Rationalization of Stock Price through Financial Analysis:

A Case Study of Agricultural Marketing Co Ltd [AMCL PRAN]

Prepared for

Dr. Masud Rahman

Professor of Finance
School of Business
North South University

Name of the Course – Managerial Finance

Course No – BUS 635

Prepared By

NUR-A-ASHRAFUL ALAM - 0910038060

SHARMEEN KHAN - 0910324060
MD. FERDOUS ALAM FAISAL – 0910055560

ACKNOWLEDGEMENT
The success of this project work depends on the contribution of a number of people,
especially those who have taken the time to share their thoughtful guidance and
suggestions to improve this project.

It’s our pleasure to acknowledge the invaluable contribution and assistance of our faculty
Dr. Abdul Hannan Chowdhury, professor, School of business, North South University for
providing us this opportunity to prove our knowledge into practicing skills. We thank him
for his kind cooperation and understanding and providing of relevant guidelines and
advises on the proceedings of a good report submission. Without his observation our
report would not have been successful.

And finally we would like to thank the group participation spirit for the successful
outcome.

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Contents
CHAPTER – 1.....................................................................................................5
INTRODUCTION AND METHODOLOGY...............................................................5
1.1 Introduction:............................................................................................6
1.1.1 Problem Statement:................................................................................7
1.2 Objectives of The study:......................................................................9
1.3 METHODOLOGY.......................................................................................9
1.3.1 Statistical techniques-.....................................................................9
1.3.2 Nature and source of data-.............................................................9
1.3.3 Period Under consideration-............................................................10
1.3.4 Nature of Analysis-..........................................................................10
1.3.5 Standard of comparison-.................................................................10
1.4 Limitation of the Study:.........................................................................11
CHAPTER 2.....................................................................................................12
ANALYSIS AND INTERPRETATION...................................................................12
2.1 Balance Sheet Analysis......................................................................13
2.1.1 Inventory Analysis:.........................................................................13
2.1.2 Cash & Cash equivalents:...............................................................14
2.1.3 Trade Debtor Analysis:....................................................................15
2.1.4 Fixed Assets Analysis......................................................................16
2.1.5 Debt Analysis:.................................................................................17
CHAPTER – 3...................................................................................................18
RATIONALIZATION OF THE BALANCE SHEET FROM THE BOOK VALUE TO
MARKET VALUE..............................................................................................18
3.1 Balance sheet analysis and correction:.................................................19
3.1.1 New Balance Sheet Justifying the Market Value (From 2009-2005) 20
Chapter – 4.....................................................................................................26
CASH FLOW ANALYSIS....................................................................................26
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 4.1 Cash Flow Analysis:...............................................................................27
4.1.1 Net Cash Provided by Operating Activities:....................................27
4.1.2 Net Cash Provided by Investing Activities:......................................28
4.1.3 Net Cash Provided by Financing Activities:.....................................29
4.1.3 Cash at the End of the Year............................................................30
CHAPTER 5.....................................................................................................31
RATIO ANALYSIS.............................................................................................31
5.1 Ratio Analysis:......................................................................................32
5.1.1 Liquidity Ratios:..............................................................................32
5.1.2 Asset Management Ratios:.............................................................37
5.1.3 Debt Management Ratios...............................................................44
5.1.4 Profitability Ratios:..........................................................................48
5.1.4 Market value ratio...........................................................................53
CHAPTER 6.....................................................................................................57
FINDINGS AND CONCLUSION..........................................................................57
6.1 Findings...............................................................................................58
6.2 Conclusion.........................................................................................59
APPENDIX....................................................................................................60
APPENDIX

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 CHAPTER – 1

INTRODUCTION AND METHODOLOGY

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1.1 Introduction:

Managerial finance refers to the functions of procurement, utilization and distribution of

funds. Performance of modern finance is reflected both at firm level and market level.
Experiences although suggest that the two levels are not perfectly interdependent; but
efforts are often made to optimize market performances through firm level optimization
of decisions related to investment, financing and cash management.

The stated objective of the management of any company is to make higher profits
consistently, in terms of wealth maximization which should attract investors to purchase
and retain shares of the company for its sustained future prospect. The key instrument by
which the management of any company communicates its performance level to its
shareholders is its year-end annual report. Annual report portrays a snapshot of its
operating performance for a given period in terms of a number of statements like Income
Statement, Balance Sheet, Statement of Cash flows, Statement of Equity Changes and
notes thereto.

The goal of this report is to evaluate the performance of our selected company in terms of
accounting measures and compare them with market-driven indicators of its performance
and finally rationalize the discrepancy that may exist between the market value per share
and Book value per share of Agricultural Marketing Co Ltd [AMCL PRAN] .

Profile of Agricultural Marketing Co Ltd:

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Company profile and present status: PRAN stands for Programme for Rural
Advancement Nationally. “PRAN” is currently the most well known household name
among the millions of people in Bangladesh and abroad also. Since its inception in 1980,
PRAN Group has grown up in stature and became the largest fruit and vegetable
processor in Bangladesh. It also has the largest exporter of processed agro products with
compliance of HALAL & HACCP to more than 70 countries from Bangladesh

PRAN is the pioneer in Bangladesh to be involved in contract farming and procures raw
material directly from the farmers and processes through state of the art machinery at its
several factories into hygienically packed food and drinks products. The brand “PRAN”
has established itself in every category of food and beverage industry and can boost a
product range from Juices, Carbonated Drinks, Confectionery, Snacks, and Spices to
even Dairy products.
Historical Highlights: AMCL PRAN has achieved prestigious certificate like ISO
9001:2000.

Office: Property Heights, 12 R K Mission Road,

Dhaka1203
Listing Status: public limited Company
DSE listing year: 1996
Current Authorized capital: 500 million
Current paid up capital: 80 million
Total No of securities: 800000
Face Value: 100 tk

1.1.1Problem Statement:

There are discrepancies between the Market Values of the Share and the Book Values of
the share of Agricultural Marketing Co Ltd. From the Table 1 and Figure 1 below, it is

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noticeable that, the book value per share is fluctuating with time and market value per
share also changes with time. Further, there is significance discrepancy between each
year’s market value and book value per share of AMCL PRAN. To be more precise, the
book value per share of AMCL PRAN as on June 30, 2009 was Tk. 449.96, whereas the
closing market price at Dhaka Stock Exchange as on June 30, 2009 was TK 1363. The
underlying effects of fluctuating market value per share and book value per share is the
issue of interest of our study.

