Introduction

PREFACE

BBA is a four year academic program where students are instructed how to maintain
a company, analyzing a firm & its activity, how to do a business and also to be a
successful business executive. It is also an arrangement where students are
introduced with the practical life style in a corporate world. To be a successful
corporate person it is must to implement your knowledge, experience in your life, not
to gain and study only.

Dhaka City College is the center of excellence where students are make their
lifestyle in a shape to face the struggles outside the college with the help of college
instructors. Department of Business Administration of this college does not work on
the different policy. As students of BBA Program of this college, here we learn how
to be a successful one.

Making of reports are also a step to gather practical knowledge that helps to get
forward. Instructors of the department are so much supportive and interested about
reports and they influenced plus help students to do different term paper, reports on
different companies and firms. This report is also a crop of their support and our
effort.

We make a financial analysis report on Agricultural Marketing Company Limited, a

concern of PRAN GROUP as the course of Principle of Finance. We tried our best to
make this report as our knowledge supports us. We hope our report can make a face
of the company which can help you to get better information about the company.

Thank you.

1
 Introduction

OBJECTIVE

We were instructed from our finance course lecturer Ms. Jafrin Sultana to submit a
financial report on a public company that has a membership on Dhaka Stock
Exchange (DSE).

We choose Agricultural Marketing Company Limited (PRAN) which fulfill all the
demand of our instructor, to make a financial analysis report on it. We had some
objectives behind making the report. These are …

- To know how to make a financial report.

- To gather practical knowledge on analyzing a company financially.
- To be experienced on calculating and making analysis on ratio, risk, scenario,
DuPoint System, Peer-to-Peer and others.
- To arrange an overall financial idea against a company.

We believe that we were successful to fulfill most of our objectives. Thanks Allah to
bless on us.

2
 Introduction

METHODOLOGY

Agriculture Marketing Company Limited (PRAN) is a well known and leading food
company in Bangladesh. So, to make a financial report on this company we have to
give our full effort. It is not an easy job to analyze AMCL (PRAN)’s financial
performance. We tried our best.

We collect information from website, reference book from Bangladesh, yearly annual
report of AMCL (PRAN) and from other sources.

To collect further information, we have to go to the head office of AMCL (PRAN). We

tried to meet with the head of finance department and head of accounting
department. But they were to busy on their job. Beside this, the head office didn’t
provide us such information that can help us making the report.

We have to go to Dhaka Stock Exchange to collect the annual reports of AMCL

(PRAN) and after a lot of straggle we got that.

We take information from the book of “Balance Sheet of Joint Stock Companies
(2000-2004)” published by the Statistics Department of Bangladesh Bank.

We also have collected information from the PRAN GROUP website

(www.pranfoods.net).

Besides this we have collected as many information we can collect from outside
source.

Thank You.

3
 Introduction

LMITATIONS

It would be a book if we start to narrate our problems and struggles. We have to face
lots of problem to complete this report. As the date of submission was too close
when we learned a little about make a financial report. We have to take preparation
for our 2nd midterm exam with the makings of report.

We feel lack of latest financial and accounting information when we constructing the
report. We have to base on the old information in maximum time. But anyhow we
tried to attach latest information about AMCL (PRAN).

On the annual report got a lot of problem. The balance sheets were puzzled us.
Besides this there was not sufficient information to make further calculation.

AMCL (PRAN)’s website is not so much informatics. They do not attach or upload
any kind of information that can help us in further financial calculation.

The head office of AMCL (PRAN) was not supportive. They don’t give us any kind of
information & instruction that can help us.

We have to face a lot of hazards on collecting information. But we believe that we

have succeeded to make a standard report at last.

Thank You.

4
 Company at a Glance

COMPANY NAME
Agricultural Marketing Company Limited (PRAN)

YEAR OF ESTABLISHMENT
1980

KEYWORD IN DSE & CSE

AMCL(PRAN)

CORPORATE MISSION
Poverty and Hunger are curses

COMPANY AIM
To generate employment and earn dignity and self-respect from compatriots through Profitable
enterprises

COMPANY POLICY
To market products of consistent quality at home and abroad as per world standards produced
hygienically in accordance with good manufacturing practices in state of the art plants &
process, packed in appropriate packaging and remain committed to these objectives at all the
times

CORPORATE HEAD OFFICE

Property Heights, 12 R K Mission Road, Dhaka – 1203

LOCATION OF PRODUCTION
Ghorashal, Palash, Narshingdi

PRODUCT CATAGORIES
Juice, Drinks, Beverage, Culinary, Snacks, Confectionary, Dairy

MAJOR EXPORTING PRODUCTS

Fruit Juices, Fruit Drinks Instant Powdered Drinks, Pickles , Canned Fruits & Vegetables,
Extruded & Fried Snacks, Tea, Aromatic Rice, Puffed Rice, Flattened Rice, Jam & Jelly,
Plain Spices, Blended Spices, Mustard Oil, Mineral Water, Dehydrated Fruits,
Tomato Ketchup / Sauce, Toffees, Candies, Bubble Gum, Biscuits & other confectionery etc.

MAJOR EXPORTING COUNTRIES

India, KSA, UAE, Kuwait, Bahrain, Qatar, Djibouti ,Angola, Australia, Austria,, Belgium, Benin,
Brunei, Burkina Faso, Bhutan, Cameroon, Canada, Capo Verde Islands, Chad, Congo
Eritrea, Equatorial Guinea, Ethiopia, France, Gabon, Gambia, Germany, Ghana, Greece
Guinea, India, Italy, Ivory Coast, Japan, Korea, Lebanon, Malaysia, Mali, Mauritania
Mauritius, Myanmar, Mayo tee, Nederland Antilles, Nepal, Niger, Oman, Pakistan
Palestine, Qatar, RCA, Reunion Islands, Senegal, Sierra Leone, Singapore, Sri Lanka
Sudan, Sweden, Switzerland, Togo, UK, USA & Yemen.

