Ratio & DuPont Analysis

Table of Content

1 Introduction of the report....................................................................3

1.1 Background of the study...........................................................................3
1.2 Objectives of the study.............................................................................3
1.3 Scope of the report..................................................................................3
1.4 Data collection methodology of the term paper............................................4
1.5 Limitations of the study.............................................................................4
2 Company Profile:.................................................................................4
2.1 Meghna Cement Mills Limited...................................................................4
2.2 Lafarge Surma Cement Ltd.......................................................................5
3 Ratio Analysis.......................................................................................6
3.1 Liquidity Ratio:........................................................................................6
3.1.1 Current Ratio:...................................................................................6
3.1.2 Quick Ratio:......................................................................................7
3.2 Profitability Ratios:...................................................................................8
3.2.1 Return on Equity (ROE):....................................................................8
3.2.2 Return on Asset (ROA):......................................................................9
3.2.3 Net Profit Margin:.............................................................................11
3.2.4 Gross Profit:....................................................................................12
3.3 Activity/Efficiency/Asset management ratio:...............................................14
3.3.1 Accounts Receivable Turnover (ART):................................................14
3.3.2 Average collection period (ACP)/ Days sales outstanding (DSO):...........15
3.3.3 Inventory Turnover (IT):....................................................................16
3.3.4 Inventory Processing Period (IPP):.....................................................17
3.3.5 Accounts Payable Turnover (APT):.....................................................18
3.3.6 Average Payment Period (APP):........................................................19
3.3.7 Fixed Asset Turnover (FAT):..............................................................20
3.3.8 Total Asset Turnover (TAT):...............................................................21

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Ratio & DuPont Analysis

3.4 Risk ratios:...........................................................................................22

3.4.1 Debt Ratio:.....................................................................................22
3.4.2 Debt to Equity Ratio:........................................................................23
3.4.3 Times Interest earned (TIE):..............................................................24
3.5 Market Value Ratio:...............................................................................25
3.5.1 P/E Ratio:.......................................................................................25
4 Dupont Analysis:................................................................................27
4.1 Meghna Cement Mills LTD......................................................................27
4.2 Lafarge Surma Cement..........................................................................28
4.3 Comparison:.........................................................................................29
5 Conclusion:.........................................................................................29
6 Findings & Recommendations..........................................................30
7 Appendix:..31

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Ratio & DuPont Analysis

1 Introduction of the report

1.1 Background of the study

The report is originated in the course of Business Finance (FIN201), by the honorable
course instructor Ms. Farzana Akter in the middle of the 1 st midterm classes. The term
paper is based on Ratio and Dupont Analysis of Meghna Cement Mills Limited. We also
select a peer group named Lafarge Surma Cement. We try to represent different ratios
based on graphical presentation and compared it with the peer group. Thus the report
was on Ratio Analysis of Meghna Cement Mills Limited which is a well-known cement
manufacturing company in Bangladesh.

1.2 Objectives of the study

The objectives of preparing this report consist of the followings:

The report will lead us to know the ins and outs procedure of analyzing a
financial report of a company.
The main objectives of doing this term paper is to get experience about
investigating the current profitability, efficiency and risk position of the company
It helps us to find out different Ratios of the company
To find out the reasons for which company faces lower liquidity & efficiency.
We also learn how to explain a ratio and compare it with other company
By DuPont analysis, we found which item i.e. profitability or efficiency or risk was
responsible for increase or decrease in return.

1.3 Scope of the report

The report is prepared on Ratio and DuPont Analysis of Meghna Cement Mills Limited.
The task is to compare those ratios with the ratios of Lafarge Surma Cement and to find
out the decision whether the company was financially good or bad compared to the pear
group. The work is done from the year 2008 to 2012. We also done DuPont analysis
between two company.

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Ratio & DuPont Analysis

1.4 Data collection methodology of the term paper

The term paper was made on the basis of the secondary data. We visited Dhaka Stock
Exchange to collect financial statement & annual report of Meghna Cement Mills Limited
and Lafarge Surma Cement. We have also gone through the, internet, websites and
many other references to make the report.

1.5 Limitations of the study

The report is made under various stressful situations. We have to make some
adjustments. Still then there are some limitations. These limitations are given below:

The knowledge was really limited as because we are inexperienced and have not
gone through many other things of the courses.

We saw some difference in comprehensive income statement and balance sheet

between two years. Though, adequate verification and cross- checking was
used, to minimize the error level.
Lack of co-ordinations in the different sectors of the term paper.
Problems in understanding many sectors of the term paper.
Lack of information about the various projects and services of the company.
Confidential information regarding past profit or product cost, financial
information was not accurately obtained

These are the areas which we had to cover up in making the report and very much
successful one. Thus we have to go through all these various steps in generating the
information and the data regarding making the report.

