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In this competitive market of Bangladesh to sustain and being profitable is necessary. To do so, a
company must focus on its well management of financial assets and keep satisfying its
stockholders to. The importance of ratio analysis emerges due to the fact that the process of ratio
analysis summarizes and simplifies the mass of accounting data derived from the Financial
Statements. It provides the information in such a simple and concise manner that not only the
comprehension of financial statements is made with a very little effort, but also it enables to
predict the events in the future so that necessary actions or precautionary measures may be
taken accordingly. When used properly, ratio analysis is very much helpful in evaluating the
current position and performance of a business while highlighting the capital gearing capacity
of a business entity. Ratio analysis is of great help in making comparative study with other
business or businesses. It is by means of ratio analysis that the current performance as well as
the profitability in terms of the trends can be identified accurately. On the one hand the Ratio
analysis provides the necessary information through which the interpretation of Financial
Statements becomes easier; on the other hand, ratios are helpful to disclose the whole story of
changes in the financial position and performance of a business entity. Thus the Ratio Analysis is
a great way to provide the overall value of a business enterprise.
BERGER Bangladesh Ltd. has enough financial strength to expand its business in future. In
future BERGER Bangladesh Ltd. will contribute more to the economy of Bangladesh by
expanding their business.
Table of contents
Introduction ...1
Profitability ratio 20
Conclusion .25
1
Introduction
Berger Paints is one of the oldest names in the paint industry, yet, it is one of the most
technologically advanced companies in the country. It is constantly striving for innovating
superior quality products and services. With more than 250 years of rich heritage, Berger
manufactures world class paints for all kinds of substrates and also provides parallel services.
Bergers inception was laid out in 1760 by a German national named Louis Berger, who started
dye and pigment making business in England. Louis involved his family into the business and
eventually changed the status of the company to Louis Berger & Sons Limited. The company
grew and expanded rapidly with a strong reputation for excellence in innovation and
entrepreneurship.
Berger Paints started painting Bangladesh since independence. Over the past few decades,
Berger has evolved and transformed itself in becoming the leading paint solution provider in the
country with a diversified product range that caters to all your painting needs.
Berger has heavily invested in technology and Research & Development (R&D) compared to
any other manufacturer in this market. Investment in technology and plant capacity is even more
evident from the establishment of Powder Coating and Emulsion plants at the Dhaka factory.
With its strong distribution network, Berger has reached almost every corner of Bangladesh.
The product range includes specialized outdoor paints to protect against adverse weather
conditions, Color Bank, Superior Marine Paints, Textured Coatings, Heat Resistant Paints,
Roofing Compounds, Epoxies and Powder Coatings. In each of these product categories, Berger
has been the pioneer. Besides, Berger offers illusions-the first designer paint solution in
Bangladesh.
In the stock market Berger is categorized under the miscellaneous sector. Berger has many
market competitor. Beximco ltd is one of the top competitors of Berger. We are going to
compare Berger and Beximco ltds financial ratios.
2
Vertical Analysis
Vertical analysis is the proportional analysis of a financial statement, where each line item on a
financial statement is listed as a percentage of another item. Typically, this means that every line
item on an income statement is stated as a percentage of gross sales, while every line item on a
balance sheet is stated as a percentage of total assets.
The central issue when creating a vertical analysis of a balance sheet is what to use as the
denominator in the percentage calculation. The usual denominator is the asset total, but one can
also use the total of all liabilities when calculating all liability line item percentages, and the total
of all equity accounts when calculating all equity line item percentages.
Balance sheet Item 2,015 2,014 2,013 2,012 2,011 Average Standard
Deviation
(%) (%) (%) (%) (%) (%)
(%)
Non-Current Assets
Property, plant & 29.08 29.52 30.34 28.07 29.61 29.32 0.83
equipment
Total non-current assets 37.66 33.90 33.99 35.79 33.87 35.04 1.67
Current assets
Trade and other 14.82 15.57 15.39 14.00 13.80 14.72 0.80
receivables
Advances, deposits & 3.73 4.07 4.17 4.12 4.47 4.11 0.26
prepayments
Cash and Equivalents 5.21 5.50 8.31 8.26 7.19 6.89 1.48
Total current assets 62.34 66.10 66.01 64.21 66.13 64.96 1.67
Non-current liabilities
Deferred tax liabilities 2.64 2.63 3.10 2.76 3.00 2.83 0.21
Current Liabilities
Trade and other payables 27.56 26.68 23.39 23.78 22.15 24.71 2.30
Provision for royalty 2.62 2.67 2.91 4.73 5.51 3.69 1.34
Provision for current tax 3.12 2.94 3.57 2.34 1.66 2.73 0.74
Provision for employees 0.19 0.28 0.66 0.14 0.18 0.29 0.21
retirement gratuity
Liability for unclaimed 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IPO application money
Total current liabilities 33.65 34.63 32.28 32.12 38.94 34.32 2.78
The most common use of vertical analysis in an income statement is to show the various expense
line items as a percentage of sales, though it can also be used to show the percentage of different
revenue line items that make up total sales.
