COURSE: ACN301

SECTION:01

SUBMITTED TO: DR. RUSHDI RAZZAQUE

LECTURER SCHOOL OF BUSINESS

SUBMITTED BY
JAHID HASAN
ID:1921750

ANALYSIS OF MJL AND PADMA OIL COMPANY

ANNUAL REVIEW | 1
5th May 2021

To,

Mr. Dr.Rushdi Razzaque

Lecturer

School of Business and Entrepreneurship at a glance

Independent University, Bangladesh

Dhaka

Subject: Submission of the report on “Financial Analysis”

Dear Sir,

I am delighted to submit the assignment on “Financial Analysis” which you had authorized us to
prepare as ACN-301 course requirement.

I have enjoyed preparing the assignment, though it was challenging to finish within the given
time. In order to prepare this report, i tried my level of best to include all the relevant
information.

So, i therefore hope that, you will find it in order and if you have any query please do not hesitate
to contact.

Thanking You.

ANNUAL REVIEW | 2
 ACKNOWLEDGEMENT

A special debt is due to our respected faculty and course instructor Mr. Dr.Rushdi Razzaque

for giving me such opportunity and providing valuable guidance, suggesting me about accumulating the
preparation of this report. i would also like to thank him for assigning with an exclusive topic that has helped to
develop information knowledge in truly unique way.

Moreover, i have benefited from the help of many people who have gleesomely supplied insightful comments,
suggestions and contribution all, which have progressively enhanced this report. The selection of these two
specific organization is vital for our successful study.

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TABLE OF CONTENTS

1. Cash Flow -----------------------------------------6-9

2. Interest and dividend method----------------10
3. Accrual Income and analysis-------------------11-12
4. Financial Ratio Analysis--------------------------12-22

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 Executive Summary

MJL Bangladesh Limited (MJLBD), a Joint Venture in the downstream petrol industry between Jamuna Oil
Company Ltd. (JOCL) and EC Securities Ltd(subsidiary of the East Coast Group),was joined in 1998.The
companystarted its business activity in 1999.

Padma Oil Company Limited (POCL) is the biggest and most seasoned oil organization in Bangladesh, with its
predecessor organizations tracing all the way back to British-India's provincial period. Its tribal endeavor,
Burmah Oil Company, previously Rangoon Oil Company in the British Empire, was set up in the center of the
nineteenth century. In 1874.
In this report we breakdown the ratio analysis, cash flow statement and interest and cash dividends of MJL
company and Padma Oil Company Ltd.

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1. CASH FLOW:

Cash flow is a measure of changes in a company's cash account during an accounting

period, specifically its cash income minus the cash payments it makes. For example
if a bike dealership sells $80,000 worth of cars in a month and spends $25,000 on
expenses, it has a positive cash flow of $55,000. But if it takes in only $25,000 and has
$80,000 in expenses, it has a negative cash flow of $55,000.
Investors frequently consider income when they evalaute an organization, since without
sufficient cash to take care of its bills, it will have a difficult time to staying in business.

There are two methods of cash flow

1. Direct Method
2. Indirect Method

MJL Company &Padma Oil Company Cash Flow Strategy:

MJL Company and padma Oil company have been followed the indirect
method of cash flow statement.

Understanding the indirect method

The indirect method is one of two accounting strategy used to produce an income
explanation. The indirect method uses increases and decreases in balance sheet line items
to modify the operating section of the cash flow statement from the accrual method to
cash method of accounting.

Example of the Indirect Method

under the indirect method of cash flow statement, a revenue is percieved when it is
earned, not really when cash is obtained. If a consumer buys a $150 mobile phone on
credit, the sale has been made but the cash has not yet been received. The revenue is still
recognized in the month of the sale. Another example let’s assume accounts receivable

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Indirect method from operating activities
Cash flow from operating activities indicates the amount of money a company brings in from its ongoing,
regular business activities like assembling and selling merchandise or offering a support to clients. It is the
principal area portrayed on an organization's cash flow statements. Cash flow from operating activities does
exclude long-term capital expenditures or investment revenue and expense

Example of cash flow from operating activities:

1. Net Income
2. + net non cash expaense
3. – non operating gains
4. + decrease in current asset
5. – inrease in current asset
6. +increase in current liabilities
7. – decrease in current liabilities
8. Net cash flow from operaring activities

IAS7:https://www.icab.org.bd/icabweb/webNewsEventNoticeCir/viewPdf?fileWithPath=/app/share_Storage/At
tachments/icabwebcommonupload/images/upload/webupload/general_file/general_file/IAS_07_2.pdf

Advantage and Disadvantage of indirect method

Advantage of indirect method:

1. Appeasement of cash income: The indirect method of cash flows appeasement the accrual accounting
net income with the actual cash flows from operating activities, showing how it could be distinctive between
an organization's expressed benefit and its money standing firm on situation.