Year 2009 2008 2007 2006 2005

Market Value Per Share 1363.00 1142.00 382.63 386.00 519.25
Book Value Per Share 449.96 428.39 409.91 422.11 412.55
Table 1.1: Market Value & Book Value per Share Of AMCL PRAN

Figure 1.1: comparison of market value per share and market value per share of AMCL
PRAN
Data source – Annual reports of AMCL PRAN(2005-2009)

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1.2 Objectives of The study:
The main objectives of the study are –

1 To identify the underlying factors causing the discrepancy between market

value per share and book value per share of AMCL PRAN.
2 To explain the reasons why market value is higher/Lower than the book
value of the company using financial tools to explore whether the above
stated discrepancy is good news or a bad news for the company.
3 To rationalize the discrepancy by constructing a corrected balance sheet,
Balance sheet analysis, Ratio analysis and Cash Flow analysis.

1.3 METHODOLOGY

We initiated our study through the gathering of information. The data were collected
from the Annual Reports of 2005, 2006, 2007, 2008 and 2009 of the respective company.
We used various financial analysis tools and statistical tools to have a deep understanding
of financial activities of the company. We did cross-sectional analysis and time series
analysis in order to find out how the company is doing with respect to the competitor
company. Fu-Wang Foods Ltd. was taken as the competitor of our company of study.

1.3.1 Statistical techniques-

The statistical techniques applied in the study include primarily descriptive statistics
statistics. The descriptive statistics techniques applied are graphical analysis. By using
the tool we conducted cross-sectional analysis and time series analysis to have a better
perception of the company.

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1.3.2 Nature and source of data-

We use secondary data for our study. We mainly use last five year [2005 to 2009] annual
report of Agricultural Marketing Co Ltd and Fu-Wang Foods Ltd. We collected annual
reports from Dhaka stock exchange library, they gave us the soft copy of reports; we also
collected some hard copy of reports from outside Dhaka stock exchange building. We
also collected information related to market price from Dhaka stock exchange web site
which is www.dsebd.org.

1.3.3 Period Under consideration-

Annual Reports of last 5 years were considered for both the companies. The annual
reports of 2005, 2006, 2007,2008 and 2009 of “AMCL PRAN” and “Fu-Wang Foods
Ltd” were taken into consideration for analysis. It would have been better if we could
have used the data over the period of last ten years to have a lucid view of the company
throughout the period of time. Due to time constraint and unavailability of data we were
unable to do that. So we have refrain ourselves in analyzing the data of last five years,
which enable us to understand the relevant position of both the companies.

1.3.4 Nature of Analysis-

For our study we make a thorough analysis of balance sheet items to identify the source
of discrepancies for what book value per share can differ from the market value per share
of the both company. We also make a cash flow analysis to gather the insight of the cash
dealings of the firm of the year from 2005 to 2009. We make ratio analysis for each year
under consideration to evaluate asset management, liquidity, debt management and
profitability.

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We also make the time series and analysis and cross section analysis to expand our
finding about AMCL PRAN and its rival company Fu-Wang Foods Ltd.

1.3.5 Standard of comparison-

As industry average data for comparison is not available in our country, so we choose a
rival company for Agricultural Marketing Co Ltd which is Fu-Wang Foods Ltd. We
compare our major finding in balance sheet analysis, ratio analysis, and cash flow
analysis between these two companies. The reason for choosing Fu-Wang Foods Ltd as a
rival company of Agricultural Marketing Co Ltd is that both company is in the business
segment of Food and Allied, both has a long experience in local and international market.
AMCL PRAN has listed to stock market in 1996 and Fu-Wang foods listed in 2000. At
present PRAN is leading the way in this business.

1.4 Limitation of the Study:

• Due to time constraints we could not visit the premise of AMCL PRAN and Fu-
Wang Foods ltd to incorporate more recent information and views of the Top
Management about the performance & position of the company. If more time is
available we could use more statistical tools and techniques to compare the
performance of the companies. We also cannot analyze last 10 years report due to
time constrain.

• Another limitation we face is that both the Companies do ambiguous accounting

practices to get rid of tax that dilute the actual scenario. Many times, these
companies try to make their performance much more lucrative to the Shareholders
by means of unethical practice which are completely unnoticeable to general public.

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 Such practice if had taken place might have diluted our findings, which are entirely
based on the information available in the Annual Reports.

• Moreover, comparison with the “Industry Average” would have been the best source
of comparison of the performance of the company with respect to the “Food
Industry.” Even though the relative performance of AMCL PRAN is far better
compared to Fu-Wang Foods Ltd but their performance would have been far more
closely scrutinized and analyzed if we had the Industry Benchmark. The two
companies that have been assigned may not to represent the whole picture of the
Food industry of Bangladesh.

CHAPTER 2

ANALYSIS AND INTERPRETATION

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2.1 Balance Sheet Analysis

Balance sheet is the snapshot of the financial position evolved from the overall
performance of the company. To analyze the balance sheet, the effect of various activities
over the company’s asset, liability and equity are identified which facilitate the
rationalization of the companies’ market value of share.

Reasons for Fluctuation:

2.1.1 Inventory Analysis:

Figure 2.1: Inventory Analysis for AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

2009- In this year inventory has gone down by .56% compare to previous year 2008,
though sales have increased by 12.29%. And inventory turnover was increased by
13.45% compared to previous year this is because cost of goods sold has increased by
12.8%.

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2008- In this year inventory has gone up by 1.73% compare to previous year 2007. This
may because sales have increased only by 6.4% compare to previous year and Inventory
turnover also increased only by 6.08%.

2007- Inventory has decreased by 2.5%, because sales have increased by 6.7%. Cost of
goods sold is increased by 7.20%, with which inventory turnover ratio is increased by
10.44% compare to previous year.

2006- In this year inventory have increased by very small percentage [0.89%] though
sales have increased by 8.68%. Cost of goods sold has increased by 12.6%.

2005- Inventory gone down by 0.34% and sales has increased by 2% compare to 2004.

2.1.2 Cash & Cash equivalents:

Figure 2.2: Cash Analysis of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

2009- In this year Cash has increased by 153.31% compare to 2008. This is because of
increase in short term and long term loan from the banks. Also sales has increased by
12.29%.

2008- In this year Cash has decreased by 46.23% compare to 2007. This is because of
huge increase in advance deposits and prepayments and also big amount of short term
loan is paid out.

2007- In this year Cash has decreased by 17.28% compare to 2006. It is because of
increase in advance deposits and prepayments decrease in short term loan. Another
reason for decrease in cash is that the company has invested huge money to punches
fixed assets.

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2006- In this year Cash has increased by 18.98% compare to 2005. This is because Sales
increase by 8.68%, and also increase has occurred in other current liabilities.

2005- In this year Cash has increased by 45.66% compare to 2004.

2.1.3 Trade Debtor Analysis:

Figure 2.3: Trade Debtor Analysis of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

2009- Debtors have decreased by 15.72% as a small amount of previously held debt has
been realized.

