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Executive Summary

BOC is the leading oxygen production company in Bangladesh. BOC is competing with
many others such as MJL Bangladesh Limited, Summit Power, DESCO and Khulna Power to
hold the leading position in the sector. By doing this report on BOC we have tried to have a
deeper look on the financial performance of the company and we have tried to apply our
theoretical knowledge in the practical life. In this report we have done ratio calculation, ratio
analysis , calculation of risk and return, stock valuation, finding the dividend policy and
weighted average cost of capital . By doing all of those things we have tried to evaluate the
financial performance of the company.
First of all we have calculated ratios and we have analyzed those ratios to comment on the
performance of company. By analyzing the ratios we have also tried to find the weak side of the
company and we have recommended the company to overcome them Secondly we have found
the risk and return of the company to compare it with the market. By doing

it we have

determined that the company is less riskier than market. In the next step we have evaluated the
stock price of the company which indicates that the stock price of the company is over-valued.
we have also found the optimum weighted average cost of capital of the company which from
our analysis indicates the best ultimate mixture of debt and equity for the company. Last but not
the least we have found that the company is following the second view of dividend policy.
In conclusion we can say that by doing this report we have understood the basic jobs of a
financial manager. This report will help us to make practical financial decisions in our future life.

BOC Bangladesh Limited


Vertical Balance Sheet

2010

2009

2008

2007

2006

Assets:
Non-current assets:
Property, plant and equipment
Intangible assets
Investment in subsidiary
Total non-current assets
Current assets:
Inventories
Trade debtors
Advances, deposits and prepayments
Cash and cash equivalents
Total current assets
Total assets
Equity and Liabilities:
Shareholders equity:
Share capital
Revaluation reserve
General reserve
Total equity
Non-current liabilities:
Employee benefits
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Current liabilities:
Current Portion of Financial Lease
Trade creditors
Expense creditors and accruals
Sundry creditors
Provision for taxation
Total current liabilities
Total liabilities
Total equity and liabilities

37.24% 35.681800%
35.41%
50.05%
58.665%
0.17009%
0.227%
0.244% 0.169872%
0.055%
0.00078%
0.00078% 0.0009199% 0.0009969% 0.001079%
37.420%
35.91%
44.46%
50.2213% 58.7213%
12.9008%
7.1415%
4.1985%
38.34%
62.58%
100%

10.7864%
5.9709%
4.14376%
43.189%
64.09%
100%

24.90%
6.53%
4.12%
19.99%
55.54%
100%

19.27%
17.33%
5.76%
7.704%
4.51%
3.87%
20.234%
12.370%
49.7787% 41.27870%
100%
100%

5.43%
0.72%
64.97%
71.12%

5.88%
0.78%
64.43%
71.10%

7.00%
2.12%
60.37%
69.50%

7.59%
8.2120%
2.25% 2.49207%
59.61% 56.73506%
69.50% 67.43942%

4.08%
2.31%
5.91%
12.31%

3.15%
2.74%
6.41%
12.31%

10.32%
4.15%
0.00%
14.47%

0.11%
11.11%
5.38%
16.60%

2.19%
7.38%
1.97%
5.00%
16.47%
28.88%
100%

1.89%
6.74%
2.90%
5.01%
16.59%
28.90%
100%

0.1027%
2.0970%
7.42%
2.49%
3.916%
30.50%
100%

0.156%
10.8676%
5.97%
16.9936%

0.03% 0.065835%
1.21% 2.24762%
6.70% 5.40166%
2.73% 2.68456%
3.22% 5.16476%
13.90% 15.56440%
30.50% 32.56058%
100%
100%
2

BOC Bangladesh Limited


Vertical Income Statement
2010

2009

2008

2007

2006

100%

100%

100%

100%

100%

-58.06%

-59.54%

-66.61%

-65.59%

-66.05%

Gross profit margin

41.94%

40.46%

33.39%

34.41%

33.95%

Operating expenses

-16.26%

-18.41

-16.54%

-17.65%

-20.16%

25.68%

22.04

16.85%

16.76%

13.79%

0.07%

0.22%

Revenue
Cost of sales

Operations profit margin


Gain on sale of lease land
Other income

4.01%
0.55%

-0.05

0.04%

2%

2.16%

1.43%

0.67%

0.26%

Profit before taxation

28.23%

28.16%

18.32%

17.50%

14.27%

Taxation

-7.35%

-5.93%

-3.94%

-4.32%

-3.82%

Net profit margin

20.88%

22.23%

14.38%

13.18%

10.45%

Interest income

BOC Bangladesh Limited


Horizontal Balance Sheet

2010

2009

2008

2007

2006

95.99% 84.88% 88.41% 92.36%


466.34% 574.95% 519.67% 333.46%
100%
100%
100%
100%
96.34% 85.34% 88.82% 92.59%

100%
100%
100%
100%

112.58%
140.17%
163.85%
468.57%
366.30%

120.40%
80.99%
125.05%
177.04%
130.55%

100%
100%
100%
100%
100%

151.20% 139.55% 117.32% 108.26%

100%

100%
100%
100%
100%
43.68% 43.68%
100%
100%
173.41% 158.48% 124.84% 113.75%

100%
100%
100%

159.67% 147.11% 120.90% 111.57%

100%

64.21%

111.44% 110.67%
81.59% 97.59%
77.21%

100%
100%
100%

1.10% 101.08%

99.92% 105.77%

100%

183.03% 53.61%
109.48% 58.34%
161.24% 134.35%
108.72% 110.24%
88.95% 67.74%

100%
100%
100%
100%
100%

Assets:
Non-current
assets:
Property, plant and equipment
Intangible assets
Investment in subsidiary
Total non-current assets
Current assets:
Inventories
Trade debtors
Advances, deposits and prepayments
Cash and cash equivalents
Total current assets
Total
assets
Equity and Liabilities:
Shareholders
equity:
Share capital
Revaluation reserve
General reserve
Total
equity
Non-current
liabilities:
Employee
benefits
Deferred
liabilities
Deferred tax liabilities
Finance Lease
Other non-current
liabilities
Total non-current liabilities
Current liabilities:
Current Portion of Financial Lease
Trade creditors
Expense creditors and accruals
Sundry creditors
Provision for taxation
Total current
liabilities
Total
liabilities
Total equity and
liabilities

58.67%

142.52%
206.60%
111.03%
146.38%

86.87%
108.16%
149.25%
487.08%
216.67%

117.52%
175.53%
150.49%
135.41%

168.60%
99.47%
124.79%
189.54%
157.86%

160.01% 148.78% 120.81%

96.67%

100% 4

133.66% 123.88% 109.91% 101.42%

100%

151.20% 139.55% 117.32% 108.26%

100%

BOC Bangladesh Limited


Horizontal Income Statement

2010

2009

2008

2007

2006

Sales

135.05%

116.27%

105.92%

84.79%

100%

Cost Of Goods Sold

119.21%

104.80%

106.81%

84.19%

100%

Gross Profit

167.57%

138.59%

104.19%

80.96%

100%

Operating Expense

109.37%

106.20%

86.89%

74.25%

100%

EBIT

252.67%

185.94%

129.48%

103.09%

100%

31.75%

22.02%

22.38%

46.33%

100%

EBT

268.50%

229.65%

136.06%

104.08%

100%

Tax

260.82%

180.48%

109.12%

95.94%

100%

Net Income

279.13%

247.66%

145.92%

107.07%

100%

Interest Expense

BOC Bangladesh Limited


Pro forma balance sheet (% of Sales Method)
As at December 31, 2011
Fixed Asset

1,137,280,634

Current Asset

1,902,240,868

Total Asset

3,039,521,502

Equity and Liabilities


Share capital
Revaluation reserve (3470493237*0.6305%)

152,183,000
21,881,460

General reserve

7,436,411,822

Total Equity

7,610,476,282

Total non-current liabilities

344,977,000

Total Current Liabilities

488,602,928

Total liabilities

833,579,928

Proposed Dividend
Total equity and liabilities

(5,404,534,708)
3,039,521,502

BOC Bangladesh Limited


Pro Forma Income statement (% of Sales Method)
For the year ended Dec 31, 2011
2011
Revenue

(3199375000

3470493237

(1.084741)
Cost of turnover

347049323758%

Gross Profit

2012886077
1457607160

Operating Expenses:
Operating Expenses

347049323716.26%

Operating profit

(564302200)
893304960

Profit before other income

34704932375.50%

190877128

Interest income

34704932372%

6940986474

Profit before taxation


Taxation

8025168562
802516856224.021
%

Profit after taxation

(1927725740
)
6097442822

BOC Bangladesh Limited


Pro forma balance sheet (% of Sales Method)
As at December 31, 2012

Fixed Asset

1,306,249,830

Current Asset

2,184,862,501

Total Asset

3,491,112,331

Equity and Liabilities:


