Liquidity, Solvency & Flexibility Analysis of 16 Manufacturing Organizations and Local NWC Management System

Working Capital Management
(Course- Fin 340)

(Sec-04)
(Report on financial ratio Analysis)
Liquidity, Solvency & Flexibility

Analysis of 16 Manufacturing
Organizations and Local NWC
Management System
Detail Ratio Analysis of 8 Local and 8 Foreign Organization and Our Local
Net Working Capital Management System
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Submitted To:
Submitted By:
Submission Date: 23/12/2018
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Table of Conten
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Acknowledgement
Primarily, we would like to thank the Almighty for giving us the moral integrity, devotion,
patience, and the ability to carry out this project.
We are greatly indebted to our course instructor, Mr. Abdullah Al Mamun, for giving us
the opportunity to work on this Term Project, which is the final and most important
group project of the course FIN340. His direction, encouragement, guidance, in
particular has been invaluable for the improvement of this assignment. This report has
enabled us to apply all that we have learned in class.
We are also genuinely thankful to all our friends and classmates, who have been co-
operative in every aspect. Our each group member has given almost equal dedication to
this project. All the other group leaders have also been equally supportive. It was indeed
pleasurable working in the friendly environment.
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Executive Summary
The purpose of the report is to show the analysis on eight manufacturing organizations
registered in NYSE (Albany, Culp Inc., Abbott Lab., AbbVie Inc., Kellogg’s, Hershey,
Continental, Eagle Corp.) and another eight registered in DSE (H.R. textile, Envoy
textile, premier cement, Meghna cement, Beximco Pharma, Renata Pharma, Gemini
Food, Fu Wang Food) using several liquidity, solvency and profitability ratios like
current ratio, acid test ratio, Inventory turnover, DSO, debt to equity ratio, equity ratio,
debt ratio etc. has been done in this project. Comparative analysis have been done to
determine the liquidity and solvency position of these organizations in 2017. Data had
been primarily collected from the annual reports of these organizations. Moreover, the
overview and background of these are also included in the report. Finally, we conclude
with some recommendations and the bibliography. An appendix, which is provided with
some financial statement. We have surveyed some local retail stores to know how they
manage their cash, inventory and receivables etc.
The report has been prepared by the members of the group as a group project for the
“Short Term Capital Management” (FIN 340) course in North South University, as per
the instruction of honorable faculty Mr. Abdullah Al Mamun. The deadline for
submission of this report was on 21th December 2018.
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Methodology
The methodology of this report required developing an analysis by doing the ratio calculation
of eight local and eight foreign companies. The ratios were calculated by using the data
collected from the annual reports of our selected organizations. Interpretation and
recommendation was based on the ratio analysis and the theory of ratios. To collect information
about local retail store’s working capital management policy, direct discussion with shop
owners or shopkeepers was conducted.
Objectives
To present an organizational overview of liquidity, solvency & flexibility condition of sixteen

organizations.
Compare the performance between local and foreign manufacturing organizations.
Information on local retail store’s working capital management policy has been analyzed.
Limitations
We have tried our best to provide the most up to date and accurate information about our
selected organizations in this report but there were few limitations. Because of these
limitations, we were unable to present the report to the level of accuracy, which we wanted to
obtain. The limitations were:
The information that we have used in this report were gathered from secondary source which
included financial statements of 2017 and also information provided from the DSE-X library
and eight foreign company’s own web sites.
Some financial terms that those organizations used in their financial reports don’t match with
our knowledge from the course, so in calculating ratio’s and risks some mistakes might have
occurred which we are unaware of.
One of the major flaws is that the Ratio Analysis does not consider macro-economic factors
into account, of the particular country or nation.
Due to shortage of time, we could conduct our research on local retail stores on large extend.
Therefore, our analysis may not reflect the actual scenario.
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Introduction
This report is mainly focusing on the liquidity, solvency & flexibility condition of eight local
and eight American company registered in NYSE. Additionally, we tried to analyze net
working capital management system followed in local retail stores. We calculated relevant
ratios to get the actual scenario. To, make all those sixteen firms comparable, we converted
USD into BDT considering 84 BDT equals to 1 USD where necessary. Then we have done
comparative analysis among those firms. To get clear idea about our local new working capital
management system, we conducted a survey among grocery shopkeepers. Though it was in
small range in Nikunjo-2 residential area, we tried to pick up the actual scenario.
Financial Ratio
Solvency Ratio:
Interest coverage = EBIT/ Interest expenses
Debt to asset ratio= Total asset / Total equity
Debt to Equity = Total Liability / Owners Equity
Liquidity Ratio:
Current Ratio = Current Asset / Current Liability
Quick Ratio= (Total Current Asset- Inventory) / Current Liability
Days sales outstanding = (A/R)*365/ Sales
Financial Flexibility Ratio:

