Purno Ibrahim
-
Upload
mohammad-ibrahim -
Category
Documents
-
view
223 -
download
0
Transcript of Purno Ibrahim
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 1/22
North South UniversityReport for Accounting 201
Title:
Intra-Company and Inter-Company Ratio Analyses of Navana CNG and Aftab
Automobiles
Submitted to:
Mr. Sabbir Mubin
Course Instructor
ACT 201
Submitted by:
Sharmin Khan 102 0320 030
Fayaz Bin Amin 102 0045 030
Mohammad Ibrahim 102 0486 030
Faria Rashid Chowdhury 102 0320 030
Section: 6
Date: 11th
April, 2011
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 2/22
Dated: April 11th, 2011
Mr. Riyashad Ahmed (RyA)
Faculty
School of Business,
North South University, Bangladesh.
Baridhara, Dhaka.
Subject: Submission of Group Project Report
Dear Sir,
We were advised to prepare a report on the Financial Performance of Navana CNG and Aftab
Automobiles. As were advised, we have successfully completed the report. It gives us immense
pleasure to tell you that working on this report has given us a wide range of exposure. To prepare
this report, we have to make intensive analyses of the company’s financial performance in last 3
years. We applied all our knowledge gathered in this course to judge and evaluate the financial
condition of the company. This report basically gives an overview the company’s performance
on the basis of 13 major financial ratios. We also had to make recommendation as to how the
company can improve its performance and whether the company would be a good investment for
the stockholders. As this was an actual company project, research was done on an extensive
basis.
It will be a great honor for us if you require us to explain any sort of queries.
Yours Sincerely,
Sharmin Khan 102 0320 030
Fayaz Bin Amin 102 0045 030
Mohammad Ibrahim 102 0486 030
Faria Rashid Chowdhury 102 0320 030
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 3/22
Ratio analysis:
Ratio Analysis expresses the relationship among selected items of financial report. It expressesthe mathematical relationship between one quantity and another. The relationship is expressed in
terms of a percentage, a rate or a simple proportion.
Liquidity ratios:
Liquidity Ratios measure the short-term ability of the company to pay its maturing obligations
and to meet unexpected needs for cash.
Navana CNG Aftab Automobiles
Year 2010 2009 2010 2009
CurrentRatio
4.19:1 2.38:1 32.66:1 1.33:1
Acid Test
Ratio0.14:1 0.25:1 1.43:1 0.52:1
Receivables
Turnover
63.07 times 24.82 times 3.39 times 2.55 times
InventoryTurnover
1.16 times 1.07 times 2.28 times 2.54 times
Calculation are Shown in Appendix
C urrent ratio:
It is a widely used ratio to evaluate a company’s liquidity and short-term debt-paying ability. Its
formula is given below-
Current Ratio=
Navana CNG:
In the year 2010, the company’s Current Assets were 4.19 times higher than its Current
Liabilities. The ratio increased from 2009 where the ratio was 2.38:1. That means Navana CNG
increased their current assets from 2009.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 4/22
Aftab Automobiles:
In the year 2010, the company’s Current Assets were 32.66 times higher than its Current
Liabilities. The ration increased from 2009 where the ratio was 1.33:1. That means Aftab
Automobiles increased their current assets from 2009.
Inter-Company Analysis:
Aftab Automobiles’ current ratio is better than Navana CNG. And Aftab Automobiles’ increase
in current assets were more that that of Navana CNG.
Acid test :
The Acid-Test Ratio is a measure of a company’s immediate short-term liquidity. Its formula is
given below-
Quick Ratio or, Acid test Ratio=
Navana CNG:
In the year 2010, the company’s current assets including receivables were 0.14 times of its
current liabilities. The ratio decreased from 2009 where it was 0.25:1. That means the company
lost its liquidity in last year.Aftab Automobiles:
In the year 2010, the company’s current assets including receivables were 1.43 times of its
current liabilities. The ratio decreased from 2009 where it was 0.52:1. That means the company
lost its liquidity in last year.