2 Company Profile:

2.1 Meghna Cement Mills Limited

Corporate Office :Bashundhara City

:13lKal1, PanthaPath, Dhaka
Factory :Mongla Port llA, Mongla,Bagerhat
Year of lncorporation :March 1992
Year of Commercial Production :January 1996
Year of Listing :Dhaka Stock Exchange : 1995
Chittagong Stock Exchange : 1996
Business Lines :Cement Manufacturing
Authorized Capital :Tk. 400,000,000'00
Paid-up Capital :Tk' 225,004'000'00

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Ratio & DuPont Analysis

2.2 Lafarge Surma Cement Ltd

Incorporated in 1997, this unique cross-border commercial venture is one of the largest
foreign investments in Bangladesh, producing world class clinker and cement since
2006.
Lafarge Surma Cement Ltd. was incorporated on 11 November 1997 as a private limited
company in Bangladesh under the Companies Act 1994 having its registered office in
Dhaka. On 20 January 2003, Lafarge Surma Cement Ltd. was made into a public
limited company. The Company is listed in Dhaka Stock Exchange and Chittagong
Stock Exchange. Today, Lafarge Surma Cement Ltd. has more than 20,000
shareholders. In November 2000, the two Governments of India and Bangladesh signed
a historic agreement through exchange of letters in order to support this unique cross
border commercial venture and till date it is the only cross border industrial venture
between the two countries. Since Bangladesh does not have any commercial deposit of
limestone, the agreement provides for uninterrupted supply of limestone to the cement
plant at Chhatak in Bangladesh by a 17 km long belt conveyor from the quarry located
in the state of Meghalaya. The plant of Lafarge Surma Cement Ltd., with its
sophisticated and state-of-the-arts machineries and processes started producing world
class clinker and cement in 2006.
Lafarge is the world leader in building materials with top ranking position in its Cement,
Aggregates & Concrete businesses. It has more than 176 years of experience and
operates in 64 countries with around 65,000 employees.

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Ratio & DuPont Analysis

3 Ratio Analysis
3.1 Liquidity Ratio:

3.1.1 Current Ratio:

Current Ratio
1.6

1.4 1.43
1.29 1.25
1.2 1.2 1.19
Meghna Cement
1
Lafarge Surma
0.8 Cement

0.6
0.43 0.47
0.4
0.32 0.31
0.2 0.23

0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the current ratio was 1.43 that means there were 1.43 units of current asset to
meet up 1 unit of current liabilities. The ratio was below standard 2:1, so we cannot say
that the current asset was sufficient to cover short liabilities. From 2009 to 2011 the
ratio was going down one after the other except to a little bit upward moved to 1.25 in
2012 though it also below the standard. The reason of low current ratio may be the
increased amount of current liabilities followed by short term bank loan and payable for
sundry expenses.

Overally the current ratio was very much ignorable as over the years this ratio was
below the standard 2:1.

For LAFARGE SURMA CEMENT,

In 2008 the current ratio was 0.32 that means there were 0.32 units of current asset to
meet up 1 unit of current liabilities. The ratio was below standard 2:1, so we cannot say
that the current asset was sufficient to cover short liabilities. In 2009 the ratio decreased
to .31, then from 2010 to 2012 the ratio was increased from .23 to .47 though it also
below the standard. The reason of low current ratio may be the decreased amount of
current asset and increased amount of current liabilities.

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Ratio & DuPont Analysis

Overally the current ratio was very much ignorable as over the years this ratio was
below the standard 2:1.

Comparison:

For both the companies the liquidity level was always questionable as current ratio was
below the standard 2:1 though the liquidity level for Meghna cement was better than
Lafarge Surma cement.

3.1.2 Quick Ratio:

Quick Ratio
1.2
1.07
1
0.92
0.86 Meghna Cement
0.8 0.79 0.81
Lafarge Surma
0.6 Cement

0.4

0.23 0.27
0.2 0.18
0.15 0.11
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the QR was 0.92 that means there were 0.92 units of current asset excluding
inventory to meet up 1 unit current liabilities. The ratio was below the standard 1:1, so
we can say that the CA are not sufficient to cover short term current liabilities. In 2009 it
decreased to 0.79 but later on, from 2010 to 2012 the QR was increasing from 0.81 to
1.07.

So overally the QR was questionable excluding 2012. So the business was lower level
of liquidity over the years which was not good for a business without 2012.

For LAFARGE SURMA CEMENT,

In 2008 the QR was 0.18 that means there were 0.18 units of current asset excluding
inventory to meet up 1 unit current liabilities. The ratio was below the standard 1:1, so

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Ratio & DuPont Analysis

we can say that the CA are not sufficient to cover short term current liabilities. In 2009
and 2010 it decreased from .15 to 0.11 but later on, from 2011 to 2012 the QR was
increasing from 0.23 to 0.27. the reason behind low quick ratio over the year may be
the high current liabilities followed trade payable and current portion of long term debt.

So overally the by QR was questionable. So the business was lower level of liquidity
over the years which are not good for a business.

Comparison:

In 2012 Meghna cement deserved more liquidity in QR & other 4 years it failed to earn
standard liquidity. On the other hand for Lafarge Surma cement the liquidity level from
2008 to 2012 was increasing very slowly by its QR standing always below standard 1:1.

3.2 Profitability Ratios:

3.2.1 Return on Equity (ROE):

ROE
60.00%

22.47% 22.12%
40.00%
Lafarge Surma
20.00% 21.62% 18.58% Cement
5.15% 6.86% 9.85%
4.81% Meghna Cement
0.00%
2008 2009 2010 2011 2012
-20.00%
-33.91%

-40.00%
-58.51%
-60.00%

For MEGHNA CEMENT LIMITED,

In 2008, the ROE was 4.81%, that means share holders equity generated 4.81% net
income.