Profit Margin= Net Income /Sales
Gross Profit Margin= Gross profit/sales
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Textile Industry
H.R. Textiles
H.R. textile is a public limited company incorporated in Bangladesh under the Companies Act
1913 on 3 December 1984 under the entrepreneurship of the Pride Group. The company owns
textile mills and its principal activities are knitting, processing and finishing of textile products
and making garments. H.R. textiles facility has a complete North American & European State-
of-the-art setup, thoroughly engineered, and is capable of manufacturing a whole range of knit
fabrics and garments.
Envoy Textiles
Envoy textiles established in 2005, started the commercial production in early 2008, within the
short period of time, ETL is now the largest denim fabric producing unit in Bangladesh.
Recently, the factory has achieved ISO 9001: 14001 quality certification and its products are
OKOTEX certified. Its annual production is 50 million yards. Envoy textiles produce a range
of products from 6.5oz to 15oz. of denim fabrics. Envoy textiles denim comes in a variety of
shades and cast basic indigos and sulphur topping or bottoming, in 100% cotton and a variety
of blends.
Albany International
In 1972, Albany International introduced its current logo. This coincided with another
momentous event in the company's history—later that year, it went public. In July 1974, its
shares began trading on the New York Stock Exchange (NYSE).During the 1970s the company
continued to grow through further acquisitions. Among these were machine-clothing
companies in England, Brazil and Norway, as well as a Boston-area research firm. Reflecting
its widening focus, in 1976 management moved the company's headquarters to the nearby,
recently renovated Henry M. Sage Estate, nearby in Menands. Production and lower-level
management activities continued at the original building.
Culp, Inc.
Culp, Inc., incorporated on March 16, 1972, is a producer of mattress fabrics and marketer of
upholstery fabrics for furniture in North America. The Company is engaged in the
manufacturing, sourcing and marketing of mattress fabrics and sewn covers used for covering
mattresses and box springs, and upholstery fabrics, including cut and sewn kits used in
production of upholstered furniture. The Company operates through two segments: mattress
fabrics (Culp Home Fashions) and upholstery fabrics. The Company markets a range of fabrics
in the categories, including fabrics produced at its manufacturing facilities and fabrics produced
by other suppliers. As of May 1, 2016, the Company had 13 manufacturing plants and
distribution facilities located in North and South Carolina; Quebec, Canada, and Shanghai,
China. The Company operates its distribution centers in North Carolina and Shanghai, China.
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Dhaka Stock Exchange
H.R. Textile Ltd.
Liquidity Ratio:
Current Ratio 0.96

Quick Ratio 0.6
DSO 68.73
Solvency Ratio:
Debt to Equity 3.06

Debt to Asset 4.06
Interest Coverage 1.04
Flexibility Ratio:
Profit Margin 2.21%

Gross Profit Margin 14.54%
Envoy Textile Ltd

Liquidity Ratio:
Current Ratio 0.85

Quick Ratio 0.84
DSO 158.69
Solvency Ratio:
Debt to Equity 1.66

Debt to Asset 2.66
Flexibility Ratio:
Profit Margin 5.28%

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NY Stock Exchange
Albany International Co
Liquidity Ratio:
Current Ratio 3.36

Quick Ratio 2.52
DSO 85.65
Solvency Ratio:
Debt to Equity 1.38

Debt to Asset 2.38
Flexibility Ratio:
Profit Margin 4%
Gross Profit Margin 34%
Culp Inc.
Solvency Ratio:
Debt to Equity 0.35

Debt to Asset 0.26
Flexibility Ratio:
Profit Margin 7%
Liquidity Ratio:
Current Ratio 2.22

Quick Ratio 1.10
DSO 27.39
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Comparative Analysis
Textile Industry
Ratio DSE listed Companies NYSE listed Companies

(Bangladesh) (USA)
H.R. Textile ENVOY Textile Albany Culp Inc.
Ltd. Ltd. International
Corporation
Liquidity Ratios:
Current Ratio 0.96 .85 3.36 2.22
Quick Ratio .60 .84 2.52 1.10
DSO 68.73 158.69 85.65 27.39
Solvency Ratios:
Debt Equity Ratio 3.06 1.66 1.38 .35
Debt to asset Ratio 4.06 2.66 2.38 .26
Interest Coverage 1.04 1.82 3.94 1.90
Ratio
Flexibility Ratios:
Profit Margin 2.21% 5.28% 4% 7%
Ratio
Gross Profit 14.54% 17.83% 34% 22%
Liquidity Ratios
Liquidity ratio is measurer of company’s ability to meet its debts and liabilities. It is related to
short-term obligation. There are some ratios to measure liquidity of an organization. These are-
Current ratio, Quick ratio and cash Ratio.
Current Ratio
Current ratio measures the company’s ability to cover the current liabilities with current asset.
H.R. Textile has a current ratio of 0.96 and Envoy textile has 0.85 both company has average
current asset than current liability. The industry average is not so good.
On the other hand, NYSE listed Albany Corporation has current ratio of 3.36 and Culp Inc. has
2.22 that’s means both the companies have higher current asset than current liability and are
capable to pay their current liabilities by their current assets. In textile industry, the DSE listed
companies are less efficient than NYSE listed companies.
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Quick Ratio
Quick ratio is also known as acid test ratio. It indicates how well accompany manage its current
obligation with most liquid asset. Liquid assets are those that can be quickly turn into cash.
In DSE, listed company H.R. Textile has quick ratio of 0.60 and Envoy Textile has a quick
ratio of o.84. This means that H.R. and Envoy textile has quick ratio below one. Meaning that
for one unit of liability H.R. and Envoy Textile has less liquid asset to cover its liability.
On the other hand, NYSE listed Albany Corporation and Culp Inc. both have quick ratio of
2.52 and 1.10. Comparing the DSE listed companies they have more liquid assets.
In this sector, NYSE listed companies position is good then the DSE listed companies.
Days Sales Outstanding

DSO is often determined on a monthly, quarterly or annual basis, and can be calculated by
dividing the amount of accounts receivable during a given period by the total value of credit
sales during the same period, and multiplying the result by the number of days in the period
measured. It is a financial ratio that illustrates how well a company's accounts receivables are
being managed. DSE listed company’s H.R. Textile’s DSO ratio is 68.73 days and Envoy
textile’s DSO is 158.69 days.
On the other hand, Albany Corporation and Culp Inc.’s DSO are 85.65 and 27 days.
Comparing with the H.R. and Envoy Textile which are the DSE listed companies, the NYSE
listed Albany Corporation and Culp Inc. are taking less days to collects their accounts
receivables, and they are managing criteria of accounts receivables is good than the DSE listed
companies.
Solvency Ratios
Solvency ratio is the indicator of measuring company’s long-term obligation. It reflects the
company’s profitability and compares it with liability.
Debt to Equity Ratio

