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Term Paper

Performance Analysis: Olympic Industries Ltd. & Quasem

Drycells Ltd.

Prepared For: M. Morshed (MdM)

Prepared By:

Shahriar Rabbani

ID: 1110615030

Section 3

Date of Submission: 13th August 2012

1

Executive Summary

This report aims at finding the overall financial performance of Olympic Industries Ltd. over a

period of time (2009-2011) and compare it with its competitor Quasem Drycells Ltd. over the

same period of time. The report seeks the basic financial position based on time series analysis

and cross sectional analysis by means of the tool-ratios. Finally the report will move towards

saying whether the financial position of Olympic Industries Ltd. is better, worse or in an

invariable position when compared to Quasem Drycells Ltd. and will provide recommendations

if required.

Table of Contents

Executive Summary.....................................................................................2

1.Introduction................................................................................................4

2.Objectives..................................................................................................5

3.Methodology..............................................................................................5

4.Limitations.................................................................................................6

5.Literature Review......................................................................................7

6. Findings..................................................................................................18

7.Analysis...................................................................................................19

8.Recommendations:.................................................................................28

9.Conclusion:..............................................................................................29

10.References:...........................................................................................30

11.Appendix................................................................................................31

11.1.Appendix A: Liquidity Ratios............................................................31

11.2.Appendix B: Profitability Ratios........................................................32

11.3.Appendix C: Leverage Ratios..........................................................35

11.4.Appendix D: Activity Ratios..............................................................37

11.5.Appendix E: Market Ratios..............................................................40

11.6.Appendix F: Dupont Formulae.........................................................41

1.Introduction

Olympic Industries Ltd

Olympic Industries Limited, is one of the longest running and most reputed manufacturing-based

companies in Bangladesh, with a heritage of over 50 years and group profile including interests

in Pharmaceuticals, Power, and Information Technology, among other FMCG. Starting with steel

production dating back to 1950, Olympic has steadily diversified over the years into various

consumer goods including biscuits, confectioneries, batteries, and ball pens, with over 40 brands

and 53 SKUs. The company has gotten to where it is today by staying true to its core beliefs, in

providing high quality, innovative products which its consumers can rely on.

Olympic Industries Limited is currently the market leader in the biscuit market and second in

position in the battery market in Bangladesh. It has been able to stride forward due to its

continuous vision for growth, its modern manufacturing facilities, and its extensive sales and

distribution network, and it has always yielded this influence to give back to the community.

Olympic Industries Limited is a public listed company and is trading on the Dhaka Stock

Exchange and Chittagong Stock Exchange. The company has an authorized share capital of

2500000 Ordinary Shares of Tk. 100 each.

Quasem Drycells Limited primarily engages in the manufacture and sale of metal jacket dry cell

batteries in Bangladesh. It also imports and sells gas lighters, UM-4 batteries, sun chips, and

light emitting diode flash lights. The company markets its products under SUNLITE brand.

Quasem Drycells Limited was founded in 1980 and is based in Dhaka, Bangladesh.

2.Objectives

The primary objective is to fulfill the requirement of the course Principles of Managerial

Finance. In order to achieve this objective, it would be necessary to interpret financial

statements of both Olympic Industries Ltd. and Quasem Drycells Ltd. for the period 2009-2011.

After interpreting, it would be necessary to analyze the performance of Olympic and Quasem

and find problem areas that Olympic is facing when compared to Quasem and put forward

necessary recommendations to Olympic to improve its financial performance.

3.Methodology

Annual reports of Olympic Industries and Quasem Drycells for the years 2009-2011 were used in

the form of secondary printed sources to calculate ratios in this report. The ratios were analyzed

using time series analysis and cross sectional analysis. The types of ratios used are: Liquidity,

Leverage, Profitability, Activity and Market Ratios. DuPont system of analysis was also used in

this report.

4.Limitations

Throughout doing the report I faced some problems

The real world annual reports are bigger than the ones we find in books. So it is time

consuming to understand and interpret them.

Collecting the annual reports of Olympic and Quasem was difficult as Dhaka Stock

Market didnt have the annual reports for all the years. They had to be collected from

other sources which took precious time.

It was required to analyze the performance of two companies for three years for this term

paper. It was a very time consuming task.

5.Literature Review

1. Liquidity Ratios: Liquidity ratios attempt to measure a company's ability to pay off its

short-term debt obligations. This is done by comparing a company's most liquid assets

(or, those that can be easily converted to cash), its short-term liabilities. In general, the

greater the coverage of liquid assets to short-term liabilities the better as it is a clear

signal that a company can pay its debts that are coming due in the near future and still

fund its ongoing operations. On the other hand, a company with a low coverage rate

should raise a red flag for investors as it may be a sign that the company will have

difficulty meeting running its operations, as well as meeting its obligations.

A. Current Ratio:

The current ratio is a popular financial ratio used to test a company's liquidity (also

referred to as its current or working capital position) by deriving the proportion of

current assets available to cover current liabilities. The concept behind this ratio is to

ascertain whether a company's short-term assets (cash, cash equivalents, marketable

securities, receivables and inventory) are readily available to pay off its short-term

liabilities (notes payable, current portion of term debt, payables, accrued expenses

and taxes). In theory, the higher the current ratio, the better.

