LAFARGEHOLCIM BANGLADESH LIMITED

Debt Ratio (Short Term)

Debt Ratio (Short Term)

Formula: Debt Ratio in Short Term = Total liabilities in Short Term/ Total Assets

Short Term Liabilities includes

1. Trade payables
2. Other current liabilities
3. Borrowings (Current)
4. Unclaimed dividend

Details 2020 2019 2018

Total Short-Term Liabilities 5,961,303,000 7,017,400,000 4,532,161,000
Total Assets 23,128,262,000 23,871,865,000 21,323,019,000
Debt Ratio in Short Term 0.26 0.29 0.21
Percentage (%) 26% 29% 21%

Debt Ratio (Short Term)

35%
29%
30%
26%
25%
21%
20%

15%

10%

5%

0%
2020 2019 2018
Interpretation:
The debt ratio in the short run measures the extent of a company’s short-term
leverage in terms of total current debt to total assets. The higher the debt ratio, the
more leveraged a company is, implying greater financial risk. At the same time,
leverage is an important tool that companies use to grow, and many businesses find
sustainable uses for debt. A debt ratio greater than 1 (>1) indicates that a company
has more debt than assets. Meanwhile, a debt ratio of less than 1 (<1) indicates that
a company has more assets than debt. From the graph we can see that Lafargeholcim
Bangladesh Limited has a debt ratio of less than 1 for consecutive 3 years starting
from 2018 to 2020. So we can say that the company has more assets than debt
implying a less financial risk for the investors. For the year 2018 it has debt ratio of
21% which is the lowest and 29% debt ratio for the year of 2019 which is the highest
among these three years.

So we say that the debt ratio of Lafargeholcim Bangladesh Limited is stable and
didn't vary that much over these three years of period thus making it a better
investment choice for the investors.
Debt Ratio (Long Term)

Debt Ratio (Long Term)

Formula: Debt Ratio in Long Term = Total liabilities in Long Term/ Total Assets

Long Term Liabilities includes

Borrowing (Non-current)
Deferred tax liability
Employee benefits

Details 2020 2019 2018

Total Long-Term Liabilities 2,700,055,000 3,155,684,000 2,977,160,000
Total Assets 23,128,262,000 23,871,865,000 21,323,019,000
Debt Ratio in Long Term 0.12 0.13 0.14
Percentage (%) 12% 13% 14%

Debt Ratio (Long term)

16%
14%
14%
12% 13%
10% 12%

8%
6%
4%
2%
0%
2020 2019 2018
Interpretation:
The debt ratio in the long run measures the extent of a company’s leverage in terms
of total non-current debt to total assets. The higher the debt ratio, the more
leveraged a company is, implying greater financial risk. At the same time,
leverage is an important tool that companies use to grow, and many businesses find
sustainable uses for debt. A debt ratio greater than 1 (>1) indicates that a company
has more debt than assets. Meanwhile, a debt ratio of less than 1 (<1) indicates that
a company has more assets than debt. From the graph we can see that Lafargeholcim
Bangladesh Limited has a debt ratio of less than 1 for consecutive 3 years starting
from 2018 to 2020.So we can say that Lafargeholcim Bangladesh Limited has
more assets than debt implying a less financial risk for the investors. For the year
2020 it has debt ratio of 12% which is the lowest and 14% debt ratio for the year of
2018 which is the highest among these three years.

So we say that the debt ratio of Lafargeholcim Bangladesh Limited is decreasing

over these three years of period thus making it a better investment choice for
the investors.
Debt to Equity Ratio

Debt to Equity Ratio

Formula: Debt to Equity Ratio = Total liabilities/ Total Equity

Total Equity includes

Retained earnings
Other components of equity
Other components of equity

Details 2020 2019 2018

Total Liabilities/Debts 8,661,358,000 10,173,084,000 7,509,321,000
Total Equity 14,466,904,000 13,698,781,000 13,813,698,000
Debt - Equity Ratio (times) 0.60 0.74 0.54

Debt - Equity Ratio

0.80
0.70
0.74
0.60
0.50 0.60
0.54
0.40
0.30
0.20
0.10
0.00
2020 2019 2018

Debt - Equity Ratio

Interpretation:

The debt-to-equity ratio is the ratio of total liabilities of a business to its shareholders'
equity. It is a leverage ratio and it measures the degree to which the assets of the
business are financed by the debts and the shareholders' equity of a business. Lower
values of the debt-to-equity ratio are favorable indicating less risk. The Higher
debt-to-equity ratio is unfavorable because it means that the business relies
more on external lenders thus it is at higher risk. So from the graph we can see
that the debt to equity ratio of Lafargeholcim Bangladesh Limited has decreased
to 0.60 in 2020 from the previous year. Among three years it has the lowest debt
to equity ratio in 2018 of 0.54 times. If the debt-equity ratio is greater than 1 then
there is higher risk for the investors to invest but stockholders like to get benefit from
the funds provided by the creditors therefore they would like a high debt to equity
ratio.

So we can say that Lafargeholcim Bangladesh Limited can be considered as a

less risky company (considering debt to equity ratio) to invest and the
shareholders can get more benefit in current market scenario.
Interest Coverage Ratio

Interest Coverage Ratio

Formula: Interest Coverage Ratio = Earning before Interest & Taxes/ Interest
Expense

Interest Expense includes

1. Interest on borrowings
2. Bank charges and commission

3. Interest expenses on lease liabilities

Details 2020 2019 2018

EBIT 2,348,804,000 1,817,202,000 1,206,209,000
Interest Expense 53,704,000 213,894,000 223,333,000
Interest Coverage Ratio
43.74 8.50 5.40
(times)

Interest Coverage Ratio

50.00
45.00
40.00 43.74
35.00
30.00
25.00
20.00
15.00
10.00
5.00 8.50
0.00 5.40
1 2 3
Interpretation
The interest coverage ratio measures a company's ability to handle its outstanding
debt. The interest coverage ratio is sometimes called the times interest earned (TIE)
ratio. It is sometimes used to determine a company's riskiness relative to its current
debt or for future borrowing. The interest coverage ratio is a good assessment of
a company’s short-term financial health. Creditors use the ratio to decide whether
they will lend to the company. A higher coverage ratio is better, although the ideal
ratio may vary by industry. The lower the ratio, the more the company is
burdened by debt expense. When a company's interest coverage ratio is only 1.5 or
lower, its ability to meet interest expenses may be questionable. From the graph we
can see that the Interest coverage ratio of Lafargeholcim Bangladesh Limited is on
its peak on 2020 which is 43.74. Among three years it has the lowest interest
coverage ratio in 2018 of 5.40 and it has been increased to 8.50 in 2019.

So by observing its increasing trend in the perspective of Interest coverage ratio,

we can say that Lafargeholcim Bangladesh Limited can be considered as a less
risky company.

Reference:
https://www.lafargeholcim.com.bd/financial-reports