5
 Highlights of Five Years (2001-2006)

HIGHLIGHTS OF PRAN GROUP (2001-06)

Company Data
(Figure in taka)

DESCRIPTION
2006 2005 2004 2003 2002 2001
Authorized Capital 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000
Paid Up Capital 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000
Gross Profit 199,231,970 204,813,078 200,779,694 196,041,728 182,647,753 171,112,426
Net Profit Before Tax 31,228,166 42,534,943 41,652,958 46,150,166 44,166,962 42,985,692
Total Asset 990,644,654 995,607,375 968,368,328 943,907,412 813,749,612 691,098,642
Net Asset 673,783,245 660,584,792 622,251,899 580,472,010 509,202,925 445,812,934
Current liabilities 500,364,804 499,627,981 503,199,292 464,013,742 391,729,576 334,673,215
Shareholder Equity 337,687,792 330,037,953 309,015,238 293,913,711 270,253,283 247,679,451
Long Term Debt 152,592,058 165,941,504 156,153,798 185,979,959 151,766,753 108,745,976
Current Ratio 1.35 1.32 1.24 1.25 1.30 1.33
Quick Ratio 0.36 0.34 0.26 0.27 0.39 0.35
Total Asset Turnover 88% 80% 80% 80% 88% 93%
Net profit After Taxation 28,947,713 40,771,757 40,309,163 44,386,931 43,410,767 41,935,472
Net Profit margin 3.34% 5.11% 5.20% 5.90% 6.06% 6.54%
Return on Total Asset (ROA) 2.92% 4.10% 4.16% 4.70% 5.33% 6.07%
Return on Total Equity (ROE) 9% 12% 13% 15% 16% 17%
Inventory Turnover Ratio 1.35 1.21 1.16 1.22 1.50 1.43
Earning Per Share BDT 36.18 BDT 50.96 BDT 50.39 BDT 55.48 BDT 54.26 BDT 52.42
Proposed Dividend 20,800,000 20,800,000 19,200,000 19,200,000 20,000,000 20,000,000
Unclaimed Dividend 1,580,230 2,706,690 1,224,623 1,003,600 913,719 580,316
Stock 496,023,771 491,608,049 493,278,897 456,605,572 357,347,834 328,013,450
Trade Debtors 45,504,079 42,501,462 29,956,569 15,220,740 17,431,470 19,136,408
Investment 16,480,000 18,210,000 18,880,000 18,680,000 17,950,000 2,600,000
Administrative & Selling Expenses 86,359,063 82,485,540 81,356,529 81,048,447 81,624,756 79,355,071

6
 COMPERATIVE INCOME STATEMENT (2001-06)

COMPERATIVE INCOME STATEMENT (2001-06)  

 
 
   
   
   
     
(Figures in Taka)
FISCAL YEARS 2006 2005 2004 2003 2002 2001

Sales 867,000,825 797,683,342 775,131,774 752,710,227 716,883,310 640,747,605

Cost of Goods Sold (667,768,855) (592,870,264) (574,352,080) (556,668,499) (534,235,557) (469,635,179)

Gross Profit 199,231,970 204,813,078 200,779,694 196,041,728 182,647,753 171,112,426

Expenses: (166,360,216) (160,039,454) (156,934,476) (147,462,606) (136,156,214) (125,864,329)

Administrative & Selling Expenses 86,359,063 82,485,540 81,356,529 81,048,447 81,624,756 79,355,071
Financial Expenses 80,001,153 77,553,914 75,577,947 66,414,159 54,531,458 46,509,258

Operating Profit 32,871,754 44,773,624 43,845,218 48,579,122 46,491,539 45,248,097

Contribution to Workers' Participation & Welfare Funds (1,643,588) (2,238,681) (2,192,260) (2,428,956) (2,324,577) (2,262,405)

Net profit before Taxation 31,228,166 42,534,943 41,652,958 46,150,166 44,166,962 42,985,692
Provision before Income Tax (2,280,453) (1,763,186) (1,343,795) (1,763,235) (756,195) (1,050,220)
Net profit After Taxation 28,947,713 40,771,757 40,309,163 44,386,931 43,410,767 41,935,472

Basic Earnings Per Share (EPS) BDT 36.18 BDT 50.96 BDT 50.39 BDT 55.48 BDT 54.26 BDT 52.42

7
 COMPERATIVE BALANCE SHEET (2001-06)

COMPERATIVE BALANCE SHEET (2001-06)

2006 2005 2004 2003 2002 2001

NET ASSETS

Property, Plant & Equipment 300,381,409 316,812,646 327,236,429 344,755,402 286,596,687 242,685,708
Investment 16,480,000 18,210,000 18,880,000 18,680,000 17,950,000 2,600,000

Current Assets 673,783,245 660,584,792 622,251,899 580,472,010 509,202,925 445,812,934

Stock 496,023,771 491,608,049 493,278,897 456,605,572 357,347,834 328,013,450

Trade Debtors 45,504,079 42,501,462 29,956,569 15,220,740 17,431,470 19,136,408
Advance & Deposits 92,771,180 93,291,132 76,235,298 90,619,101 102,406,341 79,106,537
Cash & Cash Equivalents 39,484,215 33,184,149 22,781,135 18,026,597 32,017,280 19,556,539

Current Liabilities 500,364,804 499,627,981 503,199,292 464,013,742 391,729,576 334,673,215

