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Ratio Analysis

of
Singer Bangladesh Limited

Submitted by

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OBJECTIVE OF THE STUDY

 To know about a company’s past present and future position.


 To understand and compare a company’s internal position to
make necessary aid.

Limitation of the Study

 Analysis based on company (SBL) annual report (2004-07).


 We can’t get the current Annual Report of SBL (2008).

Sources

 SBL Annual Report 2007,2006,2005,2004.


 Dhaka Stock Exchange.
 SBL Main Office.

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Company Profile

Company Name:
SINGER BANGLADESH LIMITED (SBL)

Corporate History.
# Year of Establishment of/ Incorporation 1979
# Commencement of Leasing Business 1987
# Establishment of Branch in the main port city,
Chittagong 1991
# Listed on the Dhaka Stock Exchange 1993
# Licensed by Bangladesh Bank for
deposit taking 1995

His vision
To be the most admired and respected family company in the country.

His mission
Our mission is to improve the quality of life of people by providing comforts
and conveniences at affordable prices.

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Communize Analysis/ Time Series Analysis
This analysis we can evaluates performance of the internal
progress year to year. Here we have analyzed of the year 2007,
2006, 2005, and 2004.

SBL
TK-in million
SI Name of the Ratio 2007 2006 2005 2004

1 Profit Margin- 2.86% 4.58% 2.83% 5.68%


Profitability Ratio

2 Return on Asset- 4.44% 6.51% 3.10% 7.17%


Profitability Ratio

3 Return on Equity- 27.29% 35.42% 22.76% 42.41%


Profitability Ratio

4 Receivable Turnover- 6.76 6.68 7.80 8.16


Asset Utilization

5 Average Collection 53.28 53.86 46.17 44.15


Period-Asset Utilization

6 Inventory Turnover- 2.54 2.53 2.73 2.54


Asset Utilization

7 Fixed Asset Turnover 10.87 8.36 10.23 10.675


Ratio- Asset Utilization

8 Total Asset Turnover 1.55 1.42 1.094 1.353


Ratio- Asset Utilization

9 Current Ratio- Liquidity 1.21 1.23 1.41 1.66


Ratio

10 Quick Ratio- Liquidity 0.51 0.54 0.82 0.67


Ratio

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11 Debt. Ratio- Debt 83.74% 81.62% 86.38% 81.85%
Utilization ratio

12 Time Interest Earned- 1.79 2.08 4.17 13.457


Debt Utilization ratio.

13 Fixed Charge Coverage- 1.79 2.08 4.16 13.46


Debt Utilization ratio
14 Earning Per Share(EPS) 61.26 70.18 29.13 47.75

15 Dividend Per 35.00 35.00 30.00 80.00


Share(DPS)

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Profit Margin Ratio

Net profitability margin ratio measures the percentage of each


sales money remaining after all costs and expenses, including
interest, taxes and preferred stock dividends, have been deducted.
It is calculates as this formula:

Net Profit
Profit Margin Ratio =
Sales

The analyses of 5 years of SBL are, as follows:

2007 2006 2005 2004


2.86% 4.58% 2.83% 5.68%

Interpretation
In 2007 the net profit margin ratio was 2.86% which is lower then
2006 and 2004 where the ratios were 4.58% and 5.68% and this as
not better performance of the firm.

Recommendation
Company should increase their EBIT to keep increasing net profit.

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Return on Asset

Return on asset, often called the return on investment. It measures


the overall effectiveness of management in generating profits with
its available assets. We can get this ratio by this formula,

Net Income
ROA =
Total Assets

Higher rate of this ratio indicates the higher/ better position of a


firm. Our analysis of the firm SBL are:

2007 2006 2005 2004


4.44% 6.51% 3.10% 7.17%

Interpretation

In 2004 the ratio was 7.17% which was higher then 2005, 2006
and 2007 where the ratios were 3.10%,6.51% and 4.44% and
these indicates the poor position then 2004.

Recommendation

The position of the firm is very bad according to this ratio so it


should need to increase its Net income as soon as possible to
improve or increase the company situation.
Return on Stockholders Equity

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The ratio of net income to common equity measures the return on
common equity or the rate of return on stockholders investment,

Net Income
Return on equity =
Total stockholders equity

If the present return on equity is more then past ratios that


indicates the better position to the present then past. Our analysis
of ROE of SBL are given below

2007 2006 2005 2004


27.29% 35.42% 22.76% 42.41%

Interpretation

In 2004 the return on common equity of SBL was 42.41% which


is higher then 2005 where the ratio was 22.76%. The best position
of the ratio was in 2004 where the ratio was 42.41% and in 2006
and 2007 ratio were 35.42% and 27.29%.