Note: If the company Current ratio is 1 that is good, even 2 is also good , if the

company current ratio is 50 it is not good, cause there is idle money and less than 1

also not good. But super mall current ratio always less than 1. When the liquidity goes

up profit goes down

Formula

Current Ratio :

Current assets

Current liabilities

B. Quick Ratio:

The quick ratio - aka the quick assets ratio or the acid-test ratio - is a liquidity

indicator that further refines the current ratio by measuring the amount of the

most liquid current assets there are to cover current liabilities. The quick ratio is more

conservative than the current ratio because it excludes inventory and other current

assets, which are more difficult to turn into cash. Therefore, a higher ratio means a

more liquid current position.

Formula

Quick ratio=

CAEnding Inventory

CL

Note: A ratio 1.0 or greater is occasionally recommended, but as with the current

ratio, what value is acceptable depends largely on the industry. If you have too much

inventory it is not good. If a stock increase then your liquidity going down and also

profitability going down.

2. Leverage Ratios: These ratios give users a general idea of the company's overall debt

load as well as its mix of equity and debt. Debt ratios can be used to determine the overall

level of financial risk a company and its shareholders face. In general, the greater the

amount of debt held by a company the greater the financial risk of bankruptcy.

A. Debt Ratio:

The debt ratio compares a company's total debt to its total assets, which is used to

gain a general idea as to the amount of leverage being used by a company. A low

percentage means that the company is less dependent on leverage, i.e., money

borrowed from and/or owed to others. The lower the percentage, the less leverage a

company is using and the stronger its equity position. In general, the higher the ratio,

the more risk that company is considered to have taken on.

Formula

Debt ratio=

Total Liabilities

Total Asset

To a large degree, the debt-equity ratio provides another vantage point on a company's

leverage position, in this case, comparing long term loan to shareholders' equity, as

opposed to total assets in the debt ratio. Similar to the debt ratio, a lower the

percentage means that a company is using less leverage and has a stronger equity

position.

Formula

loan100

Stockholders Equity

The interest coverage ratio is used to determine how easily a company can pay

interest expenses on outstanding debt. The ratio is calculated by dividing a

company's earnings before interest and taxes (EBIT) by the company's interest

expenses for the same period. The lower the ratio, the more the company is burdened

by debt expense. When a company's interest coverage ratio is only 1.5 or lower, its

ability to meet interest expenses may be questionable.

Formula

EBIT

Interest

performance. These ratios, much like the operational performance ratios, give users a

9

good understanding of how well the company utilized its resources in generating profit

and shareholder value.

A. Gross Profit Margin:

The gross profit margin measure the percentage of each sales currency remaining

after the firm has paid for its cost of goods sold. The higher the gross profit margin

the better.

Formula

Gross profit

100

Revenue

Operating profit margin measures the percentage of each sales currency remaining

after all costs and expenses other than interest, taxes, and preferred stock dividends

are deducted A high operating profit margin is preferred.

Formula

Operating profit

100

Revenue

Net profit margin measures the percentage of each sales currency remaining after all

costs and expenses including interest, taxes, and preferred stock dividends are

deducted. The higher the net profit margin the better.

Formula

10

Net profit

100

Revenue

EPS represents the number of currency amount earned on behalf of each outstanding

share of common stock

Formula

EPS=

Number of CommonStock Outstanding

most important variable in determining a share's price. It is also a major

component used to calculate the price-to-earnings valuation ratio

This ratio indicates how profitable a company is relative to its total assets. The return

on assets (ROA) ratio illustrates how well management is employing the company's

total assets to make a profit. The higher the return, the more efficient management is

in utilizing its asset base. The ROA ratio is calculated by comparing Earnings

Available For CS Holders to Total Assets, and is expressed as a percentage.

Formula

ROA=

100

Total Assets

11

This ratio indicates how profitable a company is by comparing its Earnings Available

For CS Holders to its Stock holders Equity. The return on equity ratio (ROE)

measures how much the shareholders earned for their investment in the company. The

higher the ratio percentage, the more efficient management is in utilizing its equity

base and the better return is to investors.

Formula

ROE=

100

Stock Holder s Equity

The return on capital employed (ROCE) ratio, expressed as a percentage, measure the

focus to gain a better understanding of a company's ability to generate returns from its

available capital base.

Formula

ROCE=

EBIT

100

FA+(CACL)

4. Activity Ratios: These ratios look at how well a company turns its assets into revenue as

well as how efficiently a company converts its sales into cash. Basically, these ratios look

at how efficiently and effectively a company is using its resources to generate sales and

increase shareholder value. In general, the better these ratios are, the better it is for

shareholders.

A. Inventory Turn Over:

It commonly measures the activity, or liquidity, of a firms inventory. It is calculated

comparing Cost Of Goods Sold to average inventory. The higher the better.

12

Formula

Inventory

Turn

COGS

Av . Inventory

Average number of days sales in inventory. The lesser the better.

Formula

Av . Inventory

365

COGS

The average collection period is arrived comparing accounts receivables to the

average daily sales. Expressed in days, the smaller the better.

Formula

Accounts Recievables

Av . Sales Per Day

The average payment period is arrived comparing accounts payables to the average

daily purchases. Expressed in days, the greater the better.