Share capital
Revaluation reserve (3986114829*0.6305%)

152,183,000
25,132,454

General reserve

7,780,301,238

Total Equity

7,957,616,692

Total non-current liabilities

344,977,000

Total Current Liabilities

540,532,126

Total liabilities

885,509,126

Proposed Dividend
Total equity and liabilities

(5,352,013,487)
3,491,112,331

BOC Bangladesh Limited


Pro - Forma Income statement BOC Bangladesh Limited
For the year ended Dec 31, 2012

2011
Revenue

(3470493237

3986114829

(1.148573)
Cost of turnover

398611482958%

Gross Profit

2311946601
1674168228

Operating Expenses:
Operating Expenses

398611482916.26%

648142271.
2

Operating profit

1026025957

Profit before other income

17602000

Interest income

63951000

Profit before taxation

1107578957

Taxation

110757895724.021

266051541

%
Profit after taxation

8415274157

Liquidity

2006

2007

2008

2009

2010

Industry
Average

Ratio

(2010)
Current Ratio

2.652
times

Acid Test

1.54 times

3.581

capital

3.86 times

3.80 times

times
2.20 times

Ratio
Net Working

3.47 times

4.0788
times

1.918

3.21 times

3.02 times

times
476515

719857

859097

TK

TK

TK

3.36036
times

1228261

1292137

TK

TK

4596716639
TK

ratio
Cash

87 days

122 days

130 days

72 days

82 days

108 day

4.852

3.39 times

3.07 times

5.85 times

5.138

4.42058 times

Conversio
n Cycle
Asset
Manage
ment
Ratio
Inventory
Turnover
Total

times

Asset 1.27 times

times
.996 times

Turnover
Fixed

Daily

1.06 times

times

Asset 2.168

Turnover

1.149

1.99 times

times

Sales 22 days

2.585

21 day

0.75948 times

times
2.95 times

times
21 day

1.1418

3.0518

6.32456 times

times
21 day

23 day

Outstandi

40.968
day

ng
Average

10 days

7 days

10 days

11 days

12days

42.054 day

Payment
Period
10

Debt

Ratio
Debt Ratio

32.560%

Time Interest 74.113


Earned

30.50%

30.50%

28.90%

28.78%

23.78%

164.884

428 times

625.98

589.88

200.38 times

times

times

times

times

Profitability
Ratio
Gross

Profit 33.945%

34.41%

33.39%

13.786%

16.76%

16.85%

Profit 10.439%

13.18%

40.46%

41.49%

30.04%

25.68%

21.60%

22.24%

20.88%

19.00%

Margin
Operating

22.05%

Profit Margin
Net

14.38%

Margin
Return

on 13.288%

13.14%

16.53%

23.58%

23.84%

11.46%

on 19.704%

18.91%

23.78%

33.17%

33.48%

19.19%

Tk 40.08/

Tk 43.90/

Tk 32.706/

share

Share

Asset
Return
Equity
Stock Market
Ratio
EPS

TK 16.18/

Tk 17.32/

Tk 23.61/

share

share

share

7.3609

18.5334

11.2579

11.9338

15.769

35.85

value 1.4502

3.50359

2.6771

4.030

5.2795

5.548

times

times

P/E Ratio
Market
Book
ratio

share

to

times

times

times

DU Pont Equation

ROA

Net Profit Margin

2006

13.26%

10.44%

1.27

2007

13.13%

13.18%

0.996

2008

16.54

14.38%

1.15

2009

23.57%

22.24%

1.06

times

Total Asset Turnover

11

2010

23.80%

20.88%

1.14

DU Pont Equation

ROE

Net Profit Margin

Total Asset Turnover

2006

19.70%

10.44%

1.27

1.48

2007

18.91%

13.18%

0.996

1.44

2008

23.78%

14.38%

1.15

1.44

2009

33.17%

22.24%

1.06

1.41

2010

33.48%

1.14

1.40

20.88%

Equity Multiplier

FINANCIAL ANALYSIS
1. Liquidity Ratios:
Liquidity ratios attempt to measure a company's ability to pay off its short-term debt obligations.
The analysis of these ratios is done by comparing a company's most liquid assets (those easily
convertible to cash) to its short-term liabilities.
The greater the coverage of liquid assets to short-term liabilities the better as it is for that
company as it 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 will have difficulty meeting
running its operations, as well as meeting its obligations.
The biggest difference between each ratio is the type of assets used in the calculation. While
each ratio includes current assets, the more conservative ratios will exclude some current assets
as they aren't as easily converted to cash.
Liquidity

2006

2007

2008

2009

2010

Industry
Average

Ratio

(2010)
Current
Ratio
Acid Test

2.652
times
1.54 times

3.581

Workin

3.86 times

3.80 times

times
2.20 times

Ratio
Net

3.47 times

4.0788
times

1.918

3.21 times

3.02 times

times
476515

719857

859097

TK

TK

TK

3.36036
times

1228261
TK

1292137
TK

4596716639
TK

12

g
capital
ratio
Cash

87 days

122 days

130 days

72 days

82 days

108 day

Conver
sion
Cycle

a. Current Ratio:
The current ratio is 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.
It measures the number of dollars of current assets for each dollar of current liabilities.

4.5
4
3.5
3
t
i 2.5
m
2
e
s 1.5

current ratio
Industry Average

1
0.5
0
2006

2007

2008

2009

2010

year

13

12
10

9.704

8
6

3.8

4.078

3.64
2.08

1.17

2
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

current ratio

Interpretation:
In 2010, BOC current assets were 3.80 times higher than their current liabilities.
Though this particular ratio gradually increased from the initial year 2006 to 2010, the
performance is not satisfactory.
This ratio has a industry average of 4.07 times which is quite above the BOC current
ratio. So it is need to be fixed.
In 2007, current assets increased by a huge margin and current liability decreased
compared to 2006. In 2008 Proportionate increase in current liability was more than
current assets compared to last year. Proportionate increase in current asset in 2009 was
more than current liability and the complete opposite happened in 2010 where
proportionate increase in current liability was more than current assets.
BOC should increase its current assets or decrease current liabilities to increase this
particular ratio.

b. Quick (Acid Test) Ratio:


The quick 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 excludes inventory and other current assets, which are more difficult to turn into
cash.

14

4.000
3.500
3.000
T 2.500
I
M 2.000
E
1.500
S

Acid test
Industry Average

1.000
0.500
0.000
2006

2007

2008

2009

2010

year

10
9

8.786

8
7
6
5
4

3.36036

3.02

2.6598

3
1.48

0.856

1
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Acid test

Interpretation:
In 2010 the current assets excluding inventories were 3.02

times higher than current

liabilities.
15

It is slightly below the industry average which is unfavorable for the company.
Though this particular ratio slightly increased in 2009, but it decreased in the 2010.
In 2010 relative increase in inventory and current liabilities was more than increase in
current assets as a result the ratio decreased.
The company should start adjusting its current liabilities and inventories to increase its
quick ratio.

c. Net working capital ratio:


The working capital is used to calculate exactly what amount of capital is working in market. It
is derived by deducting current liabilities from current assets.
$6,000,000,000.0
$5,000,000,000.0
A $4,000,000,000.0
m
o
$3,000,000,000.0
n
u
t $2,000,000,000.0

Working capital
Industry Average

$1,000,000,000.0
$2006

2007

2008

2009

2010

Year

16

1.4E+10

12545059356

1.2E+10
1E+10
7869377944

8E+09
6E+09

4854885612

4E+09
2126726981
1292137000

2E+09

441126777

0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

working capital

Interpretation:
In 2010, BOCs net working capital was 46.11% of total assets.
In 2007 it decreased by a huge amount but it overcame in 2008 and remained nearly same
in the following year.
It is quite below the industry average which is not good for the company.

d. Cash Conversion Cycle:


We use cash to invest in assets. Those assets eventually generates revenue, thus in this way the
original cash we invested comes back to us in the form of revenue. Cash conversion cycle is the
number of days it takes to get back the initial investment the company made.

17

140
120
100
D
A
Y
S

80
Cash Conversion Cycle

60

Industry Average
40
20
0
2006

2007

2008

2009

2010

YEAR

190

200
180
160

144

140
120

116

100

108
82

80
60
40
20

0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Cash Conversion Cycle

Interpretation:
In 2010 on average BOC inventory remained at its level for nearly 83 days before it was
sold and it took 82 days which means a little time of a day to get back the initial
investment that was made.
This is hugely favorable for the company.
18

2. Asset Management Ratios:


Asset management ratios measure profitability that is affected by the way that the assets of a
business are used. These ratios which are also known as efficiency ratios help us to overcome
these problems of in efficient use of assets. The ratios are used to ensure that production targets
are met efficiently.

