Performance Evaluation of MIDAS Finance Ltd and People’s leasing and financing during

(2017-2019)
Performance Evaluation of MIDAS Finance Ltd and People’s leasing and financing during
(2017-2019)
Course Code: Act 421
Course Tittle: Intermediate Accounting-II
Section:1

Prepare For:
Tania Hamid
Senior Lecturer
Department of Business Administration
East West University

Prepared By:
Anindita Barua
2017-2-10-057
Letter of Transmittal

11th January, 2021

Tania Hamid
Senior Lecturer
Department of Business Administrative
East West University
Aftabnagar, Dhaka-1212
Dear Madam,
It gives me immense pleasure to present the reports on “Performance Evaluation MIDAS
Finance Ltd and People’s leasing and financing. During 2017-2019” for the course Intermediate
Accounting( II). Doing this report, I have learned a lot of practical things, and I believe that this
experience will really help me in the long run.
In writing this report I have followed your instruction for report writing. So as to present our
views and and understand to the easiest way. I would like to thank you for your valuable
guidance in every problem that we had. I will be available for any further clarification required.
Thank you.
Yours sincerely,
Anindita Barua
Acknowledgement
This report is the result of a group work embraced by the course “Intermediate Accounting” by
Tania Hamid, Senior Lecturer of Department of Business Administration, East West University.
It is our great pleasure to develop the report on “MIDAS Finance ltd and people’s leasing and
financing ltd” during (2017-2019). At first, I would like to express our profound feelings of
appreciation to almighty Allah for His limitless blessings that permitted and helped us to finish
this task effectively. We truly would like to express our appreciation to our honorable course
instructor Tania Hamid Senior lecturer for issuing us the errand to set up this task. It was a
knowledgeable event which will tremendously help me in the future. It will improve my
expertise to an extraordinary expanse. I am exceptionally thankful for her important and minding
directions and propositions.
Executive summery
This term paper is two well-known Leasing Company based term paper. This term paper focus
on what is lease? Lease parties, classification of lease Studies on Ratio Analysis and relevant
Issues. I cover two leasing company’s Ratio Analysis (2017 to 2019) those company are MIDAS
Finance ltd and People’s leasing and financing ltd. In this term paper I have interpreted different
types of Ratio analysis and their impact on the leasing company. It is two leasing company-based
term paper. So, I have collected data from Company’s website and their annual Report. By doing
this term paper I have got enough knowledge about Leasing company’s relevant issue.
 1.Introduction
Company profile of MIDAS finance
MIDAS Financing Ltd. (MFL) extends lease finance facility to SME and Corporate Business
Units in the manufacturing and service industries sectors and also to individuals and institutions.
Its leasable items are capital machines, heavy constructional equipment, generators, air
conditioning, transformer, refrigerator, medical equipment, vehicles, agricultural equipment.
Lease period varies two to five.
Company profile of People’s leasing and financing
People’s Leasing and Financial Services Limited (PLFS) is a financial institution incorporated as
a Public Limited Company on August 12, 1996. The company commenced its business to carry
on lease finance on August 26, 1996. Its office is located in Dhaka.PLFC gives people friendly
lease like they provide life style lease, heavy vehicle, PLC motor coach, PLC three wheeler, PLC
agricultural lease.
Objective of the study
In our course, we have learned about different types of Leasing throughout the semester. But
only theoretical knowledge is not enough to gain proper knowledge. Therefore, to gain proper
knowledge, we have examined MIDAS and People’s Having objective is very much important
for a research paper. Now in this report I am trying to portrait their financial conditions. This
report is entitled to
 What is lease? And their parties
 Classification of lease
 To evaluate performance of 2 companies and to calculate ratios for last three years.
 To analyze the factors that influence performance of these 2 companies.
 To analyze income statement and balance sheet of 2 companies from 2017 to 2019 for
calculating ratios.
 To present different financial ratios.
 To analyze and interpret the ratios.
 To identify the problems of the three companies.
 To suggest remedial action for improvement of the losing company.

