Accounting Data Analysis Sample

Term paper
on
Firms Performance, Stability, and Liquidity Condition on Five (05) DSE
listed Companies: A Time Series Analysis
Submitted to:
Dr. Muhammad Shahin Miah CPA
Assistant Professor of Accountancy
Department of International Business
University of Dhaka
Submitted by:
MD. Sajeeb Hossain
ZR-43
11th batch
Department of International Business
University of Dhaka
Date of Submission: 8 April (Sunday) 2017
1
Table of Contents
Abstract ........................................................................................................................................... 3
3.1 Sample .............................................................................................................................. 6
3.2 Data Analysis (Through Table) ................................................................................................ 8
INFORMATION SERVICE NETWORK LIMITED ................................................................ 8
ISLAMI INSURANCE BANGLADESH LIMITED ................................................................. 8
ISLAMI BANK BANGLADESH LIMITED ......................................................................... 9
ISLAMIC FINANCE AND INVESTMENT LIMITED ............................................................ 9
3.3 INTERPRETATIONS ........................................................................................................ 11
INFORMATION SERVICE NETWORK LIMITED .............................................................. 11
ISLAMI INSURANCE BANGLADESH LIMITED ............................................................... 13
ISLAMI BANK BANGLADESH LIMITED ......................................................................................... 14
ISLAMIC FINANCE AND INVESTMENT LIMITED .......................................................... 16
4. Conclusion and Recommendations ........................................................................................... 19
2
Abstract
Ratio analysis is a numerical attempt to analyze the performance and financial position of a
business. By converting absolute numbers into ratios, we have the ability to make comparisons
between one firm and another, or between one period and another. Indeed, ratio analysis, which is
the interpretation of ratios, cannot be meaningfully achieved without some form of comparison.
Ratio analysis is a commonly used analytical tool for verifying the performance of a firm. While
ratios are easy to compute, which in part explains their wide appeal, their interpretation is
problematic when two or more ratios provide conflicting signals. Indeed, ratio analysis is often
criticized on the grounds of subjectivity, that is the analysts must pick and choose ratios in order
to assess the overall performance of a firm.
1. Introduction
The analysis of financial statements as well as interpretation of financial data of particular period
of operation with the help of using ratio is termed as ratio analysis. Therefore, ratio analysis is
hereby used to find out the financial soundness of a particular organization. Ratio analysis is
holding various outcomes for stakeholder like, creditors, debtors, investors as well mangers. Ratio
analysis is very essential to build the relationship between two accounting figures to highlight the
important information to the management or other users so that perfect action or decision can be
taken in terms of the present business situation or the company’s financial performance to be in
better position in future.
Ratio analysis facilitates the accounting information to be summarized and simplified in a required
form and highlights the interrelationship between the facts and figures of various segments of
business. Ratio analysis helps the company to remove all types of wastage and inefficiencies.
The paper aims at analyzing the financial ratio of financial statements of Bank companies with
special reference to Export Import Bank of Bangladesh Limited, The City Bank Limited, Bank
Asia Limited and Shahjalal Islami Bank Limited which have multi-billion-dollar business in our
country and also across the world. The primary objective is to find out about the historical
performance and current financial condition of all banks Ltd with the help of various ratios and
thereby to offer appropriate suggestions for the better performance of the organization. The
duration has been taken for 3 years that from the year 2009-2011. The study has great significance
and will provide benefits to various parties who directly or indirectly interact with the bank
companies.
There are five main categories of accounting ratios:
3
1. Liquidity Ratios: Liquidity ratios measure a company's ability to pay off its short-term
debts as they come due using the company's current or quick assets. Liquidity ratios include
current ratio, quick ratio, and working capital ratio.
2. Profitability Ratios: These ratios show how well a company can generate profits from its
operations. Profit margin, return on assets, return on equity, return on capital employed,
and gross margin ratio are examples of profitability ratios.
3. Efficiency Ratios: Also called activity ratios, efficiency ratios evaluate how well a
company uses its assets and liabilities to generate sales and maximize profits. Key
efficiency ratios are the asset turnover ratio, inventory turnover, and days' sales in
inventory.
4. Solvency Ratios: Also called financial leverage ratios, solvency ratios compare a
company's debt levels with its assets, equity, and earnings to evaluate whether a company
can stay afloat in the long-term by paying its long-term debt and interest on the debt.
Examples of solvency ratios include debt-equity ratio, debt-assets ratio, and interest
coverage ratio.
5. Coverage Ratios: These ratios measure a company's ability to make the interest payments
