Financial Statement Analysis

Of
Premier Cement Mills Limited
 NORTH SOUTH UNIVERSITY
Term Paper on “Financial Statement Analysis of
Premier Cement Mills Limited”

Course Name

Managerial Finance
Course Code: BUS-635
Section: 2

Submitted by:

Sayed Muhammad Abdullahel Baquie 1835145060

Eleyas Mahbub Rifat 1735217660
Insha Tahreem 1815186660
Kazi Asiful Alam 1815230660
Zarin Tansim Zara 1835261660
Md. Siddiqur Rahman 1915244660

Submitted to:

Dr. H. M. Mosarof Hossain

Professor, Department of Finance
School of Business and Economics
North South University

Date of Submission:

August 25, 2019

Letter of Transmittal

25 August, 2019
Professor Dr. H. M. Mosarof Hossain
Course Instructor
School of Business
North South University

Subject: Regarding submission of term paper on Financial Statement Analysis of Premier

Cement Mills Limited.

Dear Sir,

We want to thank you for giving us such opportunity to submit the term paper on “Financial
Statement Analysis of Premier Cement Mills Limited” for the course Managerial Finance (BUS-
635), which had been a great experience for us to work with such a real life issue. We tried
utmost to make and let it look like a professional one. Any shortcomings are expected to have a
kind view for our encouragement. Thank you for your sincere & honest try to let us make easy
and get familiar with the terms and facts of this analysis to help us make the paper a successful
one.

Our efforts will be valued; if this report serves the purpose for what it’s been assigned.

Thank You.

Sincerely,

Name Student ID Signature

Sayed Muhammad Abdullahel Baquie 1835145060
Kazi Asiful Alam 1815230660
Zarin Tansim Zara 1835261660
Inshe Tahreem 1815186660
Md. Siddiqur Rahman 1915244660
Eleyas Mahbub Rifat 1735217660

Acknowledgement
The whole report was based on the “Financial Statement Analysis of Premier Cement Mills
Limited” in the light of the course Managerial Finance (BUS- 635), results from considerable
intellectual and moral support given by our honorable course teacher, Professor Dr. H.
M.Mosarof Hossains, School of Business in North South University. Over the last three
months, he has been our guide from whom we got the inspiration and guidance to learn
“Managerial Finance”. We strongly believe works like this one will surely help us to develop &
make us better adapted as well as capable to cope with the issues & practical exposures in this
field as well as to the whole of the Legislative tools that are being extensively exploited in
today’s world.

Also, we would like to remember the almighty Allah for blessing us with the strength, ability and
patience to do this task.

Finally, we want to thanks all our team members and each other, to share personal expertise,
struggled with difficulties, passed away many awaked night to design the report and to collect
the information.

ii

Executive Summary
Premier Cement Mills Limited is one of the most innovative cement manufacturers in
Bangladesh. It manufactures products with the best quality raw materials and technical
excellence for ensuring dependability and premium quality.

Premier Cement Mills Limited incorporated in Bangladesh on 14 October 2001 as a Private

Limited Company, 700 employees in operation at home and abroad- Bangladesh, India,
Myanmar, etc., annual production capacity of 2.4 million tons (8,000 tons per day). Premier
Cement Mills Limited enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

Inventory Turnover Ratio measures, as we know, how many times average inventory is "turned"
or sold during a period. In 2018 Inventory Turnover in Premier Cement Mills is highest 12.24
times. And in 2015 it is 5.3 times. It is lower comparable than the other years. It indicates that
sales performance of 2015 is not as good as the other years.

In 2018 net sales was increased than the previous year but gross profit was decreased. For that
reason, Gross profit margin is decreased by 6.15%. In 2015 and 2016 Gross Profit Margin were
almost at the same percentage. In 2018, net sales were increased more than the previous year
but profit margin was decreased. As a result, the gross profit margin was decreased by 1.9.

In 2016 Premier Cement limited maintained almost 18.07% net profit over shareholders equity.
It ended up in 7.72% net profit over common equity in 2014. The increasing rate of
shareholders equity and net profit were the same. In 2018 Premier Cement limited maintained
almost 9.72% net profit over shareholders equity.