Limitation of the study For doing the term paper, we have faced some constraints or limitations
which are following:
 Difficulty in communication and gaining accesses to the financial sector.
 Non-availability of the most required data.
 Large scale research was not possible due to time constraints.
 Non availability of data in a systematic way.
 Lack of specific information because of confidentiality.
 Lack of direct observation of actual data use of the pay package’s and pay ranges and
benefits that
 Lack of resources in the critical situation of Covid-19.
1.8 Methodology of the study This term paper has been made by the help of the guideline and
resources from the course . And I have gathered other information from secondary resources
like: -
  Websites, journal activities
 Articles, Reports
 Book.

What is Lease
Lease is a contractual agreement between lease and lessor. This agreement gives right one party
to use specific property for a specific period of time. Aristotle own word “Wealth does not lie in
ownership but in the use”. Lease is helpful for both lessor(property ‘s owner) and lessee ( who
take rent). For example: a person whose name was Karim want to start a fish farm for that
reason he needs pond, now he do not have enough money to purchase a land. Lease gives him a
opportunity to start his farm without purchasing a pond.

Who are the parties to a lease contract?

There is mainly two parties lessor and lessee but there are also a third party involvement prevail.

Lessor: The one who gave his property(land, pond, car) on rent for a certain period of time is
called lessor.
Lessee: The one who is taking the property( land,pond,car) in a lease by paying money for a
certain period is termed as lessee. Any person or entity who is in need of property or land can be
a lessee.
Third parties: Financial intermediaries, in case of leverage financing.

Lessors owners of the properties are:

  Banks: Banks are the largest players in the leasing business. They have low-cost funds,
which give them the advantage of being able to purchase assets at less cost than their
competitors. Banks also have been more aggressive in the leasing markets. Deciding that
there is money to be made in leasing, banks have expanded their product lines in this
area. In Bangladesh leasing banks are exits.
 Captive Leasing Companies: Captive leasing companies are subsidiaries whose primary
business is to perform leasing operations for the parent company. Captive leasing
companies have the point-of-sale advantage in finding leasing customers. That is, as soon
as Caterpillar receives a possible order, its leasing subsidiary can quickly develop a lease-
financing arrangement. Furthermore, the captive lessor has product knowledge that gives
it an advantage when financing the parent’s product.
 Independents: Independent lessors mean individual person gives permission to use his
property for a specific period of time. Day by day individual lessor amount has been
reduced because of bank and captive leasing companies have become more aggressive in
the financing area.

Classification Of Lease

Capital lease for Lessee: A capital lease is a lease in which the lessee records the underlying
asset as though it owns the asset. In order to record a lease as a capital lease , the lease must be
noncancelable. It must be meet one or more capitalization criteria which I discus in details:
Transfer of ownership
A capital lease is a lease in which the lessee records the underlying asset as though it owns the
asset.
Bargain-Purchase Option Test
It allows the lessee to purchase the leased property for a price that is significantly lower than the
property’s expected fair value at the date the option becomes exercisable. At the inception of the
lease, the difference between the option price and the expected fair value must be large enough
to make exercise of the option reasonably assured.
The lease term is equal to 75% or more
If the lease period equals or exceeds 75 percent of the asset’s economic life, the lessor transfers
most of the risks and rewards of ownership to the lessee. Capitalization is therefore appropriate.
However, determining the lease term and the economic life of the asset can be troublesome.
The PV of the minimum lease payments equal or exceeds 90% of fair value
If the present value of the minimum lease payments equals or exceeds 90 percent of the fair
value of the asset, then a lessee should capitalize the leased asset. Determining the present value
of the minimum lease payments involves three (1) minimum lease payments, (2) executory
costs, and (3) discount rate. Executive costs includes insurance, maintenance, and tax expenses.
If lessor retains responsibility for the payment of these “ownership-type costs,” it should
exclude, in computing the present value of the minimum lease payments, a portion of each lease
payment that represents executory costs. Executory costs do not represent payment on or
reduction of the obligation. If lessee e directly pays executory costs to the appropriate third
parties. In these cases, the lessor can use the rental payment without adjustment in the present
value computation.
Operating Lease For Lessee
The lessor owns the leased asset, and the lessee has obtained the use of the underlying asset only
for a fixed period of time. Based on this ownership and usage pattern, we describe the accounting
treatment of an operating lease by the lessee and lessor.
Classification cation of Leases by the Lessor
Direct financing
Direct-financing leases are in substance the financing of an asset purchase by the lessee. In this
type of lease, the lessor records a lease receivable instead of a leased asset. The lease receivable
is the present value of the minimum lease payments. Remember that “minimum lease payments”
include rental payments, bargain purchase, guaranteed residual value, penalty for failure to
renew.
Operating lease
At the commencement date of an operating lease, the lessor shall defer all initial direct costs.
Lessor must account for lease payments, variable lease payment, initial direct cost.
Sales Type leases
In Bangladesh now there are thirty leasing company out of these only one is fully owned by the
Government, fifteen are local, eleven are joint ventures with foreign participants and two are
housing finance companies.
Performance evaluation of MIDAS financial Ltd and People’s leasing financing during (2017-
2019)
Company profile of MIDAS finance
MIDAS Financing Ltd. (MFL) extends lease finance facility to SME and Corporate Business
Units in the manufacturing and service industries sectors and also to individuals and institutions.
Its leasable items are capital machines, heavy constructional equipment, generators, air
conditioning, transformer, refrigerator, medical equipment, vehicles, agricultural equipment.
Lease period varies two to five.
Company profile of People’s leasing and financing
People’s Leasing and Financial Services Limited (PLFS) is a financial institution incorporated as
a Public Limited Company on August 12, 1996. The company commenced its business to carry
on lease finance on August 26, 1996. Its office is located in Dhaka.PLFC gives people friendly
lease like they provide life style lease, heavy vehicle, PLC motor coach, PLC three wheeler, PLC
agricultural lease.

