Term Paper on Financial Ratio Analysis

Of
Kohinoor Chemicals Company Bangladesh Ltd. & Marico Bangladesh
Ltd.
Course Title: Business Finance
Course code: FIN 201
Section 03

Submitted to
Leo Vashkor Dewri (LVD)
Senior Lecturer
Department of Business Administration
East West University

Submitted by
Name ID

Mohona Ahamed 2016-2-10-116

Saiful Alam Forhad 2016-2-10-177
Panna Akter 2018-1-13-060

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 Letter of Transmittal
2 January, 2020
Leo Vashkor Dewri
Senior Lecturer, Department of Business Administration
East West University
Subject: Submission of Report
Dear Sir,
Dear Sir, we are submitting the final term paper on Kohinoor Chemicals Company
Bangladesh Ltd. & Marico Bangladesh Ltd” which you authorized. The term paper
is descriptive cum analytical in nature. In the preparation of the term paper we
strictly followed all your instructions & requirements. While making this report we
came across many hurdles and pleasant experience. But valuable experiences we
have gained during the period will undoubtedly benefit us in the years ahead.
Despite the several constraints, we gave all of our efforts to make this report a
meaningful one.
We have tried sincerely to comprehend and translate our knowledge in writing this
report.
Sincerely,
Mohona Ahamed 2016-2-10-116
Saiful Alam Forhad 2016-2-10-177
Panna Akter 2018-1-13-060

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 Contents
Letter of Transmittal..................................................................................................2
Introduction...............................................................................................................4
Strategy and Forward Planning.................................................................................5
Ratio Analysis...........................................................................................................6
Profitability & Efficient Ratio...................................................................................8
Liquidity.................................................................................................................8
Financial structure..................................................................................................8
Short-term solvency...............................................................................................8
Activity Ratio.........................................................................................................9
Financial leverage Ratio.........................................................................................9
Competitor Analysis:..............................................................................................9
Non Financial Performance:....................................................................................11
Corporate Social responsibility:...........................................................................11
Environmental and CSR policy:...........................................................................11
HR & Social Responsibility....................................................................................13
Conclusion...............................................................................................................14
Reference.................................................................................................................15

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 Introduction

Kohinoor Chemical Company (Bangladesh) Limited (KCCL) established in 1956.

The management of KCCL subsequently completed an arduous BMRE program
with the technical collaboration of a reputed industrial conglomerate of Europe.
This enabled the enterprise to become a repositioned cosmetics and toiletries
manufacturing company of Bangladesh with the most advanced technology. It is a
Public Limited Company, listed with both the bourses of Bangladesh, the Dhaka
Stock Exchange and the Chittagong Stock Exchange.

Most of the products of KCCL are known by the legendary brand name Tibet. A
number of its other brands, such as Sandalina, Genstar, Bactrol, Ice Cool, Fair &
Care, Xpert, Heel Guard and Clean Master are equally famous in Bangladesh.

To strengthen the marketing activities of KCCL, the management has re-arranged

its distribution system to deliver quality products throughout the country, as well as
looking for regional and overseas markets. At the same time the management has
revamped the Research & Development and the Quality Control departments to
attain greater degrees of excellence for all the products, batch by batch...piece by
piece.

Kohinoor Chemical Company (Bangladesh) Limited (KCCL) has not only

emerged as a potent industrial entity, but also represents the brand of the mass
people. Intensifying quality production and penetrating new markets both at home
and abroad, the company advances forward with the introduction of new products
and further development of its existing items.

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 Strategy and Forward Planning

Kohinoor Chemical Company (Bangladesh) Limited employs a significant part of

its resources in its R&D with a view to retaining its leadership position in the
Bangladesh FMCG market through introduction of innovative products. The R&D
team comprises of academically sound and professionally competent diversified
professionals who have firm commitment to new product development. R&D team
of Kohinoor Chemical Co. (BD) Ltd. is consistently striving towards
· developing new formulations
· simplifying manufacturing processes
· bringing cost efficiency
The untiring effort of the R&D team has enabled the company to introduce five
new' products with 15 presentation forms and strengths in 2005 while a good
number of products are in the pipeline.
In the wake of the highly competitive scenario, our R&D is focusing on
innovations of some high-value, high-margin new products. We believe our
continuous effort in R&D will give us a competitive edge in the years to come.