2008- Debtors have decreased by 25.9% compare to year 2007.

2007- Debtors have increased significantly as a large amount of sales were on credit.

2006- Debtors have increased by 7.62% as a amount of sales were on credit.

2005- Debtors have increased by 41.87% due to higher level of credit sales.

2.1.4 Fixed Assets Analysis

Figure 2.4: Fixed Asset Analyis of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

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2009- Fixed assets have increased by 31.69% due to increase in land, building and
machinery equipment.
2008- Due to depreciation Fixed assets have reduced by 10.90 % and there was no
addition in land and factory building.
2007- Due to depreciation fixed assets have reduced by 11.46 % and there was no
addition in land and factory building.
2006- Fixed assets have decreased by small amount of 5.42% due to depreciation of
machinery equipment.
2005- Fixed assets have decreased due to depreciation of machinery equipment and
factory building.

2.1.5 Debt Analysis:

Figure 2.5: Fixed Asset Analysis of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

2009- It’s obvious from the above table that AMCL PRAN is heavily on long term and
short term debt compare to the total current asset of the company. In 2009 debt has
increased by 9.84% due to substantial increase in long term debt.

2008- Debt has been decreased by 7.72% compare to 2007 because a large amount of
current portion of long term loan is been paid out.

2007- Debt has been decreased by 3.65% compare to 2006 because a significant amount
of long term debt is been paid out.

2006- A very small amount of debt is been paid out.

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 CHAPTER – 3

RATIONALIZATION OF THE BALANCE

SHEET FROM THE BOOK VALUE TO
MARKET VALUE

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3.1 Balance sheet analysis and correction:

The discrepancies between the market value and book value usually arise from the
overstating or understating of certain items in the balance sheet. In an attempt to identify
the sources of discrepancies and rationalizing the price of the stock, a new figure for
common equity based on market price has been first calculated and then items in the
balance sheet has been adjusted.

We can see from the table below that for the year 2009, the market price of the stock was
Tk.1363.00 and the book value was Tk. 449.96 so, the common equity for the book value
is lower than the common equity based on the market price. The source of discrepancy
could be estimated and have higher probability of being miscalculated. Again intangible
asset like trade mark was not under consideration for profitability calculation. On the
other hand, the value of fixed assets as stated in the annual reports and the market value
of these fixed assets are likely to be different.

Year 2009 2008 2007 2006 2005

Market value 1363.00 1142.00 382.50 386.00 519.25
per Share
Book Value 449.96 428.39 409.91 422.11 412.55
per Share
Difference 913.04 713.61 -27.41 -36.11 106.70

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 Table 3.1: Market Value & Book Value per Share Of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

Figure 2.5Comparison of book value per share and market value per share of AMCL
PRAN
Data source – Annual reports of AMCL PRAN (2005-2009)

3.1.1 New Balance Sheet Justifying the Market Value (From 2009-2005)

In general Market prices tend to reflect the actual value of the share more than the book
values, therefore studies of finance prefers the market price as a basis of analysis of the
company’s position. And this study is designed to identify the sources and thus eliminate
the discrepancies.

Since with the information available from annual reports there is no justification that its
current liabilities can be revalued and that it has no long term liability with a bank or any
financial institution, it is most probable that either current assets or fixed assets of the
company is overvalued/undervalued in the balance sheet. In case of current assets it is
more probable that the discrepancy arises from inventories and/or from trade debtors. In
case of fixed assets it is more probable that the price of land, and other fixed assets are
overstated/understated.

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The fixed assets of AMCL PRAN consist of land and land development, building and
other construction plant, machinery and equipment, vehicles, furniture and fittings.
Tangible fixed assets like machinery and equipments are capitalized at their cost of
acquisition, which comprises of purchase price including import duties. It is likely that
such assets have been used for a long time and so their market value has gone down.

Thus a new balance sheet was prepared for the year 2009 to justify the market value.
Here the following two tables are showing the balance sheet based on the book value and
our new adjusted balance sheet based on the market price of the share.

Balance Sheet 2009

Balance sheet based on book value of share

Asset Amount Liabilities Amount
Current Asset 668461522 Debt 637623968
Fixed Asset 329129366 Equity 359966920
Total 997590888 Total 997590888
Table 3.2 Balance sheet based on book value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

Proposed Balance sheet based on Market value of share

Asset Amount Liabilities Amount
Current Asset 668461522 Debt 637623968
Fixed Tangible 658258732 Equity 1090400000
Asset
Intangible 401303714
Total 1728023968 Total 1728023968
Table 3.3 Proposed Balance sheet based on market value of share
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 Data source – Annual reports of AMCL PRAN (2005-2009)

For the year 2009, we can see that Market value is higher than the book value by a huge
amount. In Balance sheet based on book value of share the Fixed asset was
underestimated and company does not show there intangible asset in calculation. AMCL
PRAN has gained reputation in local market and international market which attracts the
investors to buy share in capital market. In the new proposed balance sheet based on
market value per share we adjusted the fixed asset by revaluing tangible fixed asset and
by adding intangible asset [trade marks, good will].

Balance Sheet For 2008

Balance sheet based on book value of share

Asset Amount Liabilities Amount
Current Asset 6732602852 Debt 580472177
Fixed Asset 249925685 Equity 342714361
Total 923186537 Total 923186538
Table 3.4 Balance sheet based on book value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

Balance sheet based on Market value of share

Asset Amount Liabilities Amount
Current Asset 673260852 Debt 580472177
Fixed Tangible 520811300 Equity 913600000
Asset
Intangible 300000025
Total 1494072177 Total 1494072177
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 Table 3.5 Proposed Balance sheet based on market value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

For the year 2008, we can see that in Balance sheet based on book value of share the
Fixed asset was underestimated and company does not show there intangible asset in
calculation. Here inventory turnover of the company increased heavily which might
affect the profitability and dividend proposed to the share holders, in this speculation
investors put trust on the AMCL PRAN. In the new proposed balance sheet based on
market value per share we adjusted the fixed asset by revaluing tangible fixed asset and
by adding intangible asset [trade marks, good will].

Balance Sheet For 2007

Balance sheet based on book value of share

Asset Amount Liabilities Amount
Current Asset 676467480 Debt 629060410
Fixed Asset 280520679 Equity 327927749
Total 956988159 Total 956988159
Table 3.6 Balance sheet based on book value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

Balance sheet based on Market value of share

Asset Amount Liabilities Amount
Current Asset 676467480 Debt 629060410
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Fixed Asset 258696930 Equity 306104000

Total 935164410 Total 935164410

Table 3.7 Balance sheet based on market value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

For the year 2007, we can see that market value is lower than the book value, the reason
behind may be the investor did not see any growth potentiality in dividend declaration. In
Balance sheet based on book value of share, the fixed asset was over estimated. In the
new proposed balance sheet based on market value per share we adjusted the fixed asset
by reducing tangible fixed asset.