Debt to equity ratio use to measure company’s financial leverage. The debt to equity ratio
shows the percentage of company financing that comes from creditors and investors. H.R. and
Envoy Textile have debt to equity ratio of 3.06 and 1.66. Meaning that H.R. Textile is using
more debt financing than Envoy Textile.
On the other hand, NYSE listed companies like; Albany Corporation and Culp Inc. have debt
to equity ratio of 1.38 and 0.35.
DSE listed companies are using more debt financing than NYSE listed companies and they
are achieving more tax advantages that are listed in NYSE.
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Debt to Asset Ratio
Debt to asset ratio is a leverage ratio that defines the total amount of debt relative to assets.
DSE listed textile industry companies; H.R. and Envoy Textile have debt to asset ratio of
4.06 and 2.66. This means that H.R. textile’s investor’s portion of debt is higher and Envoy
textile’s investor’s portion of debt is lower and using less debt to finance their assets.
On the other hand, NYSE listed companies; Albany Corporation and Culp Inc. have debt to
asset ratio of 2.38 and .26. These ratios indicate that, NYSE listed companies are using less
debt to finance their assets. DSE listed companies are riskier than NYSE listed companies of
textile industry.
Interest Coverage Ratio

The interest coverage ratio is debt ratio and profitability ratio used to determine how easily a
company can pay interest on its outstanding debt. DSE listed, H.R. and Envoy Textile have
interest coverage ratio of 1.04 and 1.82 both the company’s performance is not very good and
their ability to pay interest expense is not satisfying.
On the other hand, NYSE listed, Albany Corporation and Culp Inc. have interest coverage
ratio of 3.94 and 1.90.
In order to measure the ability of interest payments DSE listed companies along with NYSE
listed companies position is not good. NYSE listed company can pay their interest faster than
DSE listed company.
Flexibility Ratios
Financial flexibility is use to describe a company's ability to react to unexpected expenses and
investment opportunities. Companies with superior financial flexibility are both able to survive
tough economic times as well as take advantage of unexpected investment opportunities.
Profit Margin Ratio

Profit margin ratio is a part of a category of profitability ratios. Profit margin are express as a
percentage and in effects measures how much out of every dollar of sales a company actually
keeps in earnings. DSE listed, DSE and Envoy textile have 2.21% and 5.28% profit margin
ratio.
On the other hand, NYSE listed, Albany Corporation and Culp Inc. have profit margin ratio of
4% and 7%.
NYSE listed companies have higher profit margin ratio and are able to generate more profit on
each dollar of sales than the DSE listed companies.
Gross Profit Margin Ratio

The gross profit margin ratio also known as gross margin is the ratio of gross margin expressed
as a percentage of sales. Gross margin indicates how much profit a company makes after paying
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off its COGS. DSE listed, H.R. and Envoy textile have gross margin ratio of 14.54% and
17.83%.
On the other hand, NYSE listed, Albany Corporation and Culp Inc. have 34% and 22%. These
are higher gross profit margin compare to the DSE listed companies. So that higher gross profit
margin, it indicates that, the NYSE listed companies can make a reasonable profit on sales as
long as it keeps overhead costs in control and investors tend to pay more for a NYSE listed
companies with higher gross profit.
Pharmaceuticals Industry
Beximco
Beximco Pharmaceuticals Ltd. is a leading manufacturer and exporter of medicines in
Bangladesh. Incorporated in 1976, the company started its operation by importing products
from Bayer, Germany and Upjohn, USA and selling them in the local market. In 1980, Beximco
began manufacturing of these products under licensing arrangement and launched its own
formulation brands in 1983. From that humble beginning, Beximco Pharma has grown from
strength to strength, and today it has become an emerging global generic drug company from
the region. Beximco’s manufacturing facilities have been accredited by the leading global
regulatory authorities, and medicines manufactured by the company are now being exported to
more than 50 countries including the highly regulated markets of USA, Europe, Canada and
Australia.
Renata
Renata Limited (formerly Pfizer Laboratories Limited), also known as Renata, is one of the top
ten (in terms of revenue) pharmaceutical manufacturers in Bangladesh. Renata is engaged in
the manufacture and marketing of human pharmaceutical and animal health products. The
company also manufactures animal therapeutics and nutrition products. Renata currently
employs about 2300 people in its head office in Mirpur, Dhaka and its two production facilities
in Mirpur, Dhaka and Rajendrapur, Dhaka. There are three subsidiaries of Renata Limited.
These are Renata Agro Industries Limited, Purnava Limited, and Renata Oncology Limited.
Renata Limited have successfully synthesized the active pharmaceutical ingredients,
Sorafenib, which is used to treat various cancers.
Abbott laboratories
Abbott Laboratories is an American health care company with headquarters in Lake Bluff,
Illinois, United States. Chicago physician Wallace Calvin Abbott founded the company in 1888
to formulate known drugs; it eventually grew to also sell research-based drugs, medical
devices, diagnostics, and nutritional products. Abbott has a broad range of branded generic
pharmaceuticals, medical devices, diagnostics, and nutrition products. The company's in-vitro
diagnostics business performs immunoassays and blood screening. Hospitals, laboratories,
blood banks, and physician offices to diagnose and monitor diseases, such as HIV, hepatitis,
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cancer, heart failure and metabolic disorders, as well as assess other indicators of health use its
medical tests and diagnostic instrument systems worldwide. In 1985, the company developed
the first HIV blood-screening test.
AbbVie Inc.
On October 19, 2011, Abbott Laboratories announced its plan to separate into two publicly
traded companies. The new Abbott Laboratories would specialize in diversified products
including medical devices, diagnostic equipment and nutrition products, while AbbVie would
operate as a research-based pharmaceutical manufacturer. The separation was effective January
1, 2013, and AbbVie was officially listed on the New York Stock Exchange (ABBV) on
January 2, 2013. In January 2014, the company acquired ImmuVen for an undisclosed sum.
On September 3, 2014, AbbVie and Infinity Pharmaceuticals announced that they had entered
into a global collaboration to develop and commercialize duvelisib, Infinity's PI3K inhibitor
for the treatment of patients with cancer. On the same day, AbbVie and Calico announced that
they had entered into a R&D collaboration intended to discover, develop and bring to market
new therapies for patients with age-related diseases including neurodegeneration and cancer.
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Beximco Pharma
Liquidity Ratio:
Current Ratio 1.77