Expenses
expenses
Net finance income 0.33 0.40 0.24 0.11 0.26 0.27 0.11
Income before tax 15.76 13.68 13.97 13.43 14.16 14.20 0.92
Current tax expenses 3.91 3.49 3.87 3.60 2.69 3.51 0.49
Basic earnings per 0.00 0.00 0.00 0.00 0.00 0.00 0.00
share
7
Horizontal analysis
Horizontal analysis is a financial statement analysis technique in which absolute change and
percentage change in value of each line item of a financial statement is calculated over one or
more accounting periods. Horizontal analysis may be performed on any financial statement i.e.
balance sheet, income statement, cash flow statement and statement of changes in owners'
equity.
In Horizontal Balance Sheet, we use same Base Year. All Base Year figures will become 100%
and all other items will be expressed as a percent of that items Base Year figure.
Current assets
8
Non-current liabilities
Current Liabilities
In Horizontal Balance Sheet, we use same Base Year. All Base Year figures will become 100%
and all other items will be expressed as a percent of that items Base Year figure.
Expenses
Ratio Analysis
Liquidity Ratio
Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt
obligations. These ratios measure the ability of a company to pay off its short-term liabilities
when they fall due. They show the number of times the short term debt obligations are covered
by the cash and liquid assets. If the value is greater than 1, it means the short term obligations are
fully covered. Current Ratio is one kind of Liquidity ratio which is discussed below-
Current Ratio: The current ratio is a financial ratio that shows the proportion of current assets
to current liabilities. The current ratio is used as an indicator of a company's liquidity.
BERGER Bangladesh Limiteds Current Ratio over the five years from 2011-2015 is given
below with analysis of Time series & Cross Functional:
In the year 2015, The BERGER Bangladesh Limiteds Current asset were only 1.85 times of
their current liabilities. It has been fluctuating over the last 5 years. It increases in values over the
years 2012 & 2013 consecutively & dropped in the year of 2014 and again in 2015. It is
significantly below the current ratio of BEXIMCO Ltd. So, the current ratio is not satisfactory.
Total Assets Turnover Ratio: Total Asset turnover ratio is the ratio of a company's sales to its
assets. It is an efficiency ratio which tells how successfully the company is using its assets to
generate revenue.
Interpretation of Total Asset Turnover Ratio: In 2015, every BDT1 worth of total assets
guaranteed BDT1.94 of sales. The ratio was rising form the value 1.85 in 2011, 2.13 in 2012 and
3.11 in 2013.But then it has dropped significantly to 2.04 in 2014 and 1.94 in 2015. Though
BERGER is significantly above BEXIMCO but its sales against the asset declined over last 2
years which is not satisfactory.
Fixed Asset Turnover Ratio: Fixed asset turnover ratio compares the sales revenue a company
to its fixed assets. This ratio tells us how effectively and efficiently a company is using its fixed
assets to generate revenues. If a company has a high fixed asset turnover ratio, it shows that the
company is efficient at managing its fixed assets.
14
In 2014, every BDT1 worth of fixed assets guaranteed BDT5.14 of sales. Fixed asset turnover
ratio increased in 2012 and 2013. Then it slightly dropped to 6.00 in 2014 and dropped
significantly to 5.14 in 2015. Though BERGERs position is much better than BEXIMCO but its
Fixed asset turnover ratio is declining for last two years which is little unfavorable.
Average Collection Period: The Average Collection Period measures the average number of
days it takes for the company to collect revenue from its credit sales. The company will usually
state its credit policies in its financial statement, so the Average Collection Period can be easily
gauged as to whether or not it is indicating positive or negative information.
Average Payment Period: Average payment period means the average period taken by the
company in making payments to its creditors.
150
100
Average Payment
Period
50
0
BERGER' 15 BEXIMCO'15
A ratio of a company's debt to its total financing is called Debt Management Ratio. The debt
management ratio measures how much of a company's operations come from debt instead of
other forms of financing, such as stock or personal savings.
The debt management ratio is one measure among many of a companys risk and likely hood of
default. Two types of Debt Management Ratio:
Debt to Asset Ratio: A financial ratio that measures the extent of a companys or consumers
leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in
percentage, and can be interpreted as the proportion of a companys assets that are financed by
debt. The higher this ratio, the more leveraged the company and the greater its financial risk.
Interpretation of Debt to Asset Ratio: In the year of 2015 36.29% of total assets was financed
by debt, the amount is less than 50% also less than previous year. The ratio is also less the
competitor BEXIMCO which is favorable.
Capital Structure: Capital structure indicates what percentage of total asset is financed by debt
& what percentage of total asset is financed by equity.
