Final..FSA Project. Sakhawat Hossain. Id-20-91724-2.

Performance evaluation and ratio analysis of
two Tobacco Company in Bangladesh

Project is done by:
Name ID
SAKHAWAT HOSSAIN 20-91724-2
Project is submitted to:
Mohammad Faridul Alam

Associate Professor & Head Department of Accounting
Faculty of Business Administration
Mobile: 01819293179
Email: mf.alam@aiub.edu
1|Page
ABSTRACT
This project applies performance evaluation of Tobacco company in Bangladesh. It means evaluate how
well the company performs. The main aim is achieved through ratio analysis of two tobacco (British
American Tobacco Bangladesh Company Ltd and Japan Tobacco Inc.) companies in Bangladesh. The
main data collection from the annual financial reports on American Tobacco Bangladesh Company Ltd
and Japan Tobacco Inc. companies in 2017 to 2019.Different financial ratio are evaluated such liquidity
ratios, Capital Structure and Solvency Ratio, Return on Investment ratio, Operating performance ratio/
Profitability Ratio, Asset management ratio, Market measures and finally measure the best performance
between two companies. The mathematical calculation was establish for ratio analysis between two
companies from 20017-2019.It is most important factors for performance evaluation. The graphical
analysis and comparisons are applies between two companies for measurement of all types of financial
ratio analysis. Liquidity ratio is conveying the ability to repay short-term creditors and it total cash. It
determines perform of short term creditor of both tobacco companies under the four categories such as
current ratio, Acid test ratio, Days to Sell Inventory, Collection Period. Capital Structure and Solvency
Ratio it includes Total debt equity, Long term Debt equity,Times Interest earned. Return on Investment
ratio Return on investment (ROI) is performance measure used to evaluate the efficiency of investment. It
compares the magnitude and timing of gains from investment directly to the magnitude and timing of
investment costs. It has two parts, Return on total assets, Return on common equity. Operating
performance ratio/ Profitability Ratio Profitability ratios designate a company's overall efficiency and
performance. It includes Gross profit Margin, Operating profit margin, Pre-tax profit margin, Net profit
margin. Asset management ratio is measurement how to effectively a company to use and controls its
assets. Its also quantify into seven categories for both pharmaceutical companies such as Cash Turnover,
account receivable turnover, inventory turnover, Working Capital Turnover, account payable turnover,
fixed asset turnover ,total asset turnover. Market measures The final ratios are the market value ratio. It
also call share ownership ratio. It referred to the stockholder in analyzing present and future investment in
a company. It Includes Price-to-earnings ratio, Earnings yield, Dividend yield, Dividend payout ratio,
Price-to-book ratio. Overall analyses are measurement the best one between British American Tobacco
Bangladesh Company Ltd and Japan Tobacco Inc.
2|Page
ACKNOWLADGEMENT
I would deeply thank my honorable teacher Mohammad Faridul Alam, who kindly supervises and gives
me the excellent suggestion, guidance, and encouragement all the times during my project preparing. I
cannot complete this project without his consistent advice.
I also like to thank our families, who have always been supporting and understanding during this work.
3|Page
Table on contents
Abstract 2
Acknowledgement 3
1 Introduction 5-8
1.1 Background 5
1.2 Purpose and thesis question 6
1.3 Limitation of the study 6
1.4 Thesis outline 7-8
2 Literature review 9-10
3 Methodology 11-16
3.1 Data Collection 11
3.2 Data Analysis 11-12
3.3 Performance evaluation 13
3.4 Formula for ratio analysis 14-16
4 Result and analysis 17-43
4.1 Liquidity Ratio 17-21
4.1.1 Current Ratio 17-18
4.1.2 Acid Test Ratio 19
4.1.3 Days sell to inventory 20-21
4.1.4 Collection period 21
4.2 Capital structure & solvency ratios 22-25
4.2.1 Total debt to total equity 22-23
4.2.2 Long term debt to equity 23-24
4.2.3 Times interest earned 24-25
4.3 Return on investment 25-27
4.3.1 Return on total assets 25-26
4.3.2 Return on common equity 26-27
4.4 Operating performance ratios 27-31
4.4.1 Gross profit margin 28-29
4.4.2 Operating profit margin 29-30
4.4.3 Pre-tax profit margin 30-31
4.4.4 Net profit margin 31
4.5 Assets utilization ratios 32-38
4.5.1 Cash turnover 32
4.5.2 Accounts receivable turnover 33-34
4.5.3 Inventory turnover 34-35
4.5.4 Working capital turnover 35-36
4.5.5 Fixed assets turnover 36-37
4.5.6 Total assets turnover 37-38
4.6 Market measure ratios 38-43
4.6.1 Price to earnings ratio 38-39
4.6.2 Earning yield 39-40
4.6.3 Dividend yield 41-42
4.6.4 Dividend payout ratio 42-43
4.6.5 Price to book ratio 43
5 Conclusion 44
References 45
Appendix-A 46-51
Appendix-B 51-54
4|Page
1. INTRODUCTION
1.1 Background
Performance evaluation of a company is usually related to how well a company can use it assets,
shareholder equity and liability, revenue and expenses. Financial ratio analysis is one of the best
tools of performance evaluation of any company. In order to determine the financial position of
the Tobacco Company and to make a judgment of how well the tobacco company efficiency, its
operation and management and how well the company has been able to utilize its assets and earn
profit.
We are choosing two Tobacco companies in Bangladesh. At first we discuss British American
Tobacco Bangladesh Company. British American Tobacco Bangladesh is one of the largest
multinational corporations, operated by British American Tobacco in Bangladesh. They are listed
on the stock index of the Dhaka Stock Exchange and Chittagong Stock Exchange. It is doing its
business over 100 years in this region. It was founded in Bangladesh in 1910. It had established
its first depot at Armanitola in Dhaka. After partition in 1947, it was established in 1949. After
the independence of Bangladesh from Pakistan, it was renamed as Bangladesh Tobacco Company
(BTC) in 1972. But in 1998, it is again renamed as British American Tobacco Bangladesh
(BATB). In Bangladesh, British American Tobacco Bangladesh has more than 1,200 people as
direct employees and more than 50,000 people as indirect employees.
On the other hand, JTI produces cigarettes, rolling tobacco, electronic cigarettes, snus and
cigars. It also produces water pipe tobacco through the acquisition of companies such as Al
Nakhla Tobacco Company. JTI’s brands number over a hundred and
include Winston, Mevius (previously called Mild Seven), Camel, LD, Glamour, Benson &
Hedges, Silk Cut, and Amber Leaf and Old Holborn rolling tobacco in addition to two electronic
cigarettes: Logic and Ploom. The company’s business is extremely globalised. JTI sources its
tobacco leaf from 33 countries, manufactures its products in 26 countries, and distributes its
products in 130 countries. In 2020, the company reported on its website that it experienced a
continuous profit growth with US$3,493 million adjusted operating profit and US$11,330 million
in core revenue in 2018. JTI claimed that its products represent 14% of the global market share
that year.
5|Page
1.2. Purpose and thesis questions
The purpose of this study is a performance evaluation of two pharmaceutical companies in
Bangladesh. We will analysis the financial conditions of both pharmaceutical companies in
Bangladesh.
Questions:
➢ What is the performance of the companies related to liquidity ratios?
➢ What is the performance of the companies related to capital Structure and solvency
Ratio?
➢ What is the performance of the companies related to return on Investment ratio?
➢ What is the performance of the companies related operating performance ratio/
profitability Ratio?
➢ What is the performance of the companies related to asset management ratio?
➢ What is the performance of the companies related to market measures?
1.3. Limitation of study