Quick Ratio 1.24
DSO 51
Solvency Ratio:
Debt to Equity 0.38

Debt to Asset 0.27
Flexibility Ratio:
Profit Margin 14.36%

Renata Pharma
Liquidity Ratio:
Current Ratio 1.01

Quick Ratio 0.48
DSO 45.40
Solvency Ratio:
Debt to Equity 1.77

Debt to Asset 0.64
Flexibility Ratio:

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New York Stock Exchange
Abbott Laboratories (ABT)
Liquidity Ratio:
Current Ratio 2.26

Quick Ratio 1.85
DSO 69.94
Solvency Ratio:
Debt to Equity 1.46

Debt to Asset 2.46
Flexibility Ratio:
Profit Margin 1.74%

AbbVie Inc. (ABBV)

Liquidity Ratio:
Current Ratio 1.27

Quick Ratio 1.17
DSO 65.81
Solvency Ratio:
Debt to Equity 12.88

Debt to Asset 13.88
Flexibility Ratio:

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Pharmaceuticals Industry
Liquidity Ratios
short-term related obligation. There are some ratios to measure liquidity of an organization.
These are- Current ratio, Quick ratio and cash Ratio.
Current Ratio
Current ratio measures the company’s ability to cover the current obligation with current asset.
Beximco Pharma has a current ratio of 1.77 and Renata Pharma has 1.01. Both companies has
higher current asset than current liability. The industry average is good.
On the other hand, NYSE listed ABBOTT Lab. has current ratio of 2.26 and AbbVie Inc. has
1.27 that’s both are capable to pay its current liabilities by its current assets, but ABBOTT Lab.
is in the good position to pay their current liabilities by its current assets.
Therefore, here NYSE listed companies are in better position than DSE listed companies.
(Bangladesh) (USA)
Beximco Renata Pharma ABBOTT Lab. AbbVie Inc.
Pharma
Liquidity Ratios:
Current Ratio 1.77 1.01 2.26 1.27
Quick Ratio 1.24 0.48 1.85 1.17
DSO 51 45.40 69.94 65.81
Solvency Ratios:
Debt Equity Ratio 0.38 1.77 1.46 12.88
Debt to asset Ratio 0.27 0.64 2.46 13.88
Ratio
Flexibility Ratios:
Profit Margin 14.36% 16.28% 1.74% 18.82%
Ratio
Gross Profit 46.32% 50.51% 54.95% 75.05%
Quick Ratio
Quick ratio is also referred as acid test ratio. It indicates how well accompany manage its
current obligation with most liquid asset. Liquid assets are those that can be quickly turned into
cash.
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In DSE, listed company Beximco Pharma has quick ratio of 1.24 and Renata Pharma has a
quick ratio of 0.48. This means both companies are not in a good position with their liquid able
assets.
On the other hand, NYSE listed ABBOTT Lab. and AbbVie Inc. both have quick ratio of 1.85
and 1.17. Comparing the DSE listed companies they have more liquid assets.
In this sector NYSE listed companies position is better than the DSE listed companies.
Days Sales Outstanding

Days Sales Outstanding is a calculation used by a company to estimate their average collection
period. It is a financial ratio that illustrates how well a company's accounts receivables are
being managed.
DSE listed company’s Beximco Pharma DSO ratio is 51 days and Renata Pharma DSO is 45.40
days.
On the other hand, ABBOTT Lab and AbbVie Inc. DSO are 69.94 & 65.81 days.
So here, NYSE listed companies take more number of days to collect their accounts receivable
compare to DSE listed companies.
Solvency Ratios

shows the percentage of company financing that comes from creditors and investors. Beximco
Pharma and Renata Pharma have debt to equity ratio of 0.38 and 1.77. This means that Renata
Pharma is using more debt financing than Beximco Pharma.
On the other hand, NYSE listed companies ABBOTT Lab. and AbbVie Inc. have debt to equity
ratio of 1.46 and 12.88. Meaning that AbbVie Inc. is using more debt financing than ABBOTT
Lab.
NYSE listed companies are using more debt financing than DSE listed companies and they are
achieving more tax advantages than DSE listed companies.
Debt to Asset Ratio

DSE listed Pharmaceuticals industry companies; Beximco Pharma and Renata Pharma have
debt to asset ratio of 0.27 and 0.64. Meaning that Beximco Pharma investor’s portion of debt
is lower and they use less debt financing. However, Renata Pharma using more debt to finance
their assets compare to Beximco Pharma.
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On the other hand, NYSE listed companies; ABBOTT Lab. and AbbVie Inc. have debt to asset
ratio of 2.46 and 13.88. These ratios indicate that NYSE listed organizations are utilizing more
debt to financing their asset. NYSE listed organizations are less secure than DSE listed
organizations of Pharmaceuticals industry.

company can pay interest on its outstanding debt.
DSE listed, Beximco Pharma and Renata Pharma have interest coverage ratio of 0.256 and
0.158 both the company’s performance is very poor and their ability to pay interest expense is
not satisfying.
On the other hand, NYSE listed, ABBOTT Lab. and AbbVie Inc. have interest coverage ratio
of 3.46 and 8.69, which is in a position. They can easily pay interest on its outstanding debt.
In order to measure the ability of interest payments DSE listed companies are in a poor position
than NYSE listed companies.
Flexibility Ratios
Financial flexibility is used to describe a company's ability to react to unexpected expenses and
Profit Margin Ratio