Ratio analyses and findings of above two companies

1.Current ratio
Company’s Name 2017 2018 2019

MIDAS Finance 1.58 1.30 1.29

People’s leasing and 0.84 0.80 0.82

financing

Theoretical Background: Current ratio mainly shows that ability of insurance company pays for
its current liability with current assets or in other way to say that how much liquid fund or asset
maintaining to pay its current liability. According to rule of thumb, CR= 2:1 and CR>2 means
high liquidity but low profitability and CR <2 means low liquidity but high profitability. In
general, we know that if we have high quantity of current asset that means we are investing in
short term asset that is less profitable than investing in long term asset.
Analysis of two companies: Comparing two companies we observe MIDAS current ratio is
higher than people’s financial ltd. MIDAS hold cash more than people’s ltd. On the other hand
People’s invest their money more.

2.Return on Asset (ROA)

Company’s Name 2017 2018 2019

MIDAS Finance 1.96 0.10 0.80

People’s leasing and 4.27 3.2 3.00

financing

Theoretical Background: It refers that by utilizing total assets how much a company earns as
profit. It indicates higher the ratio, higher the profitability and lower the ratio, lower the
profitability.
Analysis of two companies: Comparing two companies we can say people’s leasing and
financing is more profitable than MIDAS is less profitable over the last three years based on
return onassets.

3.Return on equity (ROE)

Company’s Name 2017 2018 2019

MIDAS Finance 16.80% 0.8 6.12

People’s leasing and 16.89 16.66 15.88

financing

Theoretical Background: It refers that by utilizing the capital how much return or profit a
company gets. In this case, higher the ratio indicates higher the profitability and lower the ratio
indicates lower the profitability
Analysis of two companies: Comparing the two companies we can say that People’s leasing C
is more profitable and MIDAS is less profitable over the last three years based on return on
equity ratio.
4.Earning per share (EPS)
Company’s Name 2017 2018 2019

MIDAS Finance 1.75 0.08 1.75

People’s leasing and 0.10 2.75 2.90

financing

Theoretical Background: EPS represents the amount earn on behalf of each outstanding share
of common stock. If company gives higher return to the shareholder than price will increase and
demand will also increase.
Analysis of a two Companies: Comparing two companies we can say that MIDAS gives more
EPS in 2017 latter in (2018-2019) it gives less EPS. People’s provide less EPS in 2017 but latter
it provides more EPS than MIDAS.

5.Price earnings ratio

Company’s Name 2017 2018 2019

MIDAS Finance 23.66 302.55 20.44

People’s leasing and 46.30 47.39 46.00

financing

Theoretical Background: The price-earnings ratio, also known as P/E ratio, P/E, or PER, is the
ratio of a company's share price to the company's earnings per share. The ratio is used for
valuing companies and to find out whether they are overvalued or undervalued.
Analysis of a two Companies: Comparing two companies we can say that People’s leasing pay
higher share price because of growth in near future. But in 2018 MIDAS provide more P/E .