and other obligations associated with its debts. Times interest earned ratio and debt-service
coverage ratio are two examples of coverage ratios.
2. Literature Review
Rogers (2001) studied in his research about the effect of diversification on firm
performance analyses the association between diversification and firm performance by
using a sample of up to 1449 large Australian firms for the period of 1994 to 1997. He has
analyzed the firm performance by measuring profitability and, for quoted firms, market
value. From the comparative analysis of selected sample, the results showed that all the
selected firms have more focused to maintain higher profitability and also controls for firm
specific effects and other determinants of profitability. However, this association was not
found in sub-sample regressions for listed firms. He concluded that for measuring the
performance of the firm, firm select either profitability or market value. The results
indicated that listed firms may be under closer scrutiny and competitive pressures that
ensure, on average, that these firms are at their optimal degree of diversification.
Mulla (2002) discussed in his paper about the ‘Use of ‘Z’ score analysis for evaluation of
financial health of textile mills - A case study’ has been made an insight into the financial
health of ShriVenkatesh Co-operative Textile Mills Ltd., Arunageri of Dharwad District.
For the purpose of analysis, the ‘Z’ score analysis has been applied to evaluate the general
trend in financial health of a firm over a period by using many of the accounting ratios.
From the analysis he was concluded that the textiles mill under study was just on the verge
of financial falls down and on the one hand, current assets declined because of the
negative profitability performance, whereas on the other hand, the current liabilities were
on the increase because of poor liquidity performance of the mill.
4
Kakani, Saha & Reddy (2003) have studied about an empirical validation of the widely
held existing theories on the determinants of firm performance in the Indian context. In
their study they have used financial statements and capital market data of 566 large Indian
firms over a time frame of eight years divided into two sub-periods (1992-96 and 1996-
2000) and to analyse Indian firm’s financial performance across various dimensions viz.,
shareholder value, accounting profitability and its components, growth and risk of the
sample firms. They have found that size, marketing expenditure and international
diversification had a positive relation with a firm’s market evaluation. They have also
concluded that a firm’s ownership compositions, particularly the level of equity ownership
by domestic financial institution and dispersed public shareholders, and the leverage of the
firm were important factors affecting its financial performance.
Weill (2004) discussed in his paper about comparison of leverage and corporate
performance-a frontier efficiency analysis provides new empirical evidence on a major
corporate governance issue and also the relationship between leverage and corporate
performance. To analyse the leverage and corporate performance, he has applied frontier
efficiency techniques to obtain performance measures for companies from several
countries (France, Germany and Italy). This study proceeds to regressions of corporate
performance on a various set of variables including leverage. He has found mixed evidence
depending on the country; while significantly negative in Italy, the relationship between
leverage and corporate performance was significantly positive in France and Germany.
RBI Bulletin (2005) Finance of Foreign Direct Investment companies has made studied
on financial performance analysis using profit margin ratio, return on net worth ratio of
selected 490 non-governments non-financial foreign direct investment (FDI) companies
for the period 2000 -2003 based on their audited annual accounts. This study concluded
that the financial results of the selected company should improve performance in terms of
higher growth in sales, value of production, manufacturing expenses and gross profit
during 2002-03 compared with the respective growth rates in the previous year. It also
revealed that profitability ratios like profit margin return on network increased during the
year under Review Company having major portion of FDF from UK, USA, Switzerland
and Mauritius registered net flow of foreign companies in all the three years.
3. Research Methodology
Analysis Design
Analysis is a careful inquiry or examination to find new information or relationship and to expand
and verify existing knowledge. Therefore, we have used descriptive analysis in this study because
it will ensure the minimization of bias and maximization of reliability of data collected.
5
Data Collection
The information is collected from Dhaka Stock Exchange’s website during the analysis which is
utilized for calculating performance evaluation later. Further, I collected data of five DSE listed
company. Including:
1. INFORMATION SERVICE NETWORK LIMITED
2. ISLAMI INSURANCE BANGLADESH LIMITED
3. ISLAMI BANK BANGLADESH LIMITED
4. ISLAMIC FINANCE AND INVESTMENT LIMITED
5. IT CONSULTANTS LTD.
Data Analysis and Interpretation
 Annual financial statements including balance sheets, profit and loss account, changes in
owners’ equity, and cash flows statement have been analyzed with the application of ratio
analysis.
 Tabular presentations of the collected data are done to show the financial position of the
company.
 The data analysis is done using various activity, solvency, and liquidity and profitability
ratios.
3.1 Sample
I was given 5 DSE listed companies to do ratio analysis for the period of 2 years. Total sample
will be 5 firm-year observations. The name of 5 DSE listed companies are-
Company Name Period