There is some limitation of this project. When I used the main methods of ratio analysis for
performance evaluation of Tobacco Company. I can face different kinds of problem. In order to
achieve the good of performance evaluations we need to choose a ratio that is suitable .This
means that data must be correct, otherwise calculate of ratio may be erroneous. Sometime I can’t
find the items to analysis the ratio such as common share holder equality, weight average
outstanding of number of share, market value of share, book value of share, interest charged etc
in their annual report then I went to their website and try to find out about that.
6|Page
1.4. Project outline
The project comprise of six chapters including reference: introduction, literature review, methodology,
result and analysis, conclusion and recommendation, list of reference. All chapters are shown in Fig.1.
Chapter #01
Introduction
Chapter #02
Literature review
Chapter #03
Methodology
Chapter #04
Result and analysis
Chapter #05
Conclusion
Chapter #06
Discussion
7|Page
Chapter 1 - Introduction: The introductory chapter will lay out the general structure and framework of
the thesis. Shortly explain of purpose and thesis questionnaire and limitation of the thesis.
Chapter 2 - Literature Review: This chapter will review, analyze and summarize of all article those are
used our thesis.
Chapter 3 – Methodology: In this chapter we show that the represent of how to the data collection, data
analysis, model and formula to used our thesis.
Chapter 4- Result and analysis: In this chapter we are process of the data, mathematical calculation of
pharmaceutical companies, graphical analysis, statistical analysis, comparison of pharmaceutical
companies, outcome of the analysis, and declaration of the best one between those companies.
Chapter 5- Conclusion: In this chapter we our thesis conclusion are show that the best performance
between two pharmaceutical
Chapter 6- Discussion: In this chapter we discuss the overall thesis about the whole chapter
8|Page
2. LITERATURE REVIEW
Gopinathan Thachappilly (2009), He discuss about the Profitability Ratios Measure Margins and Returns
such as gross, Operating, Pretax and Net Profits, ROA ratio, ROE ratio, ROCE ratio. However, he
determines the Gross profit is the surplus generated by sales over cost of goods sold. He discussion about
the Gross Profit Margin = Gross Profit/Net Sales or Revenue. Moreover, Operating profits are arrived at
by deducting 10 marketing, administration and depreciation and R&D costs from the gross margin.
Nonetheless, He explains about the operating profit margin. Operating Profit Margin = Operating
Profit/Net Sales or Revenue. Nevertheless, pretax profits are computed by deducting non-operational
expenses from operating profits and by adding non-operational revenues to it. Pretax Profit Margin =
Pretax Profit/Net Sales or Revenue .Nonetheless, he also analysis about the net profit margin.Net Profit
Margin = Net Profit/Net Sales or Revenue. He also explains that the returns on resources used dividend
into three categories such as ROA, ROE, and ROCE: At first the Return on Assets = Net Profit/ (Total
Assets at beginning of the period + Total Assets at the close of the period)/2) - The denominator is the
average total assets employed during the year. Return on Equity = Net Profit/ (Shareholders' Equity at the
beginning of the year + Shareholders' Equity at the close of the year)/2).ROCE ratio: Return on Capital
Employed = Net Profit/ (Average Shareholders' Equity + Average Debt Liabilities) - Debt Liabilities.
James Clausen (2009), in this article he barfly express about the liquidity ratio. He Pronounce that it is
analysis of the financial statements is used to measure company performance. It also analyses of the
income statement and balance sheet. Investors and lending institutions will often use ratio analyses of the
financial statements to determine a 11 company‟s profitability and liquidity. If the ratios indicate poor
performance, investors may be reluctant to invest. Therefore, the current ratio or working capital ratio,
measures current assets against current liabilities. The current ratio measures the company‟s ability to pay
back its short-term debt obligations with its current assets. He thinks a higher ratio indicates the company
is better equipped to pay off short-term debt with current assets. Wherefore, the acid test ratio or quick
ratio, measures quick assets against current liabilities. Quick assets are considered assets that can be
quickly converted into cash. Generally they are current assets less inventory.
Munya Mtetwa (2010), in this article he short propose that about the fixed asset. He define that fixed
assets are assets that are used in production or supply of goods or services and they are to be used within
the business for more than one financial year. Consequently, fixed assets represent the company's long
term income generating assets and they can either be tangible or non tangible. It includes land and
buildings, plant and equipment, golf courses, casinos, football players, machinery and hotels depending
on the nature of the business under consideration. Fixed asset turnover = Sales / Net fixed asset
9|Page
Financial ratios are very powerful tools to perform some quick analysis of financial statements. There are
four main categories of ratios: liquidity ratios, profitability ratios, activity ratios and leverage ratios.
These are typically analyzed over time and across competitors in an industry.
• Liquidity ratios are used to determine how quickly a company can turn its assets into cash if it
experiences financial difficulties or bankruptcy. It essentially is a measure of a company's ability to
remain in business. A few common liquidity ratios are the current ratio and the liquidity index. The
current ratio is current assets/current liabilities and measures how much liquidity is available to pay
for liabilities. The liquidity index shows how quickly a company can turn assets into cash and is
calculated by: (Trade receivables x Days to liquidate) + (Inventory x Days to liquidate)/Trade
Receivables + Inventory.
• Profitability ratios are ratios that demonstrate how profitable a company is. A few popular
profitability ratios are the breakeven point and gross profit ratio. The breakeven point calculates how
much cash a company must generate to break even with their start up costs. The gross profit ratio is
equal to gross profit/revenue. This ratio shows a quick snapshot of expected revenue.
• Activity ratios are meant to show how well management is managing the company's resources. Two
common activity ratios are accounts payable turnover and accounts receivable turnover. These ratios
demonstrate how long it takes for a company to pay off its accounts payable and how long it takes for
a company to receive payments, respectively.
• Leverage ratios depict how much a company relies upon its debt to fund operations. A very common
leverage ratio used for financial statement analysis is the debt-to-equity ratio. This ratio shows the
extent to which management is willing to use debt in order to fund operations. This ratio is calculated
as: (Long-term debt + Short-term debt + Leases)/ Equity.
Lucia Jenkins (2009), Understanding the use of various financial ratios and techniques can help in gaining
a more complete picture of a company's financial outlook. He thinks the most important thing is fixed
cost and variable cost. Fixed costs are those costs that are always present, regardless of how much or how
little is sold. Some examples of fixed costs include rent, insurance and salaries. Variable costs are the
costs that increase or decrease in ratios proportion to sales.
10 | P a g e
3. METHODOLOGY
3.1. Data collection
Main data for our project are the annual financial reports on discuss British American Tobacco
Bangladesh Company and Japan Tobacco Inc. company in 2017 to 2019. When we measurement the ratio
analysis for any company, we must be used in annual financial report otherwise we don‟t measurement.
We have also used four main financial statements for ratio analysis of Tobacco Company Such As;
balance sheets, an income statement, statement of shareholder’s equity.
3.2. Data analysis
We used the performance evaluation of Tobacco Company. It is briefly discusses next page. It indicates
the different steps such Selection of financial report, Identification of balance sheet, income statement ,
ratio analysis, mathematical calculation, statistical analysis of companies, comparison of among both
companies and declaration of best one among both companies.
First step of model, we do a selection of financial report that means a chose of annual financial report.
The annual financial report present financial data of a company's position, operating performance, and
funds flow for an accounting period .We use the annual reporting of both Tobacco companies in 2017 to
2019
Second step of model, we identify the balance sheet, income statement, cash flow statement from the
annual financial report. We used some data from balance sheets for 16 different kind of ratio such as
liquidity ratios, asset management ratios, debt management ratios. In contrast, we was used some sources
from income statement. When we analysis the ratio of profitability and debt management ratio we must
be use income statement for those companies.
The third step of model, we identify the suitable ratio for performance evaluation and we analysis the
ratio such as liquidity ratio, Capital Structure and Solvency Ratio, Return on Investment ratio, Operating
performance ratio, Asset utilization ratios, Market measures. All types of ratio are most important for how
well a company to generate its assets, liquidity, revenue, expense, share holder equity profit or loss etc.
The Forth step of model, we used the Mathematical calculation for both companies. Here we identify
some figure from the income statement and balance sheet in 2017 to 2019 in both Tobacco Company. We
used scientific calculators for determine the result.
11 | P a g e
The five step of model, we used the graphical analysis for evaluation of the company. The graphical
analysis is an inexpensive, easy-to-learn program for producing, analyzing, and printing graphs. Here we
used Microsoft excel for graph of both companies.
The six step of model, we compares between two tobacco companies about the liquidity ratio, capital
structure and solvency ratio, return on investment ratio, operating performance ratio, asset utilization
ratios, market measures. under the ratio analysis. We also command why company better than other
company and also discuss why not those companies are not good position compare then other company.
Finally we can dealer the best one between the two Tobacco companies. We can easily measurement the
best one because we use different kinds of ratio and know the result, graphical analysis, compare of both
companies.
12 | P a g e
Performance evaluation of both Tobacco companies
Liquidity ratios,
Performance evaluation of both
Tobacco companies Capital Structure And Solvency
Ratio
Selection of financial Return on Investment ratio

report
Identification of balance
Operating performance ratio
sheet, income
statement
Asset utilization ratios