6.Net Asset Value (NAV)

 Company’s Name 2017 2018 2019

MIDAS Finance 10.89 10.64 11.36

People’s leasing and 11.98 10.71 11.38

financing

Theoretical Background: The Net Asset Value Per Share (NAVPS) is a real estate metric that
indicates the value of a mutual fund or an exchange-traded fund (ETF). The NAVPS is obtained
by dividing the net asset value (total assets less liabilities) of a fund by the number of
outstanding shares.
Analysis of a two Companies: Comparing two companies we can observe that both companies
NAV is close enough to each other except in 2017. In 2017 people’s leasing is in better position.

7.Return on Investment (ROI)

Company’s Name 2017 2018 2019

MIDAS Finance 11.39 13.99 5.64

People’s leasing and 0.711 null null

financing

Theoretical Background: Return on investment is a ratio between net profit and cost of
investment. A high ROI means the investment's gains compare favorably to its cost. As a
performance measure, ROI is used to evaluate the efficiency of an investment or to compare the
efficiencies of several different investments.
Analysis of a two Companies: I cannot find people’s leasing ROI in 2018 and 2019. So
comparing it is bit difficult.
8.Net asset per share
Company’s Name 2017 2018 2019

MIDAS Finance 10.89 10.71 11.38

People’s leasing and null 18.10 18.58

financing
Theoretical Background: Net asset value is the value of a funds assets minus any liabilities and
expenses. The NAV (on a per-share basis) represents the price at which investors can buy or sell
units of the fund. When the value of the securities in the fund increases, the NAV increases.
Analysis of a two Companies: Comparing the two companies we can say that people’s leasing
Company is more profitable and MIDAS Company is less profitable over the three years based
on net asset per value.

9.Profit after tax (million)

Company’s Name 2017 2018 2019

MIDAS Finance 217.95 11,5.72 968.41

People’s leasing and 4,009 4,309 4416

financing

Theoretical Background: Profit after tax (PAT) can be termed as the net profit available for the
shareholders after paying all the expenses and taxes by the business unit. The business unit can
be any type, such as private limited, public limited, government-owned, privately-owned
company.
Analysis of a two Companies: Comparing the two companies we can say that people’s leasing
Company is more profitable and MIDAS Company is less profitable over the three years based
on profit after tax.

10.Market price per share

Company’s Name 2017 2018 2019

MIDAS Finance 28.37 24.90 14.60

People’s leasing and 19.20 17.30 18.30

financing

Theoretical Background: The market price share of stock is the recent price that a stock had
traded for. It is a function of market forces, occurring when the price a buyer willing to pay a
stock meets the price a seller is willing to accept for a stock.
Analysis of a two Companies: Comparing the two companies we observe that MIDAS was
better position than people’s leasing (2017-2018). But in 2019 People’s leasing was in better
position.
 3 Conclusion and recommendation

Financial analysis is helpful in assessing the financial position and profitability of a concern.
This is done through comparison by ratios for the same concern over a period of years, or for one
concern against another, or for one concern against the industry as a whole, or for one concern
against the predetermined standards, or for one department of a concern against other
departments of the same concern. To assess any business condition financial analysis gives a
clear financial picture of any business organization. This helps to evaluate the trend and
condition of organization. From small to big business organization financial analysis helps a
great deal in decision-making.
After analyzing all the ratios, we can say that People’s leasing is more profitable than MIDAS
insurance and Meghna. Almost in every ratio we find the People’s leasing is better than other. As
their profitability ratio is higher and also their management is more efficient. So, ratio analysis
actually helps to give an idea about the financial condition, thus it helps in future financial
projection and decision-making process of any business house. Eventually one can assess how
important is financial analysis in the modern days of business. After analyzing it I can say
people’s leasing is in better condition.

Recommendation
Almost most of the ratio indicates that people’s leasing are in more profitable one. So, MIDAS
should work on it to increase. They should invest more money on leasing sector and gives more
EPS. If they can provide more EPS they can attract new share-holder.
Reference
https://www.mfl.com.bd/index.php/home/annual_reports
https://plc.lk/images/annual-reports/plc-annual-report-2018-19.pdf
http://plfsbd.com/investor/annual/Annual_Report_2017.pdf