Balance Sheet for 2006

Balance sheet based on book value of share

Asset Amount Liabilities Amount
Current Asset 673783245 Debt 652956862
Fixed Asset 316861409 Equity 337687792
Total 990644654 Total 990644654
Table 3.8 Balance sheet based on book value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

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 Balance sheet based on Market value of share
Asset Amount Liabilities Amount
Current Asset 673783245 Debt 652956862
Fixed Asset 287973617 Equity 308800000

Total 961756862 Total 961756862

Table 3.9 Balance sheet based on market value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

For the year 2006, we can see that market value is also lower than the book value. In
Balance sheet based on book value of share, the fixed asset was over estimated. In the
new proposed balance sheet based on market value per share we adjusted the fixed asset
by reducing tangible fixed asset.

Balance Sheet for 2005

Balance sheet based on book value of share

Asset Amount Liabilities Amount

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Current Asset 660584792 Debt 665569485
Fixed Asset 335022646 Equity 330037953
Total 995607438 Total 995607438
Table 3.10 Balance sheet based on book value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

Balance sheet based on Market value of share

Asset Amount Liabilities Amount
Current Asset 660584792 Debt 665569485
Fixed Tangible 400226464 Equity 415400000
Asset
Intangible 20158229
Total 1080969485 Total 1080969485
Table 3.11 Balance sheet based on market value of share

Data source – Annual reports of AMCL PRAN (2005-2009)

For the year 2005, we can see that Market value is higher than the book value . In
Balance sheet based on book value of share the Fixed asset was underestimated and
company does not show there intangible asset in calculation.. In the new proposed
balance sheet based on market value per share we adjusted the fixed asset by revaluing
tangible fixed asset and by adding intangible asset [trade marks, good will].

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 Chapter – 4

CASH FLOW ANALYSIS

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4.1 Cash Flow Analysis:

Cash flows are the cash receipts and the cash disbursements of the company that is the
inflows and outflows of cash. It is an analysis over a period of time revealing the
availability, or lack, of cash. More simply put the difference between cash in (income) vs.
cash out (expenses). Since money does not flow in and out at an equal rate, in most
businesses, an analysis of cash flow is important.

4.1.1 Net Cash Provided by Operating Activities:

This section shows how much cash came into the company and how much went out
during the normal course of business.

Cash flow from operating activities

Year Amount of Cash (Taka)
2009 109919374
2008 30510711
2007 73066129
2006 63812457
2005 53424896
Table 4.1 Cash flow from operating activities of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

Figure 4.1Cash flow from operating activities of AMCL PRAN

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We can see that cash net cash provided by operation is positive over the five of
AMCLPRAN ltd. In 2009 company’s Cash has increased by higher net income and also
because of increase in long term debt. In 2008 net cash provided by operation was much
lower compare to previous year because company has paid out a huge amount of current
amount of short term and long term loan. In 2007 cash from operation activities has
increased due to increase in current portion of long term loan and increase in defer tax
liability. In 2006 cash has increased compared to previous year because higher sales. In
2005 company has increase cash by current portion of long term loan though it has paid
out huge amount of money for advance deposit and prepayment.

4.1.2 Net Cash Provided by Investing Activities:

Cash flow from investment activities

Year Amount of Cash (Taka)
2009 -108104734
2008 -2723395
2007 -2206576
2006 -22865071
2005 -31460546
Table 4.2 Cash flow from investment activities of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

Figure 4.2Cash flow from investment activities of AMCL PRAN

We can see that net cash provided from investment activities is negative over the five
years. It measures company’s position in investment sector, company has made huge
investment to purchase fixed assets which consume cash.

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4.1.3 Net Cash Provided by Financing Activities:

Cash flow from investment activities

Year Amount of Cash (Taka)
2009 24871159
2008 -42030854
2007 -59161666
2006 -35275906
2005 -7930227
Table 4.3 Cash flow from financing activities of AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

Figure 4.3 Cash flow from financing activities of AMCL PRAN

Net cash flow from financing is positive in 2009 as company has taken huge long term
loan for increasing investment activities. Over the five years company has not changed its
shared capital, company has paid out continuous cash dividend.

The Net change in cash of AMCL PRAN Ltd is fluctuating from 2009 to 2005. In 2009
net change in cash is positive this indicated that during the year the firm has more cash
inflow then outflow the cash position have improved from the previous year as the
company was heavily dependent on long term debt. Huge inventories is piled up that the
company might sold out more inventories to improve its liquidity position, while in 2008
net change in cash is negative. due to increase in advance deposit and prepayments and
also payment of current portion of short term loan.

4.1.3 Cash at the End of the Year

Cash At the End of the Year

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 Year Amount of Cash (Taka)
2009 66266886
2008 39941087
2007 54184625
2006 42486738
2005 36815258
Table 4.4 Cash flow at the end of year for AMCL PRAN

Data source – Annual reports of AMCL PRAN (2005-2009)

Figure 4.4 Cash at the end of the year for AMCL PRAN

The AMCL PRAN maintains positive cash at the end of each year. In 2009 its cash has
increased by 65.91% due to higher net income. In 2008 cash has decreased compare to
2007 and in 2006 cash increase compare to 2005.

CHAPTER 5

RATIO ANALYSIS

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5.1 Ratio Analysis:

To evaluate a firm’s financial condition and performance, the financial analyst needs to
perform “checkups” on various aspects of a firm’s financial health. A tool frequently
used during these checkups is a financial ratio, or index, which relates two pieces of
financial data by dividing one quality by the other.

We calculate ratios because in this way we comparison that may prove more useful than
the raw numbers of themselves. The analysis of financial ratios involves two types of
comparison,

➢ First, the analyst can compare a present ratio with past and expected future ratios
for the same company. The current ratio (the ratio of current assets to current

2
 liabilities) for the present year could be compared with the current ratio for the
previous year-end. When financial ratios are arrayed over a period of years, the
analyst can study the composition of change and determine whether there has
been an improvement or deterioration in the firm’s financial condition and
performance over time.
➢ The second method of comparison involves comparing the ratios of one with
those of similar firms at the same point in time. Such a comparison gives insight
into the relative financial condition and performance of the firm.
Here we will discuss about different types of ratios and we will calculate the ratios. Then
we will compare the ratios of AMCL PRAN with the ratios of FUWANG FOODS LTD.

5.1.1 Liquidity Ratios:

Ratios that show the relationship of a firm’s cash and other current assets to its current
liabilities are known as liquidity ratios. Different types of liquidity ratios are discussed
below.