Ratio analysis
Market measures
Mathematical
calculation
Graphical analysis of
both companies
Comparison of
among both
companies
13 | P a g e
3.3. Formula for ratio analysis
We used different types of formula for calculation of different kinds of ratio. We collect some formula
from the book of Intermediate Accounting by Kieso,Weygandt, Warfield(2001).We also collect some
data from Accounting Principles by Weygandt, J. J, Kieso, D. E, & Kell, W. G. (1996). So formula is the
most important thing for our thesis without formula we can‟t calculation the ratio analysis and we don‟t
measurement of performance evaluation of pharmaceutical company. There are several formulas
revealing each of the five aspects of performance evaluation and financial condition and short discuss
about as follow as;
Liquidity ratio
Current Ratio:
Current Ratio= Current assets /Current liabilities
Acid test ratio:
Acid test ratio= (Current asset- inventories)/Current liabilities
Days to Sell Inventory:
Days to Sell Inventory= (Ending Inventory / Cost of Goods Sold) x 360
Collection Period:
Collection Period= Days x Average Accounts Receivable / Net Credit Sales
Capital Structure and Solvency Ratio
Total debt equity:
Total debt equity= Total liabilities/Stockholders’ equity
Long term Debt equity:
Long term Debt equity= Long-term Debt / Total Shareholders’ Equity
Times Interest earned:
Times Interest earned= Earnings before interest tax / Interest charged
14 | P a g e
Return on Investment ratio
Return on total assets:
Return on total assets= Net Income / Average Assets
Return on common equity:
Return on common equity= Net Income / Average Shareholders' Equity
Operating performance ratio/ Profitability Ratio
Gross profit Margin:
Gross profit Margin= Gross profit/sales*100
Operating profit margin:
Operating profit margin= Operating profits / Sales
Pre-tax profit margin:
Pre-tax profit margin= Income Before tax/ sales
Net profit margin:
Net profit margin= Net profit after tax/sales*100
Asset management ratio
Cash Turnover:
Cash Turnover= Sales/ average cash
Account Receivable Turnover:
Account Receivable Turnover= Sales / average Accounts receivable
Inventory Turnover:
Inventory Turnover= Cost of Goods Sold / Average Inventory
15 | P a g e
Working Capital Turnover:
Working Capital Turnover= Sales/ (current assets- current liability)
Fixed Assets Turnover:
Fixed Assets Turnover= Sales / Net fixed asset
Total Assets Turnover:
Total Assets Turnover= Sales / Total asset
Market measures
Price-to-earnings ratio:
Price-to-earnings ratio= Net income /weighted average number of share outstanding
Earnings yield:
Earnings yield= EPS/ Market price per share
Dividend yield:
Dividend yield= Cash dividend per share/ Market price per share
Dividend payout ratio:
Dividend payout ratio= Cash dividend per share/ EPS
Price-to-book ratio:
Price-to-book ratio= Market price per share/Book value per share
16 | P a g e
4. RESULTS AND ANALYSIS
In this part we present the result from our data analysis. This part is separate into six categories. At first, I
briefly examined the performance of liquidity position of both tobacco companies. Second, I present the
Capital Structure And Solvency Ratio of those companies .Third, I demonstrate the performance of
Return on Investment ratio those companies, Forth I discussion the Operating performance ratio. Fifth, I
represent Asset utilization ratios of those companies and finally I discuss the Market measures those both
companies.
4.1 .Liquidity ratio
Liquidity ratio refers to the ability of a company to interact its assets that is most readily converted into
cash. Assets are converted into cash in a short period of time that are concerns to liquidity position.
However, the ratio made the relationship between cash and current liability.
The Liquidity ratio there four ratios, those are:
1. Current Ratio
2. Acid test ratio
3. Days to Sell Inventory
4. Collection Period
4.1.1. Current ratio
The current ratio is calculated by dividing current assets by current liabilities. Current asset includes
inventory, trade debtors, advances, deposits and repayment, investment in marketable securities in short
term loan, cash and cash equivalents, and current liabilities are comprised short term banks loan, long
term loans-current portion, trade creditors liabilities for other finance etc. Generally current ratio are
acceptable of short term creditors for any company.
The formula is shown as below;
Current Ratio = Current assets /Current liabilities
17 | P a g e
Table: 4.1.1 Current ratios
Year British American Tobacco Bangladesh Japan Tobacco Inc.

Company Ltd
2019 16537884 + 2609916 + 3684485 + 5393764 1,925,673
17014375 1,501,757
=1.7 = 1.28
2018 30059642 1,809,406
22922858 1,430,185
=1.31 =1.27
2017 25499348 1,707,767

19597386 1,478,623
= 1.30 = 1.1549
Figure 4.1.1.Current Ratios
1.8
1.6
1.4
1.2
British American Tobacco
1 Bangladesh Company Ltd
0.8 Japan Tobacco Inc
0.6
0.4
0.2
0
2019 2018 2017
Analysis: In this analysis, we can view that in 2017 the current ratios were 1.30 times in British
American Tobacco Bangladesh Company Ltd. In 2018 it was increasing in 1.31 times. It was
increasing the next year. On the other hand, Japan Tobacco Inc. company ln 2017 years their current
ratios are 1.15 times. In 2018 and 2019 are the same positions. So we understand that both tobacco
companies are good performing for current ratio.
18 | P a g e
4.1.2. Quick ratio or acid test
Quick ratio or acid test ratio is estimating the current assets minus inventories then divide by current
liabilities. It is easily converted into cash at turn to their book values and it also indicates the ability of a
company to use its near cash.
The formula of quick ratio or acid test ratio are as follow as;
Quick ratio = (Current asset- inventories)/Current liabilities
Table: 4.1.2 Quick ratio

Company Ltd
2019 5393764 + 2609916 815671
17014375 1,501,757
= 0.47 = 0.54
2018 1633605 + 4174125 738654
22922858 1,430,185
=0.25 =0.52
2017 2315457+978169 716685

= 0.33 1,478,623
=0.48
19597386
Analysis: In 2017, the quick ratio was 0.33 times of British American Tobacco Bangladesh Company Ltd
company which decreased quietly as resulted 0.25 times in 2018. Again 2019 it is increasing to 0.47. In
2017, the quick ratio of Japan Tobacco Inc. company, it is 0.48. 2018 and 2019 are 0.52 and 0.54 Both of
these ratios represent the idea that Japan Tobacco Inc. has so far an almost constant liquidity position
which is good at some point, but the British American Tobacco Bangladesh Company Ltd too long for
this reason is not good liquidity position. So their profit margin may not so high. Finally in this ratio, we
can state that the Japan Tobacco Inc. is better liquidity position compare than the British American
Tobacco Bangladesh Company.
19 | P a g e
4.1.3 Days to Sell Inventory
Days Sales in Inventory (DSI), sometimes known as inventory days or days in inventory, is a
measurement of the average number of days or time required for a business to convert its inventory into
sales. In addition, goods that are considered a “work in progress” (WIP) are included in the inventory for
calculation purposes.
Days Sales of Inventory = (Ending Inventory / Cost of Goods Sold) x 360
Table.4.1.3 Days to Sell Inventory