2. Connected Financial Statements: The indirect method of preparing cash-flow statement requires the
foundation of of an immediate connection between the income statement and the balance sheet which helps
clients to have a more efficient view about an organization's budget summaries.

3. Disclosed Non-cash Transactions: The exposure of non-cash exchanges when utilizing the indirect
method helps clients better to see how non-cash exchanges are elements of net income however not sources
of cash flows

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4. Simplified Statement Format: The elective technique to the indirect method of cash flows to the
direct method that straightly reports all money receipts and money installments from operating activities.
When utilizing the indirect method organizations are needed to unveil separetly cash receipts and money
installments with definite subcategories, which can offer the expression to show up excessively bunched
Disadvantage of indirect method

1. Non-Cash Transactions are Overlooked: The whole focus point of Cash Flow Statement is
only on the 'Inflows' and 'outflows’ of money. Non-Cash Transactions resembles acquisition of
structures by giving shares/debentures to the sellers or issue of extra shares are out of its domain.

2. Limited Information: Before making cash flow statements accountants gather all of the known
information which are available. They utilize this data to make their best estimate Nonetheless, this
estimate can end up being incorrectly and will give an erroneous image of future incomes. Depending on
best estimates is a significant inconvenience of indirect method of cash flow statements.

3. Can Lead to Bad Business Decisions: Depending on long-term cash flow make entrepreneurs
settle on possibly expensive and incdirect business choices.

Padma Oil Company Cash Flow From Operating Activities:

Breakdown 12/30/2020 12/30/2019

$ $
Net Income before 3,638,000,000 3,810,000,000
Extraordinaries
Depreciation and Depletion 212,000,000 207,000,000
Other Funds 1,871,000,000 1,590,000,000
Funds from Operations 5,721,000,000 5,608,000,000
Changes in Working Capital 5,051,000,000 (8,065,000,000)
Receivables 79,842,000,000 (1,306,000,000)
Inventories (233,000,000) (1,499,000,000)
Accounts Payable (10,218,000,000) (14,296,000,000)
Other Assets/Liabilities (64,340,000,000) 9,036,000,000
Net Operating Cash Flow 10,773,000,000 (2,457,000,000)

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MJL Company Cash Flow Statement From Operating Activities:

Breakdown 12/30/2020 12/30/2019

$ $
Net Income before 2,596,000,000 3,058,000,000
Extraordinaries
Depreciation and Depletion 1,642,000,000 1,313,000,000
Amortization of Intangible 1,000,000 7,000,000
Assets
Other Funds (405,000,000) (574,000,000)
Funds from Operations 3,834,000,000 3,804,000,000
Changes in Working Capital 14,000,000 (1,482,000,000)
Receivables (121,000,000) (99,000,000)
Inventories 190,000,000 (285,000,000)
Accounts Payable 444,000,000 (528,000,000)
Other Assets/Liabilities (497,000,000) (547,000,000)
Other Accruals (2,000,000) (22,000,000)
Net Operating Cash Flow 3,848,000,000 2,323,000,000

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2. Interest paid: The company did not have any loans from any institute for the years under review and
thus did not have any payment of interest to be reported for. The organization brought about bank charges
which caused because of keeping ledgers at different banks for activity of the organization for accepting
receipts from clients and making installments to providers and has been appropriately detailed under Cash
Flow from Operating Activities according to area 14 and 19 of IAS 7. Nonetheless, if the organization had
any credits and brought about revenue installments therefore, it ought to have been accounted for under
Cash Flow from Financing Activities (albeit not compulsory as alluded in segment 33 of IAS 7, yet the
training is such in organizations in the business to which the organization have a place) according to
segment 17 and 21 of IAS 7 and aggregate sum of revenue paid ought to have likewise been revealed (that
isn't be gotten off with revenue got, assuming any) according to segment 32 of IAS 7

