Group 6

Submitted To:
Dr. Tauhidul Islam Tanin
Assistant Professor of Finance
School of Business and Entrepreneurship
Independent University Bangladesh

Submitted By:
Name of the
SL ID Topic Remarks
Students
1 Poonam Saha 2022717 Introduction
2 Mehedi Al Nahian 1910779 Dupont Analysis
3 Muhtasim Zawaad
1910405 Forecast
Wasee
4 Abrar Faiyaz 1910449 Liquidity Ratio
5 Ayesha Ashfica 2131194 Results

BBA Program
Semester: Spring 2023
Course- Business Finance- I
Section- 03
Independent University Bangladesh Date Of Submission: April 16, 2023
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Abstract

The purpose of this study was to know the ability of the firm if it is profitable of not. The
organization must do a ratio analysis to determine its financial condition, liquidity, profitability,
risk, solvency, efficiency, efficacy of its operations, and proper use of cash. Also, it shows a trend
or comparison of financial outcomes that is useful for shareholders of the company making
investment decisions.

We did the study on Walton’s and Aftab Automobile’s Ratio’s. By doing that we can understand
the performance & Potential of these two firms. Also, we can reveal which company is more
profitable and good to go to for investments.

Introduction

Financial statements are a formal record of a person, business, or other entity's financial activity
and give a snapshot of that entity's or individual's short- and long-term financial situation. They
provide a concise, accurate view of a company's state and operating outcomes. Company
executives and investors are the main users of financial statements as a management tool for
evaluating the overall situation and operating performance of the company.

Determine the liquidity position, long-term solvency, financial viability, and Dupont analysis of a
corporation by analyzing and interpreting its financial statements. Ratio analysis reveals if the
company has been getting better or worse over the past few years. Furthermore, this makes it
possible to compare various elements of all the organizations. It assists the clients in determining
which company carries the lowest risk or where they should invest to obtain the greatest return.
Also, Dupont analysis of Roe says about the weaknesses and strength of the company. It helps the
investors to take decisions more accurately.
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Literature Review

1. The role of derivatives uses:

The Dupont analysis, sometimes known as the Dupont model, is a financial measure that evaluates
a company's capacity to increase return on equity. Also, Comparing line items in a company's
financial accounts is known as ratio analysis. Ratio analysis is used to assess a variety of aspects
of a company, including its profitability, operational effectiveness, and liquidity.

Nissim & Penman (2001) suggest a modified version of the DuPont model for operational
managers' evaluation. Bank managers, regulators, depositors, investors, and other stakeholders
face difficulties due to bank corporate governance. Recent research suggests that bank officers and
directors should be held to higher standards than those in non-financial businesses.

Chen and Cheng's (2010) study looked at how financial ratios are used in the airline sector. The
study discovered that major measures of airline success included ratios including asset turnover,
load factor, and labor productivity.

Kothari (2001) found that return on assets, return on equity, and earnings per share are important
for predicting future earnings.

2. Relation between research paper and report:

By collecting knowledge from these research papers, we will do the analytical parts of our report.
We gathered knowledge about Dupont and ratio analysis from these researches. By doing Dupont
analysis of Roe, we will know about the operating efficiency, Asset use efficiency and financial
leverage. Also, By doing the ratio analysis we will be able to evaluate whether we should supply
raw materials to these companies.

Sources and Methods of Collecting Data

We gathered the information from the official websites of Walton Hi-Tech Industries Ltd., Aftab
Automobiles Limited, the Wall Street Journal. Various types of data are provided on various
websites. For this reason, we use the most effective method for gathering the data. Each piece of
information we obtained online was checked before being used.
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Discussion

(1)

1. Dupont Analysis:

Dupont analysis can be used to pinpoint the financial actions that have the biggest impact on
changes in ROE.

DU Point ROE
20.00%

15.00%

10.00%

5.00%

0.00%
2018 2019 2020 2021 2022

-5.00%

Walton Aftab automobiles

After doing Dupont analysis of Walton, we found out that the Roe fluctuated between these years.
The average roe is 12.65% which mostly comes from profit margin. The average EM is only 1.46
times. That means Walton is doing very well between these years. Also, investors are getting good
returns.
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Again, The Roe is very low and negative of Aftab automobiles between these years. The average
Dupont Roe of Aftab automobiles is 0.65%. Which mostly comes from Equity multiplier. That
means the company has a lot of debts which is not good for the company health. Also, The Roe is
very low. That means the investors are not getting good returns. The company is not doing well as
their average profit margin is also in negative.