INFORMATION SERVICE NETWORK LIMITED 2013-2014
ISLAMI INSURANCE BANGLADESH LIMITED 2015-2016
ISLAMI BANK BANGLADESH LIMITED 2014-2015
ISLAMIC FINANCE AND INVESTMENT LIMITED 2015-2016
IT CONSULTANTS LTD. (2015-16)-(2016-2017)
6
The financial ratios we used in the analysis are shown below-
Liquidity Ratios
1. Current Ratio Current Assets/Current Liabilities
2. Acid-Test Ratio (Cash + Short-term Investment + Net Accounts

Receivable)/Current liabilities
3. Accounts Receivable Turnover Net Credit Sales/Average Net Accounts Receivable
4. Inventory Turnover Cost of Goods Sold/Average Inventory
PROFITABILITY RATIOS
5. Profit Margin Net Income/Net Sales
6. Asset Turnover Net Sales/Average Total Assets
7. Return on Assets Net Income/Average Total Assets
8. Return on Common Stockholders’ Equity (Net Income - Preferred Dividends)/Average
Common Stockholders’ Equity
9. Earnings Per Share (EPS) (Net Income - Preferred Dividends)/Weighted
Average Common Shares Outstanding
10. Price-Earnings (P-E) Ratio Market Price Per Share/Earnings Per Share (EPS)
11. Pay-out Ratio Cash Dividends Declared on Common Stock/Net
Income
SOLVENCY RATIOS
12. Debt to Assets Ratio Total Liabilities/Total Assets
13. Times Interest Earned (Net Income + Interest Expense + Income Tax
Expense)/Interest Expense
7
3.2 Data Analysis (Through Table)
INFORMATION SERVICE NETWORK LIMITED

Ratios 2013 2014
1.Current Ratio 1.83:1 0.41:1
2.Acid-Test Ratio 1.63:1 1.60:1
3. Accounts receivable Turnover 0.20 times 0.57 times
4. Inventory turnover ……. …….
5. Profit margin -24.03% -12.90%
6. Asset turnover 0.27 times 0.02 times
7. Return on assets -4.67% 25.38%
8. Return on common stockholders’ equity -6.28% 35.40%
9. Earnings per share (EPS) (1.03) 0.70
10. Price-earnings (P-E) Ratio …… ……
11. Payout ratio 10.52% 0.12%
12. Debt to assets ratio 26.40% 27.46%
13. Times interest earned 4.8 times 1.18 times
ISLAMI INSURANCE BANGLADESH LIMITED

Ratios 2015 2016
2.Acid-Test Ratio ……. ……
3. Accounts receivable Turnover ……. ……
4. Inventory turnover ……. ……
5. Profit margin ……. …….
6. Asset turnover ……. …….
7. Return on assets 6.23% 7.45%
8. Return on common stockholders’ equity 17.64% 21.15%
9. Earnings per share (EPS) 1.15 1.45
10. Price-earnings (P-E) Ratio 14 times 13.24 times
11. Payout ratio 56.69% 47.27%
13. Times interest earned …… ……
8
ISLAMI BANK BANGLADESH LIMITED
Ratios 2014 2015
2.Acid-Test Ratio ….. …..
3. Accounts receivable Turnover ….. …..
4. Inventory turnover ….. …..
5. Profit margin ….. …..
6. Asset turnover …. …..
10. Price-earnings (P-E) Ratio 11.24 times 12.54 times
11. Payout ratio 60.39% 76.65%
13. Times interest earned …. ….
ISLAMIC FINANCE AND INVESTMENT LIMITED

