1.85
1.54
1.5
1
0.5
0
2008 2009 2010 2011 2012 2013 2014 2015

Fig.24 Current Ratio

Comments:
The Current ratios are better than the benchmark of 2 in any given year except 2008 and 2009
because of higher trade payable. In 2010, 2013, 2014 company paid its most of the short term
loan and significant working capital loan which ultimately lowered the current liability and
increased company's ability to pay back its short-term liabilities (debt and payables) with its
short-term assets (cash, inventory). At the same time compared to the DGL, ATL is much
better position in any year.

Quick Ratio:
Quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a
company’s ability to meet its short-term obligations with its most liquid assets. The quick
ratio measures the dollar amount of liquid assets available for each dollar of current
liabilities. The higher the quick ratio, the better the company's liquidity position. It is also
known as the “acid-test ratio" or "quick assets ratio”.

Quick ratio= (current assets – inventories) / current liabilities

The following table shows Quick Ratio of ATL:

Quick
Ratio 2008 2009 2010 2011 2012 2013 2014 2015
 ATL 0.26 0.73 1.94 0.99 1 2.28 2.1 1.14
DGL 0.32 0.13 0.43 0.38 0.42 0.46 0.24  

Quick Ratio
2.5
2.28
2.1
2 1.94

1.5
Tim es

1.14
0.99 1
1
0.73

0.5
0.26

0
2008 2009 2010 2011 2012 2013 2014 2015

Fig.25 Quick Ratio

Comments:

Quick ratio of 2008, 2009 is lower than the benchmark of 1 because of the higher trade
payable along with the high inventory which created liquidity shortage. In 2010, 2013
(highest), 2014 company paid up most of the short term loan and significant working capital
loan which ensured better liquidity. However compared to the DGL, ATL is better in every
year except 2008.

Overall situation of Liquidity ratio:

The benchmark analysis suggests that the firm is conveniently placed along with the both
time series and cross section analysis indicate that liquidity performance are doing better over
time. The firm needs to hold its current asset and cash balance to ensure liquidity of the firm.
Firm uses its working capital loan (current liability) in non-current asset like capital work
progress which should be discouraged. Reduction of credit purchase is also suggested.
Remarkable negative sales growth in 2009 is responsible for the poor cash balance.
ASSET MANAGEMENT RATIO
Inventory turnover:
A ratio showing how many times a company's inventory is sold and replaced over a period.
The formula for the inventory turnover ratio measures how well a company is turning their
inventory into sales. The costs associated with retaining excess inventory and not producing
sales can be burdensome. If the inventory turnover ratio is too low, a company may look at
their inventory to appropriate cost cutting.

Inventory turnover= Cost of goods sold/ Average Inventory

The following table shows Inventory Turnover of ATL:

Inventory
Turnover 2008 2009 2010 2011 2012 2013 2014 2015
ATL 2.08 1.75 2.66 3.04 3.54 7.46 7.91 6.65
DGL 13.02 5.07 70.1 55.42 43.75 22.9 6.63  
 Inventory Turnover
80

70

60

50
Times

40

30

20

10 7.46 7.91 6.65

2.08 1.75 2.66 3.04 3.54
0
2008 2009 2010 2011 2012 2013 2014 2015

Fig.26 Inventory Turnover

Comments:

ATL is sold out and restocked on average 4 times per year is considerably lower than the
DGL. It might be holding excessive stock of inventory which indeed is unproductive or it
might have old inventory piled up indicating poor inventory management.

Fixed Assets Turnover Ratio:

Fixed Asset Turnover ratio measures the amount of sales generated for every dollar's worth
of fixed assets. The fixed asset turnover ratio is calculated by dividing sale by total assets. It
is calculated as follows:

Fixed Assets Turnover Ratio = Sales Revenue/ Fixed Assets

The following table shows Fixed Asset Turnover Ratio:

FATO 2008 2009 2010 2011 2012 2013 2014 2015

ATL 15.26 10.83 10.95 11.51 10.83 10.03 10.09 6.19
DGL 3.22 1.65 2.95 3.03 2.35 2.6 2.68  
 Fixed Asset Turnover Ratio
18

16 15.26

14

12 11.51
10.83 10.95 10.83
10.03 10.09
10
Times

8
6.19
6

0
2008 2009 2010 2011 2012 2013 2014 2015

Fig.27 Fixed Asset Turnover Ratio

Comments:

Compared to the DGL, FATO ratio of ATL is significantly better. FATO is higher than the
average in 2008 because of the extraordinary higher sales compare to the net fixed asset. And
in 2015 company invested money in capital work that’s why it increases the Net fixed Asset
and decreases FATO ratio compare to other years.