Asset

2006

2007

2008

2009

2010

Industry

Manage

Averag

ment

Ratio

(2010)

Inventory

4.852 times 3.39 times

3.07 times

5.85 times

5.138 times 4.42058

Turnover

times

Total Asset 1.27 times

.996 times

1.149 times 1.06 times

Turnover

1.1418

0.75948

times

Fixed Asset 2.168 times 1.99 times

2.585 times 2.95 times

Turnover

3.0518

times
6.32456

times

Daily Sales 22 days

21 day

21 day

21 day

23 day

Outstand

times
40.968
day

ing
Average

10 days

7 days

10 days

11 days

12days

42.054 day

Payment
Period

e. Inventory Turnover Ratio:


The ratio is regarded as a test of Efficiency and indicates the rapidity with which the company is
able to move its merchandise.

19

7
6
T
I
M
E
S

5
4
3

Inventory Turnover Ratio

Industry Average

1
0
2006

2007

2008

2009

2010

YEAR

10
8.872

9
8
7
6

5.138

4.42058
3.45

2.79

1.8529

2
1
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

inventory turnover

Interpretation:
In the year 2010, the company sold out and restocked its inventory 5.138 times.
This particular ratio is above the industry average which is quite good for the company.
Though it is decreasing from 2006 to 2008 but got increased in a great amount in the year
2009.

20

The ratio got slightly decreased in the 2010 so the company needs to be more focus for the
near future.

f. Total Asset Turnover Ratio:


The total asset turnover illustrates how much of sales have been generated from the total assets
used.

1.4
1.2
T
1
I 0.8
M
0.6
E
0.4
S
0.2

Total Asset Turnover Ratio


Industry Average

0
2006

2007

2008

2009

2010

YEAR

1.4

1.27
1.1418

1.2
1

0.76

0.8

0.75948

0.6
0.4143
0.4
0.2113
0.2
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Total Asset Turnover Ratio

21

Interpretation:
In 2010, every one taka worth of total asset of BOC was generated by 3.0518

taka

worth of sales.
Though the ratio is decreasing every year but it is quite above the industry average so the
company is in a good track.
In five years, sales and total asset both fluctuated but sales increased proportionally more
than total asset in 2010.

g. Fixed Asser Turnover Ratio:


The fixed asset turnover means how much of sales have been generated by using the fixed assets.
7
6
T
I
M
E
S

5
4
3

Fixed Asset Turover Ratio

Industry Average

1
0
2006

2007

2008

2009

2010

YEAR

22

30
24.457

25
20
15
10
5

6.32456
3.0518

2.58

BOC

MJL

0.304

1.23

0
Summit Power

DESCO

Khulna Power

Industry
Average

Fixed Asset Turover Ratio

Interpretation:
In 2010 every 1 taka worth fixed asset was generated by 3.0518 taka worth of sales.
This ratio got decreased from the year 2006 to 2007 but increased from 2007 to 2010.
Comparing to its industry average it is quite unfavorable. It is far below the industry average.
So the ratio needs to be fixed.
In 2007, it decreased due to decrease in sales and also increases in fixed asset. But it
increased in the rest of the years due to a greater portion of increase in sales than fixed asset.
Average Collection Period (Days Sales Outstanding/DSO):
The Days Sales Outstanding ratio shows both the average time it takes to turn the receivables
into cash and the age, in terms of days, of a company's accounts receivable. This ratio is of
particular importance to credit and collection associates.

23

45
40
35
30
D
25
A
Y 20
S
15

Average Collection Period


Industry Average

10
5
0
2006

2007

2008

2009

2010

YEAR

90

80

80
70
55

60
50
40

40.986
30

30

23
16.84

20
10
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Average Collection Period

24

Interpretation:
In 2010, on an average BOC took 23 day to collect its account receivables from its
customers.
Its quite impossible to measure the well being of a company only by measuring days sales
turnover. We also need to analyze the Average payment period which is on an average how
much days needed to pay of the creditors.

h. Average Payment Period (APP):


Average payment period determines on an average how much time are needed to pay back the
creditors of the company.
45
40
35
30
D
25
A
Y 20
S
15

Average Payment Period


Industry Average

10
5
0
2006

2007

2008
YEAR

2009

2010

25

100
87

90

88

80
70
60
50

42.058

40
30

20

20

12

10

3.27

0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Average Payment Period

Interpretation:
On an average it took 12 days for Reckitt to clear its accounts payable to its creditors.
We can see from these two ratios that BOC has to pay their creditors before collecting
money from customer. So the condition is not favorable for the company. To improve
their performance BOC has to collect their money as quickly as possible.
3. Debt Management Ratios:

The third series of ratios in this tutorial are debt 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.

While it is not mandatory in understanding the individual debt ratios, it will give some
background information on the debt of a company. The ratios covered in this section include the
debt to asset ratio, which is gives a general idea of a company's financial leverage as does the
debt-to-equity ratio. While the interest coverage ratio show how well a company can meet its
obligations.
26

Debt

2006

2007

2008

2009

2010

Industry

Manage

Averag

ment

Ratio

(2010)

Debt Ratio

32.560%

30.50%

30.50%

28.90%

28.78%

23.78%

Time

74.113

164.884

428 times

625.98

589.88

200.38

Interest

times

times

times

times

times

Earned

a. Debt ratio:
Debt ratio is the ratio of total asset to total debt which measures the percentage of funds which
provided by the creditors.

35.000%
30.000%
25.000%
20.000%
%

Debt Ratio

15.000%

Industry Average
10.000%
5.000%
0.000%
2006

2007

2008

2009

2010

YEAR

27

60.00%
48.25%

50.00%
40.00%

36.12%
28.78%

30.00%

23.78%

20.00%
10.00%
3.15%

2.61%
0.00%
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Debt Ratio

Interpretation:
In the year 2010, BOC 28.78% % of total asset were financed by the debt.
For every 1 taka of total assets nearly 0.29 taka is financed by total debt.
The debt ratio for BOC was slightly decreasing in last two years which is very favorable
for the company because lower the debt ratio, the higher the cushion against creditors
losses in the event of bankruptcy.

b. Time interest Earned:


The interest coverage ratio is used to determine how easily a company can pay interest expenses
on outstanding debt. The lower the ratio, the more the company is burdened by debt expense.

28

700
600
500
T
I 400
M
E 300
S 200

Times Interest Earned


Industry Average

100
0
2006

2007

2008

2009

2010

YEAR

700
589.88

600
500
400
300

200.38
200
100

6.94

4.32
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Times Interest Earned

Interpretation:
In 2010 BOCs EBIT was 589.88 higher than interest expense.
The ratio is far above the industry average so the company is in a good shape.
The ratio got increased from 2006 to 2009. But it got decreased in the year 2010.

29

The proportionate increase in EBIT was higher than the interest expense so the company
was going well .But the ratio got suddenly decreased in the year 2010. So the company
should have a look into this fact.

4. Profitability Ratios:
Profitability ratios distinguish the different measures of corporate profitability and financial
performance. The long-term profitability of a company is vital for both the survivability of the
company as well as the benefit received by shareholders. It is these ratios that can give insight
into the all important "profit".
Profitability is the net result of a number of policies and decisions. Profitability ratios show the
combined effects of liquidity, asset management, and debt on operating results.

Profitability

2006

2007

2008

2009

2010

Ratio

Industry
Average
(2010)

Gross

Profit 33.945%

34.41%

33.39%

13.786%

16.76%

16.85%

Profit 10.439%

13.18%

40.46%

41.49%

30.04%

25.68%

21.60%

22.24%

20.88%

19.00%

Margin
Operating

22.05%

Profit Margin
Net

14.38%

Margin
Return

on 13.288%

13.14%

16.53%

23.58%

23.84%

11.46%

on 19.704%

18.91%

23.78%

33.17%

33.48%

19.19%

Asset
Return
Equity

30

a. Gross Profit Margin:


A company's cost of sales, or cost of goods sold, represents the expense related to labor, raw
materials and manufacturing overhead involved in its production process. Thus the gross profit
margin is used to analyze how efficiently a company is using its raw materials, labor and
manufacturing-related fixed assets to generate profits. A higher margin percentage is a favorable
profit indicator.