Ratios 2015 2016
2.Acid-Test Ratio ….. …..
3. Accounts receivable Turnover ….. …..
4. Inventory turnover ….. …..
5. Profit margin 46.14% 49.31%
6. Asset turnover …. …..
11. Payout ratio 6.09% 4.35%
9
13. Times interest earned ….. …..
10
IT CONSULTANTS LTD.
Ratios 2015-2016 2016-2017
2.Acid-Test Ratio 0.66:1 0.69:1
3. Accounts receivable Turnover 2.26 times 2.83 times
4. Inventory turnover 1.56 times 2.41 times
5. Profit margin 7.68% 9.03%
6. Asset turnover 2.26 times 0.45 times
11. Payout ratio 23.74% 57.86%
13. Times interest earned 2.10 times 3.43 times
3.3 INTERPRETATIONS
INFORMATION SERVICE NETWORK LIMITED

Ratios Interpretation
1.Current Ratio The current ratio is widely used measure for
evaluating a company’s liquidity and short
term debt paying ability. The ratio is computed
by dividing current assets by current liabilities.
For this company the current ratio of 2013 is
1.83:1 and of 2014 is 0.41:1. Comparatively
the company’s current ratio was better in 2013.
Because in 2014 the ratio is 0.41:1 that means
lack of liquidity.
2.Acid-Test Ratio The Acid-Test ratio is a measure of a
company’s immediate short term liquidity.
Cash, short term investment, net accounts
receivable are highly liquid compared to
inventory and prepaid system. Acid-Test ratio
of the company was 1.63:1 in 2013 and 1.60:1
in 2014. Comparatively, in 2013 the company
was in better condition by holding 1.63:1 of
Acid-Test ratio.
11
3. Accounts receivable Turnover Accounts receivable Turnover means measure
of liquidity by how quickly a company can
convert certain asset to cash. Comparatively,
the company in a better condition in 2014 for
the accounts receivable turnover. Because, in
2013 the ratio was 0.20 times where 0.57 times
in 2014.
4. Inventory turnover ……………………
5. Profit margin Profit margin is a measure of the percentage of
each dollar of sales that results is net income.
The company fall down in 2013 and 2014.
Doing loss both year. But in 2013 profit
margin ratio is -24.03% and in 2014 -12.90%.
So the company was in better condition in
2014. Because compare to 2013 the loss in
2014 was reduced.
6. Asset turnover Asset turnover measures hoe efficiently a
company uses it’s to generate Seles. In 2013
the company’s asset turnover was 0.27 times
and in 2014, 0.02 times. So the company was
in a better state in 2013. Because the turnover
of 0.02 is lower than 0.27.
7. Return on assets An overall measure of profitability is return on
asset. The company did loss in 2013. So
compared to 2013 the company had a
tremendous cope up in 2014. In 2013 the return
on asset was -4.67% but in 2014 it was 25.38%
which is a great state.
8. Return on common stockholders’ equity Return on common stockholders’ equity
profitability from the common stockholders’
viewpoint. In 2013 the ratio was -6.28% which
is very bad state for the company. But in 2014
the ratio was 35.40% that is much better than
that of 2013.
9. Earnings per share (EPS) Earnings per share (EPS) is a measure of the
net income earned on each share of common
stock. In 2013 the company did loss and the
EPS was (1.03). But in 2014 EPS of the
company was 0.70 that is better condition of
the company.
10. Price-earnings (P-E) Ratio ……………………
11. Payout ratio It measures the percentage of earnings
distributed in form of cash dividends. The
payout ratio was in 2013, 10.52% and in 2014,
0.12% that means downfall of the company in
2014. So in 2013 the company in a better state.
12
12. Debt to assets ratio The ratio measures the percentage of the total
assets that creditors provide. The ratio of the
company in 2013 was 26.40% and in 27.46%
In 2014. So the company was in better
condition in 2014 holding 27.46% debt to
assets ratio.
13. Times interest earned Times interest earned provides an indication of
the company’s ability to meet interest
payments as they come due. In 2013 times
interest earned was 4.8 times and in 2014 it
was 1.18 times. So the company was in a better
state in 2013 holding 4.8 times of times interest
earned.
ISLAMI INSURANCE BANGLADESH LIMITED