Formula

Accounts Payables

Av . Purchases Per Day

13

The total asset turnover indicates the efficiency with which the firm uses its assets to

generate revenue. TA turnover is calculated by comparing Revenue to Total Assets

Formula

Revenue

Total assets

generating sales or revenue - the higher the number the better. It also

indicates pricing strategy: companies with low profit margins tend to have

high asset turnover, while those with high profit margins have low asset

turnover.

F. Fixed Asset Turnover Ratio:

This ratio is a rough measure of the productivity of a company's net fixed assets

with respect to generating revenue. For most companies, their investment in fixed

assets represents the single largest component of their total assets. This annual

turnover ratio is designed to reflect a company's efficiency in managing these

significant assets. Simply put, the higher the yearly turnover rate, the better.

Formula

Net

FA Turnover Ratio=

Revenue

Asset

5. Market Ratios: market Ratios relate the firms market value, as measured by its current

share price, to certain accounting values. These ratios give insight into how well investors

in the marketplace feel firm is doing in terms of risk and return.

A. Price/Earnings (P/E) Ratio:

14

The price/earnings ratio (P/E) is the best known of the investment valuation

indicators. The P/E ratio has its imperfections, and commonly used to assess the

owners appraisal of share value. The P/E ratio measures the amount that investors

are willing to pay for each taka of firms earnings. The higher the P/E ratio, the

greater the investors confidence to invest. P/E Ratio is calculated by comparing

market price per share of common stock to earning per share (EPS).

Formula

P/ E Ratio =

EPS

The M/B ratio provides an assessment of how investors view the firms

performance. It relates the market value of the firms shares to their book value.

M/B Ratio is calculated by comparing market price per share of common stock to

book value per share of common stock. Firm always try to sell share at a higher

M/B ratio.

Formula

M /B Ratio=

Book Value Per Share Of Common Stock

Where

Number Of Common StocksOutstanding

15

The DuPont system of analysis is used to dissect the firms financial statements and to assess its

financial condition. It merges the income statement and balance sheet into two summary

measures of profitability: return on total assets (ROA) and return on total equity (ROE).

DuPont formula

Multiplies the firms net profit margin by its total asset turnover to calculate the firms

return on total assets (ROA):

ROA= Net profit margin * Total asset turnover

Modified DuPont Formula

This formula relates ROA to its ROE by the Financial Leverage Multiplier (FLM).

ROE = ROA*FLM

Where,

FLM=

Common Stock Equity

16

6. Findings

Ratios

Liquidity

Ratios

Ratio

Current Ratio

Quick Ratio

Debt Ratio

Leverage

Ratios

Profitabilit

y Ratios

Times interest

Earned Ratio

Debt/Equity

Ratio

Net Profit

Margin

Operating

Profit Margin

Gross profit

Margin

ROA

ROCE

ROE

EPS

Inventory

Turn Over

Average age

of inventory

Average

collection

period

Average

Payment

Period

Companies

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Year 2009

1.10

1.05

0.70

0.50

64.4%

41.2%

5.06 times

0.93 times

9.72%

3.52%

6.1%

2.89%

10.6%

3.44%

24.7%

17.7%

12.9%

3.29%

44.2%

10.2%

36.3%

5.60%

Year 2010

1.22

1.03

0.85

0.42

61.4%

42.5%

8.00 times

1.59 times

11.9%

1.66%

7.8%

4.3%

12.4%

5.52%

28.4%

18.75%

14.0%

4.54%

43.0%

13.9%

36.3%

7.90%

77.1

Year 2011

1.24

1.12

0.84

0.49

59.8%

18.97%

7.83 times

1.67 times

17.8%

0.08%

6.6%

4.09%

10.1%

5.77%

25.0%

18.97%

13.8%

2.17%

39.7%

5.38%

34.5%

2.68%

70.4

Quasem Drycells

52 Tk/Share

Tk.

1.56/share

Tk/Share

Tk 2.23

Tk/Share

Tk.

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

8.4 times

4.58 times

44 days

85 days

6 days

12 days

/share

8.0 times

3.73 times

46 days

106 days

2 days

9 days

2.05/share

9.8 times

3.14 times

37 days

100 days

2 days

9 days

Olympic Industries

Quasem Drycells

31 days

40 days

38 days

51 days

33 days

44 days

17

Activity

Ratios

Market

Ratios

TA Turnover

Ratio

FA Turnover

Ratio

P/E Ratio

M/B Ratio

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

Olympic Industries

Quasem Drycells

2.10 times

1.13 times

4.62 times

3.14 times

12.1

43.6

4.41

0.82

1.80 times

1.06 times

4.40 times

2.57 times

23.6

47.3

8.56

3.72

2.10 times

0.53 times

5.02 times

0.97 times

25.8

96.6

8.91

2.59

7.Analysis

Liquidity Ratios:

Current Ratio (Time Series Analysis): Throughout the 3 years in Olympic Industries

Limited the Current Ratio shows an increasing trend. From 2009 to 2010 there was a rise

in Current Ratio by 0.12 and from 2010 to 2011 by 0.02. So more or less current ratio is

stable throughout the three years and it is good for the company.

decreasing trend in Current Ratio where as in Olympic Industries Limited Current Ratio

has increased from 2009 to 2011. Although Quasems Current Ratio never goes below 1

throughout the three years, if this trend continues it may soon go below 1. Therefore,

Olympic Industries is doing better when it comes to Current Ratio analysis.