Profit margin ratio is a part of a category of profitability ratios. Profit margin is expressed as a
percentage and in effect measures how much out of every dollar of sales a company actually
keeps in earnings.
DSE listed, Beximco Pharma and Renata Pharma have 14.36% and 16.28% profit margin ratio.
On the other hand, NYSE listed, ABBOTT Lab. and AbbVie Inc. have profit margin ratio of
1.74% and 18.82%.
So here NYSE recorded organizations are quite an awful position to create more profit on every
dollar of offers than the DSE recorded organizations.

off its COGS.
DSE listed, Beximco Pharma and Renata Pharma have gross margin ratio of 46.32% and
50.51%.
On the other hand, NYSE listed, ABBOTT Lab. and AbbVie Inc. have 54.95% and 75.05%.
These are large gross profit margin compare to the DSE listed companies.
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So lesser gross profit that shows, the NYSE recorded organizations can make a reasonable
profit on sales as long as it keeps overhead expenses in charge and investors will in general pay
more for a NYSE recorded organizations with higher gross benefit.
Food Industry
Gemini Sea Food
Established in the year 1982 Gemini has supplied highest quality seafood products to customers
worldwide. Since the inception Gemini, people have believed in “Hygienic Product Healthy
Trade” and made it a part of their core values at work. Quality, Delivery Security, Social
Responsibility and Respect to Nature are the corner stones of Gemini’s Business, which has
made Gemini the most admired seafood processing companies in Bangladesh.
Fu Wang Food
Fu-Wang Foods Ltd is a public ltd companies, incorporated with joint stock companies and
Firm Bangladesh also publicly listed with Dhaka Stock Exchange Ltd And Chittagong Stock
Exchange Ltd. Fu Wang Foods Limited commenced its commercial production in August 1997
and achieved ISO-9002 certification on 04th November 1998. Since inception, Fu Wang Foods
Limited introduces different pack food items like BREAD, BISCUIT, CAKE, TOAST,
WAFER BAR, CHOCOLATE, INSTANT NOODLES, DRINKING WATER,
CARBONATED DRINKS, and ENERGY DRINKS etc. and were appreciated throughout the
globe.
Hershey
The Hershey Company, known until April 2005 as the Hershey Foods Corporation commonly
called Hershey's, is an American company and one of the largest chocolate manufacturers in
the world. It also manufactures baked products, such as cookies, cakes, milk shake, drinks and
many more, which increase its variety of range. Its headquarters are in Hershey, Pennsylvania,
which is also home to Hershey's Chocolate World. Milton S. Hershey founded it in 1894 as the
Hershey Chocolate Company, a subsidiary of his Lancaster Caramel Company. The Hershey
Trust Company owns a minority stake, but retains a majority of the voting power within the
company. Hershey's chocolate is available across the United States, due to their wide network
of distribution. They have three mega distribution centers, with modern technology and labor
management systems. Hershey's products are sold in over 60 countries worldwide. In addition,
Hershey is a member of the World Cocoa Foundation. It is also associated with the Hershey
park Stadium and the Giant Center.
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Gemini Sea Food Limited
Liquidity Ratio:
Current Ratio 1.01
Quick Ratio 0.56
DSO 56.07
Solvency Ratio:

Debt to Asset 17.97
Flexibility Ratio:
Profit Margin 2%
Fu Wang Food
Liquidity Ratio:
Current Ratio 2.26

Quick Ratio 1.77
DSO 125.72
Solvency Ratio:
Debt to Equity .12

Debt to Asset .08
Profitability Ratio:

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Kellogg’s
Liquidity Ratio:
Current Ratio 0.68

Quick Ratio 0.40
DSO 39.23
Solvency Ratio:
Debt to Equity 6.34

Debt to Asset 7.34
Flexibility Ratio:
Profit Margin 9.8%

Hershey
Solvency Ratio:
Debt to Equity 2.99

Debt to Asset .85
Flexibility Ratio:
Profit Margin 10%

Liquidity Ratio:
Current Ratio .95%

Quick Ratio .46%
DSO 28.96
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Food & Allied Industry

(Bangladesh) (USA)
Gemini Sea Fu Wang Food Kellogg’s Hershey
Food
Solvency Ratio
Debt to Equity 6.97 .12 6.34 2.99

Debt to Asset 7.97 .08 7.34 .85
Flexibility Ratio
Profit Margin 2% 11.23% 9.8% 10%

Gross Profit 8% 26.52% 38.8% 42.4%
Margin
Liquidity Ratio
Current Ratio 1.01 2.26 .68 .95

Quick Ratio .56 1.77 .40 .46
DSO 56.07 125.72 39.23 28.96
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Solvency Ratios
Debt to Equity
This is the measurement of how much debt a company maintains in relation to its equity.
Gemini Sea Food and Fu Wang Food have debt to equity ratio of 6.97 and .12 respectively. Fu
Wang Food have less debt than equity. NYSE listed two companies; Kellogg’s and Hershey
have debt to equity ratios of 6.34 and 2.99. They also have higher debt than their equity. Debt
liabilities are costly and risky compared to equity. Therefore, because of having lower debt to
equity ratio on average, Gemini Sea Food & Fu Wang Food hold more stability than Kellogg’s
& Hershey.
From the comparative analysis, we can state that, the NYSE listed companies in the food &
allied industry do more risky business than Bangladeshi companies from the same industry.
Those NSYE listed companies are much bigger than those two Bangladeshi companies are.
Moreover, the bigger companies can afford to take more risk and can be less solvent, liquid
and flexible from time to time.
Debt to asset
One of the most important indicators of financial solvency is debt to asset ratio. It refers to
company’s total debt against assets. Gemini Sea Food and Fu Wang Food both have debt to
asset ratio of 7.97 and .08. Meaning that 79.7% of Gemini Sea food’s asset will be needed to
cover its debts and for Fu Wang Food just 8% of its assets is enough to cover its debts. In this
case, Fu Wang Food is in good position because they have very low debts compared to asset.
On the other hand, Kellogg's and Hershey have debt ratio of 7.34 and .85. On a normal, the two
NYSE organizations have higher debt to asset ratio compare with DSE. These the two
organizations should utilize higher portion of their assets for cover debt. In this way, here, the
DSE organizations have more secure position.
Interest Coverage
The interest coverage ratio is a financial ratio that measures a company’s ability to make
interest payments on its debt in a timely manner. As you can see, Both Gemini Sea Food and
FU Wang Food have Interest coverage ratio of 2.00 and 8.55. Meaning that Gemini Sea Food
and Fu Wang Food have made 2.00 and 8.55 times more earnings than their current interest
payments. They can well afford to pay the interest on current debt along with its principle
payments. On the other hand, Kellogg’s and Hershey both have Interest coverage ratio of 7.60
and 12.96 respectively. This is higher than that DSE companies. This is a good sign because it
shows that both companies risk is low and the operations are producing enough cash to pay the
bills. We can say that NYSE companies hold the competitive advantage on the ability to pay
their interest payments over the DSE companies in food & allied industry.
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Flexibility Ratios
Financial flexibility is use to describe a company's ability to react to unexpected expenses and
Profit Margin Ratio