45.000%
40.000%
35.000%
30.000%
25.000%
%

Gross Profit Margin

20.000%

Industry Average

15.000%
10.000%
5.000%
0.000%
2006

2007

2008

2009

2010

YEAR

31

60.00%
52.89%
50.00%
41.94%
40.00%
30.04%
30.00%

24.67%

21.58%

20.00%
9.10%

10.00%
0.00%
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Gross Profit Margin

Interpretation:
In the year 2010, for every 100 taka sale BOC received 41.49%taka.
BOC gross profit was increasing efficiently every year except the year 2008.
BOC gross profit was increasing every year with a greater proportion compared to sales.
That is the reason behind its increasing of this ratio.
Comparing with industry average it is quite good . So it can be said that the company is
in a good track.

b. Operating Profit Margin:


The operating profit margin ratio indicates how much profit a company makes after paying for
variable costs of production such as wages, raw materials, etc. It is expressed as a percentage of
sales and shows the efficiency of a company controlling the costs and expenses associated with
business operations. Phrased more simply, it is the return achieved from standard operations and
does not include unique or one time transactions.

32

30.000%
25.000%
20.000%
% 15.000%

Operating Profit Margin


Industry Average

10.000%
5.000%
0.000%
2006

2007

2008

2009

2010

YEAR

45.00%

42.25%

40.00%
35.00%
30.00%

25.68%

25.00%

21.60%
17.72%

20.00%

14.19%

15.00%

8.17%

10.00%
5.00%
0.00%
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Operating Profit Margin

33

Interpretation:
In 2010, for every 100 taka sale BOC received 25.68 taka.
This particular ratio is increasing every year .
It is quite above the industry average which is favorable for the company.

Net Profit Margin:


Investors or any stakeholders of a company can easily see from a complete profit margin analysis
that there are several income and expenditure operating elements in an income statement that
determine a net profit margin. It allows investors to take a comprehensive look at a company's
profit margins on a systematic basis.
25.000%
20.000%
15.000%
%

Net Profit Margin

10.000%

Industry Average
5.000%
0.000%
2006

2007

2008

2009

2010

YEAR

34

40.00%

37.51%

35.00%
30.00%
25.00%

20.88%

19%

20.00%

16.55%
13.21%

15.00%
10.00%

6.85%

5.00%
0.00%
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Net Profit Margin

Interpretation:
In the year 2010, BOC made a net profit margin of 20.88% which means for every 100
taka sale Reckitt has made a net profit of 20.88 taka.
The ratio kept going up from year 2006 to 2009.But the ratio got decreased in 20010.
The ratio is quite favorable for the company as it is above the industry average.
Because of the decrease in interest and rising net income of every year this particular ratio
has increased every year excepting the year 2010.
The company should have a look into it as it goes down.
c. Return on asset:
The Return on Total Assets, also called return on investment measures the overall effectiveness
of management in generating profits with its available assets. The higher the firms return on
total assets, the better it is considered.

35

30.000%
25.000%
20.000%
% 15.000%

Return On Asset
Industry Average

10.000%
5.000%
0.000%
2006

2007

2008

2009

2010

YEAR

30.00%
23.84%

25.00%
20.00%
15.00%

11.46%

10%
10.00%

7.93%

8.67%
6.85%

5.00%
0.00%
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Return On Asset

Interpretation:
In 2010, every 100 taka worth of asset of BOC was generating 23.84 taka of net income.
This ratio got slightly decreased from the initial year to 2007 but then hugely increased in
2009. But in 2010 it again decreased.
36

This particular ratio is nearly double of industry average which is very favorable for the
company.
Due to greater portion of increase in total asset than net income this ratio got decreased in
2007. In 2009, both net income and total asset increased by a huge amount but net income
increased by a greater portion which is reason behind increment. Then in 2010, the
proportionate in net income was less than the proportionate increase in total asset .So the
ratio got decreased.

d. Return on Equity:
This particular ratio completely belongs to the shareholders of the company. It measures how
much return the shareholder will get on their investment. It also measures the amount of Net
Income earned by utilizing each dollar of Total common equity. It is the most important of the
Bottom line ratio. By this, we can find out how much the shareholders are going to get for their
shares.

40.000%
35.000%
30.000%
25.000%
Return On Equity

% 20.000%

Industry Average

15.000%
10.000%
5.000%
0.000%
2006

2007

2008
YEAR

2009

2010

37

40.00%
33.48%

35.00%
30.00%
25.00%

20.42%
18.02%

20.00%

19.19%

15.63%

15.00%
8.41%

10.00%
5.00%
0.00%

Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Return On Equity

Interpretation:
In the year 2010, shareholders of BOC earned 33.48 taka for every 100 taka investment
in the company.
The ratio got decreased in the year 2007. Its huge increment year in 2009. In 2010, the
ratio increased from the previous year.
This ratio is nearly 2 times above than the industry average which means it gives its
shareholders 2 times more profit than its competitors industry.
As the ROE is quite favorable for the company, we can say that the company is doing a
great job in profitability ratio.

38

5. Stock Market Ratios:


Stock Market ratios attempt to simplify the evaluation process by comparing relevant data that
help users gain an estimate of valuation. When looking at the financial statements of a company,
many users can suffer from information overload as there are so many different financial values.
Stock Market ratios help to evaluate easily.
For example, the most well-known investment valuation ratio is the P/E ratio, which compares
the current price of company's shares to the amount of earnings it generates. The purpose of this
ratio is to give users a quick idea of how much they are paying for each 1 taka of earnings. And
with one simplified ratio, you can easily compare the P/E ratio of one company to its competition
and to the market.

Stock

2006

2007

2008

2009

2010

Industry

Market

Average

Ratio

(2010)

EPS

Tk 16.18/

Tk 17.32/

Tk 23.61/

share

share

share

7.3609

18.5334

11.2579

11.9338

15.769

35.85

Book value 1.4502

3.50359

2.6771

4.030

5.2795

5.548

times

times

P/E Ratio
Market

ratio

Tk 40.08/
share

Tk 43.90/
share

Tk 32.706/
Share

to

times

times

times

times

a. Earnings Per Share:


The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serve as an indicator of a company's profitability. The earnings per share is a good
measure of profitability and when compared with EPS of similar companies, it gives a view of
the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of
years indicates whether or not the earning power of the company has increased.

39

P
E
R
S
H
A
R
E

50
45
40
35
30
25
20
15
10
5
0

Earning Per Share


Industry Average

2006

2007

2008

2009

2010

YEAR

111.68

120
100
80
60

43.9
32.706

40
20

3.62

2.06

2.27

0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Earning Per Share

Interpretation:
In the year 2010, the common shareholders of BOC earned 43.90 taka for every share
they hold.
Earnings per share of BOC have gradually increased from 2006 to 2010. It got a huge
increment in 2009.
This is much above the industry average which means investors are earning more per
share than the competitor industrys investors.
The reason behind their success is their growing net income.

40

Market to book value (M/B) ratio:


The Market to Book value of the share compares the book value of the share which is the internal
or face value of the share with the market price of the share. The market to book value is quite
important. If the stock goes bankrupt, the shareholders might receive most of their investment
back or not at all depending on the specific ratio. Furthermore, value investing is based on the
concept of high intrinsic value of a stock. The price to value can give one a helping hand when
screening stocks with high value compared to its selling price.
6
T 5
I
M 4
E
S
3

Market to Book Value


Industry Average

2
1
0
2006

2007

2008

2009

2010

YEAR

41

10

8.963

9
8
7
5.473

5.548

5.2795

4.3117
3.713

4
3
2
1
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

Market to Book Value

Interpretation:
In the year 2010, market price per share was 5.28 times higher than the book value per
share.
This particular ratio increased in 2007 but decreased in 2008. It kept on increasing for
2009 and 2010.
It is slightly below the industry average so the condition is not favorable for the company.
From 2006 to 2007 the market price increased a lot and book value got decreased. This is
the reason behind the increment in 2007. Then in 2008, the market price increased but
book value increased by a greater portion. In 2009 and 2010 the market price increased
more than book value.
.

42

b. Price earnings Ratio:


The price/earnings (P/E) ratio is the best known of the investment valuation indicators. The P/E
ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by
investment professionals and the investing public. The price-to-earnings ratio is a financial ratio
used for valuation: a higher P/E ratio means that investors are paying more for each unit of net
income, so the stock is more expensive compared to one with a lower P/E ratio. The P/E ratio
also shows current investor demand for a company share.

This particular ratio has no unit. It should be near the industry average. Very low and high P/E
ratio is unfavorable for the company.

40
35
30
25
20

P/E Ratio

15

Industry Average

10
5
0
2006

2007

2008

2009

2010

YEAR

80
70

68.0097

60

49.692

50

35.85

40

27.5966

30

18.1858

15.769

20
10
0
Summit Power

BOC

MJL

DESCO

Khulna Power

Industry
Average

P/E Ratio

43

Interpretation:
In the year 2010, BOCs shareholders were willing to pay 15.769 taka for every 1 taka of
reported earnings.