Quick Ratio (Time Series Analysis): From 2009 to 2010 there was a slight rise in quick

ratio by 0.15 but in 2011 quick ratio drops by by 0.1. So the company should work on

raising the quick ratio because if the drop continues company might face liquid shortage

in near future.

Quick Ratio (Cross Sectional Analysis): In case of Quasem Drycells Limited we can

see there a decrease in Quick Ratio from 2009 to 2010 and again an increase from 2010

18

to 2011. From this, we can conclude that Quasem Drycells is doing a better job of

learning from their mistakes and improving their Quick Ratio whereas Olympic

Industries needs to take steps to improve theirs.

Leverage Ratios:

Debt Ratio (Time Series Analysis): From 2009 to 2010 there was a decrease in Debt Ratio

which was a very good sign for Olympic Industries. From 2010 to 2011 the Debt Ratio

decreases even further. In 2009 64.4% of total assets were financed by debt, where as after 2

years in 2011 it has dropped to 59.8%. So overall scenario of the company is improving over

the three years and it is good sign for the company.

Debt Ratio (Cross Sectional Analysis): In Quasem Drycells Limited Debt Ratio has

increased slightly from 2009 to 2010 but from 2010 to 2011 it decreases by a substantial

percentage. This shows that Quasem Drycells is doing a much better job when it comes to

Debt Ratio when compared to Olympic Industries Ltd.

Times Interest Earned Ratio (Time Series Analysis): There is a rise in Times Interest

Earned Ratio from 2009 to 2010 but it decreases again slightly in 2011. This indicates

Olympic Industries Limited is getting more capable of making its interest payments but it is

failing to hold on to that position over the years. However, in 2011 Olympic Industries have

covered their interest expense 7.83 times which is better than 5.06 times in 2009.

Times Interest Earned Ratio (Cross Sectional Analysis): For Quasem Drycells there is a

rising trend in Times Interest Earned Ratio from 2009 to 2011. Therefore in this case,

Quasem is doing better than Olympic although Olympic is covering their interest expense

more times.

19

Debt / Equity Ratio (Time Series Analysis): From 2009 to 2011, there is an increasing

trend in Debt / Equity Ratio which was a very bad sign for Olympic Industries Limited. In

2011, 17.8% of total asset was financed by debt and equity compared to 9.72% in 2009. As at

the end of 2011 Debt / Equity Ratio is very high, the companys performance is deteriorating

which is a bad sign for the company.

Debt / Equity Ratio (Cross Sectional Analysis): For Quasem, the Debt/Equity Ratio shows

a decreasing trend form 2009 to 2011. But in case of Olympic Industries Limited Debt/Equity

Ratio has increased a lot. Therefore in this case, Quasem Drycells is doing a far better job

than Olympic Industries Limited.

Profitability Ratios:

Net Profit Margin (Time Series Analysis): From 2009 to 2010 Olympic Industries Limited

made its Net profit Margin higher by a slight percentage but it decreased again in 2011. This

shows that Olympic is not doing a good job of maintaining a stable Net Profit Margin.

Net Profit Margin (Cross Sectional Analysis): Quasem Drycells Limited has increased its

Net Profit Margin by a large percentage from 2009 to 2010. However in 2011 the Net profit

margin decreased a little but that is negligible. On the other hand in Olympic Industries

Limited Net Profit Margin increased by a small percentage from 2009 to 2010 and decreases

again in 2011 coming back to almost the same margin of 2009. Therefore in this case

performance of Quasem Drycells Limited is better than Olympic Industries Limited.

Operating Profit Margin (Time Series Analysis): Operating Profit Margin increases from

2009 to 2010 but decreases to almost the same percentage as 2009 in 2011. In 2011, Olympic

Industries Limited made operating profit 10.10 taka for every 100 taka sale which is worse

20

than 12.4 taka for every 100 taka in 2010. This shows poor performance.

Operating Profit Margin (Cross Sectional Analysis): Throughout the 3 years Quasem

Drycells Limiteds Operating Profit Margin shows an increasing trend. Although the margin

throughout the three years is lesser than Olympics operating profit margin of three years, the

increasing trend is good as it shows Quasem has potential. It has increased by a very little

amount from 2009 to 2010 and again increased a little bit in 2011. On the other hand

Olympic Industries Limiteds Operating Profit Mragin has an increased by a good percentage

from 2009 to 2010 but decreases again in 2011. Therefore, Quasem Drycells Limited is doing

better.

Gross Profit Margin (Time Series Analysis): There is also an increasing trend in Gross

Profit Margin in the first 2 years, however in the third year the margin decreases again

similar to the Net and Operating Profit margins . In 2011 Olympic Industries Limited made

gross profit of 25 taka for every 100 taka sales which is a little worse than 28.4 taka for every

100 taka sales in 2009. However, it is better than 24.7 taka for every 100 taka sales in 2009.

As the Gross Profit Margin is fluctuating over the three years, the performance of the

company is a bit unstable when it comes to gross profit margin.

Gross Profit Margin (Cross Sectional Analysis): Throughout the 3 years Quasem Drycells

Limited has an increasing trend in Gross Profit Margin, which is good for the company.

Although Olympic has higher gross profit margin throughout the three years, their margin is

fluctuating. On the other hand, Gross Profit Margin has an increasing trend throughout the 3

years for Quasem Drycells, which means Quasem Drycells Limiteds performance is better

than Olympic Industries Limited as far as Gross Profit Margin is concerned.