Total Asset Turnover:

The asset turnover ratio is an efficiency ratio that measures a company's ability to generate
sales from its assets by comparing net sales with average total assets. In other words, this
ratio shows how efficiently a company can use its assets to generate sales.

Total Asset Turnover Ratio = Net sales/Average total assets

The following table shows the Fixed Asset Turnover Ratio of ATL:

TATO 2008 2009 2010 2011 2012 2013 2014 2015

ATL 1.65 1.07 1.58 1.56 1.92 2.26 2.55 2.15
DGL 2 1.16 1.98 0.12 1.56 1.46 1.22  
 Total Asset Turnover
3
2.5
2 1.65 2.55
1.92 2.26
1.58
1.5 1.07 1.56 2.15
Times

1
0.5
0
2008 2009
2010 2011
2012 2013
2014 2015

Fig.28 Total Asset Turnover Ratio

Comments:

Compared to the DGL, ATL’s TATO ratio is alright. We can see that from 2010 TATO is
gradually increasing over time because of increasing sales. In 2015 company invested money
in fixed asset (Capital Work) by procuring loan but sales was not increased compared to
previous year. So TATO ratio has gone down.

Overall situation of Asset management ratio:

Better performance in asset management ratio except inventory turnover. It is good that
company is doing cash business. But higher sales also can be done by giving credit which can
further improve Asset Management along with Inventory turnover. ATL is decreasing
inventory compared to sales from 2013 which should the going until satisfactory Inventory
turnover. To improve the Inventory turnover, company should strictly control Inventory and
reduce unnecessary inventory.
DEBT MANAGEMENT RATIO
Debt ratio:
It measures a firm's total liabilities as a percentage of its total assets. It measures the portion
of the assets of a business which are financed through debt. Debt ratio ranges from 0.00 to
1.00. Lower value of debt ratio is favorable and a higher value indicates that higher portion of
company’s assets is claimed by its creditors which mean higher risk in operation.
Debt ratio= total liabilities/total assets
The following table shows Debt Ratio of ATL:

Debt
Ratio 2008 2009 2010 2011 2012 2013 2014 2015
ATL 58.29% 50.92% 21.38% 43.22% 36.58% 26.38% 26.45% 36.12%
DGL 72.50% 68.37% 69.72% 68.07% 73.92% 76.83% 80.73%  
 Debt Ratio
90.00%

80.00%

70.00%
58.29%
60.00%
Percentage

50.92%
50.00%
43.22%
40.00% 36.58% 36.12%

30.00% 26.38% 26.45%

21.38%
20.00%

10.00%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015

Fig.30 Debt Ratio

Comments:

Compared to DGL, Debt ratio of ATL is better in all the given year. The result is that ATL
has easy time borrowing money; creditors trust that it is in a solid financial position and can
be expected to pay them back in full. In 2010 the debt ratio is markedly decreased because of
the repayment of the short term loan and significant working capital loan. Time to time ATL
has taken loan and repaid loan. But in 2015 ATL has taken large amount of working capital
loan for new project which affects the debt ratio.

Times interest Earned ratio (T/E ratio):

Times interest earned ratio is considered a solvency ratio because it measures a firm’s ability
to make interest and debt service payments. It shows how many times the annual interest
expenses are covered by net operating income (income before interest and tax) of the
company. A high ratio ensures a periodical interest income for lenders. Generally, a ratio of 2
or higher is considered adequate to protect the creditors’ interest in the firm.

Times interest earned ratio = Income before interest and tax/ Interest expenses

The following table shows T/E ratio of ATL:

TIE 2008 2009 2010 2011 2012 2013 2014 2015

ATL 1.61 1.89 5.91 2.95 2.79 3.34 3.7 3.23
DGL 3.74 1.19 2.67 1.89 0.97 3.89 2.34  
 Time Interst Earnings
5.91
6

4
3.7
3 2.95 3.34
2.79 3.23
Times

1.61 1.89
2

0
2008 2009 2010
2011 2012 2013 2014 2015

Fig.31 Times Interest Earning

Comments:

Poor Time interest earning indicates that firm is highly levered one. This increases risk as
interests are compulsory obligations. A good amount of gross profit is eaten up by interest. In
the last two year, company has raised debt capital as well as dividend payments which is not
a good sign. But one positive sign is that, whenever the company utilized the advantage of
debt financing as there was increase in EPS. In 2010 interest charge was less because of the
repayment of short term loan and significant capital working loan.