Current Portion of long-term Loan 44,209,923 46,533,312 41,875,000 45,625,000 35,624,333 19,916,667
Short Term Loan from Bank (Secured) 424,111,655 418,762,505 417,645,508 386,748,095 328,399,834 299,178,721
Liabilities for Goods 12,891,489 10,816,582 13,609,529 8,276,626 6,165,434 5,587,769
Liabilities for Expenses 6,304,038 8,413,189 20,263,963 16,246,147 15,233,293 5,807,492
Liabilities for Other Finance 169,468 76,119 109,713 1,645,449 1,332,000 1,124,960
Interest Payable 4,471,647 5,210,687 3,443,926 1,355,373 527,895
Worker Profit Participation Fund 2,582,715 2,238,681 … … … …
Income tax payable 4,043,639 4,870,216 5,027,030 4,468,825 2,705,590 1,949,395
Unclaimed Dividend 1,580,230 2,706,690 1,224,623 1,003,600 913,719 580,316

Net Current Assets 173,418,441 160,956,811 119,052,607 116,458,268 117,473,349 111,139,719

490,279,850 495,979,457 465,169,036 479,893,670 422,020,036 356,425,427

Financed By :

Share holder Equity 337,687,792 330,037,953 309,015,238 293,913,711 270,253,283 247,679,451

Share Capital 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000 80,000,000

Share Premium 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000 40,000,000
Reserve & Surplus 196,887,792 189,237,953 169,815,238 154,713,711 130,253,283 107,679,451
Proposed Dividend 20,800,000 20,800,000 19,200,000 19,200,000 20,000,000 20,000,000

Long Term Debt 152,592,058 165,941,504 156,153,798 185,979,959 151,766,753 108,745,976

490,279,850 495,979,457 465,169,036 479,893,670 422,020,036 356,425,427

8
 SWOT Analysis

SWOT ANALYSIS

As far we know SWOT analysis is a combination of analysis of a company which

includes Strength, Weakness, Opportunity, and Threat of that company. Let’s make
SWOT Analysis of “Agricultural Marketing Company Limited (PRAN)”.

Strength of Agricultural Marketing Company Limited (PRAN)

As far we know Agricultural Marketing Company Limited (PRAN) is one of the leading food
producing and food exporting company in Bangladesh. “PRAN Juice”, “PRAN Mango Bar”, “PRAN
Badam Vaja”, “PRAN Squash” are the well known and well consumed product in Bangladesh
produced by them. Besides this they have produced more than 50 verities of products.

Besides this, Agricultural Marketing Company Limited (PRAN) is also export their products more
then 45 countries. Their product chain is too large.

Though in recent years, their profitability is in downward position, their foods become a brand. If
they take care more about it, they will be a best company.

Weakness of Agricultural Marketing Company Limited (PRAN)

Though Agricultural Marketing Company Limited (PRAN) is a leading food company, it is not a
well profitable company now. In year 2006, the company becomes collapse. All the lines and bars
of the graph of profitability are declining. YEAR 2006 is the year, where company made the worst
performance that they ever do before. As the condition of Bangladesh in year 2006 is not suitable
for doing business, all the businessmen are in vain. So nothing to be done by the company.

Besides this, Agricultural Marketing Company Limited (PRAN) is a too much fluctuating company.
All the activity ratios, liquidity ratios say that in last 5 years the company performance is jumping.
It makes the firm risky for the investors to invest.

AMCL (PRAN) prefer short term loan, but it increase the interest expenditure.

Maximum products of Agricultural Marketing Company Limited (PRAN) are not at that quality level
which customers want. They should try to maintain the quality. A market research is important to
take decision about it

9
 SWOT Analysis

Opportunity of Agricultural Marketing Company Limited (PRAN)

Agricultural Marketing Company Limited is a concern of PRAN GROUP is famous for their food
products. Besides this, their mission is to make Bangladesh hunger and poverty free, aim is to
producing quality food. They have the opportunity to fulfill their mission.

If AMCL (PRAN) tries to increase their food quality more that the customers want, their sales will
be increased at a surrounded rate.

The efficiency of Agricultural Marketing Company Limited (PRAN) is at a good look. They tries to
increase their productivity. It’s a good sign of development. And by make time series analysis of
AMCL (PRAN), they are improving.

Threat of Agricultural Marketing Company Limited (PRAN)

There lies a lot of thereat for AMCL (PRAN). The competitors of AMCL (PRAN) are strong enough
to produce quality goods. They produced maintain better quality then AMCL (PRAN). Square
Consumers Products, Akiz Foods Bangladesh Limited, BDFoods Limited, Arku Ltd. Cocola foods
ltd., are becomes threat for the company.

AMCL (PRAN) is not aware of creating a branding image of their products. Their marketing policy
in too old and not suitable with today’s world.

10
 Ratio Analysis

RATIO ANALYSIS

As the definition of ratio analysis we know that it involves method of calculating and
interpreting financial ratios to analysis and monitor the firm’s performance. The basic
inputs to ratio analysis are the firm’s income statement and balance sheet.

In this report, financial ratio analyses are conducted for wishing and evaluating the
operating performance of the company AMCL (PRAN). We analyze the ratio under
the following categories:-

A. Profitability Ratio
- Gross Profit Margin
- Operating Profit Margin
- Net Profit Margin
- Earnings per Share
- Return of Total Assets (ROA)

- Return on Stockholders Equity Ratio (ROE)

B. Liquidity Ratio
- Current Ratio
- Quick Ratio

C. Activity Ratio
- Inventory Turnover
- Total Asset Turnover
- Average Payment Period

11
 Ratio Analysis

A. PROFITABILITY RATIO

An indication of good financial health and how effectively the firm is being managed
is the company’s ability to earn a satisfactory profit and return on investment.
Investors will be reluctant to associate themselves with an entity that has poor
earning potential since the market price of stock and dividend potential will be
adversely affected.

Some major ratios that measure its operating results are summarized below:

 Gross Profit Margin

The gross profit margin reveals the percentage of each dollar left over after
the business the business has paid for its goods. The higher the gross profit earned
the better. Gross profit equals net sales less cost of goods sold.