5.1.1.1 Current Ratio:

The ratio is calculated by current assets divided by current liabilities. It shows a firm’s
ability to cover its current liabilities with its current assets.

Current Ratio = Current Assets / Current Liabilities

The following table is showing the current ratios of AMCL PRAN and FUWANG
FOODS LTD. for the last five years, from 2005 to 2009.

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 FUWANG FOODS
Years AMCL PRAN
LTD.
2009 1.280978209 0.994088018
2008 1.319127822 1.238216886
2007 1.262394735 1.339228552
2006 1.292841036 1.105166519
2005 1.269315553 1.266573682
Table 5.1 Current ratios of AMCL PRAN and Fu-Wang Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure-5.1: Current Ratio Trend of AMCL PRAN and Fu-Wang Foods Ltd.

Comment:

From table 7.1 we can see that AMCL PRAN has a liquidity which is less than
Benchmark of 2.

This ratio of 2009 has decreased from previous year. It seems that liquidity position of
the firm has become weaker. This is because of increase in current liability especially in
short term loan, deferred tax liability etc. and also current asset has been reduced in
current year specially in stock and advanced deposits & prepayment. The firm has to
consider their current asset as it would be difficult for the company to allocate more
funds for investment which is a bad news. We can also see from the graph (figure-7.1),
this ratio has decreased from the year 2006 and increased from the year 2007 & 2005.

1
In the year 2009,2008,2006,2005, AMCL PRAN is in much better position than
FUWANG Foods Ltd.

5.1.1.2 Quick Ratio

Inventories typically are the least liquid of a firm’s current assets and they are the assets
on which losses are most likely to occur in the event of liquidation. Therefore, a measure
of the firm’s ability to pay off short term obligations without relying on the sale of
inventories is important. That’s why quick ratio is used and the calculation of that is as
follows:

Quick ratio= (current assets - inventories)/ current liabilities

FUWANG
Years AMCL PRAN
FOODS LTD.
2009 0.358372 0.724146
2008 0.370428 0.7977447
2007 0.360395 0.927235
2006 0.341081 0.7364221
2005 0.324689 0.821689
Table 5.2 Quick ratios of AMCL PRAN and Fu-Wang Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure-5.2: Quick Ratio Trend of AMCL PRAN and Fu-Wang Foods Ltd.

Comment:

1
For AMCL PRAN, quick ratio for last five years is below the benchmark 1. This is a bad
news for company, the company should try to concentrate on excess inventories which is
not desirable. In comparison with FUWANG Foods Ltd., the quick ratio is also lower for
all five years.

Overall comment on Liquidity ratio:

Liquidity performance of AMCL PRAN is poor for years 2005-2009. And also it is
below than the benchmark. In comparison to FUWANG Foods Ltd., it is also weaker. So
AMCL PRAN needs to increase it cash balance through increased sales to improve its
liquidity condition.

5.1.2 Asset Management Ratios:

Asset Management Ratio is a set of ratios that measures how effectively a firm is
managing its assets. These ratios are designed to find out whether the total amount of
each type of asset as reported on the balance sheet seem reasonable, too high, or too low
in view of current and projected sales levels.

5.1.2.1 Inventory Turnover Ratio:

The ratio calculated by dividing cost of goods sold by inventories.

Inventory turnover ratio= Cost of goods sold/inventories.

The following table is showing the inventory turnover ratios of AMCL PRAN and
FUWANG Foods Ltd. for the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG

FOODS LTD.

1
 2009 1.783865 7.1883405
2008 1.572352 3.9981206
2007 1.481067 4.666536
2006 1.346243 4.891046
2005 1.205982 4.834153
Table 5.3 Inventory Turnover ratio of AMCL PRAN and Fu-Wang Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.3: Inventory Turnover Ratio Trend of AMCL PRAN and Fu-Wang Foods
Limited.

Comment:

AMCL PRAN’s inventory turnover is improving from year to year. But it is holding
excessive stock inventory which is indeed unproductive. It might have old inventory
piled up that suggests poor inventory management. Even compared to FUWANG Foods
Ltd., the inventory Turnover ratio is not satisfactory. AMCL PRAN should increase its
sales to reduce its level of inventory.

5.1.2.2 Days Sales Outstanding

The DSO ratio is calculated by dividing accounts receivable by average sales per day
which indicates the average length of time it takes the firm to collect its credit sales. DSO
is calculated as follows:

1
Days Sales Outstanding (DSO) =Receivables/Average sales per day

= Receivables/ [Annual sales/360]

The following table shows the DSO ratios of AMCL PRAN and FUWANG Foods Ltd
for the last five years, from 2005 to 2009:

Years AMCL FUWANG FOODS

PRAN(days) LTD. (days)

2009 12.1287 39.8248

2008 16.1625 54.7553
2007 23.2267 43.2845
2006 18.8944 71.9281
2005 19.1812 74.1962
Table 5.4: DSO ratios of AMCL PRAN and Fu-Wang Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.4: DSO Ratio Trend of AMCL PRAN and Fu-Wang Foods Limited.

Comment:

AMCL PRAN collects receivables quickly from year to year though it is bit higher in
2007. Compared to FUWANG Foods Ltd., AMCL PRAN is much quicker to collect its
receivables. Hence we can say AMCL PRAN has strong credit policy.

1
5.1.2.3 Fixed Asset Turnover
The fixed assets turnover ratio measures how effectively the firm uses its plant and
equipment to help generate sales. It is basically the ratio of sales to net fixed assets. It is
computed as follows:

Fixed assets turnover ratio = Sales/ Net fixed assets

The following table shows the fixed asset turnover ratios of AMCL PRAN and
FUWANG Foods Ltd for the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG

FOODS LTD.

2009 3.36238 2.03203

2008 3.94298 2.00959
2007 3.299218 1.95609
2006 2.736215 1.8549
2005 2.38098 1.9233
Table 5.5: Fixed Asset Turnover ratios of AMCL PRAN and FUWANG Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.5: Fixed Assets Turnover Trend of AMCL PRAN and FUWANG Foods Ltd.

1
Comment:

AMCL PRAN has improved Fixed Asset Turnover ratio from 2005 to 2009 though it is a
bit lower in 2009 compared to 2008. In comparison with FUWANG Foods Ltd., AMCL
PRAN is in much better position because of increase in sales of AMCL PRAN over the
years.

5.1.2.4 Total Asset Turnover

The total asset turnover ratio is calculated by dividing sale by total assets. The total assets
turnover ratio measures the turnover of all the firm’s assets. It is calculated as follows:

Total assets turnover ratio = Sales/ Total assets.

The following table shows the total asset turnover ratios of AMCL PRAN and FUWANG
Foods Ltd for the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG

FOODS LTD.