It is very much below the industry average which is unfavorable for the company.

Du Pont Equation:

DU Pont Equation

ROA

Net Profit Margin

2006

13.26%

10.44%

1.27

2007

13.13%

13.18%

0.996

2008

16.54

14.38%

1.15

2009

23.57%

22.24%

1.06

2010

23.80%

20.88%

Total Asset Turnover

1.14

44

Interpretation:
In 2010 every 100 taka of asset generated 10.44 taka of net profit. Thus the ROA
of13.26% % comprised of10.44 % in Net Profit Margin and 1.27times Total Asset
Turnover.
The ROA increased on a more or less steady range from 2008 to 2010. The only
exception to the steadiness being the ROA of 2007 which was 13.13%. The main reason
for the steady increase was due to the gradual increase in Net Profit Margin. The huge
increase in 2009 was due to the great increase net profit margin from 14.38% to
22.24%.The only exception in 2007 where Net Profit Margin increased slightly but
Total Asset Turnover fell in a great amount.
ROA of 2010 was more than that of 2009. This occurred as total asset turnover increased
from 1.06 to 1.14. Although, the net profit margin decreased 22.24% to 20.88% the total
asset turnover increased .The increase in total asset turnover was more significant than
the reduction in net profit margin in this case.

Extended Du Pont Equation:

45

DU Pont Equation

ROE

Net Profit Margin

Total
Turnover

Asset

Equity
Multiplier

2006

19.70%

10.44%

1.27

1.48

2007

18.91%

13.18%

0.996

1.44

2008

23.78%

14.38%

2009

33.17%

22.24%

2010

33.48%

20.88%

1.15
1.06
1.14

1.44
1.41
1.40

Interpretation:
In 2010 shareholders earned 33.48 taka for every 100 taka invested. This comprised of
10.44% of Net Profit margin, 1.14times of Total Asset Turnover and 1.40 times Equity
Multiplier.
The ROE increased on a gradual basis from 19.70% in 2006 to 33.48% in 2010, the only
exception being 18.91% in 2007.Without considering the 2007 ROE, the main reason for
the rise from 2008 to 2009 was the increase in Net profit margin from 23.78 to 33.17% .
The exception was 2007 was as the total asset turnover and equity multiplier decreased in
2007.
ROE of 2010 was slightly above that of 2009. The main reason for this was the increase
in Total Asset Turnover and from 2009 to 2010 the influence of which was greater than
the fall in Net Profit margin which decreased from 2009 to 2010.

46

BOC BANGLADESH

Date

Monthly Return
%

Closing Price

General index

Monthly
Return %

2010
January

February

March

April

May

June

July

03-01-2010

506.2

31-01-2010

572.50

01-02-2010

569.7

28-02-2010

585.4

01-03-2010

582.5

28-03-2010

517.5

01-04-2010

515.8

29-04-2010

540.7

02-05-2010

539.4

31-05-2010

604.00

01-06-2010

621.00

30-06-2010

647.00

04-07-2010

656.00

29-07-2010
August

September

October

November

December

BOC BANGLADESH

781.20

31-08-2010

737.00

02-09-2010

740.00

30-09-2010

791.70
816.20

31-10-2010

827.90

01-11-2010

826.40

30-11-2010

802.10

01-12-2010

795.60

30-12-2010

662.30

Date

Closing Price

4,568.40
17.483
5,367.10

2.76%

5,451.15
2.00070
5,560.56

-11.16%

5,567.40
(0.1311204)
5,560.10

4.83%

5,594.32
1.08252
5,654.88

11.98%

5,631.30
8.46180
6,107.81

4.10%

6,152.39
0.0099
6,153.68

19.36%

783.70

01-08-2010

03-10-2010

13.10%

6,217.08
2.021527
6,342.76

-5.61%

6,436.77
3.436506
6,657.97

6.86%

6,774.87
4.760386
7,097.38

1.43%

7,223.49
10.16174
7,957.12

-2.94%

7,947.80
8.24674
8,602.44

-12.98%

8,723.18
(4.96114)
8,290.41

Monthly Return
%

General index

Monthly
Return %

47

2009
January

February

March

April

May

June

July

August

September

October

November

December

01-01-2009

268.10

29-01-2009

262.80

01-02-2009

265.90

26-02-2009

279.50

01-03-2009

285.60

31-03-2009

262.60

01-04-2009

261.50

30-04-2009

243.60

03-05-2009

241.50

31-05-2009

249.60

01-06-2009

249.00

30-06-2009

294.50

02-07-2009

292.30

30-07-2009

339.10

02-08-2009

348.20

31-08-2009

369.90

01-09-2009

368.70

30-09-2009

391.30

01-10-2009

411.70

29-10-2009

431.30

01-11-2009

436.50

26-11-2009

418.20

01-12-2009

419.60

30-12-2009

486.90

-1.98%

2,807.61
(5.63183)
2,649.49

5.11%

2,661.69
(3.4109)
2,570.96

-8.05%

2,626.27
(6.8291)
2,446.92

-6.85%

2,443.25
4.5576
2,554.36

3.27%

2,539.17
1.30
2,572.18

18.27%

2,597.00
15.91297
3,010.26

16.01%

3,069.71
(5.0620)
2,914.53

6.23%

2,941.02
0.00884
2,941.28

6.13%

2,950.12
4.53439
3,083.89

4.71%

3,123.24
7.73955
3,364.26

-4.19%

3,392.02
29.15460
4,380.95

16.04%

4,424.02
2.520558
4,535.53

48

BOC
BANGLADESH

Date

Monthly
Return %

Closing
Price

General
index

Monthly
Return %

2008
January

01/01/ 2008 322.8


31/01/ 2008

February

March

April

03/02/ 2008

June

July

August

September

October

231.20
276.20

28/02/ 2008

267.00

02/03/ 2008

254.30

31/03/ 2008

241.00

01/04/ 2008

240.90

30/04/ 2008
May

-14.78%

04/05/ 2008
29/05/ 2008

277.90

01/06/ 2008

301.80

30/06/ 2008

246.20

02/07/ 2008

244.20

31/07/ 2008

336.50

03/08/ 2008

309.90

28/08/ 2008

289.20

01/09/ 2008

298.00

25/09/ 2008

312.30

05/10/ 2008

309.80

(3.3812)
2,907.17

-3.33%

2,890.25
1.4230
2,931.38

-5.56%

2,916.20
3.4440
3,016.49

4.57%

251.40
249.40

3,008.91

3,025.57
1.56268
3,072.85

11.43%

3,101.94
2.1343
3,167.99

18.42%

3,207.89
(6.46499)
3,000.50

37.80%

3,029.24
(8.53376)
2,761.05

-6.68%

2,689.94
2.80749
2,765.46

4.80%

2,820.79
5.17690
2,966.82

-13.04%

3,001.37

(8.421820)
49

November

December

30/10/ 2008

269.40

02/11/ 2008

266.00

30/11/ 2008

236.50

01/12/ 2008

237.40

30/12/ 2008
BOC
BANGLADESH

Date

2,748.60
-11.09%

(8.03704)
2,468.92

11.96%

265.80

2,517.05
11.0519
2,795.34

Monthly
Return %

Closing
Price

2,684.69

General
index

Monthly
Return %

2007
January

February

March

April

May

June

July

August

04-01-2007

116.40

31-01-2007

120.60

05-02-2007

120.00

28-02-2007

135.80

01-03-2007

134.00

29-03-2007

126.00

02-04-2007

124.60

30-04-2007

122.10

03-05-2007

122.70

31-05-2007

121.70

03-06-2007

124.80

28-06-2007

128.40

02-07-2007

129.70

31-07-2007

167.60

01-08-2007

166.10

3.61%

1589.41
1805.12

13.17%

14.02578

1,883.62
(1.91833)
1,791.54

-5.97%

1,794.02
(1.8472)
1,760.88

-2.01%

1,737.36
0.3436
1,743.33

-0.81%

1,762.36
13.68732
2,003.58

2.88%

2,007.05
7.08670
2,149.32

29.22%

2,190.46
8.84380
2,384.18

6.56%

2,394.11

2.54708

50

September

October

November

December

29-08-2007

177.00

03-09-2007

183.20

30-09-2007

205.90

01-10-2007

207.30

31-10-2007

215.70

01-11-2007

218.90

29-11-2007

301.00

02-12-2007

290.40

30-12-2007

BOC
BANGLADESH Date

2,455.09
16.79%

1.262357
2548.49

4.05%

2,627.02
8.51577
2,850.81

37.50%

2,836.32
4.7522840
2,971.11

10.54%

321.00

Closing
Price

2,540.97

2,878.74
4.81009
3,017.21

Monthly
Return %

General
index

Monthly
Return %

2006
January
February
March
April
May
June

01-01-2006

107.90

30-01-2006

102.70

01-02-2006

103.60

28-02-2006

94.20

05-03-2006

97.90

30-03-2006

102.20

02-04-2006

102.20

30-04-2006

96.30

02-05-2006

93.10

31-05-2006

96.20

01-06-2006

96.10

-4.82%

1669.80

(1.5849)
1656.27

-9.07%

1649.64

(7.1658)
1531.43

4.39%

1543.88

(4.0490)
1491.77

-5.77%

1478.47

(7.93271)
1361.27

3.33%

1355.16

(0.008855)
1355.04

3.23%

1349.75

51

(0.75754)