After comparing, Walton is way ahead than Aftab in Dupont analysis of Roe. That means Walton
is having good profit margins and Asset turnovers. Also, They have less EM than Aftab
automobiles. That means they have less debt than Aftab.

Reason behind Walton made loss in 2020 significantly in terms of Profitability

In 2020, there is a sudden decrease, and it is because of the covid as they are a product company,
their business was off during covid.

Reason behind Aftab auto Mobile Limited’s made loss in 2020 and 2021 significantly in
terms of Profitability

Aftab auto Mobile Limited’s made a loss in 2020 because of covid as they are a product company.
In 2021,when the covid happen, their import prices from China increased and they ordered 2000
units of products from China and that’s why they made loss.

(2)

1. Current Ratio: Current ratio describes the relationship between a company's assets and
liabilities.

Current Ratio = Current Assets / Current Liabilities (Times)

Current Ratio
Variable 2018 2019 2020 2021 2022
Walton 1.80 1.85 1.68 1.85 1.59
Aftab automobiles 2.02 1.57 1.40 1.37 1.35
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Current Ratio
2.50
2.02
2.00 1.85 1.85
1.68 1.59
1.80
1.50 1.57
1.40 1.37 1.35
1.00

0.50

0.00
2018 2019 2020 2021 2022

Walton Aftab automobiles

Walton's current ratio in 2018 was 1.80. and in 2022, it was 1.59. Walton's average current ratio
was 1.75 between these years. Walton's current ratio is high, meaning the company has more assets
than liabilities.

Aftab auto Mobile Limited’s current ratio in 2018 was 2.02 and in 2022, it was 1.35. Aftab
automobile Limited’s average current ratio was 1.54 between these years. Aftab automobile
Limited has a high current ratio, meaning it has more assets than liabilities.

The average current ratio of Walton is higher than Aftab automobiles. The Current Ratio of Aftab
automobiles are decreasing every year. Which is not a good sign. That’s why we will choose
Walton.

2. Quick ratio: Quick ratio means company's short-term liquidity against its short-term
obligations.

Quick Ratio = (Current Asset-Inventory) / Current Liabilities (Times)

Quick Ratio
Variable 2018 2019 2020 2021 2022
Walton 0.87 1.27 0.97 1.19 0.93
Aftab automobiles 1.4 1.2 1.13 1.18 1.18
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Quick Ratio
1.60
1.4
1.40 1.27
1.13 1.18 1.18
1.20
1.2
1.00 1.19
0.97
0.80 0.93
0.87
0.60

0.40

0.20

0.00
2018 2019 2020 2021 2022

Walton Aftab automobiles

Walton's Quick ratio in 2018 was 0.87 and in 2022, it was 0.93. Walton's average quick ratio was
1.05 between these years. That means Walton has enough liquid assets to pay their debts.

Aftab auto Mobile Limited’s quick ratio in 2018 was 1.4 and in 2022, it was 1.18. Aftab
automobile Limited’s average quick ratio was 1.22 between these years. We can say that Aftab
automobiles has enough liquid assets to settle their debts.

After comparing we got that the average quick ratio of Aftab automobiles is higher than Walton’s.
That means Aftab automobiles have more current assets to pay their debts.

Forecast

PROFIT MARGIN (WALTON) PROFIT MARGIN (AFTAB)

Walton Aftab automobiles
Forecast(Walton) Forecast(Aftab automobiles)
Lower Confidence Bound(Walton) Lower Confidence Bound(Aftab automobiles)
Upper Confidence Bound(Walton) Upper Confidence Bound(Aftab automobiles)
Linear (Walton) Linear (Aftab automobiles)
40.00% 20.00%

30.00% 0.00%

20.00% -20.00%

10.00% -40.00%

0.00% -60.00%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
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RETURN ON ASSET RETURN ON ASSET

Walton Aftab automobiles
Forecast(Walton) Forecast(Aftab automobiles)
Lower Confidence Bound(Walton) Lower Confidence Bound(Aftab automobiles)
Upper Confidence Bound(Walton) Upper Confidence Bound(Aftab automobiles)
Linear (Walton) Linear (Aftab automobiles)

20.00% 4.00%
2.00%
15.00%
0.00%
10.00%
-2.00%
5.00% -4.00%
0.00% -6.00%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