Gross Profit
Gross Profit Margin = × 100
Net Sales

Calculation of Gross Profit Margin of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Net Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0
Gross Profit TK. 171,1 TK. 182,6 TK. 196,0 TK. 200,7 TK. 204,8 TK. 199,2
Gross Profit Margin 26.71% 25% 26.04% 25.90% 25.68% 22.97%

Gross Profit Margin

27.00%
26.00%
25.00%
Percent

AMCL (PRAN)
24.00%
INDUSTRY AVERAGE
23.00%
22.00%
21.00%
2001 2002 2003 2004 2005 2006
Years

Comment:
The graph shows a fluctuating situation. Here the industry average is 25.38%.
Though the profit condition was good enough, but now it is in alarming position.

12
 Ratio Analysis

 Operating Profit Margin

Operating profit margin is an indication of the firm’s profitability from current

operations without regard to the interest charge accruing from the capital structure.
The formula is –

Profit Before Tax & Interest

Operating Profit Margin =
Sales

Calculation of Operating Profit Margin of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Net Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0
Profit Before Tax & Interest TK. 45,24 TK. 46,49 TK. 48,57 TK. 43,84 TK. 44,77 TK. 32,87
Operating Profit Margin 7.06% 6.49% 6.45% 5.66% 5.61% 3.79%

Operating Profit margin

8.00%
7.00%
6.00%
Percent

5.00%
4.00%
AMCL (PRAN)
3.00%
2.00% INDUSTRY AVERAGE
1.00%
0.00%
2001 2002 2003 2004 2005 2006
Years

Comments:
As the industry average is 5.84%, the situation of the firm is not admirable. It
looses its standards. As we see YEAR 2001 was the golden period for firm, but
YEAR 2006 is profit decreases abut 3%. Beside this profit are fluctuating.

13
 Ratio Analysis

 Net Profit Margin

This ratio measures the relationship between net profits and sales of a firm.
Depending on the concept of net profit employed. Basically the net profit to sales
expresses the cost price effectiveness of the operation. The formula is:

Profit After Tax & Interest

Net Profit Margin =
Sales

Calculation of Net Profit Margin of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Net Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0
Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94
Net Profit Margin 6.54% 6.06% 5.90% 5.20% 5.11% 3.34%

Net Profit Margin

7.00%

6.00%

5.00%

4.00%
Percent

INDUSTRY AVERAGE
AMCL (PRAN)
3.00%

2.00%

1.00%

0.00%
2001 2002 2003 2004 2005 2006
Year

Comment:
From the above table and graph we got that the situation is alarming. We take
the base or industry average is 5.36%.As the line of net profit margin of AMCL
(PRAN), Year 2006 is so much bad for the firm. It will be better for company to take
care of their earning and expenditure.

14
 Ratio Analysis

 Earnings per Share

Earnings per share indicate the amount of earnings for each common share
held. When preferred stock is included in the capital structure, net income must be
reduced by the preferred dividends to determine the amount applicable to common
stock.

Profit after taxes

Earning per Share =
Total Number of Share

Calculation of Earning Per Share of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Total number of share 800,000 800,000 800,000 800,000 800,000 800,000
Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94
Earning Per Share (EPS) 52.42 54.26 55.48 50.39 50.96 36.18

Earning Per Share

60

50

40
Taka

30
AMCL (PRAN)
20 INDUSTRY AVERAGE

10

0
2001 2002 2003 2004 2005 2006
Year

Comment:
Let’s have a look on the graph. As the industry average of AMCL (PRAN) is
TK. 49.95 or TK. 50, the situation is not good at all. The graph represents that bar of
EPS of AMCL (PRAN) is downward.

15
 Ratio Analysis

 Return of Total Assets (ROA)

The return on total asset (ROA) indicates the efficiency with which
management has used its available resources to generate income. The formula of
calculation of ROA is –

Profit after taxes

Return of Total Assets (ROA) =
Total Asset

Calculation of Return of Total Assets (ROA) of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Total Asset TK. 6910 TK. 8137 TK. 9439 TK. 9683 TK. 9956 TK. 9906
Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94
Return of Total Assets (ROA) 6.07% 5.33% 4.70% 4.16% 4.10% 2.92%

Return on Total Assets (ROA)

7.00%

6.00%

5.00%
Percent

4.00% AMCL (PRAN)

3.00% INDUSTRY AVERAGE

2.00%

1.00%

0.00%
2001 2002 2003 2004 2005 2006
Year

Comment:
In the year 2005, the company has made highest utilization of assets. But this
year it is the downward situation. Besides this the overall situation is not satisfactory.
The line of industry average is on 4.55%.

16
 Ratio Analysis

 Return on Stockholders Equity Ratio (ROE)

ROE measures the rate of return on the common stockholders or

shareholders’ investment. The formula for measurement is –

Profit after taxes

Return on Stockholders Equity Ratio (ROE) =
Total Stockholders Equity

Calculation of Return on Stockholders Equity Ratio (ROE) of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Total Stockholders Equity TK. 2476 TK. 2702 TK. 2939 TK. 3090 TK. 3300 TK. 3376
Profit After Tax & Interest TK. 41,93 TK. 43,41 TK. 44,38 TK. 40,30 TK. 40,77 TK. 28,94
ROE 16.93% 16.06% 15.10% 13.04% 12.35% 8.57%

Return on Stockholders Equity Ratio (ROE)

18.00%
16.00%
14.00%
12.00% AMCL (PRAN)
Percent

10.00%
8.00% INDUSTRY
6.00% AVERAGE
4.00%
2.00%
0.00%
2001 2002 2003 2004 2005 2006
Year

Comment:
From the above data table and line chart, we can easily imagine where the
ROE line goes to. As the industry average is 13.68%, the expected return goes on a
half position on this 6 year calculation. The firm must have follow up it.

17
 Ratio Analysis

B. LIQUIDITY RATIO

Liquidity is a company’s ability to meet its maturing short-term obligation.

Liquidity is essential to conducting business activity, particularly in times of
adversely. In fact, liquidity is a pre-requisite for the survival of the firm.

