Fin 440 Term Paper Raw PDF

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

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

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
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
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%

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

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
344,977,000
Total Current Liabilities
488,602,928
Total liabilities
833,579,928
Proposed Dividend
(5,404,534,708)
3,039,521,502

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

Taxation
8025168562
802516856224.021
%
Profit after taxation
(1927725740
)
6097442822

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

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
344,977,000
Total Current Liabilities
540,532,126
Total liabilities
885,509,126
Proposed Dividend
(5,352,013,487)
3,491,112,331

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
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
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
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
Turnover
1.1418
0.75948
times
Fixed Asset 2.168 times 1.99 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
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
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
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%
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
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
WACC
= .20*.001727(1- .24021) +0+0+ .80*.17848
= 14.3046%
Value of the firm
=
=
= 4797651.1638
64
WACC
= .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 :
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

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

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
91.6203 / share
71
RATIO
CALCULATIO
N

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%

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
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
120.8131/ share
75
RATIO
CALCULATIO
N

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

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
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
1185346485/21769213
Inventory Turnover
7222668468/814059612
Debt Ratio
18000/5719
648809596/7945762818*100
2010
1.17 times
0.856 times
55 days
8.872 times
3.15 times
8.165%
7945762818/6272735929
1.27 times
Fixed Asset Turnover
7945762818/324896501
24.457 times
Operating Return On
Asset
648809596/6272795929
10.34%
82
1733222020/19788133
88 days
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

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Executive Summary

BOC Bangladesh Limited

BOC Bangladesh Limited

Gross profit margin

Operations profit margin

Profit before taxation

Net profit margin

BOC Bangladesh Limited

95.99% 84.88% 88.41% 92.36%

151.20% 139.55% 117.32% 108.26%

159.67% 147.11% 120.90% 111.57%

160.01% 148.78% 120.81%

133.66% 123.88% 109.91% 101.42%

151.20% 139.55% 117.32% 108.26%

BOC Bangladesh Limited

Cost Of Goods Sold

BOC Bangladesh Limited

Equity and Liabilities

Total non-current liabilities

Total Current Liabilities

BOC Bangladesh Limited

Profit before other income

Profit before taxation

Profit after taxation

BOC Bangladesh Limited

Equity and Liabilities:

Total non-current liabilities

Total Current Liabilities

BOC Bangladesh Limited

Profit before other income

Profit before taxation

Asset 1.27 times

Time Interest 74.113

Net Profit Margin

Total Asset Turnover

Net Profit Margin

Total Asset Turnover

b. Quick (Acid Test) Ratio:

times higher than current

c. Net working capital ratio:

d. Cash Conversion Cycle:

Cash Conversion Cycle

2. Asset Management Ratios:

4.852 times 3.39 times

5.138 times 4.42058

Total Asset 1.27 times

1.149 times 1.06 times

Fixed Asset 2.168 times 1.99 times

2.585 times 2.95 times

Daily Sales 22 days

e. Inventory Turnover Ratio:

Inventory Turnover Ratio

f. Total Asset Turnover Ratio:

Total Asset Turnover Ratio

Total Asset Turnover Ratio

g. Fixed Asser Turnover Ratio:

Fixed Asset Turover Ratio

Fixed Asset Turover Ratio

Average Collection Period

Average Collection Period

h. Average Payment Period (APP):

Average Payment Period