ROA (Time Series Analysis): From 2009 to 2010 Return on Asset has increased and is

pretty much stable in 2011. In 2011 Olympic Industries Limited for every 100 taka worth of

total asset generated 13.80 taka net profit which is almost close 2010. So, the company is

generating a stable return on asset in the last two years. The company may want to take some

21

ROA (Cross Sectional Analysis): Quasem Drycells Limited ROA has increased a little from

2009 to 2010 and decreased again by a large percentage in 2011. At 2011, ROA is lower than

compared to what was in 2009. In case of Olympic Industries Limited ROA has increased

from 2009 to 2011. So overall, Olympic Industries Limited is in a better position than

Quasem Drycells Limited.

ROCE (Time Series Analysis): Throughout the three years(2009-2011), the return on capital

employed for Olympic Industries Ltd shows a decreasing trend. In 2011 Olympic Industries

Limited generated 39.7 taka for every 100 taka capital employed compared to 43 taka for

every 100 taka in 2010 and 44.2 taka for every 100 taka in 2009. As the ROCE is decreasing

with every passing year, the company is performing less efficiently.

ROCE (Cross Sectional Analysis): In Quasem Drycells Limited ROCE increases from 2009

to 2010 but decreases substantially in 2011. The percentages are also very small when

compared to Olympic Industries. Therefore, it can be said that although Olympic Industries

shows a decreasing trend in ROCE, it is in a better position than Quasem which shows a little

improvement but deteriorates again.

ROE (Time Series Analysis): There is a stable trend in ROE from 2009 to 2010 but it

decreases a little in 2011. In 2011 the shareholders of Olympic Industries Limited earned

34.50 taka for every 100 taka investment in the company. ROE in 2011 is somewhat less than

the ROE in 2010 and 2009. So company needs to improve its ROE a little bit.

ROE (Cross Sectional Analysis): ROE increases a little from 2009 to 2010 but decreases

substantially in 2011 for Quasem Drycells. For both the two companies ROE is in a

decreasing trend throughout the 3 years. Therefore both the companies need to improve its

22

ROE, which will be good for both the company. However, Quasem is very doing poor in the

third year.

EPS (Time Series Analysis): From 2009 to 2010 EPS has increased but in 2011 EPS again

decreased but by a very infinitesimal amount. Olympic Industries may wish to work on that.

In 2011 shareholders of Olympic have earned 70.4 taka for every share holding which is 0.07

taka less than 2010.

EPS (Cross Sectional Analysis): From 2009 to 2011 EPS of Quasem Drycells Limited is

acting in a similar manar to EPS of Olympic. Therefore, both the company have a pretty

much stable EPS. However, Olympic EPS is much greater than Quasem.

Activity Ratios:

Inventory Turnover (Time Series Analysis): There is a decreasing trend in Inventory

Turnover for the first 2 years, however it increases substantially in 2011 which is a good

sign for the comany. In 2011 Olympic Industries Limited has sold out and restock its

inventory 9.80 times which is 1.80 times greater than 2010. So performance is improving.

decreasing trend in Inventory Turnover where as Olympic Industries Limited has an

increasing trend. Quasem Drycells Limited also has a lower number of Turnover times in

2011 than Olympic Industries Limited, so in this case I can say Olympic Industries

Limited performance is better than Quasem Drycells Limited.

23

increasing for the first 2 years, but decreases again in the 3rd year. The decrease to 37 days

in the third year is a good sign for the company. In 2011 on an average in Olympic

Industries Limited inventory was held for 37 days before being sold, where as in 2009 it

was held for 44 days and in 2010 it was held for 46 days. So in 2011 the company has

more quickly sold their products and their performance has improved.

Average age of Inventory (Cross Sectional Analysis): Quasem Drycells Limiteds

Average age of Inventory has increased a lot from 2009 to 2011. The number of days is

also more compared to Olympic Industries Limited. So I can say Olympic Industries

Limited has more quickly sold their products.

Average collection period (Time Series Analysis): From 2009 to 2010 Average

Collection period has decreased and remained stable in 2011. In 2011 on an average it

took Olympic Industries Limited 2 days to make collection from the customers, which is

4 days less from 2009. So performance was good in debt collection.

Quasem Drycells Limited has decreased from 2009 to 2010 and remained stable in 2011.

However, when compared to Olympic Industries, Quasem takes more number of days to

collect its debt. Therefore, I believe Olympic Industries is doing better when it comes to

collecting its debt quickly.

Average payment period (Time Series Analysis): Throughout the 3 years there are ups

and downs in Average Payment period. In 2011 on an average it took Olympic Industries

Limited 33 days to make payment to suppliers. In 2011, Average payment period is more

than Average collection period which means suppliers are paid after collection is made

from customers. So the company is doing well here.

24

increased its Average Payment Period from 2009 to 2010, which is a good sign. But it

again decreased the collection period in 2011. When compared to Olympic Industries

Limited it is very high. So, Quasem Drycells Limited is in a better position than Olympic

Industries Limited in this case as they are keeping cash with them longer than Olympic.

Quasems liquidity position is better.