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 Ratio Analysis

Ratio Analysis from Year 2015 to Year 2019

Ratio 2019 2018 2017 20162015
Short Term Solvency Ratios  
Current Ratio 1.22 1.30 1.39 0.89 1.57
Quick Assets 2,908, 2,124, 1,672, 1,470, 753,1
927,1 735,69 188,86 297,63 87,24
84 0 3 8 5
Quick Ratio 0.91 0.73 0.79 0.84 0.47
Cash Ratio 0.12 0.09 0.08 0.27 0.12
Net Working Capital to Total Assets 0.17 0.21 0.24 -0.07 0.29
Quick or acid test 0.91 0.73 0.79 0.84 0.47
   
Activity Ratios  
Total Asset Turnover 1.92 1.75 1.84 2.98 2.19
Receivables Turnover 20.13 12.79 35.66 55.54 155.7
8
Average Collection Period 18.13 28.53 10.23 6.57 2.34
Payable Turnover 1.02 0.96 1.07 1.36 1.39
Average Pay Period 357.6 379.82 341.85 267.41 263.0
4 5
Inventory Turnover 4.10 2.46 2.75 30.76 2.22
Days in inventory 89.07 148.20 132.70 11.87 164.5
8
   
Financial Leverage Ratios or Long  
Term Solvency Ratio
Debt Ratio 0.72 0.67 0.58 0.76 0.49
Equity Multiplier 3.51 2.99 2.37 1.39 1.96
Interest Coverage 16.38 19.83 27.12 15.78 17.16
Long Term debt to equity ratio 0.05 0.03 0.03 0.03 0.02
   
Cash Coverage  
Cash Coverage Ratio 1.06 1.05 1.04 1.06 1.06
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Profitability Ratios  
Net Profit Margin 0.23 0.21 0.21 0.20 0.18
Return on Assets 0.44 0.37 0.39 0.60 0.40
Return on Equity 1.55 1.10 0.92 0.83 0.79
   
Market Value Ratios  
EPS 63.95 52.22 45.96 44.81 64.23
Price Earnings Ratio          
Market to Book Ratio          
   
EBITDA Margin 0.31 0.29 0.28 0.27 0.25
Operating Profit Margin 0.30 0.27 0.27 0.26 0.24
Net Working Capital 79111 92609 89342 - 96117
7031. 7810.0 0489.0 15772 1955.
00 0 0 0406.0 00
0
Gross profit margin 0.49 0.46 0.46 0.45 0.45
Equity Turnover 6.73 5.24 4.38 4.14 4.29
Fixed assets turnover 15.22 12.68 9.46 9.12 9.45
Debt to total asset 0.72 0.67 0.58 0.76 0.49

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 Profitability & Efficient Ratio

We can see that Marico Bangladesh Limited Industry’s 2017 current ratio was 1.39
times. It reduced to 1.30 times in 2018 and further reduced to 1.22 times in 2019. It
happened because the current assets of the company was decreased from 2017 to
2018 but it increased in 2019 more than 2017 but on the other hand the current
liabilities was increasing at a significant rate Specially in 2019 it just high jumped.
They need to reduce their current liability otherwise the current ratio will be
decrease more in the next year.
Liquidity
The Company's approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient cash balances or liquid and marketable assets to meet
its liabilities when fall due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the Company's reputation.
Typically, management ensures that it has sufficient cash and cash equivalent to
meet expected operational expenses, including the servicing of financial obligation
through preparation of the cash forecast, prepared based on time line of payment of
the financial obligation and accordingly arrange for sufficient liquidity/fund to
make the expected payment within due date.
Financial structure
The gearing ratio and interest cover ratios are slightly improves and Marico
Bangladesh Limited is capable to repay loan and interest owing to decrease the
amount of long Term liabilities and increase the figure of equity as well as raise the
amount of Profit before tax and interest. But, if the company fail to generate higher
Profit rapidly than Marico Bangladesh Limited might face financial difficulties in
short term period. In these circumstances,the firm can ask shareholders to invest
more capital Or retain dividend to mitigate any financial crisis.
Short-term solvency
Short-term solvency ratios indicate whether a company’s cash flow is sufficient to
meet its short-term liabilities. we can see that from 2015-2016, the short-term
ratios were increasing which means Marico Bangladesh Limited cash flow was
sufficient to meet its short-term liabilities. But from 2017-2019, the short-term
ratios were increasing at the same time decreasing significantly which means
Marico Bangladesh Limited cash flow might face problem in up coming year if
they fail to generate more profit to cover up the debt.