Here we interpret the firm’s liquidity with the help of some major ratios.

 Current Ratio

This ratio, which is subject to seasonal fluctuations, is used to measure the ability of
an enterprise to meet its current liabilities out of current assets. Current Ration is a measure
of margin of safety to creditors. The formula for the calculation of current ratio is –

Current Assets
Current Ratio =
Current Liabilities

Calculation of Current Ratio of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Current Assets TK. 4458 TK. 5092 TK. 5804 TK. 6222 TK. 6605 TK. 6737
Current Liabilities TK. 3346 TK. 3917 TK. 4640 TK. 5031 TK. 4996 TK. 5003
Current Ratio 16.93% 16.06% 15.10% 13.04% 12.35% 8.57%

Current Ratio

1.40
1.35
AMCL (PRAN)
Times

1.30
1.25 INDUSTRY
AVERAGE
1.20
1.15
2001 2002 2003 2004 2005 2006
Year

Comment:
As the data table and line chart, overall position is quite well. Here we take
industrial average as 1.30.

18
 Ratio Analysis

 Quick Ratio

The acid-test ratio or quick ratio is the ratio between quick current assets and
quick current liabilities. The term quick asset refers to current assets which can be
converted into cash immediately or at a short notice without diminution of value. The
current assets which are excluded are; prepaid expenses and inventory. The
exclusion of inventory is based on the reasoning that is it is not easily and readily
convertible into cash.

Current Assets - Inventory

Quick Ratio =
Current Liabilities

Calculation of Quick Ratio of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Current Assets TK. 4458 TK. 5092 TK. 5804 TK. 6222 TK. 6605 TK. 6737
Inventory TK. 3280 TK. 3573 TK. 4566 TK. 4932 TK. 4916 TK. 4960
Current Liabilities TK. 3346 TK. 3917 TK. 4640 TK. 5031 TK. 4996 TK. 5003
Quick Ratio 16.93% 16.06% 15.10% 13.04% 12.35% 8.57%

Quick Ratio

0.45
0.40
0.35
0.30 AMCL (PRAN)
Times

0.25
0.20 INDUSTRY
0.15 AVERAGE
0.10
0.05
0.00
2001 2002 2003 2004 2005 2006
Year

Comments:
Though the graph show a good improve, but the data table says something
different. There are huge amounts of inventory of the firm and this makes the firm
risky. Here the industry average is 0.33 times.

19
 Ratio Analysis

C. ACTIVITY RATIO

Activity ratio measures the speed with which various accounts are converted
into sales or cash – inflows or outflows.

Here we measure the firm’s activity with the help of some major ratios.

 Inventory Turnover

Inventory turnover commonly measures the activity, or liquidity, of a firm’s

inventory. It calculated as –

Cost of Goods Sold

Inventory Turnover =
Inventory

Calculation of Inventory Turnover of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Cost of Goods Sold TK. 4696 TK. 5342 TK. 5566 TK. 5743 TK. 5928 TK. 6677
Inventory TK. 3280 TK. 3573 TK. 4566 TK. 4932 TK. 4916 TK. 4960
Inventory Turnover 1.43 1.50 1.22 1.16 1.21 1.35

Inventory Turnover

1.60
1.40
1.20
AMCl (PRAN)
1.00
Times

0.80
INDUSTRY
0.60
AVERAGE
0.40
0.20
0.00
2001 2002 2003 2004 2005 2006
Year

Comment:
In the comparison with the industry average (1.310), we see there are a lot of
fluctuations in the graph. In Year 2002, company was on a better position then other
one.

20
 Ratio Analysis

 Average Collection Period

The average collection Period, or average age of accounts receivable, is

useful in evaluating credit and collection policies. It is arrived at by dividing the
average daily sales into accounts receivable balance. The formula of calculation of
average Collection Period is –

Accounts Receivable
Average Collection Period =
Average Sales Per Day

Calculation of Average Collection Period of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Accounts Receivable TK. 191 TK. 174 TK. 152 TK. 299 TK. 425 TK. 455
Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0
Average Collection Period 10.75 8.75 7.28 13.91 19.18 18.89

Average Collection Period

25
20
15
Days

10
5
0
2001 2002 2003 2004 2005 2006
Years

AMCL (PRAN) INDUSTRY AVERAGE

Comments:
As the graph, the overall situation is not satisfactory, but it is on a normal
level. Here the industry average is 13.13 days

21
 Ratio Analysis

 Total Asset Turnover

The total asset turnover is helpful in evaluating a company’s ability to use its
base efficiency to generate revenue. The total asset is calculated as follows;

Sales
Total Asset Turnover =
Total Asset

Calculation of Return of Total Assets (ROA) of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Sales TK. 640,7 TK. 716,8 TK. 752,7 TK. 775,1 TK. 797,6 TK. 867,0
Total Asset TK. 6910 TK. 8137 TK. 9439 TK. 9683 TK. 9956 TK. 9906
Total Asset Turnover 0.93 0.88 0.80 0.80 0.8012 0.875

Total Asset Turnover

0.95
0.90
0.85
Time

0.80
0.75
0.70
2001 2002 2003 2004 2005
Year

AMCL (PRAN) INDUSTRY AVERAGE

Comment:
The table and the graph say the asset turnover line make fluctuation. But it is
good news that firms tries to become efficient. In 2003-05 the company was not in
bad position. The industry average is 0.85

22
 SUMMARY OF RATIO ANALYSIS

SUMMARY OF RATIO ANALYSIS

DESCRIPTION/ Time
YEARS 2001 2002 2003 2004 2005 2006 Series
LIQUIDITY

Current Ratio 1.33 1.30 1.25 1.24 1.32 1.35 Improving

Quick Ratio 0.35 0.39 0.27 0.26 0.34 0.36 Improving

ACTIVITY

Inventory Turnover 1.43 1.50 1.22 1.16 1.21 1.35 Improving

Average Collection
10.75 8.75 7.28 13.91 19.18 18.89 Fluctuating
Period
Average Payment
4.66 4.88 5.51 9.95 9.76 8.23 Fluctuating
Period
Total Asset Turn
0.93 0.88 0.80 0.80 0.8012 0.875 Improving
Over