iii

Table of Contents
Letter of Transmittal:.......................................................................................................................i
Acknowledgement:..........................................................................................................................ii
Executive Summary:......................................................................................................................iii
Chapter 1- Introduction...................................................................................................................1
1.1. Background of the Report:................................................................................................2
1.2. Objectives of the Report:...................................................................................................2
1.3. Methodology of the Report:..............................................................................................2
1.4. Scope of the Report:..........................................................................................................3
1.5. Limitations:.......................................................................................................................3
Chapter 2: Organizational Profile....................................................................................................4
2.1. Premier Cement Mills Limited:............................................................................................5
2.2. Mission of Premier Cement Mills Limited:..........................................................................5
2.3. Vision of Premier Cement Mills Limited:............................................................................5
2.3. Core Values of Premier Cement Mills Limited:...................................................................5
Chapter 3- Literature Review..........................................................................................................6
3.1. Financial Statement Analysis:...............................................................................................7
3.2. Techniques of Financial Statement Analysis:.......................................................................7
3.3. Ratio Analysis:......................................................................................................................7
3.4. Liquidity Ratio:.....................................................................................................................7
3.4.1. Current Ratio:.................................................................................................................8
3.4.2. Quick Ratio:...................................................................................................................8
3.5. Asset Management Ratio:.....................................................................................................8
3.5.1. Inventory Turnover Ratio:..............................................................................................8
3.5.2. Account Receivable Turnover Ratio:.............................................................................8
3.5.3. Total Assets Turnover Ratio:.........................................................................................9
3.5.4. Fixed Asset Turnover Ratio:..........................................................................................9
iv
3.6. Debt Management Ratio/ Leverage Ratio:.........................................................................9
 3.6.1. Debt Ratio:...................................................................................................................9

3.6.2. Debt Equity Ratio:........................................................................................................9

3.6.3. Equity Multiplier:.........................................................................................................10

3.7. Profitability Ratio:..............................................................................................................10
3.7.1. Gross Profit Margin:.....................................................................................................10
3.7.2. Net Profit Margin:........................................................................................................10
3.7.3. Return on Assets (ROA):.............................................................................................10
3.7.4. Return on Equity (ROE):..............................................................................................11

3.7.5. Earnings per Share (EPS):............................................................................................11

3.7.6. Dividend Payout Ratio:................................................................................................11

3.7.7. Retention Ratio:............................................................................................................11
3.7.8. Operating Expense Ratio:.............................................................................................11
3.7.9. Operating Profit Margin Ratio:....................................................................................12
3.7.10. Times Interest Earned:...............................................................................................12
3.8. Market Value Ratio:............................................................................................................12
3.8.1. Book Value per Share:.................................................................................................12
3.8.2. Market Value per Share:..............................................................................................12
3.8.3. Price/Earnings Ratio (P/E):..........................................................................................12
Chapter 4- Ratio Analysis..............................................................................................................13
4.1. Liquidity Ratio:...................................................................................................................14
4.1.1. Current Ratio................................................................................................................14
4.1. 2.Quick Ratio..................................................................................................................15
4.2. Asset Management Ratio....................................................................................................16
4. 2.1. Inventory Turnover Ratio............................................................................................16
4.2.2. Average Collection Period:..........................................................................................17
4.2.3. Accounts Receivable Turnover Ratio:.........................................................................18
4.2.4. Fixed Asset Turnover Ratio:........................................................................................19
v
4.2.4. Total Asset Turnover Ratio..........................................................................................20
 4.3. Debt Management Ratio.....................................................................................................21
4.3.1. Debt ratio (debt to assets ratio)....................................................................................21
4.3.2. Debt - Equity Ratio......................................................................................................22
4.3.3. Equity Multiplier:.........................................................................................................23
4.4. Profitability Ratio:..............................................................................................................23
4.4.1. Return on Asset............................................................................................................23
4.4.2. Return on Equity..........................................................................................................24
4.4.3. Operating Expense Ratio:.............................................................................................25
4.4.4. Operating Profit Margin Ratio:....................................................................................26
4.4.5. Times Interest Earned Ratio:........................................................................................27
4.4. 6. Gross Profit Margin.....................................................................................................28
4.4.7. Net Profit Margin.........................................................................................................29
4.4.8. Earnings per Share (EPS).............................................................................................30
4.5. Market Value Ratio:............................................................................................................31
4.5.1. Book Value per Share:.................................................................................................31
4.5.2. Market value to Book Ratio:........................................................................................32
Chapter 5: Conclusion and Recommendations..............................................................................34
5.1. Conclusion:.........................................................................................................................35
5.2. Recommendations:..............................................................................................................36
Chapter 6: References....................................................................................................................37
References from Book:..............................................................................................................38
References from Internet:..........................................................................................................38

vi
Chapter 1:
Introduction

1
1.1. Background of the Report:

This term paper has been prepared as a part of the Managerial Finance course of North South
University. The Term Paper titled, “Financial Statement Analysis of Premier Cement Mills
Limited” is being assigned by our course instructor. We have collected all the required
information from the annual report of Premier Cement Mills Limited for the year 2018, 2017,
2016, 2015 & 2014. We have tried our best to combine and relate the information with the
concept of the report, but due to time limitation and restricted access to information there still
remains some limitations.

1.2. Objectives of the Report:

 The main objective of this report is to analyze the financial statements of
Premier Cement Mills Limited within the time period of 2014 to 2018.