In 2009, the ROE increased sharply to 21.62% where is in 2010, it decreased to 6.86%,
and 2011, it again increased to 9.85% and 2012, it increased sharply to 18.58%.

The reason behind the high ROE in 2009 and 2012 may be the high net income
followed by high sales and low cost.

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Ratio & DuPont Analysis

So, the overall profitability condition of the business was high fluctuated.

For LAFARGE SURMA CEMENT,

In 2008, the ROE was 5.15%. That means share holders equity generated 5.15% net
income.

In 2009, the ROE increased sharply to 22.47%, where is in 2010, it decreased to

-58.51%and 2011, it increased but the company was still in loss. In 2012, it increased
sharply to 22.12%

The reason behind the high ROE in 2009 and 2012 may be the high net income
followed by high sales and low cost.
On the other hand, the reason behind low ROE in 2010 may be the high net loss
followed by high financial expenses (Interest expenses) and other relevant operating
expenses. We think, low amount of Gross Profit can be also responsible for net
operating loss.

So, the overall profitability condition of the business was high fluctuated.

Comparison:

In terms of ROE, both Meghna Cement Ltd and Lafarge Surma Cement were highly
fluctuated. But because of operating loss, Lafarge Surma Cement is more fluctuated
than Meghna Cement Ltd. So, the ROE of Meghna Cement Ltd is better than Lafarge
Surma Cement.

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Ratio & DuPont Analysis

3.2.2 Return on Asset (ROA):

ROA
15.00%
10.01%
10.00% 5.76%
Lafarge Surma
5.00% 4.14% Cement
3.39%
0.99% 1.27% 1.62% Meghna Cement
0.00% 0.95%
2008 2009 2010 2011 2012
-5.00%
-9.04%
-10.00% -11.79%

-15.00%

For MEGHNA CEMENT LIMITED,

In 2008, the ROA was 0.95% that means the total asset of the company generated only
0.95% net profit.

In 2009, the ROA increased sharply to 4.14% where is in 2010, it decreased to 1.27%,
and then in 2011, it again increased to 1.62% and 2012, it increased sharply to 3.39%.

The reason behind the high ROA in 2009 and 2012 may be the high net income
followed by high sales and low cost.

So, the overall profitability condition of the business may be fluctuating.

For LAFARGE SURMA CEMENT,

In 2008, the ROA was 0.99% that means the total asset of the company generated only
0.99% net profit.

In 2009, the ROA increased sharply to 5.76% where is in 2010, it decreased to -9.04%,
and 2011, it again decreased to -11.79% and 2012, it increased sharply to 10.01%.

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Ratio & DuPont Analysis

The reason behind the high ROA in 2009 and 2012 may be the high net income
followed by high sales and low cost. On the other hand, the company experienced
operating loss in 2010 and 2011. So the ratio became negative value in the year 2010
and 2011.

So, the overall profitability condition of the business may be high fluctuating.

Comparison:

In terms of ROA, both Meghna Cement Ltd and Lafarge Surma Cement were fluctuated.
But because of operating loss, Lafarge Surma Cement is more fluctuated than Meghna
Cement Ltd. On the other hand, Meghna Cement Ltd got profit from the year 2008 to
2012. So, the ROA of Meghna Cement Ltd is better than Lafarge Surma Cement.

3.2.3 Net Profit Margin:

Net Profit Margin

30.00%

20.00% 17.42%
13.20%
10.00% Lafarge Surma
2.84% 2.87% Cement
0.00% 0.85% 0.80% 1.09% 2.14%
2008 2009 2010 2011 2012 Meghna Cement
-10.00%

-20.00%

-30.00% -28.64%
-35.87%
-40.00%

For MEGHNA CEMENT LIMITED,

In 2008, the Net Profit Margin was 0.85% that means the total sales of the company
generated only 0.85% net profit.

In 2009, the Net Profit Margin increased sharply to 2.87% where is in 2010, it
decreased to 0.80%, and 2011, it again increased to 1.09% and 2012, it increased
sharply to 2.14%.

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Ratio & DuPont Analysis

The reason behind the high Net Profit Margin in 2009 and 2012 may be the high net
income followed by high sales and low cost.

So, the overall profitability condition of the business was a little bit fluctuated.

For LAFARGE SURMA CEMENT,

In 2008, the NET PROFIT MARGIN was 2.84% that means the total sales of the
company generated only 2.84% net profit.

In 2009, the NET PROFIT MARGIN increased sharply to 13.20% where is in 2010, it
decreased to -28.64%, and 2011, it again decreased to -35.87% and 2012, it increased
sharply to 17.42%.

The reason behind the high Net Profit Margin in 2009 and 2012 may be the high net
income followed by high sales and low cost. On the other hand, the ratio produce
negative value in 2010 & 2011 because of net loss.

So, the overall profitability condition of the business was highly fluctuated.

Comparison:

In terms of Net Profit Margin, both Meghna Cement Ltd and Lafarge Surma Cement are
fluctuated. But because of net loss in 2010 and 2011, Lafarge Surma Cement is more
fluctuated than Meghna Cement Ltd. So, the Net Profit Margin of Meghna Cement Ltd is
better than Lafarge Surma Cement.