Overall Situation of Debt management ratio:

Company is much more stable which helps to less debt from the borrower. But to do any high
investment capital work, company can take debt easily. But their ability to pay interest is not
satisfactory. They are trying to be solvent by using their own asset and taking fewer loans
from the borrowers.
PROFITABILITY RATIO
Profit margin:
Profit margin serves as the source for paying additional expenses and future savings. The
profit margin is not an exact estimate of the company's pricing strategy but it does give a
good indication of financial health. Without an adequate profit margin, a company will be
unable to pay its operating and other expenses and build for the future. In general, a
company's profit margin should be stable. It should not fluctuate much from one period to
another, unless the industry it is in has been undergoing drastic changes which will affect the
costs of goods sold or pricing policies.

Profit margin= Net Income/ Net sales

The following table shows profit margin of ATL:

Profit
Margin 2008 2009 2010 2011 2012 2013 2014 2015
ATL 0.97% 9.03% 8.28% 3.85% 3.51% 3.08% 2.21% 2.53%
DGL 0.30% 0.41% 0.30% 0.40% 1.08% 1.34% 1.36%  
 Profit Margin
10.00%
9.03%
9.00%
8.28%
8.00%
7.00%
Percentage

6.00%
5.00%
4.00% 3.85%
3.51%
3.08%
3.00% 2.53%
2.21%
2.00%
0.97%
1.00%
0.00%
2008 2009 2010 2011 2012 2013 2014 2015

Fig.32 Profit Margin

Comments:

Profit margin is positive in all the given year but wasn’t very high. In 2009 and 2010 the
firm’s profit margin was abruptly high because of the profit from selling investment and less
interest charge respectively. We see that interest charge has eaten a bulk amount of the profit.
So excessive sales promotion and inventory management, interest charge could be
manageable by taking less loan which ultimately can increase profit margin. And as
compared to DGL, ATL’s profit margin is significantly better.

Return on Asset (ROA):

Return on Assets (ROA) is an indicator of how profitable company's assets are in generating
profit. In other words, the return on assets ratio or ROA measures how efficiently a company
can manage its assets to produce profits during a period. The ROA figure gives investors an
idea of how effectively the company is converting the money it has to invest into net income.

ROA= Net income/Total asset

The following table shows ROA of ATL :

RO
A 2008 2009 2010 2011 2012 2013 2014 2015
ATL 1.57% 9.65% 13.10% 6.00% 6.74% 6.97% 5.67% 5.43%
DGL 0.60% 0.48% 0.59% 0.86% 1.68% 1.96% 1.66%  
 Return on Asset
14.00% 13.10%

12.00%

10.00% 9.65%
Percentage

8.00%
6.74% 6.97%
6.00% 5.67%
6.00% 5.43%

4.00%

2.00% 1.57%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015

Fig.33 Return on Asset

Comments:
From the graph we observed that ROA is much significant compared than DGL. In 2008 due
to higher debt and poor inventory management made the lowest ROA in last 8 years. Highest
net income gives ROA a peak in 2009 and 2010. From 2011 till now there is stable ROA.
From cross section analysis ATL is way batter than the DGL.

Return on equity (ROE):

Return on equity (ROE) is a measure of profitability that calculates how many taka of profit a
company generates with each taka of shareholders' equity.

ROE= Return on Equity = Net Income/Shareholder's Equity

The following table shows the Return of Equity of ATL:

ROE 2008 2009 2010 2011 2012 2013 2014 2015

ATL 3.78% 19.67% 16.66% 10.57% 10.63% 9.47% 7.69% 8.51%
DGL 2.21% 1.53% 1.96% 2.68% 6.44% 8.48% 8.61%  
 Return on Equity
25.00%

19.67%
20.00%
16.66%
Pe rce ntage

15.00%

10.57% 10.63%
10.00% 9.47%
8.51%
7.69%

5.00% 3.78%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015

Fig. 34 Return on Equity

Comments:

From the graph we can see that ROE is decreasing from the 2009 to 2014 except 2012. This
decreasing indicates that ATL is decreasing its ability to generate profit without needing as
much capital. It also indicates that the management was not deploying the shareholder capital
efficiently. But in 2015, ROE has increased then previous year. In previous years ATL was
doing good compared to DGL but ATL’s performance is decreasing over time.

Overall situation of Profitability ratio:

As compared to DGL the profitability ratio of ATL is better. But the net income is not
satisfactory which affects the whole profitability of the company. The company is unable to
maintain its total asset and Total equity which help to bring net income for the company. One
of the factor which affecting the net income of the company is Interest. To reduce interest and
better asset management, company should give more emphasis on the inventory management
and operations.

