Running head: ANALYSIS OF SOURCES AND USES OF FUND

Analysis of Sources and Uses of Fund of Two Publicly Listed Corporations

Mehraj Ahmed

Army Institute of Business Administration, Sylhet

ANALYSIS OF SOUCES AND USES OF FUNDS 2

Abstract

In this paper, I tried to analyze the sources and uses of fund of two publicly listed

corporations of Bangladesh, Sonali Paper and Board Mills ltd and Bashundhara Paper Mills

Limited. To do so, I collected the income statement and balance sheet of both corporations

and made the statement of the sources and uses of fund. After analyzing both statement s, I

have concluded that Sonali Paper and Board Mills ltd is doing better than Bashundhara Paper

Mills Limited in terms of fund management.

ANALYSIS OF SOUCES AND USES OF FUNDS 3

Analysis of Sources and Uses of Fund of Two Publicly Listed Corporations

Managing fund is the most vital aspect for a business to run effectively and

efficiently. A small business can run for a long time if the fund is managed proficiently. At

the same time, mismanaging of fund can drown a huge business at a very short time.

In this paper, I have analyzed the fund management of two publicly listed corporation

of Bangladesh, who are doing business for more than 25 years. Sonali Paper and Board Mills

ltd and Bashundhara Paper Mills Limited are two of the publicly listed corporation from

Paper Industry. The statement of the sources and uses of fund of each company will be

presented in this paper and will be followed by explanations and comments. At conclusion, I

will discuss which firm is doing better in terms of fund management.

ANALYSIS OF SOUCES AND USES OF FUNDS 4

Sources and Uses of Fund Statement of Sonali Paper and Board Mills ltd

For the year ending 30 July, 2022

Particulars Amount (BDT)

Sources

Net Income 132470594

Depreciation 60381419

Decrease in Investment in Shares 179360739

Decrease in Advances, Deposits and Prepayments 6606390

Increase in Share Capital 36605760

Increase in Deferred Tax Liability 3721065

Increase in Short Term Bank Loan 346710637

Increase in Provision for Income Tax 494830

Total 766351434

Uses

Addition to Fixed Asset 180681118

Stock Dividend 36605760

Cash Dividend 36605766

Increase in Inventory 144328857

Increase in Receivable 20483281

Increase in Cash and C. E 229660372

Decrease in Long Term Bank Loan 112609880

Decrease in Trade and Other Payable 5376400

Total 766351434
ANALYSIS OF SOUCES AND USES OF FUNDS 5

Chart 1

Sources of fund of Sonali Paper and Board Mills ltd

Sources
Net Income
17%
Depreciation

Decrease in Investment in Shares

8%
Decrease in Advances, Deposits and
45%
Prepayments
Increase in Share Capital

Increase in Deferred Tax Liability

23%
Increase in Short Term Bank Loan
1% 1%
5% Increase in Provision for Income Tax

Note. From own calculation

Chart 2
Uses of fund of Sonali Paper and Board Mills ltd

Uses
Addition to Fixed Asset
1% Stock Dividend
15%
23%
Cash Dividend

Increase in Inventory
5% Increase in Receivable
30% 5%
Increase in Cash and C.E

19% Decrease in Long Term Bank Loan

2%
Decrease in Trade and Other
Payable

Note. From own calculation

ANALYSIS OF SOUCES AND USES OF FUNDS 6

Analysis of the Statement

A business’s one of the major sources of fund is their core business activity. The net

income of Sonali Paper and Board Mills ltd is BDT 132,470,594, which is indeed one of the

major sources of fund for them. So, primarily we can say that they are doing good at their

business.

Another major source of their fund is the decrease in share investment, which means

the selling of other business’s share. From this source, they have obtained 23% of fund worth

BDT 179,360,739. As a result, their cash and C.E increased.

However, the biggest source of fund is the short-term bank loan. They have total of

BDT 346,710,637 from short-term bank loan which is 45% of total sources of fund. They

have taken loan from Modhumoti Bank Limited, Pubali Bank Limited, EBL Securities

Limited etc. As they used 51% of fund to increase current asset, this huge amount of short-

term loan hopefully will not cause any risk and they will also not face the lacking of liquidity.

Other sources are increase in share capital, increase in deferred tax liabilities, decrease

in advances, deposits and prepayments etc.

Overall, Sonali Paper and Board Mills ltd has a total fund of BDT 766,351,434.

Addition to fixed asset is one of the major uses of their funds. They have spent 23%

of their fund to buy fixed asset which worth BDT 180,681,118. To buy inventories they used

19% of their fund worth BDT 144,328,857. Sonali Paper also increased their cash and C.E

which contributes 30% of total use. They also used BDT 112,609,880 to pay long-term bank

loan.