Recommendation

Company should increase its Net Income against of Stockholders


equity to improve the situation of this company.
Receivables turnover

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The receivables turnover indicates the number of times on the
average that receivables turnover each year. Receivables turnover
is calculated follows:
Credit sales
Receivables turnover =
Receivables

The ratio of receivables turnover of this firm is given below:

2007 2006 2005 2004


6.76 6.68 7.80 8.16

Interpretation:
In 2004 the debt ratio of the SBL was 8.16 which is higher then
2005, where the ratio was7.80. But this is higher then 2006, 2007
where the ratios were 6.68& 6.76.
Recommendation
Company must increase the ratio by decreasing total liabilities or
increasing total asset for achieving better position.
Average collection period (DSO)

Average collection period also called Days sales outstanding


(DSO), is used evaluate the firm’s ability to collect its credit sales
in a timely manner. DSO is calculated as follows:

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Receivables
Average collection period =
Average daily credit sales

The ratio of Average collection period of this firm is given


below:

2007 2006 2005 2004


53.28 53.86 46.17 44.15

Recommendation:

In 2004 the DSO of SBL was 44.15 days which was increased.
But this also too much time to collect A/R. In 2005, 2006, 2007
the time was 46.17, 53.86 and 53.28.

Interpretation:
Much should aware about this fact that they should try to decrease
the time period to collect money from A/R to get a good position.

Inventory turnover:

This ratio indicates the efficiency of the firm’s in selling product.


The inventory turnover ratio is defined as follows:
Cost of goods sold

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Inventory turnover =
Inventory
The ratio of inventory turnover of this firm is given below:

2007 2006 2005 2004


2.54 2.53 2.73 2.54

Interpretation:
In 2004 the inventory turnover ratio of the SBL was 2.54 which is
very close to one another. And here in 2005, 2006, 2007 the ratio
was 2.73, 2.53 and 2.54.

Recommendation
Company must increase the ratio by decreasing total liabilities or
increasing total asset in better position.

Fixed Asset Turnover

The fixed asset turnover ration measures how effectively the firm
uses its plant and equipment to help generate sales. It is the ration
of sales to fixed assts.
Sales
Fixed Assets Turnover Ratio =
Fixed Assets

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If the present fixed asset turnover ratio is greater than past ratio
that would be better for a company. Our analyses of SBL for fixed
asset turnover ratio of 4ears are

2007 2006 2005 2004


10.87 8.36 10.23 10.675

Interpretation

In 2004, fixed asset turnover ratio was 10.675which was less then
2007, where the ratio was10.87. We can also see in 2005 & 2006’s
ratio were 10.23 &8.36.

Recommendation

By this analysis we can understand that sales position is good


according to its fixed asset which indicates that company’s
effective uses the fixed assets. So to improve this salutation
company should increase it sales by using its fixed assets most
effectively.
Total Asset Turnover

The total Asset turnover ratio measures how effectively the firm
uses its total assets to help generate sales. It is the ratio of sales to
total assets.

Sales
Total asset turnover:
Total assets

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If the present total assets turnover ratio is higher then previous it
would be better for the company’s present performance. Our
analysis of this ratio of SBL of 4 ears is,

2007 2006 2005 2004


1.55 1.42 1.094 1.353

Interpretation

In 2004 the total asset turnover was 1.353which is lower then


2007 where the ratio was 1.55 But there are lower performance
in2005, 2006 where the ratio were 1.094, 1.42.

Recommendation

By the analysis we can say that, company must increase their


sales.

Current Ratio
The Current ration measures then ability firm’s to meet its short-
tern obligations. It is expressed as follows:

Current assets
Current Ratio:
Current liabilities

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Current Asset includes cash, account receivable and inventories.
And current liabilities consist of all payables, current maturities of
long tern debt, accrued expenses. It the current liabilities are
rising fast than current Assets, the CR will fall and when CR is
increased this post year, the present performance of the company
will be better then post performance. Here is the 4years CR of
SBL:
2007 2006 2005 2004
1.21 1.23 1.41 1.66

Interpretation:
In 2007 the CR of SBL was tell which was lower than 2004 when
the ratio 1.21which is worst position during 4 years. 2004 are the
sure which was considered as good performance.

Recommendation:
By the analysis of 4 years CR of SBL. We can find that the
company hasn’t done well over the year and to improve the
situation it should graphically enlarge CR by increasing CA or
decreasing CL.