Interest Received: The company had invested in financial assets (short-term and long-term deposits) and
received interests against the assets for the years under review. The interest recived has been properly
announced under Cash Flow from Investing Activities according to area 16 and 21 of IAS 7. It has been
unveiled independently (not got off) according to segment 32 of IAS 7. Despite the fact that being a non-
monetary organization, the organization could likewise report it under Cash Flow from Operating
Activities or Cash Flow from Financing exercises according to area 33 of IAS 7. In any case, since the
interest recived was because of the venture the organization made in monetary resources, revealing it
under Cash Flow from Investing Activities considered suitable

Dividend Received: The company had ownership (shares) in other entities and received dividend for the
years under review. The dividend received has been appropriately announced under Cash Flow from
Investing Activities according to area 16 and 21 of IAS 7. It has been uncovered independently (not got
off with profit paid) according to segment 32 of IAS 7. Once more, being a non-monetary establishment,
the organization could likewise report it under Cash Flow from Operating Activities or Cash Flow from
Financing exercises according to segment 33 of IAS 7. Notwithstanding, since the profit got was because
of the ventures the organization made in different substances (i.e., by buying portions of the elements),
detailing it under Cash Flow from Investing Activities considered fitting.

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 3. MJL Company accrual income:

Breakdown 2019 2020

Gross Profit 4,767,000,000 4,226 ,000,000
Operating Profit - 2,999,000,000
EBT 3,058 ,000,000 2,573,000,000
Net Income 2,108,000,000 1,749,000,000

MJL Company cash flow:

Breakdown 2019 2020

Net Cash flow from 2,323,000,000 3,848,000,000
operating Activities
Net Cash Flow (478,000,000) 2,419,000,000

Analysis: MJL Company Gross profit, Operating profit, EBIT & Net Income is decreasing from 2019 to 2020.
Which means day by day the company is decreasing its accrual income. In Cash flows we can see that, Net cash
flow from operating activities & Net cash flow is negative in 2019 and 2020. That means this company’s accrual
income is almost better than cash flow

Padma Company accrual income

Breakdown 2019 2020

Gross Profit 2,589,000,000 1,893,000,000
Operating Profit -170,000,000 490,000,000
EBT 3,810 ,000,000 3638,000,000
Net Income 2856,000,000 2693,000,000

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 Padma Company cash flow

Breakdown 2019 2020

Net Cash flow from -2,457,000,000 10,773,000,000
operating Activities
Net Cash Flow (2795,000,000) 10,585,000,000

Analysis: Padma Company Gross profit, Operating profit, EBIT & Net Income is decreasing from 2019 to 2020.
Which means day by day the company is decreasing its accrual income. In Cash flows we can see that, Net cash
flow from operating activities & Net cash flow is negative in 2019 and 2020. That means this company’s accrual
income is almost better than cash flow

Analysis Between the two companies: From accrual income and cash flow we can find that MJL company
is in a great position compare to Padma Oil company.

Net Income
4. a) Profit Margin On sales=
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

MJL Company 2020:

1749,000,000
Profit Margin On sales=
18,866,000,000

= 9.27%

MJL Company 2019:

2108,000,000
Profit Margin On sales=
20.268,000,000

= 10.40%

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 MJL company profut margin decrease from 2019 to 2020 because of their decrease in net
income and net sales.

Padma oil Company 2020:

2693,000,000
Profit Margin On sales=
152,597,000,000

= 1.76%

Padma oil Company 2019:

2856,000,000
Profit Margin On sales=
174748,000,000

= 1.63%

Padma Oil Company Profit Margin increases from 2019 to 2020 because of there
increase in sales and net income.

Analysis: A higher gross profit margin indicates that a company can make a reasonable profit on sales, as
long as it keeps overhead costs in control. Investors tend to pay more for a company with higher gross profit. In
this case MJL Company is better than Padma Oil Company because their profit margin is higher

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 Net Income
b) Return on assets=
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

MJL Company 2020:

1749,000,000
Return on asset=
32,194,000,000

= 5.43%

MJL Company 2019:

2108,000,000
Return on asset=
31,382,000,000

= 6.72%

MJL company return on asset improved in 2019 but deteriorated significantly in

2020 because of the decrease in net income and increase in total average assets.