July
August
September
October
November
December

29-06-2006

99.20

02-07-2006

98.80

31-07-2006

108.60

01-08-2006

110.60

31-08-2006

122.80

03-09-2006

124.90

28-09-2006

114.60

01-10-2006

115.00

31-10-2006

113.10

01-11-2006

112.90

30-11-2006

118.10

03-12-2006

117.20

27-12-2006

119.10

1339.525

9.92%

1,341.25

4.8879
1,406.81

11.03%

1,426.65

11.24522
1,587.08

-8.25%

1,588.24

(1.61877)
1562.53

-1.65%

1,551.88

(0.6592)
1,541.65

4.61%

1,533.20

(0.385476)
1,527.29

1.62%

1,544.17

4.2313
1610.67

52

Expected rate of return (Monthly)

3.469682%

(Annual Return)

3.469682% * 12

Standard Deviation

11.37875%

C.V.

3.2795

= 41.636184%

Where,
Rate of Return =
Standard Deviation =

* 100

Coefficient of variation (CV) =

Expected Rate of Return (Monthly) 2.536899%


(Annually)

2.536899 * 12

Standard Deviation
C.V.

= 30.36%

7.085807%

2.7931

53

Chart Title
50.00%
y = 0.3998x + 0.0246
R = 0.062
40.00%

30.00%

Axis Title

20.00%

10.00%
Series1

0.00%
-15.0000%
-10.0000%
-5.0000%0.0000%5.0000%10.0000%
15.0000%
20.0000%
25.0000%
30.0000%
35.0000%

Linear (Series1)

-10.00%

-20.00%

-30.00%

Axis Title

54

SUMMARY
OUTPUT
Regression Statistics
Multiple R 0.248993
R Square
0.061997
Adjusted
R Square
0.045825
Standard
Error
0.11115
Observatio
ns
60
ANOVA
df

SS

MS
0.0473
6
0.0123
54

F
3.8335
18

Regressio
n

Residual

58

Total

59

0.04736
0.71654
7
0.76390
8

Coefficie
nts

Standar
d Error

t Stat

P-value

Intercept

0.024553

0.01525
6

1.6094
11

X Variable
1

0.399845

0.20421
8

1.9579
37

Significan
ce F
0.055054

Lower
95%

Upper
95%

0.1129
56

-0.00599

0.0550
91

0.0550
54

-0.00894

0.8086
31

Lower
95.0%
0.0059
9
0.0089
4

Upper
95.0%
0.0550
91
0.8086
31

RESIDUAL OUTPUT
Observati
on

Predicted
Y

1
2

0.018216
-0.0041

3
4

0.008363
-0.00714

Residua
ls
0.06642
-0.0866
0.03553
7
55

0.024589

0.021524

0.044097

0.069517

0.018081

10

0.021917

11

0.023012

12

0.041472

13

0.080635

14

0.016883

15

0.017167

16

0.025927

17

0.079281

18

0.052886

19

0.059915

20

0.034738

21
22

0.029601
0.058615

23

0.043555

24
25

0.043786
0.011034

26

0.030243

27
28

0.038304
0.030801

0.05056
0.00871
1
0.01077
6
0.05510
3
0.04078
3
0.10058
0.03842
0.02308
8
0.02527
0.04453
0.11478
3
0.07687
0.04599
0.08743
0.02404
0.23229
8
0.03088
5
0.13829
5
-0.0181
0.33144
5
0.06158
5
-0.1588
0.06355
0.09395
0.01486
56

29

0.033067

30

-0.0013

31
32

-0.00957
0.039606

33

0.045253

34

-0.00912

35

-0.00758

36
37

0.068761
0.002035

38

0.010922

39

-0.00275

40

0.042737

41
42

0.029751
0.08818

43

0.00434

44

0.024588

45

0.042684

46

0.055477

47

0.141126

48

0.034631

49

0.094458

50

0.032578

51

0.035276

52

0.028882

1
0.08120
7
0.18293
0.38753
8
-0.1064
0.00273
3
0.12128
0.10332
0.05086
8
-0.0218
0.04022
5
0.07778
0.11119
0.00296
1
0.09455
0.15576
9
0.03773
2
0.01861
3
0.00836
0.18305
0.12575
9
0.03651
8
0.00502
0.14686
0.01939
3
57

53

0.058387

54

0.024593

55

0.032636

56

0.038294

57

0.043587

58

0.065162

59

0.057487

60

0.004716

0.06137
5
0.01643
7
0.16093
7
0.09437
0.02497
8
0.05083
0.08689
0.13456

58

BOC BANGLADESH
Average Return %
Monthly
Yearly
Standard Deviation

General index

3.469682%

2.5368%

41.636184%

30.36%

11.37875%

7.085807%

3.2795

2.7931

.399

CV
SLOPE ()

By analyzing the above data, we can say that the beta of the company is 0.399. We know that the
market beta is always 1. So the beta of the company is less than 1 which is less risky than the
market. In spite of that BOCs standard deviation and C.V. both are higher than Market so total
risk of BOC is higher.

CAPM

= Rf + (Rm-Rf)
= 11+(30.442-11).399
=18.76%

Where,

Rf

= 11%

Rm

= 30.442%

= .399

Here, 11% t-bill which was a 91 days T-bill and was announced in 18 3 12 was used as the
risk free rate.

59

Intrinsic share price

37.1850%

37.1850%

10% constant

growth

Year

2010

Dividend

35

Outcomes:

40.429

2011
48.014

2012

2013

65.87

72.457 (taka)

46.703
586.457

TV2012=827.135

673.59

For constant growth rate after 2012 we need a rate less than the Ke rate of 18.76%. So
we assumed the constant growth rate after 2012 to be 10%.

Intrinsic price is total of the outcomes which is Po= 673.59 taka


This does not reflect the true 2010 market price of 692.30 taka. There is a difference of 18.711
taka among the two values. Which means share price is overvalued.

60

CORPORATE VALUE MODEL

10% constant growth

Year

2010

FcF

643777

2011

2012

655784

681282

2013
749410.2(taka

Outcomes: 552192.66
483043.83
6065618.838

TV2012=8554910.959

7100855.328 (value of total company)

Value of 1 common share


(7100855.328 806476) = 6294379.328
=
= 413.614

61

Weighted Average Cost of Capital (WACC)


Capital Structure = 28.78% Debt & 71.22% Equity
Cost of Debt

=Kd

= .1727%

Cost of Common Equity

= KCS =17.848%

Cost of retained earnings

= KRE =17.848%

Weight of debt

=Wd

Weight of Common Equity

= WCS = 6.154%

= 28.78%

Weight of Retained Earnings = WRE = 65.066%

WACC
= WL*KL*(1-Tax rate)+WB*KB(1Taxrate)+WPS*KPS+WCS*KCS+WRE*KRE
= .2878*.001727(1- .24021)+0+0+ (.06154*.17848)+(.65066*.17848)
=0.0003776+0.1098+0.1169
= 22.707%

WACC (market value)


Capital Structure = 28.78% Debt & 71.22% Equity
Cost of Debt

=Kd

= .1727%

Cost of Common Equity

= KCS =17.848%

Cost of retained earnings

= KRE =17.848%

Weight of debt

=Wd

Weight of Common Equity

= WCS = 80.056%

= 6.117%

Weight of Retained Earnings = WRE = 13.827

= WL*KL*(1-Tax rate)+WB*KB(1-Taxrate)+WPS*KPS+WCS*KCS+WRE*KRE
= [.06117*.001727(1- .24021)]+0+0+[ .80056 * .17848] +[ .13827 * .17848]
=16.76%
62

Optimum Capital Structure

Value of the firm

=
=
= 3022349.391

1. Capital Structure = 50% Debt & 50% Equity

WACC
= WL*KL*(1-Tax rate) +WB*KB (1Taxrate) +(WPS*KPS+(WCS*KCS+WRE*KRE )
= .50*.001727(1- .24021) +0+0+ .50*.17848
= 8.9896%