Company Ltd
2019 (16537884 + 19429201)/2 (677586 + 649238)/2
29972780/360 942,299/360
=216 days =253 days
2018 (19429201 + 17469089)/2 (649238 + 612954)/2
27096297/360 933,034/360
= 245 Days = 244 Days
2017 (17469089 + 13979180)/2 (612954 + 558846)/2
27180742/360 843,558/360
=208 Days =248 Days
Figure 4.1.3.Days to Sell Inventory
300
250
British American
200 Tobacco Bangladesh
Company Ltd
150
Japan Tobacco Inc
100
50
0
2019 2018 2017
20 | P a g e
Analysis: In 2017 British American Tobacco Bangladesh Company Ltd days to sell inventory are 208
days. 2018 it was increasing in 245 days and after that 2019 it was decreasing in 216 days its harm full for
the company. Japan Tobacco Inc. in 2017 their sell to inventory was 248 days. In 2018 it was decrease in
244 days. Finally 2019 it is increasing in 253 days. Finally in this ratio, we can state that the Japan
Tobacco Inc. is better position compare than the British American Tobacco Bangladesh Company.
4.1.4. Collection Period
The average collection period ratio measures the average number of days clients take to pay their bills,
indicating the effectiveness of the business’s credit and collection policies. This ratio also determines if
the credit terms are realistic. It is calculated by dividing receivables by total sales and multiplying the
product by 360 (days in the period).
The formula of collection period is shows
Collection period =
Table- 4.1.4 Collection period

Company Ltd
2019 (2609916 + 4174125)/2 (458513 + 456591)/2
269854574/360 2,175,626/360
= 4.52days = 75 days
2018 (4174125 + 2315457)/2 (456591 + 431,199)/2
233118187/360 2,215,962/360
2017 (2315457 + 1062450/2 (431199 + 396934/2
204139715/360 2,139,653/360
Analysis: British American Tobacco Bangladesh Company Ltd their collection period was not goo. In
2017 it was 2.98 days. At the end of 2018 was increasing in 5.01 days but in 2019 it was again fall down.
On the other hand Japan Tobacco Inc. Their collection periods are increasing every year. So we compare
that Japan Tobacco is better position than British American Tobacco Bangladesh Company Ltd.
21 | P a g e
4.2. Capital Structure and Solvency Ratio
Debt Coverage Ratio measures the percentage of the total asset provided by creditor. (Kieso, Weygandt,
Warfield, 2001). If any company has realize their debt coverage ratio less than 1 then the company
understand their income greater by a property is insufficient to collect their mortgage. So more than is 1 is
best for any company.
The Debt-coverage ratio we can satisfy on the three ratios, those are:
1. Total debt equity
2. Long term Debt equity.
3. Times Interest earned.
4.2.1 Total debt equity
Debt to equity ratio (also termed as debt equity ratio) is a long term solvency ratio that indicates the
soundness of long-term financial policies of a company. It shows the relation between the portion of
assets financed by creditors and the portion of assets financed by stockholders. As the debt to equity ratio
expresses the relationship between external equity (liabilities) and internal equity (stockholder’s equity),
it is also known as “external-internal equity ratio”
Debt to equity ratio = Total liabilities/Stockholders’ equity
Table 4.2.1 Debt to equity ratio

Company Ltd
2019 23636782 2,809,459
59430237 5,553,071
= 0.397 or 40% = 0.51%
2018 27014375 2,760,955
56543229 5,461,400
=0.477 or 48% =0.50%
2017 23302070 2,379,456
464145085 5,221,484
= 0.50 or 50% = 0.46%
22 | P a g e
Figure 4.2.1 Total debt equity
40%
35%
30%
British American Tobacco
25%
Bangladesh Company Ltd
20%
Japan Tobacco Inc
15%
10%
5%
0%
2019 2018 2017
Analysis: In this problem analysis we see that the percentage of ratio has decreased from 2017 to 2019 in
the British American Tobacco Bangladesh Company Ltd company because their asset was increased at a
higher rate than from the last year. If any company debt ratio decreases day by day it is a good position
for those for the company. By the same token, in Japan Tobacco Inc. company is opposite position
compare than British American Tobacco Bangladesh Company Ltd, because that company debt ratio has
increase then last year. For this reason, those company can‟t stand the good financial position. In this
problem we state that British American Tobacco Bangladesh Company Ltd is better than Japan Tobacco
Inc. Company.
4.2.2 Long term Debt equity.
Long term debt to equity ratio is a leverage ratio comparing the total amount of long-term debt against the
shareholders’ equity of a company. The goal of this ratio is to determine how much leverage the company is
taking. A higher ratio means the company is taking on more debt. This, in turn, often makes them more prone to
financial risk.
Long-term Debt to Equity Ratio = Long-term Debt / Total Shareholders’ Equity
Table-4.2.2 Long term Debt equity

Company Ltd
2019 6622407 1,307,702
59430237 5,553,071
= 0.111 = 0.24
2018 4091517 1,330,770
56543229 5,461,400
=0.0723 =0.24
2017 3704684 900,833
46414508 5,221,484
= 0.0798 = 0.17
23 | P a g e
Figure 4.2.2 Long term Debt equity
40%
35%
30% British American
Tobacco Bangladesh
25%
Company Ltd
20%
Japan Tobacco Inc
15%
10%
5%
0%
2019 2018 2017
Analysis: In this scenario we saw that British American Tobacco Bangladesh Company Ltd and Japan
Tobacco Inc. their long term debt are increasing in every year. They are good position .
4.2.3 Times Interest earned
The time interest earned ratio indicates the company’s ability to meet interest payment as they come
due.(Kieso,Weygandt, Warfield ,2001). It is reckon by dividing their earnings before interest tax by the
interest charged. It has corroborated that the company able to pay its annual cost because this ratio denote
the annual interest charged for any company.
Time interest earned = Earnings before interest tax / Interest charged
Year British American Tobacco Japan Tobacco Inc.

2019 17403927 + 471367 465,232 + 45,526
471367 45526
=37.92 times =11.22 times
2018 19314324 + 473916 531,486 + 39,252
473916 39252
= 41.75 times = 14.08 times
2017 16759519 + 185291 538,532 + 27,349
185291 27349
= 91.44 times = 20.69 times
24 | P a g e
Figure 4.2.3 Time interest earned
0.25
0.2 British American

Tobacco Bangladesh
0.15 Company Ltd
0.1 Japan Tobacco Inc
0.05
0
2019 2018 2017
Analysis: In this dissuasion we realize that the higher ratio of time interest earned, it indicated the
Company has higher ability to pay the interest from their opportunity income. So, higher decline of this
ratio in 2017 from 2019 in British American Tobacco Bangladesh Company Ltd those indicated that the
company is paying more interest. Nevertheless, the Japan Tobacco Inc.is not paying more interest because
that company has no decline from last year for that reason we think those company has best condition for
time interest earned.
4.3 Return on Investment ratio
Return on investment (ROI) is performance measure used to evaluate the efficiency of investment. It
compares the magnitude and timing of gains from investment directly to the magnitude and timing of
investment costs. It is one of most commonly used approaches for evaluating the financial consequences
of business investments, decisions, or actions.
The Return on Investment ratio we can satisfy on the two ratios, those are
1. Return on total assets