Inter-Company Analysis:
Aftab Automobiles’ Acid-test Ratio is better than that of Navana CNG. It means Aftab
Automobiles have more liquid asset than Navana CNG to pay the liabilities.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 5/22
Receivable turnover:
Liquidity may be measured how quickly certain assets can be converted to cash. The ratio used
to assess the liquidity of the receivables is receivables turnover. It measures the number of timeson average receivables are collected during the period. Its formula is given below-
Receivables Turnover =
Navana CNG:
In the year 2010, the company collected its receivables 63 times in the whole year. The ratio
increased from 2009 (24.82 times) which means the company got its sales got cashed more than
last year.
Aftab Automobiles:
In the year 2010, the company collected its receivables 3.39 times in the whole year. The ratio
increased from 2009 (2.55 times) which means the company got its sales got cashed more than
last year.
Inter-Company Analysis:
Both of the companies Receivables Turnover increased from last year but in Aftab Automobiles’
case the increase was not significant.
I nventory Turnover: Inventory turnover measures the number of times on average the
inventory is sold during the period. Its purpose is to measure the liquidity of the inventory. Its
formula is given below-
Inventory Turnover =
Navana CNG:
In the year 2010, the company has sold out its inventories 1.16 times. This ratio decreased from
last year (1.07 times) that means the company had less sale of its inventories than last year.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 6/22
Aftab Automobiles:
In the year 2010, the company has sold out its inventories 2.28 times. This ratio decreased from
last year (2.54 times) that means the company had less sale of its inventories than last year.
Inter-Company Analysis:
In 2010, Aftab Automobiles’ sold and restocked its inventories more than Navana CNG and the
difference margin is significant.
Profitability Ratios:
Profitability ratios measure income or operating success of an enterprise for a given period of
time. Income, or the lack of it, affects the company’s ability to obtain debt and equity financing.
It also affects the company’s liquidity position and the company’s ability to grow.
Navana CNG Aftab Automobiles
Year 2010 2009 2010 2009
Profit Margin 53% 45% 29.7% 14.9%
Total Asset
Turnover0.46 times 0.55 times 0.71 times 0.91 times
Return on
Assets24.9% 25% 10.5% 13.5%
Return on
Common
Stockholders’Equity
37.6% 48.45% 33.7% 41.5%
EPS 8.01 6.74 29.1 136.49
P/E Ratio 1.23 1.48 1.63 11.64
Payout Ratio 33.44% 25.75% 16.7% 0.90%
Calculation are Shown in Appendix
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 7/22
Profit margin:
Profit margin is a measure of percentage of each dollar of sales that results in net income. Its
formula is given below-
Profit Margin Ratio =
Navana CNG:
In the year 2010, the company earned Net Profit of Tk 53 for every Tk 100 worth of Sales. This
ratio has increased from last year (45%). Which means the company managed to make more
profit out of its sales and reduced cost related to sales.
Aftab Automobiles:
In the year 2010, the company earned Net Profit of Tk 29.7 for every Tk 100 worth of Sales.
This ratio has increased from last year (14.9%). Which means the company managed to make
more profit out of its sales and reduced cost related to sales.
Intra-Company Analysis:
Navana CNG gained more profits from Aftab Automobiles from sales in 2010. And the amount
is significant.
Asset Turnover:
Assets Turnover is a measure of a company’s sales over every one Taka of Total Assets. The
formula for Asset Turnover is given below:
Total asset turnover Ratio=
Navana CNG:
In the year 2010, Navana CNG 1TK of Asset managed to generate 0.46 TK of sales. The ratio
decreased from last year (0.55 Times). Which means the company’s Assets lost efficiency in last
one year.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 8/22
Aftab Automobiles:
In the year 2010, Navana CNG 1TK of Asset managed to generate 0.71 TK of sales. The ratio
decreased from last year (0.91 Times). Which means the company’s Assets lost efficiency in last
one year.
Intra-Company Analysis:
Aftab Automobiles managed to generate more sales from their assets than Navana CNG but the
company does not have a significant advantage over Navana CNG in terms of this ratio.