Interpretation of Capital Structure: In the year of 2015 BERGERs total asset, 36.29% was
financed by debt & 63.71% was financed by equity. No time series or cross section analysis is
required.
20
Profitability Ratio
A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a
previous period is indicative that the company is doing well.
Net Profit Margin: A financial metric used to assess a firm's financial health by revealing the
proportion of money left over from revenues after accounting for the cost of goods sold, tax &
interest.
BERGER Bangladesh Limiteds net Profit Ratio over the five years 2011-2015 is given below
with analysis.
12
10
8
6 Net Profit Margin
4
2
0
BERGER'15 BEXIMCO'15
Interpretation of Net Profit Margin: In 2015, BERGER had a net profit margin of 11.62%,
which means that for every BDT100 worth of sales, they were able to generate BDT 11.62 worth
of net profit for the firm. In 2011 it was 11.14% but dropped significantly to 9.89% in 2012 and
9.79% in 2013. It has been increasing for the last two years. Net profit margin of BERGER is
pretty much higher than BEXIMCOs. So, the situation is good.
Returns of Common Equity (ROE): The amount of net income returned as a percentage of
shareholders equity. Return on equity measures a corporation's profitability by revealing how
much profit a company generates with the money shareholders have invested. ROE is expressed
as a percentage.
BERGER Bangladesh Limiteds Returns of Common Equity (ROE) over the five years 2011-
2015 is given below with analysis.
These ratios give an indication of how investors perceive the company; its past performance,
future prospects, etc. The performance of the company's shares in the stock market is crucial
from shareholders point of view and management as well. In some organizations top
management bonus are linked to the share price in the stock market. Earnings per share is one of
a stock market ratio which is discussed below.
Earnings per Share: The firms earnings per share are generally of interest to present or
prospective stockholders and management. EPS represents the number of currency earned during
the period on behalf of each outstanding share of common stock.
Earnings Net profit after tax/ 31.10 32.46 37.13 47.33 61.49 1.59
per Share Total number of
common share
outstanding
80
60
40 Earnings Per
20
0
BERGER'15 BEXIMCO'15
Interpretation of Earnings per Share: In 2015, the Common Share Holders have earned
61.49Tk per share. As showed, the performance of EPS increased significantly over the last 5
years as well as far better than BEXIMCO. The situation is very good.
25
Conclusion
In the liquidity ratio we can see that the performance of BERGER has been fluctuating and for
the last two years it has been declining. Their performance in also poor than their competitor
BEXIMCO. So the situation is a matter to be concerned and is not satisfactory. To improve
liquidity ratio, BERGER can use long-term financing rather than cash on hand to acquire
inventory and can sell unnecessary assets. Paying off liabilities also improves Liquidity ratio.
In the asset management ratio total asset turnover and the fixed asset turnover is not satisfactory
but average collection period and average payment period is satisfactory. Though all the values
are higher than that of BEXIMCO the company should consider improving the asset turnovers.
In the debt management ratio we can figure out that BERGER doesnt have so much debt to
dedicate into asset. Moreover, the debt rate has been decreasing gradually which is very good.
In the profitability ratio we can see that BERGER performing good in all aspects. Though it had
its fall but it has been uplifting significantly. The performance is far better than its competitor
BEXIMCO.
In the stock market ratio it is clear that BERGER has lucrative earnings per share which indicates
that they keep their investors satisfied.
So, analyzing all the data it can be concluded that BERGER is performing well in almost all the
aspects and it could be profitable to invest in BERGER.
26
APPENDIX
Non-Current Assets
Current assets
27
Non-current liabilities
Current
Liabilities
Cost of sales (- (- (- (- (-
7012664/12 6585744/10 5481844/879 5086852/761 4192032/632
267996)*10 881046)* 6778)* 100 1213)* 100 1274)* 100
0 100
Expenses
expenses
(- (- (- (- (-
3258931/12 2774349/10 2107719/879 1511563/761 905819/6321
267996)* 881046)* 6778)* 100 1213)* 100 274)* 100
100 100
Finance cost (- (- (- (- (-
7884/12267 4573/10881 10805/87967 17772/76112 43661/63212
996)* 100 046)* 100 78)* 100 13)* 100 74)* 100
income 7996)* 100 81046)* 100 778)* 100 13)* 100 274)* 100
(- (- (- (- (-
507499/122 391165/108 367572/8796 269553/7611 173636/6321
67996)* 100 81046)* 100 778)* 100 213)* 100 274)* 100
Current assets
receivables 2468)* 100 2468)* 100 2468)* 100 2468)* 100 468)* 100
Non-current liabilities
Current Liabilities
29242)* 100 29242)* 100 9242)* 100 29242)* 100 29242)* 100
Expenses
Ratio Analysis
Liquidity Ratio
Profitability Ratio
)*100 0 *100