2. Return on common equity
4.3.1. Return on total assets
Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the profitability of a
business in relation to its total assets. This ratio indicates how well a company is performing by
comparing the profit (net income) it’s generating to the capital it’s invested in assets. The higher the
return, the more productive and efficient management is in utilizing economic resources.
Return on total assets = Net Income / Average Assets
25 | P a g e
Table-4.3.1 Return on total assets

Company Ltd
2019 9264601 361,622
59430237+56543229 5553,071+5,461,400
2 2
=0.159 or 16% =0.07 or 7%
2018 10016416 387,431
56543229 + 464145085 5,461,400 + 5,221,484
2 2
=0.194 or 19.4% =0.07 or 7%
2017 7829856 396,749
46414508 + 35347883 5,221,484 + 4744374
2 2
=0.192 or 19.2% =0.08 or 8%
Figure 4.3.1 Return on total assets
British American Tobacco Bangladesh Company Ltd

Japan Tobacco Inc
16% 19.40%
7% 19.20%
7% 8%
2019
2018
2017
Analysis: In this scenario we saw that in 2017 British American Tobacco Bangladesh Company Ltd their
ROI was 19.20% then 2018 it was increasing in 19.40%and of the year 2019 it was decreasing. On the
other hand Japan tobacco Inc. companies ROI also decreasing in every year. Two companies ROI was not
good. It is harmful for the company.
4.3.2. Return on common equity
Return on common stockholders’ equity ratio measures the success of a company in generating income
for the benefit of common stockholders. It is computed by dividing the net income available for common
stockholders by common stockholders’ equity. The ratio is usually expressed in percentage. Return on
Common Equity is used by some investors to assess the likelihood and size of dividends that the company
may pay out in the future.
Return on common equity Ratio = Net Income / Average Shareholders' Equity
26 | P a g e
Table-4.3.2 Return on common equity

Company Ltd
2019 9264601 361,622
35793455 + 29528854 2,743,611 + 2,700,445
2 2
=0.28 or 28% =0.13 or 13%
2018 10016416 387,431
29528854 + 23112438 2,700,445 + 2,842,027
2 2
= 0.38 or 38% = 0.14 or 14%
2017 7829856 396,749
23112438 + 18882582 2,842,027 + 2528041
2 2
=0.37 or 37% =0.15 or 15%
Figure-4.3.2 Return on common equity

Japan Tobacco Inc
38% 37%
28%
13% 14% 15%
2019 2018 2017
Analysis: In this scenario we saw that in 2017 British American Tobacco Bangladesh Company Ltd their
ROE was 37% then 2018 it was decrease in 28% and of the year 2019 it was again increase 38%. On the
other hand Japan tobacco Inc. companies ROE also decreasing in every year. Two companies ROI was
not good. It is harmful for the company. In this problem we state that British American Tobacco
Bangladesh Company Ltd is better than Japan Tobacco Inc. Company.
4.4 Operating performance ratio/ Profitability Ratio
Profitability ratios designate a company's overall efficiency and performance. It measures the company
how to use of its assets and control of its expenses to generate an acceptable rate of return. It also used to
examine how well the company is operating or how well current performance compares to past records of
both pharmaceutical companies.
27 | P a g e
There are four important profitability ratios that we are going to analyze:
1. Gross profit Margin

2. Operating profit margin
3. Pre-tax profit margin
4. Net profit margin
4.4.1. Gross profit Margin
Gross margin express of the company efficiency of raw material and labor during the working process .If
any company higher gross profit margin then the company more efficiency to controls their raw material
and labors. It determines the gross profit to divide by net sales.
The gross profit margin ratio formula as following as;
Gross profit margin ratio= Gross profit/sales*100
Table-4.4.1 Gross profit Margin

Company Ltd
2019 269854574 − 29972780 2,175,626 − 942,299
269854574 2,175,626
= 0.889 or 89.9% = 0.57 or 57%
2018 233118187 − 27096297 2,215,962 − 933,034
233118187 2,215,962
= 0.883 or 88.3% = 0.58 or 58%
2017 204139715 − 27180742 2,139,653 − 843,558
204139715 2,139,653
= 0.866 or 86.6% = 0.61 or 61%
Figure-4.4.1 Gross profit Margin

Japan Tobacco Inc
1.67 1.73
1.42 1.47 1.48 1.44
2019 2018 2017
Analysis: The gross profit margin has slightly decreased in 2019 compare with 2017 in Japan Tobacco
Inc. companies. On the contrary, in 2019 sales has increased as well as gross profit margin has also
28 | P a g e
increased for the British American Tobacco Bangladesh Company Ltd. To increase gross profit margin
they should try to decrease their cost of goods sold. We think that the British American Tobacco
Bangladesh Company Ltd best performing compare then company. Because their gross profit is increase
day by day but Japan Tobacco Inc. company is decrease.
4.4.2 Operating profit margin
The operating profit margin ratio recognize of the percentage of sales to exchange into all cost and
expenses after remaining sales. A high operating profit margin is preferred. The operating margin ratio,
also known as the operating profit margin, is a profitability ratio that measures what percentage of total
revenues is made up by operating income. In other words, the operating margin ratio demonstrates how
much revenues are left over after all the variable or operating costs have been paid.
Operating profit margin is calculated as follows:
Operating Profit Margin = Operating profits / Sales
Table-4.4.2 Operating profit margin

Company Ltd
2019 18766993 502,355
269854574 2,175,626
= 0.069 or 6.9% = 0.23 or 23%
2018 20819780 564,984
233118187 2,215,962
=0.089 or 8.9% =0.25 or 25%
2017 24783001 561,101
204139715 2,139,653
= 0.121 or 12.1% = 0.26 or 26%
Figure-4.4.2 Operating Profit Margin

Japan Tobacco Inc
25% 26%
23%
12.10%
7% 8.90%
2019 2018 2017
29 | P a g e
Analysis: In this analysis we find out the operating profit margin has decrease in 2017 to 2019( 12.1% to
6.9%) in British American Tobacco Bangladesh Company Ltd because those company operating profit
and sales has decrease step by step from previous year. On the other hand Japan Tobacco Inc. company
also decrease their operating margin 2017 to 2019. Both of companies’ inefficient use of operating
expense. During those year the sales has increased but operating expense has decease. From this
discussion we can say that both of the firm had failed to control its operating cost.
4.4.3 Pre-tax profit margin
The pretax profit margin is a financial accounting tool used to measure the operating efficiency of a
company. It is a ratio that tells us the percentage of sales that has turned into profits or, in other words,
how many cents of profit the business has generated for each dollar of sale before deducting taxes. The
pretax profit margin is widely used to compare the profitability of businesses within the same industry.
Pretax profit margin= Income Before tax/ sales
Table-4.4.3 Pretax profit margin

Company Ltd
2019 17403927 465,232
269854574 2,175,626
= 0.064 or 6.4% = 0.21 or 21%
2018 19314324 531,486
233118187 2,215,962
= 0.083or 8.3% = 0.24 or 24%
2017 16759519 538,532
204139715 2,139,653
=0.082 or 8.2% =0.25 or 25%
Figure-4.4.3 Pre-tax profit margin
1.5
0.5
0
2019 2018 2017
British American Tobacco Bangladesh Company Ltd Japan Tobacco Inc
30 | P a g e
Analysis: In this scenario we saw that 2019 British American Tobacco Bangladesh Company Ltd pre-tax
are 8.2%. In next year 2018 it was increasing in 8.3%. After end of 2017 it was decreasing in 6.4%. On
the other hand Japan Tobacco Inc. they have also in decreasing path level. Every year their pre-tax are
decreeing. Both of the companies are in good position.
4.4.4 Net profit margin
The net profit margin is determined of net profit after tax to net sales. It argues that how much of sales are
changeover after al expense.
Net Profit margin = Net profit after tax/sales*100
Table-4.4.4 Net Profit margin