Value of the firm

=
=
= 7634209.267

63

2. Capital Structure = 60% Debt & 40% Equity

WACC
= WL*KL*(1-Tax rate) +WB*KB (1Taxrate) + (WPS*KPS+ (WCS*KCS+WRE*KRE)
= .60*.001727(1- .24021) +0+0+ .40*.17848
= 7.2178%

Value of the firm

=
=
= 9508227.94

3. Capital Structure = 20% Debt & 80% Equity

WACC
= WL*KL*(1-Tax rate) +WB*KB (1Taxrate) + (WPS*KPS+ (WCS*KCS+WRE*KRE)
= .20*.001727(1- .24021) +0+0+ .80*.17848
= 14.3046%

Value of the firm

=
=
= 4797651.1638

64

4. Capital Structure = 25% Debt & 75% Equity

WACC
= WL*KL*(1-Tax rate) +WB*KB (1Taxrate) + (WPS*KPS+ (WCS*KCS+WRE*KRE)
= .25*.001727(1- .24021) +0+0+ .75*.17848
= 13.418%
Value of the firm

=
=
= 5114658.49

The second option that consists of 60% Debt & 40% Equity has the perfect combination of
Capital Structure for the company and it also has the highest value for the firm of 9508227.94.
By following this capital structure the company can increase its share price. To do so the
company will have to keep the greater portion of the capital structure as loan.
The reason for which we will increase the loan is if we increase the loan the weighted average
cost of capital will decline. .

65

Dividend Policy

BOC Bangladesh limited believes that High dividend Payment Increases the share price

Justification:
In 2010 the company paid dividend of $35. If we observe the historical trend of the company it
can be easily said that the company is following the second view of dividend policy.
People are always concern about their certain income. In the view of people dividend is a certain
income whereas they are uncertain about the income from the capital gain. The reason behind
their that belief is dividends can be predictable compared to capital gain as management can
control dividend but it cannot dictate the price of stock. The incremental risk associated with
capital gain relative to dividend income implies a higher required rate for discounting a dollar of
capital gains than for discounting a dollar of dividend. So higher dividend means higher share
price for the company in the eye of people
Keeping this in mind BOC Bangladesh Limited gives maximum return to their shareholders as
the form of dividend. This policy is also known as bird in the hand dividend theory.

66

Appendix
1. General Reserve: (2011)
Opening balance:

1,836,607,000

Profit earned during the year

6,097,442,822

Payment of dividends

(4, 976,38,000)
7,436,411,822

2. General Reserve: (2012)


Opening balance:

7,436,411,822

Profit earned during the year


Payment of dividends

841,527,416
(497,638,000)
7780301238

3. Average Tax Rate:


=

EBT (1 - T)

2006

336425(1 -T) = 246252

Tax Rate = 26.803 %

2007

350155(1 - T) = 263651

Tax Rate = 24.704 %

2008

457740 (1 - T) = 359342

Tax Rate = 21.496 %

2009

772611 (1 - T) = 609870

Tax Rate = 21.064 %

2010

903256 (1 - T) = 668068

Tax Rate = 26.038 %

Average Tax Rate


=

= Net profit after tax

=
24.021 %

67

4. Ratio Calculation :
BOC Bangladesh Limited

RATIO

CALCULATIO
N

Current Ratio 764942/28842


Acid Test
Ratio
Working
Capital

7
764942321087/288
427
764942288427
75+22-10

Cash
Conversion
Cycle
Inventory
1558198/3210
Turnover
87
Ratio
Total Asset
2358955/1853
Turnover
115
Fixed Asset
Turnover
Average
Collection
Period

2358955/1088
173
142759/23589
55/365

2006
2.652
times
1.54
times
476515
tk
87 days

4.852
times
1.97
times
2.168
times
22 days

Average
Payment
Period

41651/155819
8/365

10 days

Debt Ratio

609985/18531
15*100

32.56%

68

Times Interest 325212/4388


Earned

74.114
times

Gross Profit
Margin

800757/2358955
*100

33.945 %

Operating
Profit
Margin
Net Profit
Margin

325212/2358955 *
100

13.786 %

246252/2358955
*100

10.439 %

Return On
Asset

246252/1853115
*100

13.288 %

Operating
Return On
Asset
Return On
Equity

325212/1853115

17.549%

246252/1249730
*100

19.704
%

Earnings Per
Share

246252/15218

Tk 16.18/
share

*100

Market To
Book Ratio
P/E Ratio

Book value per share =

82.1218/ share

69

RATIO

CALCULATIO
N

Current Ratio 998670/27881


Acid Test
Ratio
Working
Capital

3
998670386602/278
813
998670278813

Cash
108+21-7
Conversion
Cycle
Inventory
1311832/3866
Turnover
02
Ratio
Total Asset
2000172/2006
Turnover
219
Fixed Asset
Turnover
Average
Collection
Period

2000172/1007
549
115620/20001
72/365

2007
3.581
times
2.20
times
Tk
71985
7
122 days

3.39
times
0.996
times
1.99
times
21 days

Average
Payment
Period

24298/131183
2/365

7 days

Debt Ratio

611941/20062
19*100

30.50%

70

Times Interest 33540/2033


Earned

164.88
times

Gross Profit
Margin

688340/2000172
*100

34.41 %

Operating
Profit
Margin
Net Profit
Margin

335263/2000172 *
100

16.76 %

263651/2006219
*100

13.18 %

Return On
Asset

263651/2006219
*100

13.14 %

Operating
Return On
Asset
Return On
Equity

335263/2006219

16.71%

263651/1394278
*100

18.91 %

Earnings Per
Share

263651/15218

Tk 17.32/
share

*100

Market To
Book Ratio

times

P/E Ratio

Book value per share =

91.6203 / share

71

RATIO

CALCULATIO
N

Current Ratio 1207552/3484


Acid Test
Ratio
Working
Capital

55
1207552541345/348
455
1207552348455

Cash
119+21-10
Conversion
Cycle
Inventory
1664294/5413
Turnover
45
Ratio
Total Asset
2498583/2174
Turnover
061
Fixed Asset
Turnover
Average
Collection
Period

2498583/9665
09
142007/24985
83/365

2008
3.465
times
1.918
times
Tk
85909
7
130 days

3.07
times
1.149
times
2.585
times
21 days

Average
Payment
Period

45598/166429
4/365

10 days

Debt Ratio

663151/21740
61*100

30.50%

Times Interest 421083/982


Earned
Gross Profit
Margin

834289/2498583
*100

428 times
33.39 %

72

Operating
Profit
Margin
Net Profit
Margin

421083/2498583 *
100

16.85 %

359342/2174061
*100

14.98 %

Return On
Asset

359342/2174061
*100

16.53 %

Operating
Return On
Asset
Return On
Equity

421083/2174061

19.37%

359342/1510910
*100

23.78 %

Earnings Per
Share

359342/15218

Tk 23.61/
share

*100

Market To
Book Ratio

times

P/E Ratio

Book value per share =

99.28440 / share

73

RATIO

CALCULATIO
N

2009

Current Ratio 1,657,380 / 429119

3.86 times

Acid Test
Ratio
Working
Capital

3.21 times
1657380 429119

tk
1,228,2
61

Cash
Conversion
Cycle
Inventory
Turnover
Ratio
Total Asset
Turnover
Fixed Asset
Turnover
Average
Collection
Period

62 + 21 - 11

Average
Payment
Period

48950 / (1633072 /
365)

11 days

Debt Ratio

747477 / 2586011 *
100

28.90%

72 days

1633072 / 278938

5.85 times

2742817 / 2586011

1.06 times

2742817 / 928631

2.95 times

154409 / (2742817
/ 365)

21 days

Times Interest 609699 / 966


Earned

625.98
days

74

Gross Profit
Margin

1109745 / 2742817
* 100

Operating
Profit
Margin
Net Profit
Margin

604699 / 2742817 *
100

22.05%

609870 / 2742817 *
100

22.24%

Return On
Asset

609870 / 2586011
* 100

23.58%

Operating
Return On
Asset
Return On
Equity

604699 / 2586011
* 100

23.38%

609870 / / 1838534
* 100

33.17%

Earnings Per
Share

609870 / 15218

Tk 40.08 /

Market To
Book Ratio

40.46%

share

times

P/E Ratio

Book value per share =

120.8131/ share

75

RATIO

CALCULATIO
N

Current Ratio 1753636/4614


Acid Test
Ratio
Working
Capital

99
1753636361478/461
499
1753636461499

Cash
-71+23-12
Conversion
Cycle
Inventory
1857531/3614
Turnover
78
Ratio
Total Asset
3199375/2801
Turnover
974
Fixed Asset
Turnover
Average
Collection
Period

