“Practices of Financial Management

tools and technique in the

Manufacturing Company”.
Presented By

Name ID Group

Md. Moazzem Hossain FIN-06-18-022

3
Md. Mamun Sarder Fin-06-18-026

Md. Azizur Rahman Bhuiyan Fin-06-18-017

Mohammad Shohidul Islam FIN-06-18-025

Objective of the Report:
The fundamental goals of the studies are to observe whether the
manufacturing industry in Bangladesh are using Managerial Finance
technique in order to evaluate their financial position

Methodology of the Study:

The given topic is a research work, therefore we like to use both primary and
secondary data. In this regard we have collect some primary data from the
Two local manufacturing firm by interviewing the finance Manager of the
firm and data they have provided For secondary data, we use books
reference.

Limitations of preparing the report:

This report is mostly covered the theoretical aspect of the managerial due to
the shortage of information as the officials are reluctant to disclose which are
seem to be confidential
 Panna Battery Limited (PBL)
1. Company Name : Panna Battery Limited (PBL)
2. Business Ranking 2nd Largest firm after Rahim Afroz
3. Nature of Business : Manufacturing and trading

4. Constitution : Private Limited Company

5. Products : Battery for household appliances, automobiles and industrial
purposes. They manufacture and distribute battery under
Brand name “Volvo”, “Panna” and “ Green Power”.

6. Office Address : Business: Nasir Trde Centre (Level#12), 89, Bir Uttam C.R
Datta Road, Dhaka-1205
Factory: West Rasulpur, Kamrangirchar, Dhaka-1211,
Bangladesh
7. Year of incorporation : 2006
8. Authorized Capital : BDT 30.00 Million
9. Paid –up Capital : BDT 10.00 Million
10. Total Asset : BDT 4,497 million
11. Total Liabilities : BDT 2,029 million

12 Net worth : BDT 2,468 million

 Three Years Income statement of
Panna Battery Limited
Fig in Thousand
Particulars 31-Dec-16 31-Dec-17 31-Oct-18
Gross Sales 3,483,090.00 4,202,116.00 4,567,966.00
Less: Sales
Return+Discount+VAT 511,113.00 527,073.00
Net Sales 3,483,090.00 3,691,003.00 4,040,893.00
Add: Other Operating Income 13,686.00 13,.00 13,686.00
Total Sales Revenue 3,496,776.00 3,704,690.00 4,054,579.00
Less :Cost of Goods Sold 2,503,443.00 2,634,705.00 2,843,394.00
Gross Profit 993,333.00 1,069,985.00 1,211,185.00
Less: Selling. Gen. & Admin.
Expenses 223,050.00 236,901.00 260,212.00
Less: Other Operating Expense
EBITDA 770,283.00 833,084.00 950,973.00
Less: Depreciation 175,357.00 209,205.00 280,281.00
Less: Interest Expense 164,699.00 174,530.00 191,074.00
EBT 430,227.00 449,349.00 479,618.00
Add: Other Income (Non-
Operating) 312.00 313.00 312.00
Less: Other Expense (Non-
Operating )
Less: Income Taxes (35%) 50,579.45 157,272.15 167,866.30
EAT 279,959.55 292,389.85 312,063.70
EPS 14.00 14.62 15.60
 Three years Balance Sheet:
Panna Battery Limited
Fig in Thousand
31-Dec-15 31-Dec-16 31-Oct-17
Total Current Assets 2,577,987.00 2,950,130.00 2,769,403.00
Net Fixed Assets 1,075,742.00 1,471,509.00 1,695,634.00
Total Non-Current Assets 1,170,701.00 1,547,015.00 1,787,422.00
Total Assets 3,748,688.00 4,497,145.00 4,556,825.00
Total Current Liabilities 1,346,650.00 1,575,251.00 1,238,415.00
Long Term Liabilities      

Total Liabilities 1,730,936.00 2,029,731.00 1,609,481.00

Net worth Statement:

Panna Battery Limited
Fig in Thousand
NET WORTH 31-Dec-15 31-Dec-16 31-Oct-17

Paid-up Capital 1,0000.00 1,0000.00 1,0000.00

Retained Earnings 2,016,752.00 2,466,414.00 2,946,344.00
NET WORTH
 Credit Line

Sl Nature of Limit Outstanding Interest Weight of Weighted

No: facility Rate Outstanding Avg. Interest
I w iw
1 Overdraft 260.00 261.64 10.00 0.18 1.80%
2 Rev. Time loan 380.00 293.12 10.00
0.20 2.01%
3 CCHYC 200.00 196.10 10.50 0.13 1.41%
4 Short Term Loan- 9.00 00 9.50
1 0.00 0.00%
5 Short Term Loan- 420.00 394.14 9.50
2 0.27 2.57%
6 Short Term Loan- 3.47 9.50
3 0.00 0.02%
7 Term Loan-1 75.00 46.48 10.00 0.03 0.32%
8 Term Loan-2 52.00 10.00 0.00 0.00%
9 Term Loan-3 25.00 109.27 10.00 0.08 0.75%
10 Term Loan-4 108.00 78.81 10.00 0.05 0.54%
11 Term Loan 100.00 68.40 9.5.00 0.05 0.45%
12 Lease Finance 1.28 3.73 12.5 0.00 0.03%
Total
1630.28 1455.16 1.00 ∑iw=9.91%
 Provided required information
To analyze the data firms General manager has given the following data:
The firm is a non-listed manufacturing firm. It has build-up it’s capital by entrepreneurs’
investment to the firm, retained earnings and debt financing from commercial banks and financial
institution. The firm’s General Manager informed us that the firm calculated cost of debt Retained
earning.
The firm has paid dividend 18%, 22% for last two years and projects that
the firm will be able to pay 25% which would be equivalent to BDT 3.90 per share for the current
year.
Firm’s growth rate is 4.44% (for the year 2017).
Market price of per share BDT 522.00 (initial value per share value plus growth rate)
Cost of debt :

The firm has been availing different types of credit facility from different banks &
Financial Institution. Credit line information showed in the above, firms total credit
limit (only Funded Facility considered) is BDT 1630.28 million and present outstanding
is BDT 1455.16 million. The firms waited average rate of interest is 9.9%. Since the
firm is non-listed therefore the tax rate is 35%. Considering the above information
firm calculated cost of debt is 6.44%
Calculation :
Formula KD = Kd(1-t)

KD = Effective cost of date

Kd = Contractual Cost of Debt (Weighted)
T = Firms corporate Tax
KD = 9.91%(1-.35)
= 9.91% x .65
= 6.44%
Cost of retained Earning:
The firm has been building-up their capital by retaining certain percentage earning per year
therefore the firm calculate the cost of retain earning as:

From the received data we have calculated the same as under

Formula:
KS = (D1/Po)+g
D1 = Divided to be paid end of the year is BDT 3.9
Po = Current market price of share is BDT 522.00
G = Growth rate is BDT .044

KS = (3.9/522)+.044

KS = 5.19%
Leverage
We have asked to the finance manger Whether they calculate the leverage of the firm. The
manager inform that there is no ready reference always however the calculate as an when
required, such as for Board of Directors and for business proposal to the bank as per the universal
formula He also informed that fro the given financial information leverage of the firm can be
calculated.
Degree of Operating Leverage: A quantitative measure of sensitivity of a firm’s operating profit
to change in the firms sales is refer to the Degree of Operating Leverage
DOL of the fir is as under (Data refer to the income statement)

DOL = (EBIT+ Operating Fixed cost)/EBIT

EBIT = 950,973.00
Operating fixed cost = 260,212.00
DOL = (950,973.00+ 260,212.00 )/ 950,973.00
DOL = 1.27

Implication: If the sales increase by 10% Operating profit will increase by 12.70% again if the
sales is dropped by 10% operating profit will dropped by 12.70% of the firm.

The greater is a DOL the more its EBIT will very with sales fluctuations, therefore the DOL is refer
as the indicator of the firm’s business risk.
Degree of financial Leverage: Degree of financial leverage is a quantitative measure of the
sensitivity of a firms earning per share to change in the firms operating profit.

DFL = % change in EPS/% Change in EBIT

DFL = EBIT/EBIT-Ff
EBIT = 950,973.00
Interest (Ff) = 191,074.00
DFL = 950,973.00 / (50,973.00- 191,074.00)
DFL = 1.25

Implication: If 20% increase in EBIT, the DFL indicates EPS will increase 25% if EBIT is dropped
by 20% EPS will also be dropped by 25%
Degree of Combined leverage. A degree of combined leverage (DCL) is a leverage ratio that
summarizes the combined effect that the degree of operating leverage (DOL) and the degree of
financial leverage have on earnings per share (EPS), given a particular change in sales.