2009 1.10933 1.08856

2008 1.06749 0.92822
2007 0.96709 0.92705
2006 0.875188 0.98349
2005 0.80120 1.02314
Table 5.6: Total Asset Turnover ratios of AMCL PRAN and Fu-Wang Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

1
 Figure 5.6: Total Assets Turnover Trend of AMCL PRAN and Fu-Wang Foods Ltd.

Comment:

AMCL PRAN has improved its total asset turnover ratio gradually from 2005-2009. It
shows that AMCL PRAN is improving its sales compared to its total assets. Compared to
Fu-Wang Foods Ltd., AMCL PRAN has lower total asset turnover in year 2005 & 2006.
AMCL PRAN has increased sales in comparison to its total asset.

Overall comment on Asset Management ratio:

AMCL PRAN has poor performance in inventory turnover ratio. The company has to
improve its inventory management and sales promotion. To achieve this goal, the
company needs to maintain lower level of inventory. Even in comparison with
FUWANG Foods Ltd., the company weaker inventory management policy. This is a bad
news for the company. The company collects receivables quickly which shows maturity
in company’s credit policy.

5.1.3 Debt Management Ratios

This ratio measures how effectively a firm is managing its debts. This ratio helps the
analyst to determine the extent to which borrowed funds have been used to finance assets
and to determine how well operating profits can cover fixed charges such as interest. This
ratio includes analysis of two types of ratio; one is debt ratio and the other is times
interest earned ratio.

3
5.1.3.1 Debt Ratio
It measures the percentage of the firm’s assets financed by creditors. It is computed as
follows:

Debt ratio= Total debt/ total assets

Total debt includes both current liabilities and long term debts. Creditors prefer low debt
ratios, because the lower the ratio, the greater the cushion against creditor’s losses in the
event of liquidation. But, too much debt often leads to financial difficulty, which
eventually might cause bankruptcy.

The following table shows the debt ratio of AMCL PRAN and FUWANG Foods Ltd for
the last five years, from 2005 to 2009.

Years AMCL FUWANG

PRAN FOODS LTD.
2009 63.92% 46.706%
2008 62.88% 43.458%
2007 65.73% 39.28%
2006 65.91% 42.51%
2005 66.85% 36.95%
Table 5.7: Debt ratios of AMCL PRAN and Fu-Wang Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

1
 Figure 5.7: Debt Ratio Trend of AMCL PRAN and FUWANG Foods Ltd

Comment:

The Debt ratio of AMCL PRAN is significantly high in all the five years a compare to
Fu-Wang Foods the ratio is higher for all the five years, this is alarming as interest
charges are compulsory obligation in future this may result in a constraint to raise debt. It
might be rationalized by an increased EPS by means of high debt financing.

5.1.3.2 Time Interest Earned (TIE) Ratio:

The TIE ratio is computed by dividing earnings before interest and taxes (EBIT) by
interest charges. It is the measures the ability of the firm to meet its annual interest
payments. The TIE ratio is defined as follows:

Time interest earned ratio = EBIT/ Interest charges

Failure to meet this obligation can bring legal action by the firm’s creditor, possibly
resulting in bankruptcy. The following table is showing the TIE ratios of AMCL PRAN
and FUWANG Foods Ltd. for the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG

FOODS
LTD.
2009 2.415 3.6246
2008 1.45 3.3003
2007 1.39 2.783
2006 1.4109 4.58
2005 1.577 4.85

2
 Table 5.8: TIE ratios of AMCL PRAN and FUWANG Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.8: TIE ratio of AMCL PRAN and FUWANG Foods Ltd.

Comment:

TIE ratio for AMCL PRAN is alarming even compare to fu-wang foods ltd TIE ratio is
lower for all five years, AMCL PRAN is covering its interest charges by a low margin of
safety. This effects the potentiality of raising further debt in future.

Overall comment on Debt Management Ratio:

AMCL PRAN is a highly levered firm as it has poor debt ratio and TIE ratio. This may
affect the cost of debt in future. The firm has raised debt capital to pay dividend and
increase fixed assets.

5.1.4 Profitability Ratios:

Profitability Ratio implies a group of ratios showing the effect of liquidity, asset
management, and debt management on operating results. Profitability is the net result of a
number of policies and decisions.

3
5.1.4.1 Net Profit Margin on Sales:
The ratio measures net income per dollar of sales. It is calculated by dividing net income
by sales. It is defined as follows:

Net profit margin on sales = Net Income/ Sales

The following table is showing the net profit margin on sales ratios of AMCL PRAN and
FUWANG Foods Ltd. for the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG

FOODS
LTD.
2009 3.612% 4.13%
2008 3.648% 3.67%
2007 3.169% 3.74%
2006 3.339% 7.337%
2005 5.11% 7.73%

Table 5.9: Net profit margin on sales ratios of AMCL PRAN and FUWANG Foods ltd.

Data source – Annual reports of AMCL PRAN (2005-2009)

1
 Figure 5.9: Profit Margin on Sales Trend of AMCL PRAN and FUWANG Foods Ltd.

Comment:

AMCL PRAN has almost same net profit margin on sales for the year
2009,2008,2007,2006 but profit margin on sales was higher in 2005.even compare to fu-
Wang foods ltd AMCL PRAN has weaker position in Profit margin on sales. AMCL
PRAN should reduce its cost of goods sold, Administrative, selling and financial
expenses to increase its net income.

5.1.4.2 Return on Asset (ROA)

It is the ratio of net income to total assets. It provides an idea of the overall return on
investment earned by the firm. The ROA after interest and taxes are computed as follows:

Return on total assets (ROA) = Net Income/ total Assets

The following table shows the ROA ratios of AMCL PRAN and FUWANG Foods Ltd
for the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG

FOODS LTD.

2009 4.0066% 4.497%

2008 3.894% 3.407%
2007 3.065% 3.467%
2006 2.922% 7.2155%
2005 4.095% 7.908%

3
 Table 5.10: ROA ratios of AMCL PRAN and FUWANG Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.10: Return on Total Asset (ROA) Trend of AMCL PRAN and FUWANG Foods
Ltd.

Comment: AMCL PRAN has improves its return on asset from 2006 to 2009 but it was
higher in 2005. only in 2008 AMCL PRAN has higher return asset compare to fu-Wang
foods. AMCL pran should concentrate on their fixed assets, debt and inventories to
increase its net income.