Company Ltd
2019 9264601 361,622
269854574 2,175,626
=0.034 or 3.4% =0.17 or 17%
2018 10016416 387,431
233118187 2,215,962
= 0.043 or 4.3% = 0.17 or 17%
2017 7823856 396,749
204139715 2,139,653
= 0.038 or 3.8% = 0.18 or 18%
Figure-4.4.4 Net Profit margin

Japan Tobacco Inc
2 1.67
1.73
1.42 1.471.48
1.5 1.44
0.5
0
2019
2018
2017
Analysis: We saw that both of the company’s net profit margins are not good. They are decreasing in
every year because of their net profit and sales are decrease. As a result this two company are not
standard position.
31 | P a g e
4.5 Asset management ratio
Asset management ratios are most notable ratio of the financial ratios analysis. It measure how effectively
a company uses and controls its assets. It is analysis how a company quickly converted to cash or sale on
their resources. It is also called Turnover ratio because it indicates the asset converted or turnover into
sales. Finally, we can recognize the company can easily measurement their asset because this ratio made
up between assets and sales.
Following are discussed six types of asset management ratios:
1. Cash Turnover
2. Account Receivable Turnover
3. Inventory Turnover
4. Working Capital Turnover
5. Fixed Assets Turnover
6. Total Assets Turnover
4.5.1 Cash Turnover
Cash Turnover a ratio measuring the amount of times that the company’s cash has been spent through
over certain period of time. In other words, it measures the frequency of company's cash account
replenishment through the sales revenue.
Cash Turnover = Sales/ average cash
Table-4.5.1 Cash Turnover

Company Ltd
2019 269854574 2,175,626
5393764 + 1633605 357,158 + 282,063
2 2
=76.80 =6.81
2018 233118187 2,215,962
1633605 + 978169 282,063 + 285,486
2 2
= 178.52 = 7.80
2017 204139715 2,139,653

978169 + 1564600 285,486 + 294157
2 2
=160.56 =7.38
Analysis: In this calculation we saw that British American Tobacco Bangladesh Company Ltd cash
turnover in2017 was 160.56 then it was increased 178.52 in 2018. Last year it was decrease 76.80 in
2019. Japan Tobacco also same position their turn over also decrease in 2019. It is good position for the
company.
32 | P a g e
4.5.2 Account Receivable Turnover
The Accounts receivable turnover is comparison of the size of the company sales and uncollected bills
from customers. If any company is difficult to collect money so it has large account receivable and also
indicates the low ratio. Instead of, if any company aggressive collection money so it has low receivable
and also high ratio. This ratio measure the number of times are collected during the period.
Accounts receivable turnover = Sales / average Accounts receivable
Table-4.5.2 Accounts receivable turnover

Company Ltd
2019 269854574 2,175,626
2609916 + 4174125 458,513 + 456,591
2 2
=79.56 =4.75
2018 233118187 2,215,962
4174125 + 2315457 456,591 + 431,199
2 2
=71.84 =4.99
2017 204139715 2,139,653
2315457 + 1062450 431,199 + 396934
2 2
= 12.09 = 5.17
Figure-4.5.2 Accounts receivable turnover
1.67 1.73
1.42 1.47 1.48 1.44
2019 2018 2017
33 | P a g e
Analysis: From this ratio analysis we acquire that the ratio is continuously increasing from 2017 to 2019
British American Tobacco Bangladesh Company Ltd. It means that Account receivable is increasing
day by day which is very bad position for company because it has make up a lot of cash money, for this
reason the company must be invested by other sector. On the other hand japan Tobacco Inc. Are good
position because their account receivable turnover decreases in every year. Account receivable decrease
that means company are in good position.
4.5.3 Inventory Turnover
The inventory turnover ratio measures the number of times on average the inventory was sold during the
period (Kieso, Weygandt, Warfield, 2001).The ratio is calculate the cost of goods sold by divide into
average inventory. the measurement of average inventory is; at first we are add to years inventory after
that we divide in to two.Inventory turnover ratio is also known as inventory turns ratio and stock turnover
ratio.
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Table-4.5.3 Inventory Turnover Ratio

Company Ltd
2019 29972780 942,299
16537884 + 19429201 677,586 + 649,238
2 2
= 1.67 = 1.42
2018 27096297 933,034

19429201 + 17469089 649,238 + 612,954
2 2
=1.4 =1.48
2017 27180742 843,558

17469089 + 13979180 612,954 + 558846
2 2
=1.73 =1.44
Analysis: In this analysis we saw that British American Tobacco Bangladesh Company Ltd in 2017
Inventory Turnover Ratio was 1.73 then it decease 2018 in 1.47. At last year 2019 it was increase in 1.67.
On the other side Japan Tobacco Inc. their inventory turnover are decreasing in every year. It is not good
for the company. Here we understand that the cost of goods sold is increasing day by day as well as the
turnover is also increasing because the increasing rate of sales is higher than average inventory. Generally
it is important that they are holding much more inventory, which has make up the cash balance. So we are
confirms that British American Tobacco Bangladesh Company Ltd is better than Japan Tobacco Inc.
34 | P a g e
Figure-4.5.3 Inventory Turnover Ratio
1.67 1.73
1.42 1.47 1.48 1.44
2019 2018 2017
4.5.4 Working Capital Turnover
Working capital turnover is a ratio that measures how efficiently a company is using its working capital to
support sales and growth. Also known as net sales to working capital, working capital turnover measures
the relationship between the funds used to finance a company's operations and the revenues a company
generates to continue operations and turn a profit.
Working capital turnover= Sales/ (current assets- current liability)
Table-4.5.4 Working capital turnover

Company Ltd
2019 296854574 2,175,626
28226049 − 17014375 1925,673 − 1,501,757
= 24.07 = 5.13
2018 233118187 2,215,962
30059642 − 22922858 1,809,406 − 1,430,185
=32.66 =5.84
2017 204139715 2,139,653
25499348 − 19597386 1,707,767 − 1,478,623
=34.59 =9.34
Analysis: Here we saw that two companies British American Tobacco Bangladesh Company Ltd and
Japan Tobacco Inc. their working capital turnover are decreasing in every year because of their sales are
not good
35 | P a g e
Figure-4.5.4 Working capital turnover
80%
60%
40%
20%
0%
2019 2018 2017

Japan Tobacco Inc
4.5.5 Fixed Assets Turnover
Fixed asset turnover ratio is the sales to the value of fixed assets of the company. It determines the
effectiveness in generating net sales revenue from investments in net property, plant, and equipment back
into the company evaluates only the investments. The fixed asset balance is used as a net of
accumulated depreciation. A higher fixed asset turnover ratio indicates that a company has effectively
used investments in fixed assets to generate sales.
Fixed asset turnover = Sales / Net fixed asset
Table-4.5.5 Fixed Assets Turnover

Company Ltd
2019 269854574 2,175,626
31204188 + 26483587 3,627,397 + 3,651,993
2 2
=9.36 =0.60
2018 233118187 2,215,962
26483587 + 20915160 3,651,993 + 3,513,717
2 2
=9.84 =0.62
2017 204139715 2,139,653
20915160 + 15411873 3,513,717 + 3138384
2 2
=11.24 =0.64
Analysis: In this ratio we see that the fixed asset turnover ratio was as high as 11.24 times in 2017 in
British American Tobacco Bangladesh Company Ltd than Japan Tobacco Inc. However, it declined to
9.36 times in the following year in 2019. In contrast, Japan Tobacco Inc. has rapid declination of fixed
36 | P a g e
assets turnover ratio in 2019 occurred because sales and net fixed assets the increase of companies .we
mention that the balance sheet shows that large amount of investments were made during that year that
inflate the money volume of fixed assets, and give an impression of mismanagement.
4.5.6 Total Assets Turnover
The total asset turnover ratio measures the ability of a company to use its assets to generate
sales.(Kieso, Weygandt, Warfield ,2001).It considers all assets including property ,plant and equipment,
capital working in process, investment –long term, inventories, trade debtors, advances, deposit and
prepayment, investment in market securities, short term loan, cash and cash equivalents etc. In these
criteria a high ratio means the company is achieving more profit.
Total asset turnover = Sales / Total asset
Table-4.5.6 Total asset turnover