DEBT

Debt Ratio 64% 67% 69% 68% 66.85% 65.90% Improving

Times Interest
97% 92% 73% 62% 56.81% 40.86% Declining
Earned Ratio

PROFITABILITY

Gross Profit Margin 26.71% 25% 26.04% 25.90% 25.68% 22.97% Declining
Operating Profit
7.06% 6.49% 6.45% 5.66% 5.61% 3.79% Declining
Margin
Net Profit Margin 6.54% 6.06% 5.90% 5.20% 5.11% 3.34% Declining
Earnings Per Share BDT 52.42 BDT 54.26 BDT 55.48 BDT 50.39 BDT 50.96 BDT 36.18 Declining
Return of Total
6.07% 5.33% 4.70% 4.16% 4.10% 2.92% Declining
Assets
Return of Common
16.93% 16.06% 15.10% 13.04% 12.35% 8.57% Declining
Stock Ratio

MARKET

Price/Earnings (P/E)
7.62 6.75 7.43 10.39 10.19 10.67 Declining
Ratio
Market/Book (M/B)
1.29 1.08 1.12 1.36 1.26 0.91 Declining
Ratio

23
 DuPoint Analysis

DuPoint Analysis

DuPont System of analysis is an analysis of profitability that breaks down return on

assets between the profit margin and asset turnover. The second or modified version
show how return on asset is translated into return on equity. Let see the DuPoint
analysis of AMCL (PRAN).

DuPoint Analysis of AMCL (PRAN)

(Figure in Taka)
FISCAL YEAR 2001 2002 2003 2004 2005 2006
1. Sales 640,747,605 716,883,310 752,710,227 775,131,774 797,683,342 867,000,825
2. Cost of Goods Sold 469,635,179 534,235,577 556,668,499 574,352,080 592,870,264 667,768,855
3. Operating Expenses 81,617,476 83,949,333 83,477,403 83,548,789 84,724,221 88,002,651
4. Interest Expenses 46,509,258 54,531,458 66,414,159 75,577,974 77,553,914 80,001,153
5. Taxes 1,050,220 756,195 1,763,235 1,343,795 1,763,186 2,280,453

6. Earnings Available For

Common Stock Holders (1-2- 41,935,472 43,410,747 44,386,931 40,309,136 40,771,757 28,947,713
3-4-5)

7. Net Profit Margin

6.54% 6.06% 5.90% 5.20% 5.11% 3.34%
((6÷1)*100)

8.Total Assets 691,098,642 813,749,612 943,907,412 968,368,328 995,607,375 990,644,654

9. Total Asset Turn Over

0.93 0.88 0.80 0.80 0.80 0.88
(8÷1)

10. Return on Asset (ROA)

0.061 0.053 0.047 0.042 0.041 0.029
(7*9)

11. Total Liabilities 691,098,642 813,749,612 943,907,412 968,368,328 995,607,375 990,644,654

12. Share holder Equity 247,679,451 270,253,283 293,913,711 309,015,238 330,037,953 337,687,792

13. Financial Leverage

2.79 3.01 3.21 3.13 3.02 2.93
Multiplier (FLM) (11/12)

14. RETURN ON COMMON

0.17 0.16 0.15 0.13 0.12 0.09
EQUITY (ROE) (10*13)

** Please go to annexure to get detailed analysis & flowchart of DuPoint Analysis 24

 Peer to Peer Comparison

PEER GROUP COMPARISON FOR YEAR 2004

To make peer to peer comparison we choose Yusuf Flower Mills LTD

(YOUSUFLOUR) and Fu-Wang Ltd. Lets have a look on the comparisons.

DESCRIPTION FU-WANG EVALUATION AMCL (PRAN) EVALUATION YOUSUFLOUR

Current Ratio 1.22 Better 1.24 Better 0.73

Quick Ratio 0.88 Worst 0.26 Better 0.11

ACTIVITY

Inventory Turnover 7.03 Worst 1.16 Worst 6.2

Average Collection Period (DAYS) 76.4 Better 13.91 - (not available)
Average Payment Period (DAYS) 25.17 Better 9.95 - (not available)
Total Asset Turn Over 1.06 Worst 0.80 Worst 4.47

DEBT

Debt Ratio 35% Better 68% Better 0

Times Interest Earned Ratio 12.6 Worst 62% Worst (not available)
Fixed Payment Coverage Ratio (not available) - (not available) - (not available)

PROFITABILITY

Gross Profit Margin 22.30% Better 25.90% Better 7%

Operating Profit Margin 14.20% Worst 5.66% Better 3%
Net Profit Margin 8.73% Worst 5.20% Better 2%
Earnings Per Share (BDT) 1.63 Better 50.39 Better 0.16
Return of Total Assets 9.20% Worst 4.16% Worst 15%
Return of Common Stock Ratio 14.20% Worst 13.04% Better -43%

MARKET

Price/Earnings (P/E) Ratio 7.63 Better 10.39 Worst 68.75

Market/Book (M/B) Ratio 1.08 Better 1.36 Better -8.66

25
 Risk Analysis

RISK ANALYSIS

Risk is the chance that an outcome other then expected will occur. Generally the
terms risk is used interchangeable with uncertainty to refer to variability of return
associated with a given assets.

More finally, risk is a measure of uncertainty about the outcome from a given event.
This greaten the variability of possible outcomes, on both the high side and the low
side, the grater the risk. There are two types of risk:

1. Business Risk

2. Financial Risk

Business Risk

The chance that the firm will be unable to cover operating costs level is driven by the
firm’s revenues stability and the structure of its operating cost.

