Leather Industry of Bangladesh: Performance Analysis Based On Financial Ratio

Performance Analysis based on Financial Ratio
Leather Industry of Bangladesh

Presented By
Md. Abu Sufian Rony B16231026
Tashfia Mahbub Tiasha B16231030
Rafia Fahmida B16231042
Mostofa Shahriar B16231062
Kazi Siam Alam B16231064
NTRODUCTION
Ratios measure companies' operational efficiency,
liquidity, stability and profitability, giving investors
more relevant information than raw financial data
a standardized method for comparison
Ratios reveal trends in particular industries, creating

benchmarks against which the performance of all
industry players can be measured.
Ratios provide guidance to entrepreneurs when

SAMPLE CHOSEN
Tannery Industry
BATA Bangladesh Ltd. Apex Footwear Ltd. Apex Tannery Ltd. Legacy Footwear Ltd.
Fortune Shoes Ltd.

mportant Ratios
 Liquidity Ratio: Measure of the liquidity. Measured by
Current Ratio
Current Ratio = Current Assets ÷ Current Liabilities
 Activity Ratio: How fast a firm converts it’s efforts to

cash. Measured by Inventory Turnover
Inventory Turnover = Sales ÷ Average Inventory
 Leverage Ratio: Tells about the firm’s capital structure.

Measured by Debt Ratio.
Debt Ratio = Total Debt ÷ Total Asset
Methodology
 5 firms from Leather and Tannery sector of DSE
has been taken for analysis.
 Recent 5 years data has been taken from the

respective companies’ annual reports
 Ratios have been calculated and graphs have

been created
 Performance of the 5 firms have been compared

alysis & Discussion
Liquidity Ratio (Current ratio)-
Slightly higher than industry

average is generally considered
Year Bata Apex Legacy Fortune Apex Tan acceptable
2012-13 9.42 6.64 17.20 13.70 7.21
2013-14 11.64 8.20 15.60 17.30 4.56 Lower ratio indicates higher risk
of distress or default
2014-15 14.23 9.32 12.25 19.60 5.15
2015-16 12.22 8.41 16.50 15.04 4.31 If a company has a very high
current ratio compared to their
2016-17 11.65 7.71 11.42 11.77 6.90
peer group, it indicates that
2017-18 10.65 5.19 9.20 8.37 5.24 management may not be using their
assets efficiently
alysis & Discussion
Liquidity Ratio (Current ratio)-
Liquidity (Current Ratio)

25.00
20.00
15.00
10.00
5.00
0.00
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Bata Apex Legacy Fortune Apex Tan

alysis & Discussion
Activity Ratio (Inventory Turnover ratio)-
Higher the inventory turnover, the better

Year Bata Apex Legacy Fortune Apex Tan since a high inventory turnover typically means
2012-13 3.90 4.56 5.31 4.33 5.32
a company is selling goods very quickly
2013-14 4.87 3.62 7.53 10.97 10.87

Low inventory turnover, on the other
2014-15 6.77 6.42 6.72 13.45 12.53 hand, would likely indicate weaker sales
2015-16 5.23 5.61 7.29 15.64 14.42

Provides insight as to
2016-17 4.41 5.23 6.25 11.54 11.57 whether a company is
managing its stock properly
2017-18 2.24 4.76 1.12 2.28 2.65
alysis & Discussion
Activity Ratio (Inventory Turnover ratio)-
Activity (Inventory Turnover Ratio)

18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

alysis & Discussion
Leverage (Debt ratio)-
Ratio greater than 1 shows that a
considerable portion of debt is
Year Bata Apex Legacy Fortune Apex Tan funded by assets
2012-13 0.50 0.90 0.45 0.65 0.40
2013-14 0.51 1.00 0.52 0.66 0.47

A high ratio also indicates that a
company may be putting itself at a risk
2014-15 0.45 0.89 0.46 0.61 0.42 of default on its loans if interest rates
were to rise suddenly
2015-16 0.43 0.89 0.49 0.54 0.41
2016-17 0.47 0.81 0.54 0.59 0.43

A ratio below 1 translates to the fact
2017-18 0.49 0.83 0.47 0.54 0.42
that a greater portion of a company's
assets is funded by equity
alysis & Discussion
Leverage (Debt ratio)-
Leverage (Debt Ratio)

1.20
1.00
0.80
0.60
0.40
0.20
0.00
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Analysis & Discussion
Profitability Ratio (Net Profit Margin ratio)-
By tracking increases and decreases in its

Year Bata Apex Legacy Fortune Apex Tan net profit margin, a company can assess
whether current practices are working
2012-13 0.09 0.06 0.14 0.142 0.081
and forecast profits based on revenues
2013-14 0.15 0.072 0.158 0.139 0.072
2014-15 0.21 0.062 0.165 0.144 0.068

Investors can assess if a company's
management is generating enough
2015-16 0.16 0.061 0.154 0.151 0.074 profit from its sales and whether
operating costs and overhead costs
2016-17 0.19 0.069 0.16 0.152 0.065 are being contained
2017-18 0.18 0.077 0.152 0.147 0.064
Analysis & Discussion
Profitability Ratio (Net Profit Margin ratio)-
Profitability (Net Profit Margin Ratio)

0.25
0.2
0.15
0.1
0.05
0
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

CONCLUSION
Financial ratios help in determining financial health and growth potential of a company
Ratios can help assess a company’s comparative performance
Contrasts were shown among the companies chosen
Fluctuation were observed during assessing the firms’ performances

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Performance Analysis based on Financial Ratio

Leather Industry of Bangladesh

a standardized method for comparison

Ratios reveal trends in particular industries, creating

Ratios provide guidance to entrepreneurs when

Fortune Shoes Ltd.

 Activity Ratio: How fast a firm converts it’s efforts to

 Leverage Ratio: Tells about the firm’s capital structure.

 Recent 5 years data has been taken from the

 Ratios have been calculated and graphs have

 Performance of the 5 firms have been compared

Slightly higher than industry

Liquidity (Current Ratio)

Bata Apex Legacy Fortune Apex Tan

Higher the inventory turnover, the better

2013-14 4.87 3.62 7.53 10.97 10.87

2015-16 5.23 5.61 7.29 15.64 14.42

Activity (Inventory Turnover Ratio)

Bata Apex Legacy Fortune Apex Tan

2013-14 0.51 1.00 0.52 0.66 0.47

2016-17 0.47 0.81 0.54 0.59 0.43

Leverage (Debt Ratio)

Bata Apex Legacy Fortune Apex Tan

Profitability Ratio (Net Profit Margin ratio)-

By tracking increases and decreases in its

2014-15 0.21 0.062 0.165 0.144 0.068

Profitability Ratio (Net Profit Margin ratio)-

Profitability (Net Profit Margin Ratio)

Bata Apex Legacy Fortune Apex Tan

Ratios can help assess a company’s comparative performance

Contrasts were shown among the companies chosen

Fluctuation were observed during assessing the firms’ performances

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