Sonali Paper paid a total of BDT 73,211,526 as dividend to it’s shareholders which is

10% of the uses of their total fund. They paid 5% as cash dividend and 5% as stock dividend.
ANALYSIS OF SOUCES AND USES OF FUNDS 7

Sources and Uses of Fund Statement of Bashundhara Paper Mills Limited

For the year ending 30 July, 2022

Particulars Amount (In Millions of BDT)

Sources

Net Income 507.84

Transfer to Retained Earnings 13.43

Depreciation 868.11

Decrease in Right of Use Assets 11.87

Decrease in Capital Work in Progress 232.76

Decrease in Advances Deposits and Prepayments 54.37

Decrease in Advances Income Tax 69.59

Decrease in Cash and C.E 3.4

Increase in Long Term Borrowings 301.2

Increase in Deferred Tax Liabilities 163.3

Increase in Short Term Borrowings 1358.8

Increase in Trade and Other Payable 53.9

Increase in Revaluation Reserve 4392.7

Total 8031.27

Uses

Addition to Property, plant and equipment 6697.5

Payment of Cash Dividend 208.5

Increase in Intangible Asset 5.4

Increase in Inventory 404.6

Increase in Receivables 247.8

ANALYSIS OF SOUCES AND USES OF FUNDS 8

Decrease in Lease Liabilities 207.5

Decrease in Long Term Borrowings-current portion 159.5

Decrease in Provision for Expenses 50.5

Decrease in Income Tax Provision 49.9

Total 8031.2

Chart 3

Sources of fund of Bashundhara Paper Mills Limited

Sources
Net Income

Transfer to Retained
Earnings
Depreciation

Decrease in Right of Use

Assets
Decrease in Capital Work in
Progress
Decrease in Advances
Deposits and Prepayments
Decrease in Advances
Income Tax
Decrease in Cash and C.E

Increase in Long Term

Borrowings
Increase in Deferred Tax
Liabilities
Increase in Short Term
Borrowings
Increase in Trade and Other
Payable
Increase in Revaluation
Reserve

Note. From own calculation

ANALYSIS OF SOUCES AND USES OF FUNDS 9

Chart 4

Uses of fund of Bashundhara Paper Mills Limited

Uses

Addition to Property, plant and

equipment
Payment of Cash Dividend

Increase in Intangible Asset

Increase in Inventory

Increase in Receivables

Decrease in Lease Liabilities

Decrease in Long Term

Borrowings-Current Portion
Decrease in Provision for
Expenses
Decrease in Income Tax
Provision

Note. From own Calculation

Analysis of the Statement

Bashundhara Paper Mills Limited earned BDT 507.84 million from their core

business activity. However, it is contributing only 6% of total sources of fund. There are

other sources of fund which contributes more than net income.

Short term borrowings is one of the major sources of funds for Bashundhara papers.

They have total borrowed an amount of BDT 1358.8 million as short-term loan providing

17% of total sources of fund. However, they might face difficulties to pay those loan as their
ANALYSIS OF SOUCES AND USES OF FUNDS 10

current asset increased only around 7%. Their net income is also low compare to the loan

they took.

The biggest source of fund is the Increase in Revaluation Reserve, which contributes

BDT 4392.7 million. The other sources of fund include increase in long-term borrowings,

increase in deferred tax liabilities, decrease in capital work in progress etc.

Overall Bashundhara Paper Mills Limited has total fund of BDT 8031.27 million.

Most of the funds were used to buy property, plant and equipment. They have used

BDT 6697.5 million in this section (around 83%). At first look, it seems like they are opening

new factory but actually this amount became huge because of the revaluation of their assets. I

found that the value of land has increased significantly. That’s why the total amount of

property, plant and equipment increased. The revaluation contributes BDT 4525.6 million. As

a result it is looking so big.

The buying of inventories cost BDT 404.6 million which 5% of total uses. They also

paid BDT 159.5 million to the current portion of long-term borrowings. Their liabilities also

decrease an amount of BDT 207.5 million.

Bashundhara paper paid a total of BDT 208.5 million to it’s shareholders as dividend

which is 3% use of their fund.

Sonali Paper Is Performing Better Than Bashundhara Paper

If we compare both companies, the total amount of fund is significantly high in

Bashundhara Paper. However, their net income is only contributing 6% in sources of their

fund where Sonali Paper has managed 17% of their fund from net income.

Both of the companies using short-term loan as source but because of having higher

liquidity, Sonali Paper is safer than Bashundhara Paper.

ANALYSIS OF SOUCES AND USES OF FUNDS 11

Sonali Paper used 15% of their fund to pay long term loan and 1% for paying

payables, where Bashundhara paid only 2% of their fund to decrease the current portion of

long-term borrowings.

Shareholders often seek dividend from a business. Sonali Paper paid 10% dividend

from their fund and their EPS was 6.03 where Bashundhara paper paid 3% dividend from

their fund and the EPS was 2.92. So, Sonali Paper is having a clear advantage in this term.

That’s some of the reasons why I think Sonali Paper and Board Mills ltd is doing

better than Bashundhara Paper Mills Limited in terms of fund management.