DCL = DFL x DCL

DFL = 1.25
DOL = 1.27
 
DCL = 1.25 x 1.27
= 1.59

Implication: If sales of the Panna Battery Ltd increases by 10% it EPS will increase by 15.90%

 
Energypac Engineering Limited
 Company Profile
Company Name : Energypac Engineering Ltd

Established : 1982

Chairman : Enamul Haque Chowdhury

CEO : Rabiul Alam

Industry : Engineering

Products : Substations, Transformer, Switchgear

Company Type : Partnership Business

Total Employees : 3100

 Market Segment
• Private sales:
– Large Industries
– Mill/ Factories
– Developers
– House owners
– Others
• Project sales
– DESCO
– DESA
– PDB
– PGCB
– REB
– DPDC
– PBS
 Analysis of Capital Structure

Capital Structure Amount %

Total Equity of the firm 6,855,401,991 68%

Total Liabilities of the firm 3,178,794,434 32%

Total value of the firm 10,034,196,425 1

 Weighted average cost of capital
Cost of Debt
Interest Weighted
Financial Institutions Loan Weight
Rate Rate
Debt        
HSBC Term Loan 242,012,784 0.3640 13 4.7318
AS Bank Term Loan 8,483,946 0.0128 11.25 0.143
SO Finance and Investment Co. Ltd. 3,847,146 0.0058 13 0.0752
SCB Term Loan 65344601 0.0983 12 1.1793
Midland Bank Ltd. 249,092,276 0.3746 12.5 4.6829
National Housing Finance & Inv. Ltd. 659,335 0.0010 12 0.0118
DBBL Tel111Loan 18,500,000 0.0278 13.5 0.3756

Uttara Finance Installment Loan 25,445,123 0.0383 12 0.45923

Prime Finance & Investment Limited 51,499,348 0.0775 12.5 0.9682

KD 664,884,559 1.0000   12.627

Tax (35%) (1-T)       0.65
KD (Tax adjusted)       8.2081%
 WACC

Weighted
Capital Portion Capital Weight Rate
Rate

Debt 664,884,559 0.81547 8.285 6.69562

Owner’s Investment 150000000 0.18453 20 3.6863

WACC 814,884,559 1   10.3363

 Capital Budgeting Practices
• Matarbari Coal Power Plant Project:
– Project Life time: 3 years.
– Required Rate of Return: 10.378%
– Contract value: Tk.25, 000,000.00

Cash Receivable in 3 years

Contact value 30% 30% 40%

25,000,000.00 7,500,000.00 7,500,000.00 10,000,000.00

Particulars Year 0 Year 1 Year 2 Year 3
Sales   7,500,000 7,500,000 10,000,000
Project Expenses        
Mobilization cost for start the project (2,000,000) - - -

Purchase of bricks, Sand, Rod, Cement   1,000,000 1,100,000 750,000

Pilling work   1,100,000 500,000 -

Construction of Control building   1,800,000 700,000 300,000

Salaries and Wages   350,000 300,000 200,000

VCB foundation   500,000 1,500,000 200,000

Gantry Tower foundation   1,100,000 1,600,000 50,000

Electrical work   120,000 200,000 600,000

Fuel cost   230,000 200,000 250,000

Project Entertainment Expenses   250,000 450,000 300,000

Tour and Travelling Expenses   200,000 300,000 150,000

Others Expenses   50,000 80,000 30,000

Earnings before interest tax & Depreciation - 1,150,000 870,000 7,370,000

Depreciation (straight Line)   150,000 150,000 150,000

Earnings before Interest & Tax - 1,000,000 720,000 7,220,000

Interest   150,000 150,000 150,000

Earnings before tax - 850,000 570,000 7,070,000

Tax (35%)        
Net Profit - 850,000 570,000 7,070,000

Depreciation   150,000 150000   150000

Net Cash Inflows (2,000,000) 1,000,000 591133 5352112

 NPV calculation
Discount
  10.378 10.3787 10.3787
factor
PV of Cash
Flows
(2,000,000) 905,977 591,133 5,352,112

NPV 4849222      
Working Capital Management
Conclusion:
From our observation and the provided data it
can be remarked that the firm are using the
financial tools and technique based on their
requirements and following financial
management practices their own ways
Thank You