Padma oil Company 2020:

2693,000,000
Return on asset=
129,593,000,000

=2.08%

Padma oil Company 2019:

2856,000,000
Return on asset=
168,019,000,000

= 1.70%

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 Padma Oil Company return on asset increases from 2019 to 2020 because their net
income and total asset decrease

Analysis: The ROA figure gives investors an idea of how effective the company is in converting the
money it invests into net income. The higher the ROA number, the better, because the company is
earning more money on less investment. From 2019 t0 2020 MJL Company had the upper hand than
Padma Oil company because their ratio is higher

Net Income−preferred dividend

c) Return on Equity=
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑚𝑚𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 ℎ𝑜𝑙𝑑𝑒𝑟

MJL Company 2020:

1749,000,000
Return on Equity=
11,451,000,000

= 15.27%

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MJL Company 2019:

2108,000,000
Return on Equity=
11,041,000,000

= 19.09%

MJL Company return on equity decrease from 2019 to 2020 beacuse of there net income
and stockholder equity decreases.

Padma oil Company 2020:

2693,000,000
Return on Equity=
14,759,000,000

=18.25%

Padma oil Company 2019:

2856,000,000
Return on Equity=
13,244,000,000

= 21.57%

From 2019 to 2020 their return on equity is deteriorated because of increase in net I
income and decrease in shareholder equity.

Analysis: Return on equity (ROE) is more than a measure of profit; it's a measure of efficiency A
rising ROE suggests that a company is increasing its ability to generate profit without needing as much
capital. It also indicates how well a company's management is deploying the shareholders' capital. In
other words, the higher the ROE the better.Thats why Padma Oil Company is better than MJL Company
because their ratio is much higher.

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 Net Income−preferred dividend
b) Earning Per share=
𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑠ℎ𝑎𝑟𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

MJL Company 2020:

1749,000,000
Earning Per share=
316,000,000

= $5.53

MJL Company 2019:

2108,000,000
Earning Per share =
316,000,000

= $6.67
From 2019 to 2020 their EPS decreases significantly because of the decrease in net
income

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 Padma oil Company 2020:

2693,000,000
Earning Per share=
98,000,000

= $27.48

Padma oil Company 2019:

2856,000,000
Earning Per share=
98,000,000

= $29.14

From 2019 to 2020 their EPS is decreasing but still they are in a good position

Analysis: EPS indicates how much money a company makes for each share of its stock A higher EPS
indicates greater value because investors will pay more for a company's shares if they think the company has
higher profits relative to its share price. In this case Padma Company is in a better position than MJL company
because of their EPS higher.

EPS
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
MJL Company Padma Oil
Company

2020 2019 Column1

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 Market Price of stock
b) Price Earning Ratio=
𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑃𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

MJL Company 2020:

83.30
Price Earning Ratio=
5.53

= 15.06 times

MJL Company 2019:

82.9
Price Earning Ratio=
6.67

= 12.43times

MJL Company Price earning ratio significantly increases from 2019 to 2020 because of their
increase in market price of stock.

Padma oil Company 2020:

196
Price Earning Ratio=
27.48

= 7.13times

Padma oil Company 2019:

196
Price Earning Ratio=
29.14

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 = 6.73times

From 2019 to 2020 their Price Earning Ratio significantly increases because of their eps
is higher

Analysis: The price-earnings ratio relates a company's share price to its earnings per share. A high P/E ratio
could mean that a company's stock is over-valued, or else that investors are expecting high growth rates in the
future. Which means MJL Company is in a good position compare to Padma Oil Company.

Price Earning Ratio

16

14

12

10

0
MJL Company Padma Oil Company

2020 2019 Column1

Cash dividends
b) Payout Ratio=
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒

MJL Company 2020:

(1420000,0000
Payout Ratio=
1749,000,000

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 = -81.18%%

MJL Company 2019:

(1352000,000)
Payout Ratio=
2108,000,000

= -64.14%

MJL Company payout Ratio is negative.

Padma oil Company 2020:

(1259000,000)
Payout Ratio=
2693,000,000

= -46.75%

Padma Oil Company 2019:

(1260000,000)
Payout Ratio=
2856,000,000

= -44.12%

In 2019 and 2020 their payout ratio is negative because their cash dividends are negative.

Analysis: The payout ratio, also known as the dividend payout ratio, shows the percentage of a company's
earnings paid out as dividends to shareholders.In this case both company ratio is not acceptable.

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 Payout Ratio
60.00%

40.00%

20.00%

0.00%
MJL Company Padma Oil
-20.00% Company

-40.00%

-60.00%

2020 2019 Column1

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