Others:

 To identify the future growth and current position of Premier Cement Mills
Limited

 To Provide recommendations to improve Premier Cement Mills Limited’s

performance

1.3. Methodology of the Report:

Four sources are highly used to collect the data for calculating the ratios:

 Internet.
 Text Books
 Lecture Sheets and Slides
 Annual Report of Premier Cement Mills Limited

2
1.4. Scope of the Report:

This report is being conducted to know the attitude toward the companies finance and
financial conditions from different point of view.

But, Premier Cement Still Mills Limited is a Large Organization. So, it is unattainable to
work on the whole financial condition from the beginning of this organization at a time. As a
result, we have chosen only 2014 to 2018 annual reports to do this analysis.

1.5. Limitations:

 Restricted access in Internet

 Difficult to ensure the accuracy of the entire Term Paper.
 It was hard to identify the exact reason of the variations.
 The time frame for this Term Paper was restricted to a single semester. If it
was allowed more time, surely the analysis will be more accurate and viable.

3
 Chapter 2:
Organizational Profile

4
2.1. Premier Cement Mills Limited:

Premier Cement Mills Limited is one of the most innovative cement manufacturers in
Bangladesh. It manufactures products with the best quality raw materials and technical
excellence for ensuring dependability and premium quality.

 Incorporated in Bangladesh on 14 October 2001 as a Private Limited

Company.
 Start commercial production on 12th March 2004.
 First Export of cement on 26th April 2008.
 Converted to Public Limited Company on 16th April 2010.
 700 employees in operation at home and abroad- Bangladesh, India,
Myanmar, etc.
 Nature of Business: Manufacturing and Marketing.
 Annual production capacity of 2.4 million tons (8,000 tons per day).
 Enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

2.2. Mission of Premier Cement Mills Limited:

Work towards the development of the society through sustainable growth and excellence in
performance

2.3. Vision of Premier Cement Mills Limited:

To become a Leader in the Cement industry by satisfying our existing as well as potential
customers through production excellence, competitive Pricing and also by creating value for
the stakeholder.

2.3. Core Values of Premier Cement Mills Limited:

The core values of Premier Cement Mills Limited lies on ensuring highest standards of Ethics
in business integrity and process for the best interests of all our stakeholders - not just the
customers - But also the shareowners, workforce and external parties.

5
 Chapter 3:

Literature Review

6
3.1. Financial Statement Analysis:
Financial Statement Analysis is defined as the process of identifying financial strengths and
weaknesses of the firm by properly establishing relationship between the items of the balance
sheet and the profit and loss account.

The process of reviewing and evaluating a company’s financial statements (such as the
balance sheet or profit and loss statement), thereby gaining an understanding of the financial
health of the company and enabling more effective decision making.

3.2. Techniques of Financial Statement Analysis:

1. Common-size or vertical analysis

2. Horizontal analysis
3. Trend percentage analysis
4. Ratio analysis
5. Statement in changes in financial position (Cash flow statement and funds
flow statement)

This report is based on Ratio Analysis. So, only Ratio Analysis is described broadly in the
literature review.

3.3. Ratio Analysis:

Single most important technique of financial analysis in which, quantities are converted into
ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or
different industries. Ratio analysis determines trends and exposes strengths or weaknesses of
a firm.
3.4. Liquidity Ratio:

Ratios that show, the relationship of a firm’s cash and other current assets to its current
liabilities is called liquidity ratio.

A class of financial metrics that is used to determine a company's ability to pay off its short-
terms debts obligations is liquidity ratio. Generally, higher the value of the ratio, larger the
margin of safety, that the company may cover its short-term debts.

7
3.4.1. Current Ratio:

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and
long-term obligations. The current ratio is called “current” because, unlike some other
liquidity ratios, it includes all current assets and liabilities. The current ratio is also known as
the working capital ratio.

Current Ratio is calculated by dividing the current assets of a company by current

liability

3.4.2. Quick Ratio:

The quick ratio is a measure of how well a company can meet its short-term financial
liabilities. It’s also known as the acid-test ratio.

Quick (Acid Test) Ratio is calculated by subtracting the inventory from current assets
then dividing by the current liabilities.

3.5. Asset Management Ratio:

A set of ratios that measures how effectively a firm is managing its assets is called asset
management ratio.

3.5.1. Inventory Turnover Ratio:

Inventory turnover is a ratio showing how many times a company's inventory is sold and
replaced over a period.

Inventory Turnover Ratio is calculated by dividing the cost of goods sold by the
inventory.

3.5.2. Account Receivable Turnover Ratio:

Accounts receivable turnover is the number of times per year that a business collects its
average accounts receivable. The ratio is intended to evaluate the ability of a company to
efficiently issue credit to its customers and collect funds from them in a timely manner.

8
3.5.3. Total Assets Turnover Ratio:

Total Assets Turnover Ratio measures the turnover of all of the firm’s assets.

Fixed Asset Turnover Ratio is Calculated by dividing the sales by total assets.