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Activity Ratio
Activity ratios indicate how efficiently a company is leveraging the assets on its
balance sheet, to generate revenues and cash. we can that from 2015-2017, the
activity ratios were somehow constant which means Marico Bangladesh Limited
was not doing anything for the improvement of leveraging the assets on its balance
sheet, to generate revenues and cash. But from 2018-2019, the activity ratios were
decreasing significantly which means the company was not efficiently leveraging
the assets on its balance sheet.
Financial leverage Ratio
Financial leverage which is also known as “leverage” or “trading on equity”,
refers to the use of debt to acquire additional assets. From the above scenario we
can see that financial leverage of Marico Bangladesh Limited was increasing from
2015-2019 which means if the value of the assets of Marico Bangladesh Limited
increase which will increase stock volatility also it increase risk and at the same
increase high return.
Competitor Analysis:
Kohinoor Chemical Co. short term solvency ratio for the year 2019 was good as
compare to Marico Bangladesh Limited which means company’s cash flow is
sufficient to meet its short-term liabilities.We have mentioned above that Marico
Bangladesh Limited short term solvency increasing from 2015-2019.Activity
Ratio of Kohinoor Chemical Co. is creasing because their total operating revenue
is increasing which is 54.39 on the other hand for Marico Bangladesh Limited the
total operating revenue is 20.13.Inventory turnover for Kohinoor Chemical Co. is
79.63 on the other hand Marico Bangladesh Limited have 89.07.Financial leverage
is basically use of debt to acquire additional asset for Kohinoor Chemical Co.
Financial leverage is not that good if we compare with Marico Bangladesh
Limited.However Cash coverage ratio and Profitability ratio is high for Marico
Bangladesh Limited as compare to Kohinoor Chemical Co. which shows that the
firm Marico Bangladesh Limited is doing well by generating revenues,profit and
enough cash flow.
Particulars 2019
Cash flows from operating activities
Collection from customers 8,822,012,157
Payment to suppliers and for operating expenses -5,601,612,652

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Cash generated from operating activities 3,220,399,505
Interest paid -13,791,469
Interest received 160,886,164
Income tax paid -638,320,374
Net cash from operating activities 2,729,173,826

Cash flows from investing activities

Acquisition of property, plant and equipment -88,842,501
Acquisition of intangible assets
Disposal of property, plant and equipment 1,229,955
(Investment in)/encashment of short-term
investments -805,949,140
Net cash from investing activities -893,561,686

Cash flows from financing activities

Net proceeds from loans and borrowings 200,000,000
Net Repayment of loans and borrowings -300,000,000
Dividend paid -1,631,700,000
Net cash used in financing activities -1,731,700,000

Net increase/decrease in cash and cash

equivalents 103,912,140
Opening cash and cash equivalents 279,189,736
Closing cash and cash equivalents 383,101,876

Non Financial Performance:

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Corporate Social responsibility:
Corporate Social Responsibility defines Marico Bangladesh Limited CSR as a
process that aims to embrace responsibility for the company’s actions and
encourage a positive impact through its activities on the environment, consumers,
employees, communities, and other stakeholders. In this respect, Marico
Bangladesh Limited acknowledges that as a corporate entity, its social and
environmental impacts are a legitimate concern for its sustainability. Keeping this
in mind, Marico Bangladesh Limited treats its CSR with paramount significance.
This is done by creating standing committees that develops and implements
policies. These are policies which are intended to ensure all aspects of Marico
Bangladesh Limited CSR are addressed. These aspects are not only relevant to but
are also needed to fulfill Marico Bangladesh Limited commitment to the
community and environment. Furthermore, Marico Bangladesh Limited believes
CSR is not something that can be imposed from the outside, but rather an ideology
that is made to be an inherent part of its business’s principles, which are derived
from the mission, vision and values of the Marico Bangladesh Limited group.
Accordingly, Marico Bangladesh Limited makes its CSR initiatives cohesive and
meaningful to create the perfect balance between business sustainability and social
needs, keeping society and its stakeholders satisfied.
Environmental and CSR policy:
Environmental and CSR Policy As a corporate entity, Marico Bangladesh Limited
believes that its operations should be financially sustainable, socially responsible
and environmentally friendly. In this regard, Marico Bangladesh Limited does not
engage in activities that cause difficulties in localities where it operates. Marico
Bangladesh Limited does not cause pollution nor does it degrade the environment,
While choosing CSR worthy initiatives Marico Bangladesh Limited remains
conscious of the fact that its core competencies are utilized through projects that
build efficiency through the application of Marico Bangladesh Limited knowledge
and resources. Marico Bangladesh Limited wishes to reiterate that its CSR
activities are not philanthropic or unsystematically chosen. Marico Bangladesh
Limited endeavors to fulfill its responsibility for social improvement and
abolishing poverty. In this respect, Marico Bangladesh Limited CSR programs are
aimed at those who are impacted due to its operations, these may be consumers of
Marico Bangladesh Limited products, the locality in which Marico Bangladesh
Limited operates or the environment. This leads Marico Bangladesh Limited to be
socially and environmentally sustainable. Various projects under Marico

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Bangladesh Limited CSR pillars are designed by its management committee which
falls under corporate strategy.

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 HR & Social Responsibility

KCCL is committed to cater to the healthcare needs of the nation. This

commitment demands immense socials responsibility of ensuring quality in terms
of quantity, purity, stability, safety, efficiency and presentation of the product. At
every stage of the production, stringent control mechanism involving raw material
testing, in-process quality control, packaging, labeling, finished product testing as
well as stability monitoring and documentation is maintained to ensure the highest
quality product consistently.

Standard Operating Procedures (SOPs) developed according to the cGMP

guidelines of WHO and EU are being strictly followed in every step to ensure full
compliance with the process parameters. Well equipped with most modern and
sophisticated equipment like High Performance Liquid Chromatography (HPLC),
Gas Chromatography (GC), Infrared (IR) Spectrophotometer, Ultraviolet (UV)
Spectrophotometer, Homogenizer, In-vitro Bio-availabilty tester, Lung simulator,
Disintegrator and many others latest computer-aided quality control instruments
and accessories, BPL ensures the highest quality products. This is how BPL has
succeeded in gaining uncompromising trust and confidence of doctors and patients
all over the country.

Cosmetics is directly related to human life and therefore, its manufacturers have
immense social responsibility of providing safe and effective medication. From its
very inception, KCCL has always emphasized the need for uncompromising
quality. KCCL commitment to quality is clear from its progressive use of state of
the art manufacturing technology. BPL’s priority is to build a healthier tomorrow
for the nation.

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 Conclusion

Most of the local industries in Bangladesh do not practice the Strategic Human
Resource Planning. Organization should establish HR department which will work
on different HR issues like ‘Development of HR policies’ ‘ Development of
Performance System’, ‘Development of job description & Specification’, Training
& Development’, etc should ensure the proper implementation of the policies and
system. Kohinoor Chemical Co. (BD) ltd has implemented the HR policy, they
developed their SHRp and modified. They also make new reward policy to
motivate their employees. They follow almost every step of SHRP but they have
also some lacking. They should introduce HRIS system properly and should
balance their manpower as soon as possible for their betterment. They should
maintain the policy and after getting the feedback should take steps according to
those.

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 Reference

1. http://www.kohinoor-bd.com/
2. https://www.lawyersnjurists.com/article/a-case-study-on-kohinoor-chemical-
co-bd-ltd/
3. https://marico.com/bangladesh
4. https://www.lankabangla.com/

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