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Ratio & DuPont Analysis

3.2.4 Gross Profit:

Gross Profit
60.00%

50.00% 39.37%
40.22%
Lafarge Surma
40.00% 38.25%
Cement
30.00% Meghna Cement

20.00% 10.22% 9.19%

10.00% 8.92% 8.86% 10.55%

6.92%
0.00% 1.41%
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008, the Gross Profit Margin was 6.92% that means the total sales of the company
generated only 6.92% gross profit.

In 2009, the Gross Profit Margin increased sharply to 10.41% where is in 2010, it
decreased to 8.92%, and 2011, it again decreased to 8.86% and 2012, it increased
sharply to 10.55%.

The reason behind the high Gross Profit Margin in 2009 and 2012 may be the high
gross profit followed by high sales and low cost.

So, the overall profitability condition of the business was a little bit fluctuated.

For LAFARGE SURMA CEMENT,

In 2008, the Gross Profit Margin was 40.22% that means the total sales of the company
generated 40.22% gross profit.

In 2009, the Gross Profit Margin decreased to 38.25%. In 2010, it sharply decreased to
10.22%, and 2011, it again decreased to 9.19% where is in 2012, it increased sharply to
39.37%.

Meghna Cement Mills Limited 13

Ratio & DuPont Analysis

The reason behind the high Gross Profit Margin in 2008 and 2012 may be the high
gross profit income followed by high sales and low cost.

So, the overall profitability condition of the business was highly fluctuated

Comparison:

In terms of Gross Profit Margin, both Meghna Cement Ltd and Lafarge Surma Cement
are fluctuated. But considering overall the value of Gross Profit Margin, Lafarge Surma
Cement was carrying high gross profit margin than Meghna Cement Ltd. So, the Gross
Profit Margin of Lafarge Surma Cement Ltd is better than Meghna Cement Ltd.

3.3 Activity/Efficiency/Asset management ratio:

3.3.1 Accounts Receivable Turnover (ART):

ART
18
16 16.41
14
13.2 Meghna Cement
12
Lafarge Surma
10 10.62
Cement
8 7.86
7.16
6 5.68 5.92
4.63 4.94
4 3.78
2
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 MEGNA CEMENTs ART was 10.62 times that means sales/credit sales 10.62
times of accounts receivable (A/R) , in 2009 it increased to 16.41 times then both in
2010 & 2011 the times sequentially decreased from 13.20 to 7.68 and even in 2012 it
again dropped down to 5.92 times. So overall we can state that the efficiency was
enhanced from 2008 to 2009 but later on, from 2010 to 2012 the efficiency lessened
very sharply.

For LAFARGE SURMA CEMENT,

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Ratio & DuPont Analysis

In 2008 LAFARGE SURMAs ART was 4.63 times that means sales/credit sales 4.63
times of accounts receivable (A/R) , in 2009 it increased to 7.16 times then in 2010 &
2011 the times sequentially decreased from 5.68 to 3.78 times and in 2012 it increased
to to 4.94 times. So overally we can state that the efficiency position was fluctuating.

Comparison:

For both companies the efficiency levels were quietly changeable though the ART for
MEGHNA CEMENT was all the time more than LAFARGE SURMA CEMENT.

3.3.2 Average collection period (ACP)/ Days sales

outstanding (DSO):

ACP
160
140 95.18
72.87
120
77.79 Lafarge Surma
100 Cement
63.34
80 Meghna Cement
50.28
60 60.82
46.9
40
33.91
21.94 27.28
20
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the ACP/DSO was 33.91 days that means it took on an average 33.91 days to
collect the A/R., In 2009 the ACP dwindled 21.94 days then both in 2010 &2011 it
augmented consistently from 27.28 to 46.90 days and even in 2012 it also amplified to
60.82days. So over ally the efficiency level for MEGHNA CEMENT was bad by
calculating ACP except in 2009.

For LAFARGE SURMA CEMENT,

In 2008 the ACP/DSO was 77,79 days that means it took on an average 77.79 days to
collect the A/R., In 2009 the ACP decreased to 50.28 days then both in 2010 &2011 it
increased consistently from 63.34 to 95.18 days and even in 2012 it once more

Meghna Cement Mills Limited 15

Ratio & DuPont Analysis

decreased to 72.87 days. So over ally the efficiency level for LAFARGE SURMA
CEMENT was very vastly fluctuating.

Comparison:

The efficiency level for MEGHNA CEMENT was downward sloping, seen by calculating
ACP except the irregular consistency in 2009, on the contrary the DSO/ACP for Lafarge
Surma Cement was come down from 2008 to 2009 serially from 77.79 to 50.28 again
from 2010 to 2012 it increased irregularly basis as efficiency level also fluctuating with
this ratio.

3.3.3 Inventory Turnover (IT):

IT
16
14
13.42
12
Meghna Cement
10 Lafarge Surma
8 Cement
6.93 6.93
6
5.01 5.03
4 4.43 3.89
3.4 3.72 3.52
2
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the IT was 5.01 times which indicates COGS/sales was 5.01 times of inventory,
in 2009 the IT enlarged to 5.03 times, then from 2010, 2011 & 2012 the IT keep going
up successively from 6.93, 6.96 & 13.42 times. So it proves that overall the efficiency
level was first-class from 2008 to 2012.