3.5.4. Fixed Asset Turnover Ratio:

Fixed Asset Turnover Ratio measures how effectively the firm uses its plant and equipment
to help generate sales.
It is calculated by dividing the sales by net fixed assets.

3.6. Debt Management Ratio/ Leverage Ratio:

The Debt Management Ratio/ Leverage Ratio measures how much of a company’s operation
comes from debt instead of other forms of financing like stock and personal savings.

3.6.1. Debt Ratio:

The Debt Ratio measures the percentage of the firm’s assets financed by creditors
(Borrowing).

Debt Ratio is Calculated by dividing the total liabilities by total assets.

3.6.2. Debt Equity Ratio:

Debt Equity Ratio compares a company's total liabilities to its total shareholders' equity.
Thisisa measurement of how much suppliers, lenders, creditors and obligors have
committed to the company versus what the shareholders have committed.

Debt Equity Ratio is Calculated by dividing a company’s total liabilities by its

stockholders' equity.

9
3.6.3. Equity Multiplier:

Equity Multiplier is the ratio of a company’s total assets to its stockholder’s equity. The
equity multiplier is a measurement of a company’s financial leverage. Companies finance
the purchase of assets either through equity or debt, so a high equity multiplier indicates
that a larger portion of asset financing is being done through debt.

3.7. Profitability Ratio:

Profitability Ratio shows the combined effects of liquidity management, asset

management, and debt management on operating results.

3.7.1. Gross Profit Margin:

Gross profit margin is a profitability ratio that measures how much revenue from sales is
left over after paying cost of goods sold (COGS).

3.7.2. Net Profit Margin:

Net profit margin is the percentage of revenue remaining after all operating expenses,
interest, taxes and preferred stock dividends (but not common stock dividends) have been
deducted from a company's total revenue.

Net Profit Margin is Calculated by dividing the net profit by the sales or total revenue.

3.7.3. Return on Assets (ROA):

ROA gives an idea as to how efficient management is at using its assets to generate earnings.

ROA is calculated by dividing the net income by the total asset.

10
3.7.4. Return on Equity (ROE):

The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by enlightening how much profit a company generates
with the money shareholders have invested.

ROE is calculated by dividing the net income available to common stockholders by the
common equity,

3.7.5. Earnings per Share (EPS):

EPS is the portion of a company's profit allocated to each outstanding share of stock.
Earnings per share serve as an indicator of a company's profitability. It tells an investor how
much of the company's profit belongs to each share of stock.

The equation is, EPS = Net income/ profit available to common stockholders divided by
Number of common shares outstanding.

3.7.6. Dividend Payout Ratio:

The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during the year. In other words, this ratio shows the
portion of profits the company decides to keep funding operations and the portion of profits
that is given to its shareholders.

3.7.7. Retention Ratio:

Percentage of the earnings of a firm that are not paid out to stockholders
(shareholders)

as dividends but are either reinvested in the firm or are kept as reserve for specified purposes.
It

is the opposite of the payout ratio.

3.7.8. Operating Expense Ratio:

An Operating Expense is a category of expenditure that a business incurs as a result of

performing its normal business operations.

11
3.7.9. Operating Profit Margin Ratio:

The operating profit margin is a type of profitability ratio known as a margin ratio. Operating
income is often called earnings before income and taxes or EBIT.

3.7.10. Times Interest Earned:

The times interest earned ratio, sometimes called the interest coverage ratio, is a coverage
ratio that measures the proportionate amount of income that can be used to cover interest
expenses in the future. It measures a firm's ability to make interest and debt service payments.

3.8. Market Value Ratio:

Market Value Ratios relate the firm’s stock price to its earnings and book value per share. It
gives the management an identification of what investors think of the company’s future
prospects based on its past performance.

3.8.1. Book Value per Share:

Book value per share is a financial measure that represents a per share assessment of the
minimum value of a company's equity. More specifically, this value is determined by relating
the original value of a firm's common stock adjusted for any outflow (dividends and stock
buybacks) and inflow (retained earnings) modifiers to the amount of shares outstanding.

3.8.2. Market Value per Share:

The market value per share or fair market value of a stock is the price that a stock can be
readily bought or sold in the current market place.

3.8.3. Price/Earnings Ratio (P/E):

P/E is a company's share price to its per-share earnings. The Price-to-Earnings Ratio or P/E
ratio is a ratio for valuing a company that measures its current share price relative to its per-
share earnings.

12
 Chapter 4:
Ratio Analysis

13
4.1. Liquidity Ratio:

4.1.1. Current Ratio:

Year Current Asset (million) Current Liability (million) Current Ratio

2014 3858.36 5041.16 0.77
2015 4159.51 4802.83 0.87
2016 4458.19 4194.22 1.06
2017 5071.10 5223.77 0.97
2018 6664.33 8373.28 0.80

Current Ratio (Times)

1.20

1.00

0.80

0.60

0.40

0.20

0.00
2014
2015
2016
2017
2018

Interpretations:

Current ratio for premiere cement ltd was close in 2018, 2015. It was little higher in 2017.
Only in 2016 current asset is comparatively higher than current liability. However from
2014 to 2016 current asset is higher than current liability.