5.1.4.3 Return on Equity (ROE)

This is the ratio of net income to common equity. It measures the rate of return on
common stockholder’s investment. The return on common equity (ROE) or the rate of
return on stockholder’s return is measured as follows:

Return on Common Equity (ROE) = Net income available to common

stockholders/Common Equity

= Net Income – Preferred Dividends/ Common

Equity

1
 Years AMCL PRAN FUWANG
FOODS
LTD.
2009 11.104% 8.438%
2008 10.49% 5.858%
2007 8.944% 5.57%
2006 8.5723% 11.58%
2005 12.354% 12.54%

Table 5.11: ROE ratios of AMCL PRAN and FUWANG Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.11: Return on Total Equity (ROE) Trend of AMCL PRAN and FUWANG Foods
Ltd.

Comment: AMCL PRAN has improved from 2007 to 2009 and it was all time high in
2005 but AMCL PRAN lower ROE in 2005 and 2006 compare to fu-Wang foods.

Overall comment on Profitability Ratio: AMCL PRAN needs to increase its

profitability ratio, both ROA and ROE needs to improve much. AMCL PRAN is
financially levered company this conforms the earlier observation that AMCL PRAN has
excess inventory and debt. AMCL PRAN should devote to its inventory and asset
management. The apparent benefit of leverage in terms of tax extension is not evienditial
in profit promotion. Operating activities of the firm suffered from poor liquidity position,
poor asset management and high debt.
3
5.1.4 Market value ratio

The market value ratios represent a group of ratios that relates the firm’s stock price to its
earnings and book value per share. These ratios give management an indication of what
investors think of the company’s past performance and future prospect. If the firm’s
liquidity, asset management, debt management, and profitability ratios are all good then
market value ratios will be high which will lead to increase the stock price of the
company. Market value ratio is of two types- Price/Earning Ratio and Market/Book value
Ratio.

5.1.4.1 Price/Earning (P/E) Ratio

This is the ratio of the price per share to earnings per share. It shows the dollar amount
investors will pay for $1 of current earnings. It is computed by market price per share and
earning per share (EPS).

P/E ratio = Market price per share/ Earnings per share

Price/Earning ratio is higher for firms with high growth potentials and low for riskier
firms. The investors consider the firm with high leverage more risky than firm with low
leverage. However if the ratio of the firms is increasing it means that it is gaining trust of
the investors.

3
The following table shows the P/E ratio of AMCL PRAN and FUWANG Foods Ltd for
the last five years, from 2005 to 2009.

Years AMCL PRAN FUWANG FOODS LTD.

2009 27.28x 26.49x

2008 25.41x 30.129x
2007 10.44x 19.714x
2006 10.67x 10.42x
2005 10.19x 8.798x

Table 5.12: P/E ratio of AMCL PRAN and FUWANG Foods Ltd

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

3
 Figure 5.12: Price/Earnings (P/E) Ratio Trend of AMCL PRAN and FUWANG Foods
Ltd

Comment:

AMCL PRAN has all time high PE ratio in 2009 but it was lower in 2008 compared to
fu-wang foods ltd. PE ratio is higher for firms with high growth potentials and low for
riskier firms. We do not know the growth potentials of AMCL PRAN but we know
investors consider the firm more risky perhaps due to high leveraged one. However the
P/E ratio of the firm is increasing to suggest more trust of the investors.

5.1.4.2 Market/Book value ratio:

The ratio of a stock’s market price to its book value gives another indication of how
investors regard the company. Companies with relatively high rates of return on equity
generally sell at higher multiples of book value than those with low returns.

Book value per share = Common equity/ Number of common shares outstanding

Market/ book ratio = Market price per share/ book value per share

The following table is showing the P/E ratio and Market / book ratio of AMCL PRAN
and FUWANG Foods Ltd. for the last five years, from 2005 to 2009

1
 Year AMCL PRAN FUWANG FOODS LTD.

Book value M/B value Book value M/B value

(tk) ratio (times) (tk) ratio (times)

2009 449.96 3.029 13.9001 2.23

2008 428.39 2.666 12.7254 1.823
2007 409.91 0.9334 12.32 1.12
2006 422.11 0.9144 11.9245 1.308
2005 412.55 1.2586 13.142 1.1033

Table 5.13: Market/Book Ratios of AMCL PRAN and FUWANG Foods Ltd.

Data source – Annual reports of AMCL PRAN (2005-2009), FUWANG Foods Ltd.
(2005-2009)

Figure 5.13: Market/ Book Ratio (M/B Ratio) Trend of AMCL PRAN and FUWANG
Foods Ltd.

Comment:

In 2009 the market/Book value ratio of AMCL pran is the highest compare to other years
even it is higher in 2009, 2008 and 2005 compare to fu-wang foods ltd. The market value
per share of AMCL PRAN is 3.029 times the book value per share; this is remarkable for
the company. It demonstrates that the trust of investors is going up.

1
 CHAPTER 6

FINDINGS AND CONCLUSION

2
6.1 Findings

From the above analysis, the current ratios and quick ratios of AMCL PRAN are low
which means that the company has liquidity problem. It also indicates high liabilities as
can be seen in the financial statement. Poor inventory management has to be improved.
An important aspect that was revealed by the financial analysis was it heavily relies on
borrowing. This increases the interest charges to pay and ties up company’s cash and
cash equivalent. This could lead to serious financial problem even bankruptcy. Another
aspect which needs to be considered is company’s very low profit margin. Low profit
margin is probably due to the net income which intern is because of high interest charges
paid. The assets may not be properly utilized.

Investors often lose their trust in such companies as it has already been reflected in low
market price AMCL PRAN in 2006 and 2007. Investors are not getting enough return on
their investment and such financial condition may lead to investors withdrawing their
investments and may affect the goodwill of the company negatively.

The company should increase the current asset specially cash to cover its liabilities and to
increase the liquidity situation. They should decrease the dependency on debt so that the
company doesn’t face financial difficulties and can increase the investor’s trust. Net
income should be increased to increase the profitability margin which will help to gain
investors faith on the company. The company has matured credit policy to increase it
receivables and to decrease the DSO. They can dispose some unutilized assets which will
help them to increase ROA. To increase the market price of their share AMCL PRAN is
effectively communicating their future prospects and trying to increase their goodwill in
the market .This is being reflected in market price of AMCL PRAN IN 2009.

2
AMCL PRAN wants to ensure highest return and growth of their assets. AMCL PRAN
has been performing far better than its rival FUWANG FOODS in respect to Fixed asset
turnover, Total asset turnover, ROE and Market/ Book value etc. its market price per
share has been increasing for last three years and its recent market price also suggest that
the investors are keeping faith on AMCL PRAN as a viable investment option and
investors are willing to pay much for the company’s book value than that for of an
average company of the same industry and they are excited about the future prospects of
its common stock as an investment. The company is trying to give a positive signal to the
market that the company is doing well by paying regular dividends. The investors think
that AMCL PRAN would bring more profitable return in future and its higher market
price compared to book value confirms that trust of the investors.