Company Ltd
2019 269854574 2,175,626
59430237 + 56543229 5,553,071 + 5,461,400
2 2
= 2.56 = 0.40
2018 233118187 2,215,962
56543229 + 46414508 5,461,400 + 5,221,484
2 2
=2.26 =0.41
2017 204139715 2,139,653
46414508 + 35347583 5,221,484 + 4744374
2 2
=2.50 =0.43
Analysis: In this Analysis we see that a gradual fall of company‟s total asset turnover in 2017, it was 2.50
times, declined to 2.26 times and again increase 2.56 in British American Tobacco Bangladesh Company
Ltd. Instead, the Japan Tobacco Inc. also declined slightly to 0.43 to 0.40 in 2017-19. It may be an
indicator of company’s pricing strategy as company with high profit margins tends to have low asset
turnover. It is in fact might be one of the reasons for why the assets turnover was low in the year 2017 to
2019 for both companies. Other than investment in marketable securities, every other asset especially
long-term investments, inventories, short-term loans and cash balance had gone up substantially profit
margin may not be the actual reason for the turnover to go down.
37 | P a g e
Figure-4.5.6 Total asset turnover
80%
70%
50% Tobacco Bangladesh
Company Ltd
40%
Japan Tobacco Inc
30%
20%
10%
0%
2019 2018 2017
4.6 Market measures
The final ratios are the market value ratio. It also call share ownership ratio. It referred to the
stockholder in analyzing present and future investment in a company. In this ratio the stockholders are
interested in the way to certain variables affect the value of their holdings. In order to the stockholder is
able to analyze the likely future market value of the stock market. There are two ratios under this ratio.
They are as follows:
1. Price-to-earnings ratio
2. Earnings yield
3. Dividend yield
4. Dividend payout ratio
5. Price-to-book ratio
4.6.1 Price-to-earnings ratio
Earnings per share ratio are a small variation of ownership ratio. It gauges by dividing net income into
total number of share outstanding .it is most important for deterring of share price.
Earnings per share ratio: Net income /weighted average number of share outstanding
Table-4.6.1 Price-to-earnings ratio

Company Ltd
2019 970 2663
51.37 195.97
= 18.88 = 13.59
2018 3542 3039
166.87 215.31
= 21.23 = 14.11
38 | P a g e
2017 3402 3647
130.50 219.10
=26.07 =16.65
Figure-4.6.1 Price-to-earnings ratio
77% 79%
70%
64%
45%
29%
2019 2018 2017
Analysis: Analysis shows that earning per share ratio has decreased from 2017 to 2019 in both of the
Company British American Tobacco Bangladesh Company Ltd and Japan Tobacco Inc. Every year their
earning per share is decreasing. We can state that those companies can stand the bed financial position.
Other source: market price-- https://simplywall.st/stocks/jp/food-beverage-tobacco/tse-2914/japan-

tobacco-shares#share-price-and-news
4.6.2 Earnings yield
The earnings yield refers to the earnings per share for the most recent 12-month period divided by the
current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the
percentage of a company's earnings per share. This metric is used by many investment managers to
determine optimal asset allocations and is used by investors to determine which assets seem underpriced
or overpriced.
Earnings yield= EPS/ Market price per share
39 | P a g e
Table-4.6.2 Earnings yield

Company Ltd
2019 51.37 195.97
970 2663
= 0.052 or 5.2% = 0.072 or 7.2%
2018 166.87 215.31
3542 3039
= 0.047 or 4.7% = 0.071 or 7.1%
2017 130.50 219.10
3402 3647
= 0.038 or 3.8% = 0.06 or 6%
Figure-4.6.2 Earnings yield
80%
70%
60%
50% British American Tobacco
40%
Japan Tobacco Inc
30%
20%
10%
0%
2019 2018 2017
Analysis: Analysis shows that British American Tobacco Bangladesh Company Ltd and Japan Tobacco
Inc. their earnings yields are increasing in every year. In 2017 to 2019 British American Tobacco
Bangladesh Company Ltd increased their earnings yield 3.8% to 5.2%. Other side Japan Tobacco Inc. it
also increased in 6% to 7.2%. Both of the Company can be profitability.
40 | P a g e
4.6.3 Dividend yield
Dividend yield is the financial ratio that measures the quantum of cash dividends paid out to shareholders
relative to the market value per share. It is computed by dividing the dividend per share by the market
price per share and multiplying the result by 100. A company with a high dividend yield pays a
substantial share of its profits in the form of dividends. Dividend yield of a company is always compared
with the average of the industry to which the company belongs.
Dividend yield= Cash dividend per share/ Market price per share
Table-4.6.3 Dividend yield

Company Ltd
2019 40 154
970 2663
= 0.041 or 4.1% = 0.058 or 5.8%
2018 50 150
3542 3039
= 0.014 or 1.4% = 0.05 or 5%
2017 60 140
3402
= 0.017 or 1.7% 3647
= 0.04 or 4%
Figure-4.6.3 Dividend yield
90%
80%
70%
Tobacco Bangladesh
50%
Company Ltd
40%
Japan Tobacco Inc
30%
20%
10%
0%
2019 2018 2017
Analysis: Analysis shows that British American Tobacco Bangladesh Company Ltd their dividend in
2017 it was 1.7% then 2018 it was decreased in 1.4% last year 2019 it was again increased in 4.1%. Japan
41 | P a g e
Tobacco Inc. are increased their dividend in every year. Both of the companies are doing well at their
dividend yield.
4.6.4 Dividend payout ratio
The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to
the net income of the company. It is the percentage of earnings paid to shareholders in dividends. The
amount that is not paid to shareholders is retained by the company to pay off debt or to reinvest in core
operations. It is sometimes simply referred to as the 'payout ratio.
Dividend payout ratio= Cash dividend per share/ EPS
Table-4.6.4 Dividend payout ratio

Company Ltd
2019 40 154
51.37 195.97
= 0.778 or 77% = 0.79 or 79%
2018 50 150
166.87 215.31
= 0.29 or 29% = 0.70 or 70%
2017 60 140
130.50 219.10
= 0.45 or 45% = 0.64 or 64%
Figure-4.6.4 Dividend payout ratio
80%
70%
60%
50% British American Tobacco
40%
Japan Tobacco Inc
30%
20%
10%
0%
2019 2018 2017
Analysis: Analysis shows that British American Tobacco Bangladesh Company Ltd their dividend payout
ratio in 2017 it was 45% then 2018 it was decreased in 29% last year 2019 it was again increased in 77%.
42 | P a g e
Japan Tobacco Inc. are increased their dividend payout in every year. Both of the companies are doing
well at their dividend payout.
4.6.5 Price-to-book ratio (Market to Book Ratio)
The Market/Book Ratio refer to the company market value per share to its book value per share. It
indicates management success in creating value for its stockholders.
Market/Book ratio: Market price per share/Book value per share
Table-4.6.5 Price-to-book ratio (Market to Book Ratio)