For LAFARGE SURMA CEMENT,

In 2008 the IT was 3.4 times which indicates COGS/sales was 3.4 times of inventory, in
2009 the IT increased to 3.72 times, then in 2010 it again went up to 4.43 times,
although in 2011 IT going down to 3.52 times. In 2012 IT increased to 3.89 times So it
proves that overally the efficiency level was increasing from 2008 to 2012 excluding
2011.

Comparison:

Meghna Cement Mills Limited 16

Ratio & DuPont Analysis

The Inventory Turnover (IT) position for LAFARGE SURMA CEMENT was increasing in
2008, 2009 & 2010 then it diminished in next 2 years, on the other hand the IT position
for MEGHNA CEMENT was at all times flourishing.

3.3.4 Inventory Processing Period (IPP):

IPP
120
105.89 102.24
100 96.73 92.61
81.28 Meghna Cement
80
71.91 71.55 Lafarge Surma
60 Cement
51.93 51.72
40
26.83
20

0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the IPP was 71.91 days which specify it received on an average 71.91 days to
process the inventory from raw material. Then in 2009, 2010, 2011 & 2012 the IPP
diminished consecutively to 71.55, 51.93, 51.72 & 26.83 days. So the efficiency level
was growing at a higher rate.

For LAFARGE SURMA CEMENT,

In 2008 the IPP was 105.89 days which specify it received on an average 105.89 days
to process the inventory from raw material. In 2009 the IPP decreased to 96.73 days,
then in 2010, 2011 & 2012 the IPP starts to augment consecutively to 81.28, 102.24 &
92,61 days. So the efficiency level was very bad except 2010 comparing with 2008,
2009, 2011 & 2012.

Comparison:

For MEGHNA CEMENT the efficiency level by IPP was constantly first class
alternatively for LAFARGE SURMA Cement the IPP position was quietly irregular
exclusive of 2010.

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Ratio & DuPont Analysis

3.3.5 Accounts Payable Turnover (APT):

APT
14

12 11.58
10 9.87 9.53 Meghna Cement
9.46 9.08
8 Lafarge Surma
Cement
6

4
2.53 2.61 2.74 2.59 2.67
2

0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the APT was 9.46 times that states the credit purchase or COGS was 9.46
times of accounts payable (A/P).In 2009 the IT went up to 11.58 times then in
2010,2011 & 2012 the IPTs were at sixes and sevens 11.58,9.08,9.87 &9.53 times. So
overally the efficiency level was high fluctuating.

For LAFARGE SURMA CEMENT,

In 2008 the APT was 2.55 times that states the credit purchase or COGS was 2.55
times of accounts payable (A/P).In 2009 the IT went up to 2.61 and again it increased
to 2.74 in 2010, then in 2011 the APT came down to 2.59 & in 2012, it increased to
2.67 times. So overally the efficiency level was little fluctuating.

Comparison:

The efficiency level for MEGHNA CEMENT was highly variable. In contrast for
LAFARGE SURMA CEMENT the efficiency level was decreasing by calculating APT for
both.

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Ratio & DuPont Analysis

3.3.6 Average Payment Period (APP):

APP
160
140 142.53 138.08 138.87 135
131.35
120
Meghna Cement
100 Lafarge Surma
80 Cement
60
40 38.06 39.63 36.46 37.77
31.09
20
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the APP was 38.06 days that denotes it took on an average 38.06 days to pay
accounts payable (A/P). Then in 2009, 2010, 2011 &2012 the APPs were different
serially 31.09, 39.63, 36.46 & 37.77 days. So the efficiency level was irregular.

For LAFARGE SURMA CEMENT,

In 2008 the APP was 142.53 days that denotes it took on an average 142.53 days to
pay accounts payable (A/P). Then in 2009 it decreased to 138.08days but again in 2010
it decreased to 131.35 days and ultimately in 2011, the APPs increased successively to
138.87 & in 2012, it decreased to 135 days. So the efficiency level may be fluctuating.

Comparison:

From APP calculation it seems that the efficiency level was not good as APP was
reducing as fluctuating rate for LAFARGE SURMA CEMENT; conversely the efficiency
level was extremely irregular for MEGHNA CEMENT.

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Ratio & DuPont Analysis

3.3.7 Fixed Asset Turnover (FAT):

FAT
7

6 5.92
5 4.99 Meghna Cement
4.29 4.38 Lafarge Surma
4
Cement
3
2.67
2

1
0.51 0.73
0.41 0.36 0.4
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the FAT was 2.67 times which represents the sales was 2.67 times of total fixed
assets. Then in 2009, 2010, 2011 & 2012 the FATs were raising one after the other 4.29,
4.38, 4.99 & 5,92times. So the efficiency level was consecutively on the rise from 2008
to 2012.

For LAFARGE SURMA CEMENT,

In 2008 the FAT was 0.41 times which represents the sales was 0.41 times of total fixed
assets. Then in next four years the FATs were fluctuating one after the other without
2012 when the FAT came to 0.73 times. So the efficiency level was not superior even it
was fluctuating.