It is encouraging, however, to note that for the last few years, the company is operating at
profit although the profit margin is not very attractive. Thus, the company is in the
positive EPS over the five years having attributed to such growth potentiality and
investor’s trust in it as a profitable investment opportunity. Again one of the most
important ratios to evaluate the performance of the firm is the price earnings ratio. The
PE ratio of AMCL PRAN is significantly high in 2009 compared to 2007.Even the
market/book value ratio has significantly improved from 2007 to 2009 and it is better
than FUWANG FOODS Ltd. The improvement may indicate that the firm is gaining
more trust of investors. Thus, the company is in progress for further improvement and
they are improving from years to years.

6.2 Conclusion

To sum up the company is improving its liquidity ratio, profit margin on sales, ROA,
market/book value ratio is very impressive. Besides, it has also been carrying significant amount
of accumulated profit in the balance sheet. The asset management ratio shows that the company is
doing a good job in terms of utilizing its assets towards earning encouraging level of profit. Now,
it may be because of the fact that the assets that the company is utilizing is worth and is not

2
overstated as per the book value compared to their market value. P/E ratio is higher for high
growth potential firms. As AMCL PRAN shows a better P/E ratio than FU WANG FOODS Ltd
Investors trust on AMCL PRAN is increasing and gaining shareholder’s confidence and
credibility day by day.

2
 APPENDIX
Cash Flow of AMCL PRAN

Particulars Year
2009 2008 2007 2006 2005
Cash flow from operation Activities
Net Income 39969803 35949959 29331413 28947713 40771757
Add Back Depreciation 28901053 33318389 38547306 41026308 42554329
INC/DEC IN CURRENT ASSET
Inc/Dec In Stock 2750310 -854106 12677732 -4415722 1670848
inc/Dec in trade Debtor 6958520 15469081 -14207902 -3002617 -12544893
Inc/Dec in Advance Deposit and Prepayment 19886256 -27895437 -7978121 519952 -17055834
INC/DEC IN CURRENT LIABILITY
Inc/Dec in short term loan 5855688 -4143976 -10705112 5349150 1116997
change in unclaimed dividend 772800 280205 230487 -1126460 1482067
change in deferred tax 3604426 -181837 18790827 0 0
change in account payable 4037651 2720730 -1178309 -1565617 1609947
change in other current liability -1656531 2640301 1665210 403139 -12438634
dividen
change in proposed d 800000 1600000 0 0 1600000
current portion of long term lone -1960602 -28392598 5892598 -2323389 4658312
Net Cash provided by operation 109919374 30510711 73066129 63812457 53424896
Cash Flow From Investment Activities
-
Inc/Dec in fixed asset 108104734 -3003395 -3406576 -24595071 -32130546
Inc/Dec in investment 0 280000 1200000 1730000 670000
-
Net Cash flow from Investment Activities 108104734 -2723395 -2206576 -22865071 -31460546
Cash Flow From Financing Activities
Change in long term lone loan 46498359 -21511059 -38592153 -13349446 9787706
Change in share capital 0 0 0 0 0
Dividend paid to shareholder -21627200 -20519795 -20569513 -21926460 -17717933
Net Cash Flow from financing Activities 24871159 -42030854 -59161666 -35275906 -7930227
Net Change in Cash 26685799 -14243538 11697887 5671480 14034123
Cash at the beginning of the year 39941087 54184625 42486738 36815258 22781135
Cash at the End of the year 66,626,886 39,941,087 54,184,625 42,486,738 36,815,258

3
 Fu-Wang Foods Ltd

History of the Company:

Date of Incorporation : 27th February 1997

Listed in Dhaka Stock Exchange Ltd. : July 2000

Listed in Chittagong Stock Exchange Ltd. : July 2000

Commercial Production : August 1997

ISO certification : ISO-9002 Certified on 04 November 1998

Business Lines : Food Processing Industry

Authorized capital : Tk. 500 Million

Paid-up Capital : Tk. 184 Million

Number of Employees : 819

Financial and Operational Highlights for Five Years

2008 - 2009 2007 - 2008 2006 - 2007 2005 - 2006 2004 - 2005

Turnover (Net) 522.439 384.463 346.245 375.354 341.231

Gross Profit 87.470 67.470 64.174 82.728 76.182
Net Profit before tax 29.770 23.522 21.580 39.340 37.679
Net profit after tax 21.583 14.113 12.948 27.538 26.375
Shareholders’ Equity 255.776 234.193 226.778 219.411 210.272
Market Price/ per 31 23.20 13.80 15.60 14.50
Share
Earning Per Share 1.17 0.77 0.70 1.497 1.648
after Tax(Taka)
Cash Dividend Per Nil 0.60 0.50 1.00 Nil
Share (Taka)
Bonus 10% Nil Nil Nil 15%
Dividend(Percentage)

4
Balance Sheet
2009 2008 2007 2006 2005
Net Assets:
Non - Current Assets 257,102,135 191,314,221 177008040 202348238 177419413
Tangible Fixed Assets, net of
accumulated depriciation
257,095,135 191,307,221 177001040 201122253 174974443
prelimanary expence 11000 22000
Share issues expence 1207985 2415970
Trade Marks 7,000 7,000 7000 7000 7000

Current Assets 222,835,498 222,880,222 196484625 179308689 156095368

Inventories 60,510,390 79,285,401 60445455 59829027 2415970
Sundry Debtors 57,794,689 58,476,200 41630756 74955971 70328009
Loans, Advances and Deposites 83,972,706 73,496,882 64433553 33590158 24359926
Cash and cash Equivalents 20,557,713 11,621,739 29964861 10893533 6542967

Current Liabilities and - - - - -

Provisions 224,160,732 180,000,955 146714782 162245857 123242230
Credits, Short Term Bank Loans - -
Secured 109,491,742 -58167775 -69542261 -83952431 -75612031
Accrued Expenses -2,757,315 -6173446 -3988270 -3723954 -3635522
Sundry creditors -40,995,911 -46232972 -14282730 -11481702 -11109131
Proposed Dividend -6697830 -5581525 -18400000 0
Provision for Income Tax -70,915,764 -62728952 -53319996 -44687770 -32885546
net current assets -1325234 42879267 49769843 17062832 32853135
Total 255,776,901 234193488 266,77,883 219411070 210272548
Financed By:
Shareholders' equity 255776901 234193488 266777883 219411070 21022548
Share Capital 184000000 148000000 184000000 184000000 160000000
Tax Holiday Reserve 18245470 18245470 1845470 18245470 18245470
Retained Earnings-As per Profit &
Loss Account 53531431 31948018 24532413 17165600 32027078

Total 255776901 234193488 226777883 219411070 210272548