The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a profitability
ratio that measures the amount of net income earned with each dollar of sales generated by
comparing the net income and net sales of a company. Both Gemini Sea Food and Fu Wang
food converted 2% and 11.23% of their sales into profits. At the same time, Both Kellogg’s
and Hershey converted 9.8% & 10% of their sales into profits. Therefore, NYSE food & allied
industry companies are generating more profit than DSE.
Gross margin
Gross margin expressed as a percentage of sales. Gross margin, alone, indicates how much
profit a company makes after paying off its Cost of Goods sold.
Gemini Sea Food generate Gross profit margin of 8% and Fu Wang Food generate gross profit
of 26.52%. The gross profit margin ratio is an indicator of a company’s financial health. It tells
investors how much gross profit every dollar of revenue a company is earning.
Again, two NYSE listed companies Kellogg’s and Hershey generate Gross profit margin of
38.8% and 42.4%, which is higher than DSE listed two companies. Therefore, it is clear that
compare to the DSE, NYSE are making higher reasonable profit that indicate their wealthy
financial position.
Liquidity Ratios
short-term related obligation. There are some ratios to measure liquidity of an organization.
These are- Current ratio, Quick ratio and cash Ratio.
Current Ratio
Current ratio measures a company’s ability to cover their current obligations with current
assets. In Bangladeshi food & allied industry, Gemini Sea Food generate a current ratio of 1.01
and Fu Wang Food generate 2.26, both the companies have higher current assets than current
liabilities.
NYSE listed- Kellogg’s and Hershey have current ratio of 0.68 & .95 that indicate they are
performed on an average but not so well.
If we measure an industry average, Gemini Sea Food and Fu Wang Food’s average current
ratio is about 1.634, not very much high from the two NSYE companies’ average .815
26 | P a g e
We can say that DSE companies hold the competitive advantage on the ability to meet current
liabilities through current assets over the NSYE companies in food & allied industry.
Quick Ratio
In finance, the quick ratio, also known as the acid-test ratio is a type of liquidity ratio, which
measures the ability of a company to use its near cash or quick assets to extinguish or retire its
current liabilities immediately. Liquid assets are those assets that can be quickly turn into cash.
Therefore, while measuring the quick ratio, we keep inventory apart. Gemini Sea Food has a
quick ratio of 0.56 and Fu Wang Food has a quick ratio of 1.77. There average is. 1.165.
On the other hand, Kellogg’s and Hershey both have quick ratios of 0.40 and 0.46 respectively.
There average is 0.43, which is below one. Meaning that one unit of liability, they have less
liquid assets to cover. Therefore, the two Bangladeshi companies are in better position than the
NSYE companies are in terms of quick ratio.
DSO (Daily Sale Outstanding)

DSO is often determined on a monthly, quarterly or annual basis, and can be calculated by
dividing the amount of accounts receivable during a given period by the total value of credit
sales during the same period, and multiplying the result by the number of days in the period
measured. It is a financial ratio that illustrates how well a company's accounts receivables are
being managed. Gemini Sea Food’s DSO is 56.07 days and Fu Wang food’s is 125.72 days. It
shows that Fu Wang is selling its product to customers on credit and taking longer to collect
money. This may lead to cash flow problems because of the long duration between the time of
a sale and the time the company receives payment. Now, NYSE listed companies Kellogg’s
and Hershey have 39.23 and 28.96. Therefore, we can say that NYSE listed companies are
managing their account receivables perfectly.
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Cement Industry
Premier cement mills limited:
Premier Cement one of the largest and most renowned cement brand in Bangladesh. It started
its journey as a private limited Company on 14 October 2001 under the Company Act 1994
with the commitment of manufacturing high quality cement under the brand name “Premier
Cement”. It was converted into a public limited company under the Companies Act 1994 with
an authorized capital of BDT 5,000 million in 2010. After going through successful operation
and production for three more years, in 2013 it was listed with the Dhaka Stock Exchange
Limited and Chittagong Stock Exchange Limited simultaneously.
Meghna cement:
Meghna Cement Mills Ltd, the first manufacturing enterprise of Bashundhara Group is one of
the largest cement manufacturing industries in Bangladesh. This organization was established
in 1992 on the bank of Pashur River and in the industrial zone of Mongla Port on 9.83 acres of
land to produce Portland cement. MCML has an excellent communication facility connecting
all parts of the country through rivers and roads.
Eagles Material Corporation:

The company was founded in 1963 as a division of Centex Construction Company. Between
April 1994 and January 30, 2004, the company was known as Centex Construction Products,
Inc. On January 30, 2004, Centex distributed its shares in the company to its shareholders and
the company was renamed Eagle Materials Inc.
Continental building products:

Continental Building Products, Inc. manufactures and sells gypsum wallboard and
complementary finishing products in the eastern United States and eastern Canada. The
company sells its products to gypsum wallboard distributors, buying groups, wholesalers, and
mass merchants in the new residential, repair and remodel, and commercial construction
markets under the Lift Lite, Mold Defense, and Weather Defense brand names. Continental
Building Products, Inc. is headquartered in Herndon, Virginia.
28 | P a g e
Cement Industry
Premier cement:
Solvency Ratio:
Interest Coverage ratio 3.16

Debt to asset ratio 2.55
Debt to equity ratio 1.55
Liquidity Ratio:
Current ratio 0.9383

Quick ratio 0.7717
DSO 7
Profit margin ratio 5.29%

Gross profit margin ratio 16.41%
Meghna Cement:
Solvency Ratio:

Interest coverage ratio 6.15
Liquidity Ratio:
Current ratio 1.065

Quick ratio 0.852
DSO 8.076

Profit Margin 12.9%
29 | P a g e
Eagle Materials:
Solvency Ratio:

Interest Coverage ratio 14.80
Liquidity Ratio:
Current ratio 3.151

Quick ratio 1.13
DSO 2.88
Financial flexibility Ratio:

Gross Profit 0.2025%
Continental building products:

Solvency Ratio:
Debt to assets ratio 2.018

Interest coverage ratio 7.482
Liquidity Ratio:
Current ratio 3.32

Quick ratio 2.76
DSO 4
Financial flexibility Ratio:
Profit margin 12%

Gross profit margin 26%
30 | P a g e
Cement Industry

(Bangladesh) (USA)
Premier Meghna Eagle Continental
cement Cement Corporation building product
Liquidity Ratios:
Current Ratio .94 1.065 3.15 3.32
Quick Ratio 0.77 0.86 1.088 2.76
DSO 7 8.076 2.88 4
Solvency Ratios:
Debt Equity 1.55 4.73 0.80 1.018
Ratio
Debt to asset 2.55 5.73 1.81 2.018
Ratio
Interest 3.16 6.15 14.80 7.482
Coverage Ratio
Flexibility
Ratios:
Profit Margin 5.29% 1.29% 13.30% 12%
Ratio
Gross Profit 16.41% 11.6% 20.25% 26%
31 | P a g e
Solvency Ratio
Solvency ratio is the indicator of measuring company’s long term obligation. It reflects the
Debt to asset Ratio

Premier and Meghna cement have debt to asset ratio of 2.55 and 5.739. This means that Meghna
cement have higher ratio then Premier cement. It tells premier cement have 2.55% of total
assets that were financed by creditors, liabilities, debt.
On the other hand, Eagle and CBP has debt to asset ratio of 1.81 and 2.018. Here Eagle has
lower ratio then CBP. But in comparison with Premier and Meghna cement both Eagle and
CBP Company are in a good position.

shows the percentage of company financing that comes from creditors and investors. Premier
and Meghna cement has debt to equity ratio of 1.55 and 4.73. This means that Meghna cement’s
investors’ portion of debt is higher and premier cement using less debt financing to manage
their equity.
On the other hand, Eagle and CBP has debt to equity ratio of 0.80 and 1.018. Here Eagle has
less debt to equity ratio then CBP. However, these companies are in a good position compared
to Premier cement and Meghna Cement. Higher debt to equity ratio means company uses
higher debt from lenders and this type of debt is costly and negative impact on dividends.

company can pay interest on its outstanding debt. Premier Cement and Meghna Cement have
3.16 and 6.15. Here Meghna cement have higher interest coverage ratio.
On the other hand, Eagle and CBP have 14.80 and 7.482 interest coverage ratio. Both the
company has higher interest coverage ratio then Meghna and Premier cement. That means
Meghna and Premier Cement can pay interest more easily than other two company.
Liquidity ratio
Liquidity ratio is measurer of company’s ability to meet its debts and liabilities. It is basically
related to short-term related obligation. There are some ratios to measure liquidity of an
organization. These are- Current ratio, Quick ratio and cash Ratio.
Current Ratio
Current ratio measures the company’s ability to cover the current obligation with current asset.
Premier Cement has a current ratio of .9383 and Meghna Cement has 1.06. Meghna cement
has higher current asset than current liability.
32 | P a g e
On the other hand, Eagle has current ratio of 3.15 and CBP has 3.32. DSE companies have
lower current ratio than these companies. Therefore, these two companies have higher ability
to meet current obligation than Premier and Meghna Cement.
Quick Ratio
Quick ratio is also referred as acid test ratio. It indicates how well accompany manage its
current obligation with most liquid asset. Liquid assets are those that can be quickly turned into
cash. Premier cement has quick ratio of .7717 and Meghna cement has a quick ratio of 0.8520.
This means that both companies have a quick ratio below 1. This means for one unit of liability
both have less liquid asset.
On the other hand, Eagle and CBP both have quick ratio of 1.13 and 2.76. Both of the assets’
is above 1. This means Eagle and CBP have more liquid asset against short-term obligation.
Therefore, these two companies are in better position than Premier and Meghna Cement.
Day Sales Outstanding Ratio

DSO ratio measures the average number of days it takes for a supplier to collect on credit sales,
which reflects the efficiency of the credit and collection departments. Premier Cement’s DSO
ratio 7 days and Meghna Cement’s DSO is 8.076 days. Meghna Cement’s DSO is higher
compare to the Premier’s DSO.
On the other hand, Eagle and CBP have 2.88 and 4 DSO. IN compare to the Premier and
Meghna cement Eagle DSO ratio and CBP DSO are very relatively low. That’s mean NYSE
listed companies are manage their accounts receivable perfectly.
Financial Flexibility Ratio

Financial flexibility is used to describe a company's ability to react to unexpected expenses and
Profit Margin Ratio