To find out risk of AMCL (PRAN) and Fu-Wang, we need the calculate –

- Expected EBIT
- Standard Deviation
- Coefficient of Variation

* See appendixes for details formula and calculation 26

 Risk Analysis

Calculation of Business risk of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004
EBIT TK. 429.86 TK. 441.67 TK. 461.50 TK. 416.53

After calculation we get….

The Expected EBIT* of AMCL (PRAN) is 414.53

The Standard Deviation* is 47.88

The Coefficient of Variation* is 0.1155 or 11.6%

Calculation of Business risk of Industry (FU-WANG)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004
EBIT TK. 64 TK. 317 TK. 405 TK. 405

After calculation we get….

The Expected EBIT* of FU-WANG is 297.75

The Standard Deviation* is 53.625

The Coefficient of Variation* is 0.18 or 18%

Comments:

From the above calculation we get that the coefficient of variation of sales of
AMCL (PRAN) is lower then the industry as Fu-Wang Foods which means firm’s
business risk is lower then the risk of industry.

* See appendixes for details formula and calculation 27

 Risk Analysis

FINANCIAL RISK

The chance that firm will be unable to cover its financial obligations level is driven by
the predictability of the firms operating cash flows and its cost financial obligations.

 DEBT TO ASSETS RATIO

It measures the extent to which borrowed funds has been used to finance the firm’s
operation. Debt includes both short and long term debt. The formula for the
calculation of this ratio is,

Formula:

Total Debt
Debt - To - Assets Ratio =
Total Assets

Calculation of Debt – to – Asset Ratio of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Total Assets TK. 6911 TK. 8137 TK. 9440 TK. 9684 TK. 9956 TK. 9906
Total Liability/Debt TK. 4434 TK. 5435 TK. 6499 TK. 6593 TK. 6655 TK. 6529
Debt – to - Assets Ratio 0.64 0.67 0.69 0.68 0.67 0.66

Debt-To-Assets Ratio

0.80
0.70
0.60
0.50
Times

AMCL (PRAN)
0.40
INDUSTRY AVERAGE
0.30
0.20
0.10
-
2001 2002 2003 2004 2005 2006
Year

Comment:
This ratio measures the share of the total assets financed by outside funds.
We find that in comparison with the industry average (0.38) the firm posses a high
debt to ratio. In that case the firm faces less financial risk then the industry.

28
 Risk Analysis

 DEBT TO EQUITY RATIO

Debt – To – Equity ratio shows the relationship between borrowed funds and owner’s
capital. This ratio reflects the relative claims of creditors and shareholders against
the assets of the firm.

Formula:

Total Debt
Debt - To - Equity Ratio =
Total Share Holders Equity

Calculation of Debt – To – Equity Ratio of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Total Liability/Debt TK. 4434 TK. 5435 TK. 6499 TK. 6593 TK. 6655 TK. 6529
Total Shareholders Equity TK. 2477 TK. 2702 TK. 2939 TK. 3090 TK. 3300 TK. 3376
Debt – To – Equity Ratio 1.7901 2.0115 2.2113 2.1337 2.0167 1.9339

Debt-To-Equity Ratio

2.5

1.5
Times

1 AMCL (PRAN)
INDUSTRY AVERAGE
0.5

0
2001 2002 2003 2004 2005 2006
Year

Comment:
Here the industry average is (0.48) and we see that the ratio of firm is
increasing over the year. In 2003, the ratio was highest (2.2113). It implies that for
taka 2.2113 of outside liability the firm has taka 1 of owner’s capital which indicates
that the owners are putting up relatively less for their own. It is danger signal for the
creditors. If the firm should fail financially, the creditors will loss heavily.

29
 Risk Analysis

 TIME INTEREST EARN RATIO

It is also known as “Interest Coverage Ratio”. The ratio measures the debt serving
capacity of a firm insofar as fixed interest on long-term loan is concerned. Here is the
formula –

Formula:

Earning Before Interest & Tax

Time Interest Earn Ratio =
Total interest Charge

Calculation of Time Interest Earn Ratio of AMCL (PRAN)

(Figures in 00,000)
FISCAL YEARS 2001 2002 2003 2004 2005 2006
Earning Before Interest& Tax TK. 894 TK. 988 TK. 1129 TK. 1171 TK. 1201 TK. 1112
Total Interest Charge TK. 465 TK. 546 TK. 661 TK. 756 TK. 775 TK. 800
Time Interest Earn Ratio 1.9226 1.8095 1.7080 1.5489 1.5497 1.390

Time Interest Earn Ratio

AMCL (PRAN) INDUSTRY AVERAGE

12
10
8
TIMES

6
4
2
0
2001 2002 2003 2004 2005 2006
YEAR

Comment:
As we see here it is shocking news for AMCL (PRAN) that the difference
between their ratio and the industry average (11.39) is very high. It indicates that the
extent to which a fall in EBIT is tolerable in the sense that the ability of the firm to
service its debt would be adversely affected. Here we got that the firm is loosing the
ability to handle fixed charge liabilities and the assurance to payback of interest to
the creditors is low.

