Você está na página 1de 39

FIN 254

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 Ltd


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.

I have a lack of experience in interpreting and analyzing financial statements.

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

B. Debt To Equity Ratio :


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

Debt Equity Ratio =Longterm

loan100
Stockholders Equity

C. Times Interest Earned Ratio:


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

Time Interest Earned Ratio:

EBIT
Interest

3. Profitability Ratios: the different measures of corporate profitability and financial


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 Margin :

Gross profit
100
Revenue

B. Operating Profit Margin:


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 Margin :

Operating profit
100
Revenue

C. Net Profit Margin:


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 Margin :

Net profit
100
Revenue

D. Earnings Per Share (EPS):


EPS represents the number of currency amount earned on behalf of each outstanding
share of common stock
Formula

EPS=

Earnings available for Common Stock


Number of CommonStock Outstanding

Note: Earnings per share is generally considered to be the single


most important variable in determining a share's price. It is also a major
component used to calculate the price-to-earnings valuation ratio

E. Return On Total Assets (ROA):

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=

Earnings available for Common Stock


100
Total Assets

11

F. Return On Common Equity(ROE):

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=

Earnings available for Common Stock


100
Stock Holder s Equity

G. Return On Capital Employed(ROCE):


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

B. Average Age Of Inventory:


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

Average Age Of Inventory =

Av . Inventory
365
COGS

C. Average Collection Period:


The average collection period is arrived comparing accounts receivables to the
average daily sales. Expressed in days, the smaller the better.
Formula

Average Collection Period=

Accounts Recievables
Av . Sales Per Day

D. Average Payment Period:


The average payment period is arrived comparing accounts payables to the average
daily purchases. Expressed in days, the greater the better.
Formula

Average Payment Period=

Accounts Payables
Av . Purchases Per Day

E. Total Asset Turnover Ratio:

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

Total Asset Turnover Ratio=

Revenue
Total assets

Note: Asset turnover measures a firm's efficiency at using its assets in


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 =

Market Price Per ShareOf Common Stock


EPS

B. Market/ Book (M/B) Ratio:

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=

Market Price Per Share Of Common Stock


Book Value Per Share Of Common Stock

Where

Book Value Per Share Of Common Stock=

Common Stock Equity


Number Of Common StocksOutstanding

15

DuPont System Of Analysis:


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=

Earnings Available for Common Stock holders


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.

Current Ratio (Cross Sectional Analysis): In Quasem Drycells Limited, there is a


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

initiatives to increase the return on asset in the coming years.


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.

Inventory Turnover (Cross Sectional Analysis): In Quasem Drycells Limited there is a


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

Average age of Inventory (Time Series Analysis): Average age of Inventory is


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.

Average collection period (Cross Sectional Analysis): Average collection period of


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

Average payment period (Cross Sectional Analysis):

Quasem Drycells Limited has

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:

For Olympic Industries Ltd:

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

Olympic Industries 490101413


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

11.2.Appendix B: Profitability Ratios


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

Operating Profit Margin:


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%

Gross Profit Margin:


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

4. ROA=(Earnings Available for Common Stock Holders * 100) / TA

Earnings Available for


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

6. ROE= (Earnings Available for Common Stock Holders *100)/Stockholders Equity

Earnings Available for


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

Earnings Available for


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

11.3.Appendix C: Leverage Ratios


Debt Ratio:
33

1. Debt Ratio = (Total Liability * 100) / Total Assets

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%

Times Interest Earned:


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

2009

Income Before Tax and

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%

11.4.Appendix D: Activity Ratios


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

Average Age Of Inventory:


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

Average Collection Period:


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

Accounts Receivables

Company

2009

2010

2011

Olympic Industries

35110821

13543286

24167168

Quasem Drycells

31272784

24161564

28334623

Olympic Industries 2099562491 2457753100 3885101824


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

Average payment Period:


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

11.5.Appendix E: Market Ratios


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

Market price per share of

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

Market price per share of


common stock

Book value per share


Market / Book Ratio

38

11.6.Appendix F: Dupont Formulae

DuPont Formula : ROA= Net Profit Margin*Total Asset Turnover

Net Profit Margin


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%

Modified DuPont Formula: ROE= FLM * ROA

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