Quick ratio:
The quick ratio or acid test ratio is calculated by deducting
inventories from current assets and dividing the result by current
liabilities. The quick ratio is a variation of the current ratio. The
quick ratio or acid test ratio is calculated as follows:

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Current assets-Inventory
Quick ratio =
Current liabilities

The ratio of Quick ratio f this firm is given below:

2007 2006 2005 2004


0.51 0.54 0.82 0.67

Interpretation:

In 2004 the debt ratio of the SBL was 0.67which is higher then
2007, where the ratio was0.51. But this is lower then 2005, 2006,
where the ratios were 0.82, 0.54.

Recommendation

Company must decrease the ratio by decreasing total liabilities or


increasing total asset in better position.

Debt Ratio

The debt ratio measures the proportion of total assets financed by


the firm’s creditors. It’s formula:

Total Liabilities
Debt Ratio
Total Assets

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Total debt includes both CL and LLB tern debt, creditors prefer
low debt ratios because the lower the ratio the greater the cushion
against creditors losses in the event of liquidation. Our analysis of
this ratio of SBL for 4 years is given below:

2007 2006 2005 2004


83.74% 81.62% 86.38% 81.85%

Interpretation:
In 2004 the debt ratio of the SBL was 81.86 which is lower then
2007, where the ratio was 83.74. But this is lower then 2005
where the ratios 86.38%

Recommendation:
Company must decrease the ratio by decreasing total liabilities or
increasing total asset in better position.

Time Interest Earned Ratio

The time interest earned ratio, measures the firm’s ability to make
contractual interest payment, Sometimes it also called as interest
coverage ratio, the formula of this ratio is:

Earning before interest takes


Time interest earned Ratio =
Interest Charges

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This ratio measures the extent to which operating income can
decline before the form is unable to meet its annual interest costs.
If the present ratio is higher then post then it would better for the
firm. But the company has to pay tax fewer for lower time interest
earned. Our analyses of this SBL are,

2007 2006 2005 2004


1.79 2.08 4.17 13.46

Interpretation
In 2004 the time interest earned ratio was 13.46 which were
higher then 2007, where the ratio was 1.79. In 2006 though ratio
was 2.08 which was lower than 2005.

Recommendation
By the analysis of 4 years ratio we can say that, if the company
wishes to decrease its taxation, the company should increase their
EBIT.
Fixed charge coverage

Fixed charge coverage measures the firm’s ability to meet all


fixed obligations rather then interest payment alone, on the
assumption that failure to meet any financial obligation will
endanger the position of the firm. The formula of this ratio is:

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Income before fixed charge and taxes
Fixed charge coverage =
Fixed charge

The ratio of fixed charge coverage of this firm is given below:


2007 2006 2005 2004
1.79 2.08 4.16 13.46

Interpretation:
In 2004 the time interest earned ratio was 13.46 which were
higher then 2007, where the ratio was 1.79. In 2006 though ratio
was 2.08 which was lower than 2005.
Recommendation:
By the analysis of 4 years ratio we can say that, if the company
wishes to decrease its taxation, the company should increase their
EBIT.

Earning Per share (EPS)

EPS represents the amount canned on behalf of each outstanding


share of common stock not the amount of earnings actually
distributed to share holders. EPS is calculated as follows.

EAT (earning after tax)

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Earning Per Share =
Number of shares

The ratio of EPS of this firm is given below:

2007 2006 2005 2004


61.26 70.18 29.13 47.75

Interpretation:
In 2007 the earning per share of SBL was 61.26% which is lower
than 2006, where the ratio was 70.18%. But the ratio of 2005 was
29.1% which is lower than 2004 where the ratio was 47.75%.

Recommendation:
EPS is closely watched by then investing public and is considered
an important indictor of corporate EPS success and by the above
analysis we can see the good position of the firm.

Dividend Per Share (DPS)

DPS represent the amount of cash actually distributed to each


shareholder. It is calculated by

Cash Dividend
DPS =

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Number of Share

Here is the dividend per share of the SBL,

2007 2006 2005 2004


35.00 35.00 30.00 80.00

Interpretation:
The ratio of dividend per share of 2007, 2006, 2005 and 2004 are
35%, 35%, 30%and 80%. Which are same over 2 years and it
decreases 50% in 2005.It rises 5%in 2006.
Recommendation:
Ratio rate was by this analysis we can see the increasing and this
should be encourage to be attract the shareholder.

Final Recommendation

The EPS and DPS of the SBL were in good position but the firm
must should be were of its increasing liabilities. And it also try to
utilize it’s assets by effective uses. In other hands the time period
of required account receivable collecting which should be

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decreased. And to increase the total asset turnover the firm should
increase its sales and to increase its net income, it should increase
its EBT company must should were of these fact to reach in the
better position.

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