lack of liquidity than 2015.
2.Acid-Test Ratio …………….
3. Accounts receivable Turnover …………….
4. Inventory turnover …………….
5. Profit margin ……………
6. Asset turnover ……………
asset. In 2015 return on assets of the company
was 6.23% and in 2016, 7.45%. So the
company was in a better condition in 2016 by
holding 7045% return on assets.
viewpoint. In 2015 the ratio was 17.64% and
in 2016, 21.15% of the company. So the
company was in a better state in 2016 than
13
2015 by holding 21.15% return on common
stockholder’s equity.
stock. In 2015 the EPS was 1.15 of the
company. But in 2016 EPS of the company
was 1.45 that is better condition than 2015 of
the company.
10. Price-earnings (P-E) Ratio It is widely used measure of the ratio of the
market price of each share of common stock to
the earnings per share. In 2015 price earnings
ratio of the company was 14 times and 13.24
times in 2014. So the ratio was better in 2015
than 2016 by holding 14 times of price
earnings ratio.
payout ratio was in 2015, 56.69 % and in 2016,
assets ratio.
13. Times interest earned ………………………
ISLAMI BANK BANGLADESH LIMITED

2.Acid-Test Ratio ……………..
3. Accounts receivable Turnover ……………..
14
4. Inventory turnover ……………..
5. Profit margin ……………..
6. Asset turnover ……………...
was 0.67% and in 0.44% 2015. So the
holding 0.67% return on assets than 2015.
viewpoint. In 2014 the ratio was 8.51% and in
2015, 6.66% of the company. So the company
was in a better state in 2014 than 2015 by
holding 8.51% return on common
stockholder’s equity.
stock. In 2014 the EPS was 2.48 taka of the
was 1.88 taka. So the company was in better
condition in 2014 than 2015 by holding 1.88
taka earnings per share.
ratio of the company was 11.24 times and
12.54 times in 2015. So the ratio was better in
2015 than 2014 by holding 12.54 times of price
earnings ratio.
assets ratio.
13. Times interest earned …………………
15
ISLAMIC FINANCE AND INVESTMENT LIMITED
2.Acid-Test Ratio …………….
3. Accounts receivable Turnover ……………
4. Inventory turnover …………...
In 2015 the profit margin of the company was
46.14% and in 2016, 49.31%. so, the company
was in a better condition in 2016 than 2015 by
holding 49.31% of profit margin.
6. Asset turnover …………………….
was 2.35% and in 2016, 2.60%. So the
holding 2.60% return on assets than 2015.
viewpoint. In 2015 the ratio was 12.71%
which is very bad state for the company. But in
2016 the ratio was 16.72% that is much better
than that of 2015.
stock. In 2015 the EPS was 1.64 taka of the
was 2.30 taka that is better condition than 2015
of the company.
ratio of the company was 9.44 times and 8.40
times in 2016. So the ratio was better in 2015
than 2016 by holding 9.44 times of price
earnings ratio.
16
assets ratio.
13. Times interest earned ……………………
IT CONSULTANTS LTD.
For this company the current ratio of 2015-
2016 is 0.18:1 and of 2016-2017 is 1.42:1.
Comparatively the company’s current ratio
was better in 2016-2017 Because in 2015-2016
the ratio is 0.18:1 that means lack of liquidity.
2.Acid-Test Ratio The Acid-Test ratio is a measure of a
company’s immediate short term liquidity.
Cash, short term investment, net accounts
receivable are highly liquid compared to
inventory and prepaid system. Acid-Test ratio
of the company was in 2015-2016, 0.66:1 and
0.69:1 in 2016-2017. Comparatively, in 2016-
2017 the company was in better condition by
holding 0.69:1 of Acid-Test ratio.
3. Accounts receivable Turnover Accounts receivable Turnover means measure
of liquidity by how quickly a company can
convert certain asset to cash. Comparatively,
the company in a better condition in 2016-
2017 for the accounts receivable turnover.
Because, in 2016-2017 the ratio was 2.83 times
where 2.26 times in 2015-2016.
4. Inventory turnover Inventory turnover measures the number of
times, on average, the inventory is sold during
the period. Its purpose is to measure the
17
liquidity of inventory. In 2015-2016 inventory