Return on asset: An overall measure of profitability is return on assets. Its formula is given
below-
ROA =
Navana CNG:
In the year 2010, Every Tk100 worth of assets generated Tk24.90 of Net Profit for the company.
The ratio slightly decreased from last year (25%)
Aftab Automobiles:
In the year 2010, Every Tk100 worth of assets generated Tk10.5 of Net Profit for the company.
The ratio decreased from last year (13.5%)
Intra-Company Analysis:
Navana CNG managed to generate more profit from Assets than Aftab Automobiles and the
amount is significant.
Return on Common Stockholders’ Equity:
This ratio measures the return that the stockholders get from their investment to the company.
The formula of the ratio is-
Return on Common Shareholders’ Equity =
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 9/22
Navana CNG:
In the year 2010, Shareholders earned Tk37.6 out of every Tk100 of investment. The ratio
decreased from last year (48.45%) this means the stockholders got less return from their
investment in last year.
Aftab Automobiles:
In the year 2010, Shareholders earned Tk33.7 out of every Tk100 of investment. The ratio
decreased from last year (41.5%) this means the stockholders got less return from their
investment in last year.
Inter-Company Analysis:
From the ratios above, we can see that Navana CNG’s investors got more profit than those of
Aftab Automobiles, though the difference is not significant.
Earnings per share:
Earnings per share is a measure of net income earned on each share of common stock. A measure
of net income earned on a per share basis provides a useful perspective for determining
profitability. Its formula is given below-
EPS =
Navana CNG:
Common Shareholders of the company earned Tk8.01 for every share they hold. This has
increased by TK1.27 from last year and the change is not drastic.
Aftab Automobiles:
Common Shareholders of the company earned Tk29.1 for every share they hold. This has
decreased by TK107 from last year and the change is drastic.
Inter-Company Analysis:
Navana CNG was far better than Aftab Automobiles in terms of providing profit to their
shareholders.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 10/22
Price earnings ratio:
The price earnings ratio is an oft-quoted measure of the ratio of the market price of each share of
common stock to the earnings per share. Its formula is given below-
P/ E Ratio =
Navana CNG:
Company’s shareholders were willing to pay Tk1.23 for each Taka of reported earnings. This
ratio has decreased slightly from last year. Due to a little change in share price the ratio also
changed a little.
Aftab Automobiles:
Company’s shareholders were willing to pay Tk1.63 for each Taka of reported earnings. This
ratio has decreased drastically from last year. Due to a drastic change in share price the ratio also
changed drastically.
Payout ratio:
The payout ratio measures the percentage of earnings distributed in the form of cash dividends.
Its formula is given below-
Payout Ratio =
Navana CNG:
The company paid 37.44% of dividends from its net income. This ratio has increased from last
year (25.75%)
Aftab Automobiles:
The company paid 16.7% of dividends from its net income. This ratio has increased drastically
from last year (0.90%)
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 11/22
Solvency ratios:
Solvency ratios measure the ability of the company to survive over a long period of time. There
are several ratios under solvency ratios-
Navana CNG Aftab Automobiles
Year 2010 2009 2010 2009
Debt to Asset
Ratio25.69% 43% 23.3% 63%
Time Interest
Earned13.79 times 3.95 times 3.87times 1.71 times
Calculation are Shown in Appendix
Debt to total assets ratio:
The debt to total assets ratio measures the percentage of the total assets provided by creditors. Its
formula is given below-
Debt to Asset Ratio=
Navana CNG:
In the year, 2010, company’s 25.69% of the total assets were financed by the creditors. The
amount decreased from last year (43%)
Aftab Automobiles:
In the year, 2010, company’s 23.3% of the total assets were financed by the creditors. The
amount decreased from last year (63%)
Inter-Company Analysis:
Both of the company have had almost same amount of debt in their assets in 2010.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 12/22
]Times interest earned:
Times interest earned provides an indication of the company’s ability to meet interest payments
as they come due. This represents the amount available to cover interest. Its formula is given
below-
TIE Ratio =
Navana CNG:
In the year 2010, EBIT was 13.79 times higher than Interest Expense. The ratio increased from
last year (3.93times)
Aftab Automobiles:
In the year 2010, EBIT was 3.87 times higher than Interest Expense. The ratio increased from
last year (1.71times)
Inter-Company Analysis:
The above information refers that Navana CNG has more income than Aftab Automobiles to pay
their interest from debts.