30
 Scenario Analysis

Scenario Analysis

INCOME STATEMENTS FORCUSTING ( PRAN GROUP)

+ 10%
FISCAL YEARS 2006 2007 2008 2009 2010
Sales TK. 86,700,083 TK. 953,700,908 TK.1,049,070,998 TK.1,153,978,098 TK.1,269,375,908

Cost of Goods Sold TK.66,776,886 TK. 734,545,741 TK.808,000,315 TK.888,800,346 TK.977,680,381

Gross Profit TK.19,923,197 TK.219,155,167 TK.241,070,684 TK.265,177,752 TK.291,695,527

Expenses: TK.16,636,022 TK.182,996,238 TK.201,295,861 TK.221,425,447 TK.243,567,992

Administrative & Selling Expenses TK.8,635,906 TK.94,994,969 TK.104,494,466 TK.114,943,913 TK.126,438,304

Financial Expenses TK.8,000,115 TK.88,001,268 TK.96,801,395 TK.106,481,535 TK.117,129,688

Operating Profit TK.3,287,175 TK.36,158,929 TK.39,774,822 TK.43,752,305 TK.48,127,535

Contribution to Workers' Participation & Welfare Funds TK.164,359 TK.1,807,947 TK.1,988,741 TK.2,187,616 TK.2,406,377

Net profit before Taxation TK.3,122,817 TK.34,350,983 TK.37,786,081 TK.41,564,689 TK.45,721,158

Provision before Income Tax TK.228,045 TK.12,709,864 TK.13,980,850 TK.15,378,935 TK.16,916,828
Net profit After Taxation TK.2,894,771 TK.21,641,119 TK.23,805,231 TK.26,185,754 TK.28,804,329

31
 Scenario Analysis

INCOME STATEMENTS FORCUSTING ( PRAN GROUP)

- 10%
FISCAL YEARS 2006 2007 2008 2009 2010
Sales TK. 86,700,083 TK. 780,300,743 TK. 702,270,668 TK. 632,043,601 TK. 568,839,241

Cost of Goods Sold TK. 66,776,886 TK. 600,991,970 TK. 540,892,773 TK. 486,803,495 TK. 438,123,146
Gross Profit TK. 19,923,197 TK. 179,308,773 TK. 161,377,896 TK. 145,240,106 TK. 130,716,096

Expenses: TK. 16,636,022 TK. 149,724,194 TK. 134,751,775 TK. 121,276,597 TK. 109,148,938

Administrative & Selling Expenses TK. 8,635,906 TK. 77,723,157 TK. 69,950,841 TK. 62,955,757 TK. 56,660,181
Financial Expenses TK. 8,000,115 TK. 72,001,038 TK. 64,800,934 TK. 58,320,841 TK. 52,488,756

Operating Profit TK. 3,287,175 TK. 29,584,579 TK. 26,626,121 TK. 23,963,509 TK. 21,567,158
Contribution to Workers' Participation & Welfare Funds TK. 164,359 TK. 1,479,229 TK. 1,331,306 TK. 1,198,176 TK. 1,078,358

Net profit before Taxation TK. 3,122,817 TK. 28,105,349 TK. 25,294,814 TK. 22,765,333 TK. 20,488,800
Provision before Income Tax TK. 228,045 TK. 2,052,408 TK. 1,847,167 TK. 1,662,450 TK. 1,496,205
Net profit After Taxation TK. 2,894,771 TK. 26,052,942 TK. 23,447,648 TK. 21,102,883 TK. 18,992,594

32
 Findings

FINDINGS

After we finished all the calculations and comparisons, we got something about the
company which can be noted down.

- In most of the cases, the company’s position is fluctuating. On an expanded way, all the ratios,
percentages are well in first two years and on the last year 2006, company improving. But in
these middle 3 years the position is down the standards.
- The graph line of profitability and earnings or the company is declining.
- The gap between Current Ratio and Quick Ratio is huge.
- The inventory position of the company is increasing year by year. As we know that the
economy of Bangladesh, the price of raw-materials are fluctuating. In this situation huge
amount of inventory make the company risky.
- Company’s inventory is staying on 70% - 75% of current assets all the year.
- Companies “Processing of goods” related costs are increasing.
- Selling and administrative expenses are on control.
- Company is not interested in long term lone. They prefer short term lone. So the interest
expenses of the company increasing.
- The EPS (Earning per Share) of the company is in alarming position in year 2006.
- The Return on Equity (ROE) is in a bad position in recent year.
- Company’s management efficiencies are admirable.
- Company’s amounts of exporting food are increasing. Importers of AMCL (PRAN) are also
increasing

33
 Recommendation

RECOMMENDATION

We recommend company to follow up about some situations that will help company
to go further up.

- Sales of the company are goes down. Marketing department should follow-up about the matter.

- The cost of processing goods should be reduced. Company can use new machinery or

techniques.

- Company should take care about inventory

- Interest rates of long term loan are low; company should avoid taking short-term loan.

- Company should decrease its business risk more.

- Company has to stop the production of low demanded food product of the company.

- They should increase food quality and also marketing quality.

34
 DuPoint Analysis Flowchart

Sales
-
Earning
Available for
COGS
Common
Stockholder
-
Operating Net Profit
÷
Expenses Margin
-
Contribution
at Wale fare Sales
Fund
-
Return on
Interest × Total Asset
(ROA)
-
Taxes
Return On
Common
Stock Equity
(ROE)
Sales
Total Asset
Current Assets ÷
Turnover
Total
+ ×
Assets
Net Fixed
Assets

Current
Liabilities
Total
+
Liabilities
Total
Liabilities &
Long-term
+ Stockholder
Debt
Equity =
Total Asset
Financial
Stockholders
÷ Average
Equity
ratio
Common
Stock
Equity

35
 Risk Analysis Formula

RISK ANALYSIS FORMULA

To make calculation on business risk analysis,

The formulas are…

For Expected EBIT:

Expected EBIT =
∑ EBIT of Last Four Years
Number of years

For The Standard Deviation:

Standard Deviation =
∑ EBIT Per Year - Expected EBIT
Number of years

For Co-efficient of Variation:

Standard Deviation
Co - efficient of Variation = × 100
Expected EBIT

36
 References

REFERENCES

+ Annual reports of Agricultural Marketing Company Limited (PRAN) 2001-2006

+ Balance Sheet of Joint Stock Companies 2000-04” published by Statistics Department

of Bangladesh Bank.

+ Agricultural Marketing Company Limited (PRAN)’s website

+ Different Finance Related Books

+ http://www.dsebd.org

+ www.pranfoods.net

+ www.investopedia.com

+ www.wikipedia.com

+ www.finance.yahoo.com

+ www.weeklyindustry.com

37