Company Ltd
2019 970 2663
10 1.807
= 97 = 1474
2018 3542 3039
15.30 2.375
=231.50 =1280
2017 3402 3647
12.77 2.774
=266 =1315
Analysis: In this case the market value per ratio is increase by British American Tobacco Bangladesh
Company Ltd in 2017 to 2018 ( 266 to 231.50).Then in 2019 it was deceased in 97. On the other hand
Japan Tobacco Inc. in 2017 their price to book ratio was 1315. In 2018 it was fall down in 1280. Again
2019 it was increased in 1474. Analysis shows that Japan Tobacco Inc. in good position. Japan Tobacco
Inc. is better than British American Tobacco Bangladesh Company Ltd.
Book value-- https://ycharts.com/companies/JAPAF/price_to_book_value
43 | P a g e
5. CONCLUSION
This project is based on seven main research questions. First, we analysis of liquidity measures indicates
that current ratio is good condition for both companies .Quick ratio measures is found Japan Tobacco Inc.
is better than British American Tobacco Bangladesh Company Ltd because of japan Tobacco Inc. quick
ratio are increasing every year and British American Tobacco Bangladesh Company Ltd are fall down.
Than we analysis Days to Sell Inventory their also japan Tobacco are in good position. They have
increase their days to sells inventory. But British American Tobacco Bangladesh Company Ltd was
decrease. We can state that the Japan Tobacco Inc. is better position compare than the British American
Tobacco Bangladesh Company. In collection period Japan Tobacco are doing well they have increased in
every year but British American Tobacco Bangladesh Company increased in 1st to 2nd in 3rd year they fall
down again. So we compare that Japan Tobacco is better position than British American Tobacco
Bangladesh Company Ltd. Second we analysis Capital Structure and Solvency Ratio. In here British
American Tobacco Bangladesh Company is better than Japan Tobacco Inc. in Total debt equity. In Long
term Debt equity two companies are good position. British American Tobacco Bangladesh Company is
paying more Time interest rather than Japan Tobacco Inc. Thirdly we calculate Return on Investment
ratio. In here ROI are not well in both companies it decreasing in every year. Its harmful for both
companies. In Return on common equity British American Tobacco Bangladesh Company is better than
Japan Tobacco Inc. Fourthly we analysis Operating performance ratio. Gross profits margin British
American Tobacco Bangladesh Company Ltd best performing compare then company. Because their
gross profit is increase day by day but Japan Tobacco Inc. company is decrease. In Operating profit
margin both of the firm had failed to control its operating cost. Pre-tax profit margin both of the
companies are in good position. We saw that both of the company’s net profit margins are not good. Fifth,
we analysis Asset management ratio in here Cash Turnover and Accounts receivable turnover was good
japan Tobacco Inc. British American Tobacco Bangladesh Company Ltd their Inventory Turnover Ratio
are then better Japan Tobacco Inc. Working Capital Turnover are not well both of the company. British
American Tobacco Bangladesh Company Ltd their Fixed Assets Turnover & Total asset turnover is better
than opposite company. Last we analysis Market measures, in here Price-to-earnings ratio both of them
in bed position. Earnings yield, Dividend yield, Dividend payout ratio both of them are in good position.
In Price-to-book ratio Japan Tobacco are better than British American Tobacco Bangladesh Company.
Finally we analysis everything we can compare that British American Tobacco Bangladesh Company is
better than japan tobacco Inc.
44 | P a g e
REFERENCES
https://en.wikipedia.org/wiki/British_American_Tobacco_Bangladesh
https://tobaccotactics.org/wiki/japan-tobacco-international/
https://www.investopedia.com/terms/a/acidtest.asp
https://corporatefinanceinstitute.com/resources/knowledge/modeling/days-sales-in-inventory/
https://corporatefinanceinstitute.com/resources/knowledge/finance/operating-profit-margin/
https://www.accountingtools.com/articles/long-term-debt-to-equity-ratio.html
https://www.investopedia.com/terms/a/average_collection_period.asp
https://www.etomate.com/capital-structure-and-solvency.html
https://www.accountingformanagement.org/debt-to-equity-ratio/
https://corporatefinanceinstitute.com/resources/knowledge/accounting/operating-margin/
https://www.wallstreetmojo.com/working-capital-turnover-ratio/
https://en.wikipedia.org/wiki/Financial_statement_analysis
Weygandt, J. J, Kieso, D. E, & Kell, W. G. (1996). Accounting Principles (4th ed.). New York, Chichester,
Brisbane, Toronto, Singapore: John Wiley & Sons, Inc. p. 800.
Weygandt, J. J, Kieso, D. E, & D, Warfield Terry (2001). “Intermediate accounting: cash ratio analysis”.
(10thed.). Bearcat Company, Vol-1.p.211.
Weygandt, J. J, Kieso, D. E., & D, Warfield Terry (2001). “Intermediate Accounting: Inventory turnover
ratio”. (10thed.). Bearcat Company, Vol-1.p.470.
Marshall, D., McManus, W., Viele, D. (2003).Managerial Accounting and Cost-VolumeProfit

Relationships. Accounting: What the numbers mea
Clausen, James. (2009), “Accounting 101 – Income Statement: Financial Reporting and Analysis of Profit
and Loss ‟‟, Journal of income statement.
Diane, White. (2008), “Accounts Receivable: Analyzing the Turnover Ratio‟‟, Journal of account
receivable
45 | P a g e
Appendix-A
Annual report for 2017: Balance of the company
46 | P a g e
2017- Income statement of the company
47 | P a g e
Annual report 2018: Balance for the company
48 | P a g e
49 | P a g e
50 | P a g e
51 | P a g e
Appendix-B
52 | P a g e
53 | P a g e
Annual report for 2017: Balance of the company
54 | P a g e

Final..FSA Project. Sakhawat Hossain. Id-20-91724-2.

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Final..FSA Project. Sakhawat Hossain. Id-20-91724-2.

Uploaded by

Copyright:

Available Formats

Performance evaluation and ratio analysis of

two Tobacco Company in Bangladesh

Project is submitted to:

Mohammad Faridul Alam

Faculty of Business Administration

1.3. Limitation of study

Result and analysis

3.1. Data collection

3.2. Data analysis

Selection of financial Return on Investment ratio

Asset utilization ratios

Current Ratio= Current assets /Current liabilities

Acid test ratio:

Acid test ratio= (Current asset- inventories)/Current liabilities

Days to Sell Inventory:

Days to Sell Inventory= (Ending Inventory / Cost of Goods Sold) x 360

Collection Period= Days x Average Accounts Receivable / Net Credit Sales

Capital Structure and Solvency Ratio

Total debt equity:

Total debt equity= Total liabilities/Stockholders’ equity

Long term Debt equity:

Long term Debt equity= Long-term Debt / Total Shareholders’ Equity

Times Interest earned:

Times Interest earned= Earnings before interest tax / Interest charged

Return on total assets:

Return on total assets= Net Income / Average Assets

Return on common equity:

Return on common equity= Net Income / Average Shareholders' Equity

Operating performance ratio/ Profitability Ratio

Gross profit Margin:

Gross profit Margin= Gross profit/sales*100

Operating profit margin:

Operating profit margin= Operating profits / Sales

Pre-tax profit margin:

Pre-tax profit margin= Income Before tax/ sales

Net profit margin:

Net profit margin= Net profit after tax/sales*100

Asset management ratio

Cash Turnover= Sales/ average cash

Account Receivable Turnover:

Account Receivable Turnover= Sales / average Accounts receivable

Inventory Turnover= Cost of Goods Sold / Average Inventory

Working Capital Turnover= Sales/ (current assets- current liability)

Fixed Assets Turnover:

Fixed Assets Turnover= Sales / Net fixed asset

Total Assets Turnover:

Total Assets Turnover= Sales / Total asset

Price-to-earnings ratio= Net income /weighted average number of share outstanding

Earnings yield= EPS/ Market price per share

Dividend payout ratio:

Dividend payout ratio= Cash dividend per share/ EPS

Price-to-book ratio= Market price per share/Book value per share

4.1 .Liquidity ratio

The Liquidity ratio there four ratios, those are:

4.1.1. Current ratio

The formula is shown as below;

Current Ratio = Current assets /Current liabilities

Year British American Tobacco Bangladesh Japan Tobacco Inc.

2017 25499348 1,707,767

Figure 4.1.1.Current Ratios

Quick ratio = (Current asset- inventories)/Current liabilities

Table: 4.1.2 Quick ratio

Year British American Tobacco Bangladesh Japan Tobacco Inc.