14
4.1.2.Quick Ratio:

Year Current Current Current asset- Quick

Asset million Liability(million) inventory(million) Ratio
(Times)
2014 3858.36 5041.16 1282.26 0.51
2015 4159.51 4802.83 990.53 0.66
2016 4458.19 4194.22 825.54 0.87
2017 5071.10 5223.77 899.31 0.80
2018 6664.33 8373.28 495.18 0.74

Quick Ratio (Times)

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2014
2015
2016
2017
2018

Interpretations:
In 2016 Premiere Cement Ltd had quick ratio is 0.87 which is highest. Gradually from 2014
their quick ratio had been increased but in 2018 it had been decreased. The industry average
being show that Premiere Cement Ltd. is facing difficulties to deal with the liquid assets
without the inventories against the current liabilities.

15
4.2. Asset Management Ratio:

4. 2.1. Inventory Turnover Ratio:

Year Cost of Goods Inventory (mn) Inventory

Sold (mn) Turnover Ratio
(Times)
2014 5650.97 937.14 6.03
2015 6033.28 1138.35 5.3
2016 6583.24 1022.24 6.44
2017 7757.68 890.66 8.71
2018 8570.91 700.23 12.24

Inventory Turnover Ratio

14

12

10

0
2014
2015
2016
2017
2018

Interpretations:
Inventory Turnover Ratio measures how many times average inventory is "turned" or sold
during a period. In 2018 Inventory Turnover in Premier Cement Mills is highest 12.24
times. And in 2015 it was 5.3 times. It is lower compare to other year. High inventory
turnover ratio is a signal of sufficient sales of inventory. Means, sales performance of 2018
is so good compare to other years.

16
4.2.2. Average Collection Period:

Account Credit Sales Average Collection

Year Receivable*365 Period (days)

2014 482606.65 7536.60 64

2015 507674.85 8094.98 63
2016 512765.39 8405.99 61
2017 482606.65 7536.60 64
2018 507674.85 8094.98 63

Average Collection Period (Days)

64

63.5

63

62.5

62

61.5

61

60.5

60

59.5
2014
2015
2016
2017
2018

Interpretations:

Average collection period of Account Receivable for the last 5 years was 63 days within 365
day, it is reasonable. On average collection period is around 60 Days.

17
4.2.3. Accounts Receivable Turnover Ratio:

Year Credit Account Account Receivable Ratio

Sales Receivable (Times)
2014 7536.6 1322.21 6.34
2015 8094.98 1390.89 5.97
2016 8405.99 1779.80 5.69
2017 7536.6 1888.80 4.81
2018 8094.98 4522.55 4.44

Account Receivable Ratio (Times)

7
6
5
4
3
2
1
0
2014
2015
2016
2017
2018

Interpretations:

The graph shows that, In 2014 Account Receivable Turnover is 6.34 times, In 2015 it is
decreased by 5.97 times, In 2016 it is decreased again and the ratio is 5.69. After that in 2017
and 2018 it is decreased all over again and the ratio is 4.81 times and 4.4 times. That means
from 2014 to 2018 Accounts Receivable Turnover Ratio is decreased.

Whether the accounts receivable turnover ratio is good or bad depends on the company's past
ratios. So, its clear from the graph that, Accounts Receivable Turnover of Premier Cement
Mills Limited is not good as it is decreased.

18
4.2.4. Fixed Asset Turnover Ratio:

Year Net Sales Fixed Assets Fixed Asset Turnover

Ratio (Times)

2014 3428.53 3428.53 1.34

2015 4288.14 4288.14 1.36
2016 6415.96 6415.96 1.52
2017 7538.86 7538.86 1.53
2018 8102.94 8102.94 1.72

Fixed Asset Turnover Ratio (Times)

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2014
2015
2016
2017
2018

Interpretations:

The graph clearly indicates that, Fixed Asset Turnover Ratio is around 1.36 in 2015 and it is
gradually increasing from 2014 to 2018. In 2018 Fixed Asset Turnover Ratio is around 1.72.

19
4.2.5. Total Asset Turnover Ratio:

Year Net Sales Total Asset Total Asset Turnover

Ratio (Times)
2014 4288.14 6602.06 2.14
2015 6415.96 8496.23 2.02
2016 7538.86 9803.42 2.17
2017 8102.94 10089.33 2.1
2018 10049.86 13567.18 1.71

Total Asset Turnover Ratio (Times)

2.5

1.5

0.5

0
2014
2015
2016
2017
2018

Interpretations:

The graph clearly indicates that, Total Asset Turnover Ratio is around 2.14 in 2014 and it
goes down to 0.12 in 2015. In 2016 the value was 2.17 and after that In 2017 and 2018 the
value is decreasing. The lower the total asset turnover ratio as compared to historical data
for the firm and industry data, it is more slow-moving the firm's sales. This may indicate a
problem with one or more of the asset categories composing total assets - inventory,
receivables, or fixed assets.