TA Turnover Ratio (Time Series Analysis): From 2009 to 2010 TA Turnover has

decreased and it increases again in 2011. In 2011 Olympic Industries Limiteds TA

Turnover Ratio was different from 2010s which was 1.8 times but similar to 2.1 times in

2011. Therefore, the company is maintaining a pretty stable TA turnover Ratio.

TA Turnover Ratio (Cross Sectional Analysis): For Quasem Drycells Ltd, TA Turnover

has decreased from 2009 to 2011. Therefore, Quasem needs to work more efficiently on

TA Turnover. Olympic here is in a better position.

FA Turnover Ratio (Time Series Analysis): From 2009 to 2010 FA Turnover has also

decreased and it increases again in 2011. In 2011 Olympic Industries Limiteds FA

Turnover Ratio was 5.02 times which is better than 4.40 times in 2010. So company is

working efficiently on FA Turnover.

FA Turnover Ratio (Cross Sectional Analysis): For Quasem Drycells FA Turnover has

decreased from 2009 to 2011. But Olympic Industries FA turnover has decreased by a

smaller amount than Quasem Drycells Limited in the first 2 years. So in this case

Olympic Industries Limited is in a better position than Quasem Drycells Limited.

Market Ratios:

25

P/E Ratio (Time Series Analysis): P/E Ratio has significantly increased from 2009 to 2011.

It indicates EPS is decreasing and we can notice this in EPS change. The higher the P/E

Ratio, the lower the EPS and it means that investors are paying more to earn one taka. In

2011 the shareholders of Olympic Industries Limited were willing to pay 25.80 taka for every

taka of reported earnings. As there is a significant increase in 2011, so it can be said that this

company is doing poor in managing P/E in recent year. However, a higher P/E ratio indicates

a good perception of the company in the market.

P/E Ratio (Cross Sectional Analysis): In Quasem Drycells Limited P/E Ratio has also

increased from 2009 to 2011. It means that investors are paying more to earn one taka, which

is not good for the investors. However, a high P/E Ratio indicates that the company has a

very good perception in the market and has potential to do good in the future. When

compared to Olympic, Quasem constantly has a higher P/E Ratio which makes Quasems

stock more costly. However, Quasem has potential.

M/B Ratio (Time Series Analysis): M/B Ratio of Olympic Industries Limited has increased

by a huge number from 2009 to 2011. In 2011 Olympic Industries market value per share

was 8.91 times more than book value per share. As the M/B Ratio has increased, performance

has improved over the three years.

M/B Ratio (Cross Sectional Analysis): In Quasem Drycells Limited M/B ratio has

increased a lot from 2009 to 2010 but decreased a little in 2011. In 2011 Quasem Drycells

Limited market value per share was 2.59 times more than book value per share which is less

than Olympic Industries Limited. Therefore, Olympic Industries Ltds performance is better.

26

8.Recommendations:

Olympic needs to improve its profitability. It needs to maintain either a stable Net, Operating

and Gross profit Margin or take some initiatives to increase them. Although the margins are very

high, if they continue to decrease over the coming years than the profitability of the company

would be affected. Olympic may also want to maintain a stable EPS.

Olympic can improve its liquidity position by increasing the Average Payment Period and

decreasing the Average Collection Period so that it does not have a shortage of cash to pay its

dues.

Olympic Industries Limited is such a large company that a few unsatisfactory ratio results may

seem negligible. However, if olympic is to continue to being successful financially, it must take

some strong steps to better itself to gain a competitive edge over all its competitors.

9.Conclusion:

After doing a thorough analysis on the performance of Olympic Industries Limited, I found

the overall financial scenario of the company over a period of time. I understand how the

company has operated in the recent years. With the help of cross sectional analysis I easily

compared the performance of Olympic Industries Limited with Quasem Drycells Limited. In

most of the cases Olympic Industries Limited is performing better than Quasem Drycells

Limited. In some cases the competitor Quasem Drycells Limited is doing better. But overall

Olympic Industries Limited is in a better position in the market than its competitor Quasem

Drycells Ltd as it is a much bigger company.

27

10.References:

1. Gitman, J(2009). Principles of Managerial Finance. 12th Edition. Pearson International

Edition.

2. Investopedia. (n.d). Retrieved July 2012, from www.investopedia.com

3. Dhaka Stock Exchange. (n.d). Retrieved August 2012, from www.dsebd.org

4. Olympic Industries Ltd. (n.d). Retrieved from www.olympicbd.com

5. Quasem Drycells Ltd. (n.d). Retrieved from www.quasemdrycells.com

28

11.Appendix

11.1.Appendix A: Liquidity Ratios

Current Ratio:

1. Current Ratio = Current Assets/Current Liabilities

Current Assets

Current

Company

Olympic Industries

Quasem Drycells

Olympic Industries

2009

541403007

350532568

490101413

2010

797331808

376550056

651071767

2011

1076067327

457861411

862244637

29

Liabilities

Current Ratio

Quasem Drycells

Olympic Industries

Quasem Drycells

331562467

1.10

1.05

366864899

1.22

1.03

408510059

1.24

1.12

Quick Ratio:

2. Acid-Test Ratio (Quick Ratio) = (Current Assets-Ending Inventories)/Current

Liabilities

Company

Current Assets

Olympic Industries

2009

2010

541403007

797331808

2011

1076067327

Quasem Drycells

350532568

376550056

457861411

Ending

Olympic Industries

197078067

245123706

349721212

Inventories

Quasem Drycells

185830294

221552994

256192433

Current Liabilities

651071767

862244637

Quasem Drycells

331562467

366864899

408510059

Acid-Test Ratio

Olympic Industries

0.70

0.85

0.84

(Quick Ratio)