MARKET VALUE RATIO

Market: Book value Per Share:

The Market-to-Book Ratio relates the firm's market value per share to its book value per
share. Since a firm's book value reflects historical cost accounting, this ratio indicates
management's success in creating value for its stockholders. This ratio is used by "value-
based investors" to help to identify undervalued stocks.
The following table shows Market to Book value Ratio of ATL:

M/B
Ratio 2008 2009 2010 2011 2012 2013 2014 2015
ATL 1.45 2.43 2.64 2.27 1.55 1.25 2 1.5
DGL 1.85 1.73 1.71 1.75 1.91 1.96 1.97  

M/B Ratio
3
2.64
2.43
2.5
2.27
2
1.45 2
1.5 1.55
Times

1.25 1.5
1

0.5

0
2008 2009 2010 2011 2012 2013 2014 2015
Fig.35 M/B Ratio

Comments:

The market book value per share has decreased over the time period of 2010 to 2015 except
2014. Sometimes the M:B ratio is less than the DGL indicates that not only firm performs
poorer then the DGL but also trust of the investor in the firm goes down.

Price Earnings Ratio (P/E ratio):

The price earnings ratio shows what the market is willing to pay for a stock based on its
current earnings. The price to earnings ratio indicates the expected price of a share based on
its earnings. As a company's earnings per share being to rise, so does their market value per
share. A company with a high P/E ratio usually indicated positive future performance and
investors are willing to pay more for this company's shares. In general, a high P/E suggests
that investors are expecting higher earnings growth in the future compared to companies with
a lower P/E.

Price-earnings ratio = Market price per share / Earnings per share

The following table shows P/E ratio of ATL

 P:E
Ratio 2008 2009 2010 2011 2012 2013 2014 2015
ATL 38.25 12.34 15.84 21.43 14.58 13.2 25.88 17.71
DGL 13.5 12.29 12.53 10.6 14.9 16.85 13.8  

P:E Ratio
45

40 38.25

35

30
25.88
25
21.43
20 17.71
15.84
14.58
15 12.34 13.2

10

0
2008 2009 2010 2011 2012 2013 2014 2015

Fig.36 P:E Ratio

Comments:

P/E ratio is higher for the firms with higher growth potentials as well as for the riskier firms.
The growth has gone down gradually over the time. So firm must have increased risk perhaps
due to high leverage than the industry. Of course increased P/E ratio indicates that the firm
gained more trust from the investor.

Overall situation of Market value ratio:

One of the most important ratios to evaluate the performance of the firm is the price earnings
ratio. The ratio is acceptable as compared to the DGL. But the fluctuation of the P/E ratio
indicates that investors are still confused about the firm’s profitability and management.
Market value per share is not same at the end of the year , it means company doesn’t suffer
from the “Thin trading problem”.

Overall condition of the company is satisfactory. If this situation persists, investors may
impatient and withdraw their trust.
 CHAPTER Five: Findings and Conclusion

Findings:

Apex Tannery Limited is the most expanded and one of the largest private business
corporations of Bangladesh in its own sector. However, company has some weak points in
the management system and there is improper way of managing inventory. Hey are taking
loan at high interest rate. As a result, their profit is not up to the mark because of inefficient
way of inventory management and interest payment. They can do this by reducing the
production quantity and selling the unsold items first by giving price cut or other means of
promotional activities.
The benchmark analysis of the liquid ratio suggested that company is doing better over the
time. In case of debt management firm is in advantage position. They are trying to be solvent
by using their own asset and taking fewer loans from the borrowers.

The Company looks attractive to the ordinary investor as it has enough cash to pay off
necessary payables or give out dividend; as we have seen the company has done over the
years. The future outlook of the company also looks positive due to their consistent cash
growth.

The most important is that firms firm’s market value is way higher that the net asset value per
share which brings the good news for the company.

Conclusion:
Though Apex Tannery Limited is the foremost company, they have a significant number of
competitors in the industry. The competitors are trying to capture the market share as much as
possible. Therefore, company should be proactive rather than reactive in their management
decision; otherwise, the scenarios will be change indeed.

Apex Tannery Limited did demonstrate a good performance in the last 8 years but they need
to be more alert regarding company’s profitability gaining and keeping raise their market
value. This will be possible by improving their financial performance in an organized way. If
they manage it properly, their market position will be stronger than others.
Bibliography:
1. Annual Report of 2008 to 2015
2. Besley & Brigham “Essential of Managerial Finance” 14th edition.
3. www.apextannery.com/
4. www.deshgroup.com/
5. www.dsebd.org