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 13/22
Appendix:
Ratio Analyses of Navana CNG for 2010:
Liquidity Ratio:
I. Current Ratio=
=
= 4.19: 1
II. Quick Ratio or, Acid test Ratio=
=
= 0.14: 1
III. Receivables Turnover =
=
= 63.07 Times
IV.
Inventory Turnover =
=
= 1.16 times
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 14/22
Profitability Ratio:
I. Profit Margin Ratio =
=
= 53%
II. Total asset turnover Ratio=
=
= 0.46 times
III. ROA =
=
= 24.9%
IV. Return on Common Shareholders’ Equity =
=
= 37.6%
V. EPS =
=
= 8.01
VI. P/ E Ratio =
=
= 1.23
VII. Payout Ratio =
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 15/22
=
= 37.44%
Solvency Ratio:
I. Debt to Asset Ratio=
=
= 25.6%
II. TIE Ratio =
=
= 13.79 Times
Ratio Analyses of Navana CNG for 2009:
Liquidity Ratio:
V. Current Ratio=
=
= 2.38: 1
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 16/22
VI. Quick Ratio or, Acid test Ratio=
=
= 0.25: 1
VII. Receivables Turnover =
=
= 24.82 Times
VIII. Inventory Turnover =
=
= 1.07 times
Profitability Ratio:
VIII. Profit Margin Ratio =
=
= 45%
IX. Total asset turnover Ratio=
=
= 0.55 times
X. ROA =
=
= 25%
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 17/22
XI. Return on Common Shareholders’ Equity =
=
= 48.45%
XII. EPS =
=
= 6.74
XIII. P/ E Ratio =
=
= 1.48
XIV. Payout Ratio =
=
= 25.75%
Solvency Ratio:
I. Debt to Asset Ratio=
=
= 43 %
II. TIE Ratio =
=
= 3.95 Times
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 18/22
Ratio Analyses of Aftab Automobiles for 2010:
Liquidity Ratio:
I. Current Ratio=
=
= 32.66: 1
II. Quick Ratio or, Acid test Ratio=
=
= 1.43: 1
III. Receivables Turnover =
=
= 3.39 Times
IV. Inventory Turnover =
=
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 19/22
= 2.28 times
Profitability Ratio:
I. Profit Margin Ratio =
=
= 29.7%
II. Total asset turnover Ratio=
=
= 0.71 times
III. ROA =
=
= 10.5%
IV. Return on Common Shareholders’ Equity =
=
= 33.7%
V. EPS =
=
= 299.10
VI. P/ E Ratio =
=
= 1.63
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 20/22
VII. Payout Ratio =
=
= 16.7%
Solvency Ratio:
I. Debt to Asset Ratio=
=
= 23.3 %
II. TIE Ratio =
=
= 3.87 Times
Ratio Analyses of Aftab Automobiles for 2009:
Liquidity Ratio:
V. Current Ratio=
=
= 1.33: 1
VI. Quick Ratio or, Acid test Ratio=
=
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 21/22
= 0.52: 1
VII. Receivables Turnover =
=
= 2.55 Times
VIII. Inventory Turnover =
=
= 2.54 times
Profitability Ratio:
VIII. Profit Margin Ratio =
=
= 14.9%
IX. Total asset turnover Ratio=
=
= 0.91 times
X. ROA =
=
= 13.5%
XI. Return on Common Shareholders’ Equity =
=
8/3/2019 Purno Ibrahim
http://slidepdf.com/reader/full/purno-ibrahim 22/22
= 41.5%
XII. EPS =
=
= 136.49
XIII. P/ E Ratio =
=
= 11.64
XIV.
Payout Ratio =
=
= 0.90%
Solvency Ratio:
III. Debt to Asset Ratio=
=
= 63 %
IV. TIE Ratio =
=
= 1.71 Times