3199375/1048
338
200103/31993
75/365

2010
3.80
times
3.02
times
Tk
12921
37
82days

5.138
times
1.1418
times
3.0518
times
23 days

Average
Payment
Period

59360/185753
1/365

12 days

Debt Ratio

806476/28019
74*100

28.78%

76

Times Interest 82703/1393


Earned

589.880
times

Gross Profit
Margin

1341844/3199375
*100

41.94 %

Operating
Profit
Margin
Net Profit
Margin

821703/3199375 *
100

25.68 %

668068/3199375
*100

20.88 %

Return On
Asset

668068/2801974
*100

23.84 %

Operating
Return On
Asset
Return On
Equity

821703/2801974

29.33%

668068/1995498
*100

33.48 %

Earnings Per
Share

668068/15218

Tk 43.90/
share

*100

Market To
Book Ratio

times

P/E Ratio

Book value per share =

tk 131.1274/ share

77

Summit Power
Formula

2010

RATIO
Current
Ratio

= 9.704 times

Acid Test
Ratio

= 8.786 times

Working
Capita
l Ratio

CA - CL

=(

= Tk
21267269
81
= 3.45 times

Inventory
Turno
ver
Debt
Ratio

= 2.609

Times
Interes
t
Earne
d
Ratio
Operating
Profit
Margi
n
Total
Asset
Turno
ver
Fixed
Asset
Turno
ver
Operating
Return
On
Asset
Average
Collect

= 4.32 times

= 0.2113
times

= 0.304 times

= 8.9278

= 30 days
78

ion
Period
Return
On
Equity
Average
Payme
nt
Period
Cash
Conve
rsion
Cycle
Return
On
Asset
Gross
profit
margi
n

Days in Inventory + DSO APP

*100

=8.4103%

= 20 days

= 106 + 30 20

= 116 days

=(616686948*100)/777
9846388

= 7.926%

= 52.8889%

*100

= 37.5148%

Earnings
=
per
share
= 140.1 / 2.06
Price
to =
earnin
gs
ratio
(P/E
Ratio)
:
Market=
tobook
ratio
DU PONT
Analysis
= Net Profit Margin Total Asset = 37.5148* .2113
ROA
Turnover

= tk
2.06/shar
e
=68.0097

Net Profit
Margi
n

ROE

*100

= Net Profit Margin Total Asset


Turnover Ratio Equity Multiplier

= 37.5148 * .2113 *
1.061

=5.473 times

= 7.926%

=8.4103%

79

Desco
RATIO

CALCULATION

Current Ratio

17288454805/4743395449

3.64 times

Acid Test
Ratio
17288454805-4743395449
Working
Capital
197 + 80 - 87
Cash
Conversion
Cycle
8,656,378,087/
Inventory
Turnover
Ratio
10810974226/26093791941
Total Asset
Turnover
10810974226/8805337136
Fixed Asset
Turnover
Average
Collection
Period

2.6598 times

Average
Payment
Period
Debt Ratio

2010

Tk 12545059356
190 days

1.8529 times

0.4143 times
1.23 times
80 days

87
days

12,590,540,857/26093791941

48.251%

* 100

Times Interest 1534280431/221200045


Earned

6.94 times

80

Gross Profit
Margin

2332813327/10810974226
*100

21.58 %

Operating
Profit
Margin
Net Profit
Margin

1534280431/10810974226
* 100

14.19 %

1788730635/10810974226
*100

16.5455 %

Return On
Asset

1788730635/26093791941
*100

6.85 %

Operating
Return On
Asset
Return On
Equity

1534280431/26093791941
*100

5.8799 %

Earnings Per
Share

1,788,730,635 / 16,017,044

1788730635/8759855635
*100

2031.5 / 547.132
Market To
Book Ratio

P/E Ratio
DU Pont
ROA:
ROE

2031.5 / 111.68

16.5455 * 0.4143
16.5455 * .4143 * 2.9788

20.42 %
Tk111.68 / share
3.713 times
18.1858

6.85%
20.42%

81

Khulna Power
RATIO
Current Ratio
Acid Test Ratio

CALCULATION
3023789428/2582662651
2209729816/2582662651

Average Collection Period

1185346485/21769213

Inventory Turnover

7222668468/814059612

Debt Ratio
Operating Profit Margin

18000/5719

648809596/7945762818*100

2010
1.17 times
0.856 times
55 days

8.872 times
3.15 times
8.165%

Total Asset Turnover

7945762818/6272735929

1.27 times

Fixed Asset Turnover

7945762818/324896501

24.457 times

Operating Return On
Asset

648809596/6272795929

10.34%

82

Average Payment Period

1733222020/19788133

88 days

Cash Conversion Cycle

41+55-88

8 days

Net Profit Margin

544091591/7945762818*100

6.85%

Gross Profit Margin

723094350/7945762818*100

9.1%

Return On Asset

544091591/6272735929*100

8.673%

ROE

544091593/3019023067*100

18.02%

EPS

544091593/239,881,950

Tk 2.27 / share

Market Book ratio

112.8/12.585

8.963 times

P/E Ratio

112.8/2.27

49.692

83

MJL Bangladesh Limited

RATIO

Formula

CALCULATI
ON

2010

3597263697/1727
885753

2.08
tim
es

Acid Test
Ratio

(35972636971039932037)/
1727885753

1.48

Debt Ratio

1838265995
/5089393965

Times
Interest
Earned

681900999/Not
Given

N/A

Inventory
Turnove
r

2898731931/1039
932037

2.79
time
s

Total Asset
Turnove
r

3847949116/5089
393965

.76
time
s

Fixed Asset
Turnove
r

3847949116/1492
130269

2.58
tim
es

Days sales
outstand
ing

177520128/
(3847949116/365
)

16.84
day
s

Average
payment
period

25966104/(28987
31931/365)

3.27
Day
s

Current
Ratio

tim
es
36.12%

84

Cash
Conversio
n Cycle

131+16.84-3.27

144
day
s

Gross profit
margin

949217185/38479
49116

24.67
%

Operating
profit
margin

681900999/38479
49116

17.72
%

Net profit
margin

508337317/38479
49116

13.21
%

Return on
asset

508337317/50893 10%
93965

Operating
Return on
asset

681900999/50893 13.39
93965
%

Return on
Equity

508337317/32511
27970

15.63
%

Earnings per
share

508337317/14032
0000

3.62

Price to
earnings
ratio

136.40/3.62

37.679

Book value
per share

3251127970/1403
200000

tk2.32/
shar
e

Days in Inventory + DSO APP

Days In Inventory
=

85

Market to
book
ratio
ROA (Return
on Asset)

Net Profit Margin Total


Asset Turnover Ratio

ROE (Return
on
Equity)

Net Profit Margin Total


Asset Turnover Ratio
Equity
Multiplier(TA/TE)

136.4/2.32

58.79

13.21.76

10.04

13.21.76
1.56

15.72

5. DIVIDENED PAYOUT RATIO


2006
DIVIDENED PAYOUT RATIO =
g = (1-.308996) .19704 = 13.6155%
2007
Dividend payout ratio =
g = (1-.04049) .1891= 11.2694%
2008
Dividend Payout ratio = =
g = (1-.71996).2378 = 6.6586%

2009
Dividend Payout Ratio =
g = (1-.441674)

= 18.5196%

86

2010
Dividend Payout Ratio =

= 8.541082%

=11.72082%

Dividend growth rate:


1. 2006 -2007 =

2. 2007-2008 =

3. 2008-2009 =

4. 2009-2010 =

5. Average =

Average of two growth rate


g=

87

6. WACC Calculation
COST OF COMMON STOCK
1ST APPROACH
= Rf + (Rm-Rf)

CAPM

= 11+(30.442-11).399
=18.76%
2nd APPROACH
Ke =

=16.935%
Average of two
Ke =

=17.848%

cost of retained earnings

17.848%

Cost of debt

Weight of debt

Weight of common equity

Weight of Retained Earnings

88

MARKET VALUE
Common share 15218000692.3 = 10555595
Debt

=806476

Retained earnings

= 1823141

Total asset market value


806476 + 10555595+1823141 = 13185212

Weight of debt

Weight of common equity


Weight of Retained Earnings

Cost of common equity


Cost of debt

=17.848%
= .1727%

Note:
In this project, all companys annual year ends at 31st December except DESCO whose annual
year ends at 31st June. Due to lack of options in choosing competitors, it was assumed that
DESCOs annual year also ends at 31st December.

89