20
 4.3. Debt Management Ratio:
4.3.1. Debt ratio (debt to assets ratio):

Year Total asset Total debt (million) Debt Ratio (%)

(million)
2014 6602.06 2080.48 62
2015 8496.23 4343.59 66
2016 9803.42 5278.25 64
2017 10089.33 6498.14 66
2018 13567.18 6691.48 66

Debt Ratio (%)

67%

66%

65%

64%

63%

62%

61%

60%
2014
2015
2016
2017
2018

Interpretations:
To calculate debt ratio, total asset and total debt is needed. The debt ratio was same during
the years of 2015, 2017 & 2018.It slightly decrease in 2016. But in year 2014, the debt ratio
was much lower compared to the debt ratios of other years.

21
 4.3.2. Debt - Equity Ratio:

Year Net equity Total debt Debt-equity ratio (times)

(million) (million)
2014 2262.29 2080.48 0.92
2015 3218.45 4343.59 1.35
2016 3298.55 5278.25 1.6
2017 3397.84 6498.14 1.91
2018 4547.84 6691.48 1.47

Debt Equity Ratio (Times)

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2014
2015
2016
2017
2018

Interpretations:
Compared to 2016, Debt equity ratio was higher and same in the years of 2017 and 2018. Net
equity and total debt is needed to calculate the debt equity ratio.

4.3.3. Equity Multiplier:

Year Net Equity Total Assets Equity Multiplier Ratio

(Times)

2014 2262.29 6602.06 2.92

2015 3218.45 8496.23 2.64
2016 3298.55 9803.42 2.96
2017 3397.84 10089.33 2.97
2018 4547.84 13567.18 2.98

22
 Equity multiplier Ratio (times)
3

2.9

2.8

2.7

2.6

2.5

2.4
2014
2015
2016
2017
2018

Interpretations:

According to this graph’s indication, Equity Multiplier Ratio is in 2014 which is 2.92 times
and highest 2018 that is 2.98 times. The graph also indicates that Equity Multiplier Ratios
are not consistent and fluctuates with time. Equity Multiplier Ratio of Premier Cement Mills
Limited is good as it is has gone up in 2018.

4.4. Profitability Ratio:

4.4.1. Return on Asset:

Year Net income(million) Total asset(million) Return on Asset

(%)
2014 174.29 6602.06 2.64
2015 499.57 8496.23 5.88
2016 508.79 9803.42 5.19
2017 408.62 10089.33 4.05
2018 442.183 13567.18 3.26

23
 ROA (%)
6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2014
2015
2016
2017
2018

Interpretations:

The only common rule is that the higher return on assets is the better, because the company is
earning more money on its assets. Here, though it was higher in 2015, compared to 2017 to
2018it decreases 4.05 to 3.26 so it indicates inefficient use of companies’ asset.

4.4.2. Return on Equity:

Year Net income Stock holder equity Return on Equity

(million) (million) (%)
2014 174.29 2257.64 7.72
2015 499.57 3134.07 15.94
2016 508.79 2815.66 18.07
2017 408.62 3396.67 12.03
2018 442.183 4547.85 9.72

24
 ROE (%)
20.00%

18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2014
2015
2016
2017
2018

Interpretations:

Return on equity demonstrates all positive figures.Net benefit or deficit and net value are
expected to compute return on value. From the above figure we see that, in 2016 Premier
concrete constrained kept up practically 18.07% net benefit over investors value it wound up
in 7.72% net benefit over basic value in 2014. The expansion pace of investor’s value and net
benefit was very similar.

4.4.3. Operating Expense Ratio:

Year Operating Net Sales Operating Expense ratio

Expense (Million) (%)
2014 202.77 4288.14 4.73
2015 301.45 6415.96 4.70
2016 374.55 7538.86 4.97
2017 442.85 8102.94 5.47
2018 538.6 10049.86 5.36

25
 Operating Expense Ratio (%)
5.60%

5.40%

5.20%

5.00%

4.80%

4.60%

4.40%

4.20%
2014
2015
2016
2017
2018

Interpretations:

The chart obviously shows that, Operating Expense Ratio is lower 4.70% in 2015 and most
astounding 5.47% in 2017. It was moderate 5.36% in 2018. It shows that Operating Expense
Ratios are expanding gradually. Operating Expense Ratio of Premier Cement Mills Limited is
expanding just as deals is expanding, therefore benefit is augmenting.