RETURN ON EQUITY RETURN ON EQUITY

Walton Aftab automobiles

Forecast(Walton) Forecast(Aftab automobiles)

Lower Confidence Bound(Walton)
Lower Confidence Bound(Aftab
Upper Confidence Bound(Walton) automobiles)
Upper Confidence Bound(Aftab
Linear (Walton) automobiles)
30.00% 10.00%
25.00% 5.00%
20.00%
0.00%
15.00%
-5.00%
10.00%
5.00% -10.00%
0.00% -15.00%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

We have done the forecasting on the profitability of Walton and Aftab automobiles for the next 5
years from 2022-2027 and find out that Walton will grow in the next five years, but Aftab
automobiles will do loss soon. Although the profit margin of Walton is growing slowly but Walton
will grow. Also, there is no sign of Aftab automobiles growing in the next five years.
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Results

After forecasting the profitability of both the companies we can clearly see that Walton is growing
but Aftab automobiles will do loss. That means if we have stocks of Walton then we will hold
those stocks to get profit in future. After doing the Dupont Roe we get to know that The investors
of Walton are getting higher return than Aftab automobiles. Also, if we don’t have the stocks of
Walton then we must buy the stocks because the stock price will go up gradually because the
company is growing. If we have the stocks of Aftab automobiles, then we must sell the stocks
because the company is losing their money and soon the stock price will go down.

The current and quick ratio should be higher than 1. Walton and Aftab automobiles both the
company have higher average current and quick ratio. That means both the companies have enough
current assets to pay their debts. So, we can supply raw material to both the companies, but Aftab
automobiles is more preferrable as they have a higher average quick ratio than Walton because
Aftab automobiles have more current assets to pay their debts.

To give loans we must first see the Equity multiplier(EM) ratios by doing Dupont analysis. The
EM of Walton is low between these years. That means the company has less debt against their
assets. At the same time the EM of Aftab automobiles is high. That means the company has a lot
of debts. That’s why Walton is risk free to give loans. At the same time Aftab automobiles have
high chances to become bankrupt. That’s why we will give long-term loans to Walton.

We know that to find the health of the company, first we need to find out the profitability,
Liquidity, and solvency. We find out the profitability and solvency by doing Dupont analysis.
After calculating we get that Walton has acceptable liquidity and solvency, Also Walton is way
ahead than Aftab automobiles in terms of profitability and Roe which is a very important element
to find the health of the company. That is why after comparing we can say that The overall health
of Walton is good.

Walton is doing much better than Aftab automobiles. In Future Walton will do better because they
have a profitable business. On the other hand, Aftab automobiles is a loss-making business. If they
didn’t do well, they might have to shut down their business. But they can survive because they
have a good liquidity ratio. They just must make their business profitable.
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Conclusion

The purpose of the report to calculate the financial performance of Walton and Aftab automobiles
and to examine the financial performance and growth of the company from 2018-2022.

By doing the analysis we saw that Walton is doing well although the growth in profit is slow. At
the same Aftab automobiles is losing their money in every step. It mainly happened after covid
when the import duty increases from China. Also, Walton loses their money because of Covid.
Because they are product company, and they didn’t sell their products much because of the
pandemic and lockdown happen in Bangladesh.

In conclusion we can say that Walton is a better company than Aftab automobiles. The profit that
Walton is enjoying is way better than Aftab automobiles.

Reference

1. Cheng, T. C., C. C. F. (2010). Applying grey relational analysis to the airline industry:
Evaluating the service quality of low-cost carriers (16th ed., Vol. 4). Journal of Air Transport
Management.
2. Financial Statements – Aftab Automobiles Limited. (n.d.). Aftab Automobiles Limited.
Retrieved April 15, 2023, from https://www.aftabautomobiles.com/financial-statements/
3. Prof. M.Balanji Reddy, M. K. S. U. (2018). A Study on Financial Performance Analysis of
Construction Company (Vol. 5). International Journal of Engineering Technology Science and
Research.
4. STEPHEN H. PENMAN, D. N. (2001). Ratio Analysis and Equity Valuation: From Research
to Practice (Vol. 6). 2001 Kluwer Academic Publishers.
5. Walton Hi-Tech Industries PLC. (n.d.). Walton Hi-Tech Industries PLC. Retrieved April 15,
2023, from https://www.waltonhil.com/investors

Appendix
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