turnover of the company is 1.56 times and 2.41
times in 2016-2017. So in 2016-2016 the
company was in a better state than 2015-2016
by holding 2.41 times of inventory turnover.
In 2015-2016 the profit margin of the company
was 7.68% and in 2016-2017, 9.03%. so, the
company was in a better condition in 2016-
2017 than 2015-2016 by holding 9.03% of
profit margin.
6. Asset turnover Asset turnover measures hoe efficiently a
company uses it’s to generate Seles. In 2015-
2016 the company’s asset turnover was 2.26
times and in 2016-2017, 0.45 times. So the
company was in a better state in 2015-2016.
Because the turnover of 0.45 is lower than
2.26.
asset. In 2015-2016 return on assets of the
company was 3.23% and in 2016-2017, 9.03%.
So the company was in a better condition in
2016-2017 by holding 9.03% return on assets
than 2015-2016.
viewpoint. In 2015-2016 the ratio was 4.78%
which is bad state for the company. But in
2016-2017 the ratio was 6.39 % that is much
better than that of 2016-2017.
stock. In 2015-2016 the EPS was 0.93 taka of
the company. But in 2016-2017 EPS of the
company was 1.04 taka that is better condition
than 2015-2016 of the company.
the earnings per share. In 2015-2016 price
earnings ratio of the company was 20.82 times
and 8.40 times in 2016-2017. So the ratio was
better in 2015-2016 than 2016-2017 by
holding 20.82 times of price earnings ratio.
18
payout ratio was in 2015-2016, 6.09% and in
2016-2017, 4.35% that means downfall of the
company in 2016-2017. So in 2015-2016 the
company in a better state.
company in 2015-2016 was 32.37% and in
35.91% In 2016-2017. So the company was in
better condition in 2016-2017 holding 35.91%
debt to assets ratio.
13. Times interest earned Times interest earned provides an indication of
the company’s ability to meet interest
payments as they come due. In 2015-2016
times interest earned was 2.10 times and in
2016-2017 it was 3.43 times. So the company
was in a better state in 2016-2017 holding 3.43
times of times interest earned.
4. Conclusion and Recommendations
From this term paper we can know about the financial condition of 5 DSE listed companies of 2
years through 13 Ratios. Ratios are just one number divided by another and as such really don’t
mean much. The trick is in the way ratios are analyzed and used by the decision maker. A good
strategy is to compare the ratios to some sort of benchmark, such as industry averages or to what
a company has done in the past, or both. Once ratios are calculated, an analyst needs some
benchmarks to find out where the company stands at that particular point. Useful benchmarks are
industry comparisons and company trends.
It may be useful to compare a company to certain industry averages to get a feel for how the
company is performing. In that case it is necessary to obtain industry performance measures. One
of the ways in which financial statement can be put to work is through ratio analysis. Ratios are
simply one number divided by another; as such they may or not be meaningful. In finance, ratios
are usually two financial statement items that may be related to one another and may provide the
prudent user a good deal of information. Of the myriad of ratios that could be generated, some will
be more meaningful than others. Generally, ratios are divided into four areas of classification that
provide different kinds of information: liquidity, turnover, profitability and debt.
19

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Term paper

Date of Submission: 8 April (Sunday) 2017

Company Name Period

2. Acid-Test Ratio (Cash + Short-term Investment + Net Accounts

INFORMATION SERVICE NETWORK LIMITED

ISLAMI INSURANCE BANGLADESH LIMITED

ISLAMIC FINANCE AND INVESTMENT LIMITED

INFORMATION SERVICE NETWORK LIMITED

ISLAMI INSURANCE BANGLADESH LIMITED

ISLAMI BANK BANGLADESH LIMITED

4. Conclusion and Recommendations

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