4.4.4. Operating Profit Margin Ratio:

Year Operating Net Sales Operating Profit Margin

Expense(Million) Ratio (%)
2014 202.77 4288.14 4.73
2015 301.45 6415.96 4.70
2016 374.55 7538.86 4.97
2017 442.85 8102.94 5.47
2018 538.6 10049.86 5.36

26
 Operating Profit Margin (%)
5.60%

5.40%

5.20%

5.00%

4.80%

4.60%

4.40%

4.20%
2014
2015
2016
2017
2018

Interpretations:

The chart obviously shows that, Operating Profit Ratio is lower 4.70% in 2015 and most
astounding 5.47% in 2017. It was moderate 5.36% in 2018. It shows that Operating Profit
Ratios are expanding gradually. Operating Profit Ratio of Premier Cement Mills Limited is
expanding just as deals is expanding, therefore benefit is augmenting.

4.4.5. Times Interest Earned Ratio:

Operating Interest Times Interest Earned

Year Profit (Million) Expense Ratio (Times)

2014 482.84 1462.33 0.33

2015 1125.99 299.04 3.76
2016 1106.10 386.62 2.86
2017 908.22 453.19 2.00
2018 1003.96 398.17 2.52

27
 Times interest earned ratio (times)
4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00
2014
2015
2016
2017
2018

Interpretations:

The diagram plainly shows that, Times Interest Earned Ratio is lower 0.33 in 2014 and most
elevated 3.76 in 2015. It shows that Times Interest Earned Ratios are diminishing gradually.
Step by step from 2014 to 2018 it has been diminishing. As a result, it's obvious from the
diagram that, Times Interest Earned Ratio of Premier Cement Mills Limited is great as it is
diminished very little in 2018.

4.4. 6. Gross Profit Margin:

Year Gross Net Sales Gross Profit Margin (%)

Profit
2014 531.30 4288.14 12.39
2015 1153.59 6415.96 17.98
2016 1295.93 7538.86 17.19
2017 1238.94 8102.94 15.29
2018 1516.88 10049.86 15.09

28
 Gross Profit Margin (%)
18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2014
2015
2016
2017
2018

Interpretations:

The diagram and outline demonstrates that, in 2015 Gross Profit Margin is higher than other
different years however that time Gross Profit was low yet Net Sales was higher. Thus, Gross
Profit Margin is expanded. Be that as it may, in 2016 net deals is expanded than the earlier
year yet gross benefit is diminished. Hence, Gross net revenue is diminished 17.19%. In 2017
and 2018 Gross Profit Margin is nearly at same rate. In 2018, net deals are expanded than the
earlier year however overall revenue is diminished.

4.4.7. Net Profit Margin:

Year Net Profit Net Sales Net Profit Margin (%)

2014 174.32 4288.14 4.07
2015 499.17 6415.96 7.78
2016 509.10 7538.86 6.75
2017 603.92 8102.94 7.45
2018 410.25 10049.86 4.08

29
 Net Profit Margin (%)
8.00%

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2014
2015
2016
2017
2018

Interpretations:

The diagram and outline demonstrates that, the level of net revenue is particularly fluctuating.
In 2014, Net Profit Margin is 4.07%. Be that as it may, in 2015 it tremendously increased
to7.78%. In 2016 both net deals and net benefit are diminished. In any case, in 2017net profit
and Net Profit Margin increased and 2018decreased. Therefore, net overall revenue is
diminished at an arrangement.

4.4.8. Earnings per Share (EPS):

Year Net income (million) Common stock EPS

outstanding (million)
2014 174.29 93.20 1.870064
2015 499.57 99.91 5.0002
2016 508.79 106.44 4.780064
2017 408.62 106.69 3.829975
2018 442.183 105.45 4.193295

30
 EPS
6

0
2014
2015
2016
2017
2018

Interpretations:

In Premier Cement Mills Limited, the normal investors were 99.91(millions) in 2015 and it
step by step expanded in 2017 it is 106.69. In 2018, it was moderate 105.45(millions).
Premier Cement Ltd.’s EPS is higher in 2015 and lower in 2017.

4.5. Market Value Ratio:

4.5.1. Book Value per Share:

Year No of Common Stock holder equity Book Value Per

Shares (million) Share (Taka)
2014 105.45 3018.35 28.62
2015 105.45 3106.91 29.46
2016 105.45 3905.27 37.03
2017 105.45 4317.69 40.95
2018 105.45 4547.84 43.13

31
 Book Value Per Share(Taka)
45.00

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00
2014
2015
2016
2017
2018

Interpretation:
Book value per share of Premier Cement Mill Limited in 2014 is tk.28.62. It increased in
2015 to tk.29.46 and other 2016 book value per share is higher than tk. 37.03 till 2018.