Comparison:

In FAT proportion, the efficiency level was consecutively on the rise from 2008 to 2012
for MEGHNA CEMENT, on the opposite the efficiency level was enhancing from 2008 to
2012 without the intervene reduction of 2010 & 2011 for LAFARGE SURMA CEMENT.

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Ratio & DuPont Analysis

3.3.8 Total Asset Turnover (TAT):

TAT
1.8
1.6 1.59 1.59
1.44 1.48
1.4
Meghna Cement
1.2
1.12 Lafarge Surma
1
Cement
0.8
0.6 0.57
0.4 0.35 0.44
0.32 0.33
0.2
0
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008 the TAT was 1.12 times that means the sales was 1.12 times of total assets.
Then in next 4 years till 2012 the TAT was increasing at a moderate rate excluding 2011.

For LAFARGE SURMA CEMENT,

In 2008 the TAT was 0.37 times that mean the sales was 0.37 times of total assets.
Then in next year the TAT was increased to 0.44 times & in 2010, it decreased to 0.32
times. we see the TAT enlarged to 0.33 times in 2011 but the company was enabled to
hold this increasing TAT and yet again it increased to 0.57 times. So overally the
efficiency level in 2008, 2009, 2010 & 2011 was fluctuating. In addition, In 2012, the
efficiency level was increasing.

Comparison:

IN TAT relation, except 2011 overally the efficiency level was okay for MEGHNA
CEMENT, in opposition the efficiency level in 2008, 2009 & 2012 was increasing, where
in 2010 &2011 the efficiency level sloped downward was for LAFARGE SURMA
CEMENT.

At last we can finalize saying that among eight efficiency proportions MEGHNA
CEMENT did well in 4 proportions are IT, IPP, FAT &TAT alternatively LAFARGE
SURMA CEMENT could not do well at least 1 ratio of efficiency level consecutively .

Meghna Cement Mills Limited 21

Ratio & DuPont Analysis

3.4 Risk ratios:

3.4.1 Debt Ratio:

Debt Ratio
90.00%
83.17%
80.00% 80.53%
74.10% 75.40% 77.86% 76.08%
70.00% 72.73%
71.89% 64.73% Meghna Cement
60.00%
Lafarge Surma
50.00% 50.71%
Cement
40.00%
30.00%
20.00%
10.00%
0.00%
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008, the debt ratio was 72.73%. That mean 72.73% of total asset was financed by
short term and long term debt. This ratio was greater than 50% which indicated that this
company was more prone to risk of probability to default.

In 2009, the ratio was 56.63% where is in 2010, it increased to 75.04%. The ratio also
increased in 2011 but decreased to 76.08% in 2012. The reason behind high risk in all
year may be the high amount of total liabilities followed by payable for sundry debts and
short term bank loan.

So overall the risk position of the business was higher from the year 2008 to 2012.

For LAFARGE SURMA CEMENT,

In 2008, the debt ratio was 80.53%. That mean 80.53 % of total asset was financed by
short term and long term debt. This ratio was greater than 50% which indicated that this
company was more prone to risk of probability to default.

In 2009, the ratio decreased to 71.89% where is in 2010, it increased to 83.17%. The
ratio decreased sharply to 64.73% and in 2011, it again decreased to 76.08% in 2012.
The reason behind high risk in all year may be the high amount of total liabilities.

Meghna Cement Mills Limited 22

Ratio & DuPont Analysis

So overall the risk position of the business was higher from the year 2008-2012 but the
company was improving their condition by reducing the risk in the recent years.

Comparison

Both companies are facing higher risk to be the probability of default but the recent risk
position of MEGHNA CEMENT LIMITED is higher than LAFARGE SUMA LIMITED.

3.4.2 Debt to Equity Ratio:

Debt to Equity Ratio

600.00%
538.17%
500.00%
473.36%
400.00% 417.60%387.32%406.53% 417.17%Meghna Cement
369.02% Lafarge Surma
300.00% Cement
280.54%
200.00% 186.19%

100.00% 112.08%

0.00%
2008 2009 2010 2011 2012

For MEGHNA CEMENT LIMITED,

In 2008, the debt to equity ratio was 369.02%. That mean we have taken debt financing
369.02% of total equity. The company was heavily prone to the risk of probability of
default.

In 2009, the ratio increased to 387.32% and in 2010, it again increased to 406.53%.The
ratio increased sharply to 473.36% where is in 2011, it decreased to 76.08% in 2012.
The reason behind high risk over all year may be the high amount of current liabilities.

So overall the risk position of the business was higher from the year 2008 to 2012.

For LAFARGE SURMA CEMENT,

In 2008, the debt to equity ratio was 417.60%. That mean we have taken debt financing
417.60% of total equity. The company was heavily prone to the risk of probability of
default.

In 2009, the ratio decreased to 280.54% where is in 2010, it increased sharply to

83.17%. The reason behind high risk in 2010 may be high amount of current liabilities

Meghna Cement Mills Limited 23

Ratio & DuPont Analysis

and low amount of shareholders equity. The ratio decreased sharply to 186.19% in
2011 and it again decreased to 112.08% in 2012. The reason behind low risk in the year
2011 &2012 may be the high amount of shareholders equity and low amount of current
liabilities.

So overall the risk position of the business was higher from the year 2008-2012 but the
company was improving their condition by reducing the risk in the recent years.

Comparison

Both companies are facing higher risk to be the probability of default but the recent risk
position of MEGHNA CEMENT LIMITED is higher than LAFARGE SUMA LIMITED.

3.4.3 Times Interest earned (TIE):

TIE
5

4 4.02

3 Meghna Cement
2.54
2.46 2.41 Lafarge Surma
2 1.91 Cement
1.35
1.31 1.47
1

0 0.08
2008 2009 2010 2011 2012
-1
-1.55
-2

For MEGHNA CEMENT LIMITED,

In 2008, the TIE ratio was 1.35 times. That mean operating income of 2008 was only
1.35 times of interest expense.

In 2009, the ratio increased sharply to 2.54 times where in 2010, it decreased 2.41
times. In 2011 the ratio again decreased sharply in 1.47 times where is in 2012, it
increased to 1.91 times.

So overall risk position of the MEGHNA CAMENT LIMITED was fluctuating.

For LAFARGE SURMA CEMENT,

In 2008, the TIE ratio was1.31 times. That mean operating income of 2008 was only
1.31 times of interest expense.

Meghna Cement Mills Limited 24

Ratio & DuPont Analysis

In 2009, the ratio increased sharply to 2.46 times where in 2010, it decreased sharply
and produce negative figure of -1.55 times because of net operating loss. In 2011 it
slowly increased to 0.08 times and in 2012 the ratio increased sharply to 4.02 times.

The reason behind negative figure in 2010 was operating loss and the reason behind
high TIE ratio in 2012 was high earnings before interest and tax.

So overall risk position of the LAFARGE SURMA CEMENT was fluctuating highly.

Comparison

As the TIE ratio of LAFARGE SURMA CEMENT was fluctuating highly than MEGHNA
CEMENT LIMITED, I think MEGHNA CEMENT LIMITED is in the better position than
LAFARGE SURMA CEMENT.

3.5 Market Value Ratio:

3.5.1 P/E Ratio:

P/E Ratio
250.00

211.37
200.00
Meghna Cement
150.00 155.16
Lafarge Surma
Cement
100.00

50.00 47.16
37.55
16.69
0.00 3.42 0.59 (0.41) (0.14) 0.21
2008 2009 2010 2011 2012
-50.00

For MEGHNA CEMENT LIMITED,

In 2008, the P/E ratio was 37.55 times. That mean the investors were willing to pay
37.55 times market price of 1 unit earnings.

In 2009 the P/E Ratio increased sharply to 211.37 times where in 2010, the ratio
decreased to 155.16 times and so on the next two years. That is, in 2011, the ratio was
47.16 times and in 2012, It was 16.69 times.

The Reason behind high P/E Ratio in 2009 may be the high market price per share.

Meghna Cement Mills Limited 25

Ratio & DuPont Analysis

Though the P/E ratio in 2009 increased sharpely, it was decreased down in the following
years. So,overally growth rate of Meghna Cement Mills Limited may not be satisfactory,

For LAFARGE SURMA CEMENT,

In 2008, the P/E ratio was 3.42 times. That mean the investors were willing to pay 3.42
times market price of 1 unit earnings.

In 2009 the P/E Ratio decreased to 0.59 times. In 2010, the ratio again decreased to
-0.41 times. The ratio produced negative figure because of net operating loss in 2010
and so on the next year. In 2012, the ratio increased slowly to 0.21 times.

So we think, the overall growth condition of Lafarge Surma Cement was not good. The
reason may be the low market price and dramatic loss on 2010 & 2011 also.

Comparison

The growth condition of Meghna Cement Mills Limited was better than Lafarge Surma
Cement which was reflected in the line chart. Though the growth line of Meghna
Cement Mills Limited was decreasing in last two years, the growth line of Meghna
Cement Mills Limited was always above the growth line of Lafarge Surma Cement.

Lafarge Surma Cement also faced net operating loss in 2010 and 2011. So Meghna
Cement Mills Limited was better than Lafarge Surma Cement.

Meghna Cement Mills Limited 26

Ratio & DuPont Analysis

4 Dupont Analysis:
4.1 Meghna Cement Mills LTD

Net profit Total Asset Equity Return on

Year
Margin Turnover Multiplier Equity
2008 0.85 1.12 5.05 4.81
2009 2.87 1.44 5.23 21.62
2010 0.80 1.59 5.39 6.86
2011 1.09 1.48 6.11 9.85
2012 2.14 1.59 5.46 18.58

Percentage changed (Meghna cement):

Net profit Total Asset Equity Return on
Year
Margin Turnover Multiplier Equity
2009 237.65% 28.57% 3.54% 349.48%
2010 -72.13% 10.42% 3.09% -68.27%
2011 36.25% -6.92% 13.22% 43.59%
2012 96.33% 7.43% -10.57% 88.63%

Here in 2008, ROE was 4.81% where in 2009, ROE was 21.62%. The reason behind
high ROE in 2009 is high Net profit Margin, high Total Asset Turnover and Risk. Here
profitability increased by 237.64%, efficiency increased by 28.57% and risk increased
by 3.56%. Here in 2009, Net profit Margin was more responsible for high return rate.

In 2010, ROE dropped down to 6.86%. The reason behind fall of ROE was fall of
profitability i.e Net profit Margin.

In 2011, ROE again increased to 9.85%. The reason behind increase of ROE was the
increase of both profitability and risk. Here profitability increased by 36.25% and risk
increased by 13.22%. So Profitability is more responsible for high return in 2011.

In 2012, ROE highly increased to 18.58% compared to 2011. The reason behind
increase of ROE was the increase of both profitability and efficiency. Here profitability
increased by 96.33% and efficiency increased by 7.43%. So Profitability is more
responsible for high return in 2012.

Meghna Cement Mills Limited 27

Ratio & DuPont Analysis

4.2 LAFARGE SURMA CEMENT

Net profit Total Asset Equity Return on
Year
Margin Turnover Multiplier Equity
2008 2.84 0.35 5.18 5.15
2009 13.20 0.44 3.87 22.47
2010 -28.64 0.32 6.38 -58.51
2011 -35.87 0.33 2.86 -33.91
2012 17.42 0.57 2.23 22.12

Percentage changed (Lafarge Surma Cement):

Net profit Total Asset Equity Return on
Year
Margin Turnover Multiplier Equity
2009 364.79% 25.71% -25.29% 336.31%
2010 -316.97% -27.27% 64.86% -360.39%
2011 -25.24% 3.13% -55.17% 42.04%
2012 148.56% 72.73% -22.03% 165.23%

Here in 2008, ROE was 5.15% where in 2009, ROE was 22.47%. The reason behind
high ROE in 2009 is high Net profit Margin and high Total Asset Turnover. Here
profitability increased by 364.78% and efficiency increased by 25.71%.Here in 2009,
Net profit Margin was more responsible for high return rate.

In 2010, ROE dropped down to -58.51%. that mean the company in heavy operating
loss. The reason behind fall of ROE was fall of profitability and fall of efficiency. Here,
profitability is heavily responsible for turning the profit into loss.

In 2011 the company was still in loss but in 2012, the profitability increase highly into
22.12%. The reason behind high return in 2012 was high profitability and high
efficiency. Here profitability is more responsible to turn the loss into profit.

Meghna Cement Mills Limited 28

Ratio & DuPont Analysis

4.3 Comparison:

ROE
60.00%

22.47% 22.12%
40.00%
Lafarge Surma
20.00% 21.62% 18.58% Cement
5.15% 6.86% 9.85%
4.81% Meghna Cement
0.00%
2008 2009 2010 2011 2012
-20.00%
-33.91%

-40.00%
-58.51%
-60.00%

By observing line chart of ROE of both Meghna Cement Mills LTD and Lafarge Surma
Cement, the ROE of Meghna Cement Mills LTD was Quite Stable than Lafarge Surma
Cement.

Lafarge Surma Cement was faced loss in the year 2010 and 2011 where Meghna
Cement Mills LTD always in operating profit

So Meghna Cement Mills LTD is better than Lafarge Surma Cement founded from
Dupont Analysis.

5 Conclusion:
Meghna Cement Mills Limited is one of the market leader in cement manufacturing
industry of Bangladesh. It is gradually expanding its assets and able to proper utilize
its assets well. We tried with our best effort to make the report most accurately.
Finally, we can come to a final decision That the overall financial position of the
company may said to be satisfactory over the years.

Meghna Cement Mills Limited 29

Ratio & DuPont Analysis

6 Findings & Recommendations

At the end of the report we try to summarize the entire report and now we are going
to show some findings. We try to sum up all the key points here & try to give
solution about few problems that the both companies are facing largely. They are
given below:
Meghna Cement Limited has taken high quantity of current liabilities followed by
short term bank loan and payable for sundry expenses. As a result liquidity ratio
of Meghna Cement Mills Limited was below the standard which may not be good
for the company. The authority has to reduce these liabilities.
Lafarge Surma Cement faced high operating loss in 2010 & 2011 because of low
sales at the same time high cost of good sold and high interest burden.
Considering last 3 years, if we evaluate the profitability ratios, we found that the
company was increasing its return. Day by day, Meghna Cement Mills Limited
was increasing its revenue generation capacity which was really appreciable. On
the other hand Lafarge Surma Cement was faced net operating loss. So
investing in Meghna Cement will be preferable than Lafarge Surma Cement.
Efficiency followed by inventory turnover, fixed asset turnover and total asset
turnover indicate that Meghna Cement Mills Limited was performing good
whether company failed to increase its efficiency in collecting accounts
receivable.
The company should speed up its average collection process which will increase
its efficiency.
Over the years, Meghna Cement Mills Limited was in high risk of probability to
default because of high amount payable for sundry debts and short term bank
loan. The company should reduce their short term loans to reduce its debt risk.
By evaluating P/E Ratio, in 2009, the company enjoys high growth of 211.37
times but for next 3 years, it was decreasing.
Net profit is mainly responsible for increasing return on equity of Meghna Cement
Mills Limited over the years.
The company should increase its sales, at the same time it should reduce cost of
the selling goods to enhance its profit.
The company should reduce its operating expenses.
The company has taken high amount of current liabilities like sundry debts and
short term bank loan for financing which increased risk over the year. They need
to reduce current liabilities with a view to managing debt and leveage.

Meghna Cement Mills Limited 30