Quasem Drycells

0.50

0.42

0.49

Net Profit Margin:

1.Net Profit Margin=(Net Profit * 100) / Sales

Company

Net Profit

Sales

Net Profit Margin

2010

2011

Olympic Industries

2009

128805888

191170188

256212992

Quasem Drycells

28005087

40215241

47132022

Olympic Industries

2099562491

2457753100

3885101824

Quasem Drycells

969204292

935094525

1152265740

Olympic Industries

6.1%

7.8%

6.6%

Quasem Drycells

2.89%

4.3%

4.09%

30

2. Operating Profit Margin = (Operating Profit * 100) / Sales

Operating Profit

Sales

Operating Profit

Margin

Company

2009

2010

2011

Olympic Industries

223942114

305234167

392222519

Quasem Drycells

33319662

51661673

66467217

Olympic Industries

2099562491

2457753100

3885101824

Quasem Drycells

969204292

935094525

1152265740

Olympic Industries

10.6%

12.4%

10.1%

Quasem Drycells

3.44%

5.52%

5.77%

3. Gross Profit Margin = (Gross profit * 100) / Sales

Gross profit

Sales

Gross Profit Margin

Company

2009

2010

2011

Olympic Industries

519134198

698105020

971639077

Quasem Drycells

171814068

175361149

218591175

Olympic Industries

2099562491

2457753100

3885101824

Quasem Drycells

969204292

935094525

1152265740

Olympic Industries

24.7%

28.4%

25.0%

Quasem Drycells

17.7%

18.75%

18.97%

ROA:

31

Common Stock Holders

TA

Return on Assets

(ROA)

Company

2009

2010

2011

Olympic Industries

128805888

191170188

256212992

Quasem Drycells

28005087

40215241

47132022

Olympic Industries

996283282

1361913744

1850322260

Quasem Drycells

850897245

12.9%

885904358

2173267379

14.0%

13.8%

Olympic Industries

Quasem Drycells

3.29%

4.54%

2.17%

ROCE:

5. ROCE = EBIT * 100 / (FA + CA CL)

EBIT

(FA + CA CL)

ROCE

Company

2009

2010

2011

Olympic Industries

223942114

305234167

392222519

Quasem Drycells

33319662

51661673

66467217

Olympic Industries

506181869

710841977

988077623

Quasem Drycells

Olympic Industries

327231454

44.2%

372967501

43.0%

1234734011

39.7%

Quasem Drycells

10.2%

13.9%

5.38%

ROE:

32

Common Stock Holders

Stockholders Equity

ROE

Company

2009

2010

2011

Olympic Industries

128805888

191170188

256212992

Quasem Drycells

28005087

40215241

47132022

Olympic Industries

354371670

526193378

743408956

Quasem Drycells

499920955

509194782

1760890305

Olympic Industries

36.3%

36.3%

34.5%

Quasem Drycells

5.60%

7.90%

2.68%

EPS:

7. EPS = Earnings Available for Common Stock Holders / Number of Common Stock

Outstanding

Common Stock Holders

Number of Common Stock

Outstanding

Company

Olympic Industries

2009

128805888

2010

191170188

2011

256212992

Quasem Drycells

28005087

40215241

47132022

Olympic Industries

2478278

2478278

3639186

Quasem Drycells

18000000

18000000

77.1

23040000

70.4

Olympic Industries

52 Tk/Share

Tk/Share

Tk

Tk/Share

Tk.

2.23 /share

2.05/share

Tk.

Earnings Per Share

Quasem Drycells

1.56/share

Debt Ratio:

33

Total Liability

Total Assets

Debt to Total Assets Ratio

Company

2009

2010

2011

Olympic Industries

641911612

835720366

1106913304

Quasem Drycells

350976290

376709576

412377074

Olympic Industries

996283282

1361913744

1850322260

Quasem Drycells

850897245

885904358

2173267379

Olympic Industries

64.4%

61.4%

59.8%

Quasem Drycells

41.2%

42.5%

18.97%

2. Times Interest Earned = Income before Income Tax and Interest Expense/Interest

Expense

Company

2009

Olympic Industries

223942114

Interest Expense

Quasem Drycells

Olympic Industries

33319662

51661673

66467217

44266202

38148952

50104075

Quasem Drycells

35660810

32570755

39752203

Olympic Industries

5.06 times

8.00 times

7.83 times

Quasem Drycells

0.93 times

1.59 times

1.67 times

Interest Expense

Times Interest Earned

2010

305234167

2011

392222519

Debt/Equity Ratio:

3. Debt/Equity Ratio = Long-term loan * 100 / Stockholders equity

Company

2009

2010

2011

Olympic Industries

34469803

62686050

132135699

Long-term loan

Quasem Drycells

Stockholders equity Olympic Industries

17622997

354371670

8377075

526193378

1374669

743408956

34

Quasem Drycells

499920955

509194782

1760890305

Olympic Industries

9.72%

11.9%

17.8%

Quasem Drycells

3.52%

1.66%

Debt/Equity Ratio

0.08%

Inventory Turn Over:

1. Inventory (Stock) Turn over= COGS / Av. Inventories

COGS

Average Inventories

Inventory Turnover

Company

2009

2010

2011

Olympic Industries

1580428293

1759648080

2913462747

Quasem Drycells

797390224

759733376

933674565

Olympic Industries

188201991

221100886.5

297422459

Quasem Drycells

174411889.5

203691644

238872713

Olympic Industries

8.4 times

8.0 times

9.8 times

Quasem Drycells

4.58 times

3.73 times

3.14 times

2. Average age of Inventory or Stockholding Period= 365 / Inventory turnover

365

Inventory turnover

Company

2009

2010

2011

Olympic Industries

365

365

365

Quasem Drycells

365

365

365

Olympic Industries

8.4 times

8.0 times

9.8 times

35

Average Age Of

Inventory

Quasem Drycells

4.29 times

3.43 times

3.64 times

Olympic Industries

44 days

46 days

37 days

Quasem Drycells

85 days

106 days

100 days

3. Average Collection Period= (Accounts Receivables * 365) / Sales

Accounts Receivables

Company

2009

2010

2011

Olympic Industries

35110821

13543286

24167168

Quasem Drycells

31272784

24161564

28334623

Sales

Average Collection Period

Quasem Drycells

969204292

935094525

1152265740

Olympic Industries

6 days

2 days

2 days

Quasem Drycells

12 days

9 days

9 days

4. Average Payment Period = (Accounts Payables * 365) / Purchases

Accounts Payables

Company

2009

2010

2011

Olympic Industries

135499592

190215522

274749064

Quasem Drycells

48986430

49430550

54599246

36

Purchases

Average Payment Period

Olympic Industries

1598180445

1807693719 3018060253

Quasem Drycells

Olympic Industries

448566445

31 days

352350088

38 days

455929139

33 days

Quasem Drycells

40 days

51 days

44 days

TA Turnover Ratio:

5. TA Turnover Ratio = Sales / TA

Sales

TA

TA Turnover Ratio

Company

2009

2010

2011

Olympic Industries

2099562491

2457753100

3885101824

Quasem Drycells

969204292

935094525

1152265740

Olympic Industries

996283282

1361913744

1850322260

Quasem Drycells

850897245

885904358

2173267379

Olympic Industries

2.10 times

1.80 times

2.10 times

Quasem Drycells

1.13 times

1.06 times

0.53 times

FA Turnover Ratio:

6. FA Turnover Ratio = Sales / Net FA

Sales

Net FA

FA Turnover Ratio

Company

2009

2010

2011

Olympic Industries

2099562491

2457753100

3885101824

Quasem Drycells

969204292

935094525

1152265740

Olympic Industries

454880275

564581936

774254933

Quasem Drycells

308261353

363282344

1185382659

Olympic Industries

4.62 times

4.40 times

5.02 times

Quasem Drycells

3.14 times

2.57 times

0.97 times

37

P/E Ratio:

(P/E) Ratio= Market price per share of common stock/ EPS

Company

Olympic Industries

2009

631.65

2010

1816

2011

1818

Quasem Drycells

Tk/Share

68

Tk/share

105.50

Tk/Share

198

common stock

Tk/Share

52

Olympic Industries

Tk/Share

Tk.

EPS

P/E Ratio

M/B Ratio:

Quasem Drycells

Olympic Industries

Quasem Drycells

1.56/share

12.1

43.6

Tk/Share

77.1

Tk/Share

70.4

Tk/Share

Tk 2.23

Tk/Share

Tk.

/share

2.05/share

23.6

47.3

25.8

96.6

Market / Book Ratio = Market price per share of common stock / Book value per share

Company

2009

631.65

2010

1816

2011

1818

Olympic Industries

Tk/Share

Tk/share

105.50

Tk/Share

198

Quasem Drycells

68 Tk/Share

Tk/Share

212

Tk/Share

204

Olympic Industries

143 Tk/Share

83.3

Tk/Share

28.3

Tk/Share

76.4

Quasem Drycells

Olympic Industries

Quasem Drycells

Tk/Share

4.41

0.82

Tk/Share

8.56

3.72

Tk/Share

8.91

2.59

common stock

Market / Book Ratio

38

Total Asset Turnover

ROA

Company

2009

2010

2011

Olympic Industries

6.1%

7.8%

6.6%

Quasem Drycells

2.89%

4.3%

4.09%

Olympic Industries

2.10 times

1.80 times

2.10 times

Quasem Drycells

Olympic Industries

1.13 times

12.81%

Quasem Drycells

3.26%

1.06 times

14.04%

4.6%

0.53 times

13.86%

2.17%

Total Assets

Stock holders Equity

FLM

ROA

ROE

Company

2009

2010

2011

Olympic Industries

996283282

1361913744

1850322260

Quasem Drycells

850897245

885904358

2173267379

Olympic Industries

354371670

526193378

743408956

Quasem Drycells

499920955

509194782

1760890305

Olympic Industries

2.81

2.60

2.50

Quasem Drycells

Olympic Industries

1.70

12.81%

1.73

14.04%

1.23

13.86%

Quasem Drycells

3.26%

4.6%

2.17%

Olympic Industries

36.0%

36.5%

34.7%

Quasem Drycells

5.54%

7.95%

2.67%

39

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