4.5.2. Market value to Book Ratio:

Year MV BVPS MV to BV Ratio (Times)

2014 77.50 28.62 2.71
2015 50.00 29.46 1.70
2016 91.95 37.03 2.48
2017 90.40 40.95 2.21
2018 77.50 43.13 1.80

32
 MV to BV Ratio (Times)
3.00

2.50

2.00

1.50

1.00

0.50

0.00
2014
2015
2016
2017
2018

Interpretation:

In 2014 market value was 2.71 times higher than the book value. Market value was almost
1.70 times higher than book value in 2015. Premier Cement Mill’s Book Value to Market
value ratio is decreased consecutively from 2015 to 2018. Lower market to book value ratio
is not a good indication for the company and emphasize that currently Premier Cement Mills
Limited has a demand downward in the stock market.

33
 Chapter 5:
Conclusion and Recommendations

34
5.1. Conclusion:

Premier Cement Mills Limited is one of the most innovative cement manufacturers in
Bangladesh. It manufactures products with the best quality raw materials and technical
excellence for ensuring dependability and premium quality.

Premier Cement Mills Limited incorporated in Bangladesh on 14 October 2001 as a Private

Limited Company, 700 employees in operation at home and abroad- Bangladesh, India,
Myanmar, etc., annual production capacity of 2.4 million tons (8,000 tons per day). Premier
Cement Mills Limited enlisted with Dhaka Stock Exchange and Chittagong Stock Exchange.

Inventory Turnover Ratio measures, as we know, how many times average inventory is
"turned" or sold during a period. In 2018 Inventory Turnover in Premier Cement Mills is
highest 12.24 times. And in 2015 it is 5.3 times. It is lower comparable than the other years.
It indicates that sales performance of 2015 is not as good as the other years.

In 2018 net sales was increased than the previous year but gross profit was decreased. For
that reason, Gross profit margin is decreased by 6.15%. In 2015 and 2016 Gross Profit
Margin were almost at the same percentage. In 2018, net sales were increased more than the
previous year but profit margin was decreased. As a result, the gross profit margin was
decreased by 1.9.

In 2016 Premier Cement limited maintained almost 18.07% net profit over shareholders
equity. It ended up in 7.72% net profit over common equity in 2014. The increasing rate of
shareholders equity and net profit were the same. In 2018 Premier Cement limited
maintained almost 9.72% net profit over shareholders equity.

35
5.2. Recommendations:

1. Premier Cement Mills Limited should increase its gross profit margin by increasing
selling price at a minimum level and according to customer’s demand without increasing the
cost of goods sold. For Example: Finding Lower Price Supplier, Cheaper by good quality raw
materials, the labor saving technology and so on.

2. Company should focus on most profitable customers to increase sales volume and cut
down the avoidable operating expenses to increase the net profit margin.

3. Company need to predict pending sales growth to improve its sales performance and
increase inventory turnover ratio from next year.

4. Premier Cement Mills Limited should increase its total asset turnover ratio by:

 Increasing its sales by more promotions and by quick movements of the finished
goods.
 Leasing assets, instead of buying them
 Fast collections of accounts receivable

36
Chapter 6:
References

37
References from Book:

1. Scott Besley and Eugene F. Brigham (2012-2013), “Essential of Managerial

Finance”, Thomson Higher Education, USA; PP 52-62

2. Annual Report of Premier Cement, 2017-2018

References from Internet:

1. Investopedia-
 http://www.investopedia.com/terms/l/liquidityratios.asp
 http://www.investopedia.com/terms/r/returnonequity.asp
 http://www.investopedia.com/terms/e/equitymultiplier.asp
 http://www.investopedia.com/terms/o/operating_expense.asp
 http://www.investopedia.com/terms/c/currentratio.asp
 http://www.investopedia.com/terms/i/inventoryturnover.asp
 http://www.investopedia.com/terms/b/bookvalue.asp
 http://www.investopedia.com/ask/answers/183.asp
 http://www.investopedia.com/university/ratios/debt/ratio3.asp?no_header_alt=true
 http://www.investopedia.com/ask/answers/040215/what-are-best-ways-
company-improve-its-net-margin.asp
 http://www.investopedia.com/terms/r/returnonassets.asp
 http://www.investopedia.com/terms/b/bvps.asp
 http://www.investopedia.com/terms/p/price-earningsratio.asp

2. Business Dictionary:
 http://www.businessdictionary.com/definition/ratio-analysis.html
 http://www.businessdictionary.com/definition/retention-ratio.html

38
 http://www.myaccountingcourse.com/financial-ratios/dividend-payout-ratio
 http://www.investinganswers.com/financial-dictionary/ratio-analysis/quick-ratio-924

 http://www.investinganswers.com/financial-dictionary/ratio-analysis/gross-profit-
margin-2076
 http://www.investinganswers.com/financial-dictionary/financial-statement-
analysis/net-profit-margin-2233

3. Website of Premier Cement Mills Limited-

 http://www.premiercement.com/

4. The Financial Dictionary-

http://financial-dictionary.thefreedictionary.com/debt+management+ratio
http://www.myaccountingcourse.com/financial-ratios/times-interest-earned-ratio
http://www.myaccountingcourse.com/accounting-dictionary/market-value-per-share

39