Profit margin ratio is a part of a category of profitability ratios. Profit margins are expressed as
a percentage and in effect measures how much out of every dollar of sales a company actually
keeps in earnings. Premier Cement and Meghna Cement have 5.29% and 1.295% profit margin.
Premier cement have higher profit margin.
On the other hand, Eagle and CBP has a 13.32% and 12% higher profit margin compare to the
Meghna and Premier cement industries.

off its COGS. The value of the gross profit margin varies from company and industry. Premier
Cement Company and Meghna Cement Company have a 16.41% and 20.25% gross profit
33 | P a g e
margin. We can see that Premier Cement has lower gross profit than Meghna cement. Means
that Premier Cement is underpricing compare to the Meghna Cement.
On the other hand, Eagle and CBP have 20.25% and 26% gross profit margin. However, Eagle
and Meghna have same level of profit margin and CMP has higher level of gross profit margin
then all companies. So that higher gross profit margin it 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.
34 | P a g e
Local NWC Management System
Sotota General Store is grocery store located in NIKUNJO-2 R/A, Dhaka, Bangladesh. They
offer all kinds of grocery products to the customers at retail price. Mainly large amount of
products the agents deliver them to their store, and for some products they have to go to the
whole sellers to buy. The stores daily sale is 16000-18000 taka. They follow moderate liquidity
strategy. They normally hold 4000 taka daily, but when obligation arises they increase their
cash holdings. Because they want to be more secure in their business. Their investment in
inventory is 25000 taka. The store keeps some safety stock worth of 4000-5000 taka. To keep
their inventory they have to rent a small room nearby which cost 1500 taka monthly. They
sometimes give credit to their customer. It is based on trust. Credit sales amount depends from
person to person. They give up to 800 taka credit normally. Beside they do also offer credit on
monthly basis. Sometimes they offer 10-20 taka discount if the amount is more than 500 taka.
They also get trade credit from the suppliers. They have a good relationship with their suppliers
and they have to pay their supplier within 7-15 days depends on product. They get discount
from their suppliers if they pay instant. Sometimes they take the discount if the cash is
available. And their primary target also to get as much discount as possible from suppliers. So
that they can gain more profit from selling those products to the customer. The store has a
constant sell and they don’t face problem to pay their suppliers. It’s all because the constant
demand of products from customers and a number of good products delivered in time from
suppliers. Sometimes agents approach them to keep their product in the store. The store gets
some discount if they sell those products and they get longer trade credit for those products. The
store’s initial investment was 250000 taka. From profit they make, keep a portion in bank and
rest of the profit they re-invest in their stores such as re-purchase products, shop maintenances,
paying several bills.
We think they should expand their store. They are kind of popular local shop in our place. If
they can open a new branch of their store on another suitable place, there is a high chance they
can attract and grab more customers. For doing this providing good services is a mandatory
thing, also they have to provide wide range of products. Currently their competitors have a
bigger store and they can keep wide varieties of products. Sotota General Store has a consistent
sale but because of their shorter space they couldn’t keep wide varieties of products. As a result
they lose their sales. With the new investment they can keep more inventories.
35 | P a g e
Conclusion
Our analysis says that some cases foreign companies are performing well and some cases our
local companies are doing well. In some cases, the numbers of ratios are far away than our
companies in terms of their solvency, liquidity and flexibility. To improve this situation, local
companies should focus on effective working capital management. On the other hand, our local
retail shops do not follow any specific or standardized accounting principle to manage their net
working capital. Due to this mismanagement, they sometimes face different problems to pay
their liabilities on time or in other financial crisis. Better knowledge about working capital
management will help them to overcome this situation.
36 | P a g e
Appendix
37 | P a g e

Liquidity, Solvency & Flexibility Analysis of 16 Manufacturing Organizations and Local NWC Management System

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Liquidity, Solvency & Flexibility Analysis of 16 Manufacturing Organizations and Local NWC Management System

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Working Capital Management

(Course- Fin 340)

Liquidity, Solvency & Flexibility

Submission Date: 23/12/2018

To present an organizational overview of liquidity, solvency & flexibility condition of sixteen

Financial Flexibility Ratio:

Current Ratio 0.96

Debt to Equity 3.06

Profit Margin 2.21%

Envoy Textile Ltd

Current Ratio 0.85

Debt to Equity 1.66

Profit Margin 5.28%

Current Ratio 3.36

Debt to Equity 1.38

Debt to Equity 0.35

Current Ratio 2.22

Ratio DSE listed Companies NYSE listed Companies

Days Sales Outstanding

Debt to Equity Ratio

Interest Coverage Ratio

Profit Margin Ratio

Gross Profit Margin Ratio

Current Ratio 1.77

Debt to Equity 0.38

Profit Margin 14.36%

Current Ratio 1.01

Debt to Equity 1.77

Profit Margin 16.28%

Current Ratio 2.26

Debt to Equity 1.46

Profit Margin 1.74%

AbbVie Inc. (ABBV)

Current Ratio 1.27

Debt to Equity 12.88

Profit Margin 18.82%

Days Sales Outstanding

Debt to Equity Ratio

Debt to Asset Ratio

Interest Coverage Ratio

Profit Margin Ratio

Gross Profit Margin Ratio

Debt to Equity 16.97

Current Ratio 2.26

Debt to Equity .12

Profit Margin 11.23%

Current Ratio 0.68

Debt to Equity 6.34

Profit Margin 9.8%

Debt to Equity 2.99

Profit Margin 10%

Current Ratio .95%

Ratio DSE listed Companies NYSE listed Companies

Debt to Equity 6.97 .12 6.34 2.99

Profit Margin 2% 11.23% 9.8% 10%

Current Ratio 1.01 2.26 .68 .95

Profit Margin Ratio

DSO (Daily Sale Outstanding)

Eagles Material Corporation:

Continental building products:

Interest Coverage ratio 3.16

Current ratio 0.9383

Financial Flexibility Ratio: