Analysis Of The Financial Performance

A Study On BSRM Steels Limited 1

Assignment on Financial Performance:

Prepared for:

Shajedul AlamSenior Lecturer

Department of Business Administration

East West University

• Prepared byNazmul Mishuk

Id:142051013

Mamun Ahmed

Id:133051012

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BSRMThe Ultimate Steel

Bsrm steels limited

BSRM Steels Limited

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BSRMThe Ultimate Steel

Acknowledgement 4

At the very outset, we would like to express our sincere gratefulness to the Almighty Allah, the most merciful and beneficiary for empowering us to accomplish the dissertation within scheduled time.We are highly indebted to our course instructor, Shajedul Alam. He allowed us to encroach upon his precious time right from the very beginning of this paper work till the completion. His expert guidance, affectionate encouragement and critical suggestion provided us necessary insight into the problem and paved the way for the meaningful ending of this assignment work in a short duration. Without his constant supervision and valuable advices a suggestion from time to time, we would not be able to complete the whole thing in a right manner.We would like to thank all those who contributed through their comments and suggestions to prepare the term paper in a comprehensive manner.

Executive Summar y 5

Every corporation has many and varied uses for the standardized records and reports of its financial activities. Financial performance is the most important thing for a public or private limited company. It is the key tool for attracting investors towards the company. In this study we have analyzed about the overall financial performance through ratio analysis of BSRM steels limited. We have finished this work as much efficiently as we could.In this report we have worked on Statement of Comprehensive Income (income statement or trading and profit and loss account), owner’s equity statement and Statement of Financial Position (balance sheet) of BSRM steels limited . The data needed were collected from the annual reports of the BSRM steels over last 3 years, the website of the company and the website of the Dhaka stock exchange. We also took help from the class lectures and the Financial Accounting text book while preparing the theory part of the assignment and while taking the decision about the financial performance of the BSRM steels limited.We have go through the study by analyzing the following things of the company over last three years data:

•Profitability ratio

•Liquidity ratio

•Efficiency ratio

Based on these data we have worked on the financial performance of the BSRM steels limited .

Finally we have some recommendations for the company to do their business well further. In this way, we have prepared our study in a well manner and as relevant and reliable as possible.

INTRODUCTIONINTRODUCTION 6

Financial Management is that activity is concerned with the planning and controlling of the firm’s financial resources. Though it was a branch of economics till 1890 as a separate or discipline it is of recent origin. Financial management is concerned with the duties of finance manager in a business firm. He performs such as budgeting, financial forecasting, cash management, credit administration, investment analysis and fund procurement. The recent trend towards globalization of business activity has created new demands and opportunities in managerial finance. Financial statements are prepared and presented for external users of accounting information. As these statements are used by investors and financial analysts to examine the firms performance in order to make investment decisions.

Overview of ProjectOverview of Project 7

The topic of this project is Financial Performance Analysis at BSRM steels. Financial Performance Analysis constitutes approach to judge the effectiveness of the financial function of the firm. Finance is needed to promote or establish the business, acquires fixed assets, make investigations, develop product, meeting day to day affairs of the company, encourage manager to make progress and create value. The project work during the period of study equips the youngsters with necessary experience and enhances the learner with adequate to the real field. It enables the learner to meet the challenges of a business world.

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Overview of BSRM Steels 9

The BSRM began the first re-rolling mills to emerge in the then East Bengal in 1952.Shares of BSRM Steels limited,the flagship company of BSRM group was listed with the countrys premier bourses DSE ltd and Cse ltd as on 18 january 2009.BSRM has been recognized as the best brand of Bangladesh in the Steel Category at the Best Brand Award Bangladesh 2011 & 2013 ceremony, organized by Bangladesh Brand Forum. BSRM Steels Limited is a high grade steel manufacturing company and only producer of EMF tested ductile rod in Bangladesh. EMF (Elongation at Maximum Force) is the parameter of measuring of ductility of steel which has taken the country’s construction sector to a new era. BSRM is the market leader in the steel industry. Net sales for 2013 were 601,935 MT with value in Taka 3,622.90 crore.

BSRM VisionBSRM Vision 10

We at BSRM group aspire to...

Maintain our leadership position in the steel industry by producing the best quality steel products, continuously enhancing customer satisfaction and becoming a reliable business partner of our customers and suppliers. Be an employer of choice, with focus on nurturing talent and developing future leaders of the organization. Protect the interest of our shareholders through sustainable growth and value creation. Preserve the trust of all our stakeholders by adopting ethical business practices. Support the society through Corporate Social Responsibility initiatives.

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CORPORATE OBJECTIVES

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Company’s corporate objectives are;

• To procure material of required quality or quantity at most competitive prices for uninterrupted

production and maintenance of plant with least possible tie ups in inventories.

• To develop services and retain customers for the range of products manufactured by the

company and to meet customer needs in terms of new products or services.

• To promote and raise the standard of system and practices of corporate conduct to attain high

levels of accountability.

• To adopt transparency and responsibility in its operation and enhancement of overall long term

value of its shareholders, customers, lenders, and employees.

• To ensure maximum utilization of available human resources.

PRODUCTS AND MARKETS 13

SL.NO

Name OF Products

Size(mm)

1.

Xtreme500W

8, 10, 12, 14, 16,20, 22, 25, 28,29, 32 & 40 mm

2.

Grade – 400

BSRM Steels Limited is a high grade steel manufacturing company and only producer of EMF tested ductile rod in Bangladesh. EMF (Elongation at Maximum Force) is the parameter of measuring of ductility of steel which has taken the country’s construction sector to a new era. Products of BSRM Steels are:

BSRM is the market leader in the steel industry. Net sales for 2013 were 601,935 MT with value in Taka 3,622.90 crore.

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DATA ANALYSIS AND INTERPRETATION 15

Ratio AnalysisRatio Analysis is a powerful tool of Financial Analysis. The relationship between

two accounting figures, expressed mathematically is known as Financial Ratio. A ratio is used as an index or yardstick for evaluating the financial position and performance o a firm. Ratio Analysis highlights the liquidity, solvency, profitability, capital gearing etc. The technique serves as a tool for assessing the current and long term financial soundness of a business. It is also used to analyze various aspects of operating efficiency and level of profitability. Ratio was used for the time in 1919 by a German Scholar.Definition :-

“Ratio is simply a means of highlighting in arithmetical terms of relationship between figures drawn from financial statements”.

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Year Current Asset (Taka)

Current Liabilities ( Taka)

Current Ratio

2011 16,552,520,058 17,763,310,917 0.93

2012 14,931,429,134 16,178,604,488 0.92

2013 15,316,947,598 15,829,546,471 0.97

1.Current Ratio = Current Assets / Current liabilities

INTERPRETATION: -The current ratio of BSRM steels is

slightly lower the standard ratio of 2:1 in almost all the years. The highest ratio is 0.97 which were in the year 2013 and the lowest ratio is 0.92 which was in the year 2011.

LIQUIDITY RATIOSLIQUIDITY RATIOS

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2.Quick ratio = Quick assets / Current liabilitiesYEAR Quick Assets Current Liabiliies Quick Ratio

2011 10099590791 17763310917 0.57

2012 7069225271 16178604488 0.44

2013 9631974052 15829546471 0.61

INTERPRETATION: -The quick ratio of BSRM steels

shows not satisfactory level because it is less than the standard level (accepted level) of 1:1. The ratio had increased in the year 2013 with a ratio of 0.61 and the lowest ratio was in the year 2012 with a ratio of 0.44..

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1.Gross Profit Ratio = Gross Profit * 100 / SalesYEAR Gross Profit Net Sales Gross Profit Ratio

2011 1,914,574,971 31,234,710,327 6.13%

2012 1,888,439,411 38,253,464,657 4.94%

2013 3,250,148,580 36,229,050,933 8.97%

INTERPRETATION: - BSRM steels has reasonable gross

margin to cover all operating expenses and building up of results. From the analysis it is clear that, Gross Profit Ratio is highest in the year 2013 with a ratio of 8.97% and lowest in the year 2012 with a ratio of 4.94%.

The above given graph shows an up and down trend from 2011 to 2013, but the ratio considerably decreased in the year 2012. PROFITABILITY RATIOS

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2.Net Profit Ratio = Net Profit * 100 / SalesYEAR Net Profit Sales Net Profit Ratio

2011 839,205,050 31,234,710,327 2.69%

2012 865,331,036 38,253,464,657 2.26%

2013 1,196,113,781 36,229,050,933 3.30%

INTERPRETATION: - Net Profit is calculated after

deducting non-operating expenses from operating profit and adding non-operating income to such profit. Higher the ratio, the better it is, because it gives efficiency to the concern. Net Profit is at its highest in the year 2013 with a ratio of 3.30% and lowest in the year 2012 with a ratio of 2.26%. The above figure shows an increasing and decreasing trend from 2011 to 2013, .

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3.Mark up = (Gross Profit X 100)/ Cost of Goods Sold

YEAR Gross Profit Cost Of Goods Sold Mark Up

2011 1,914,574,971 29,320,135,356 6.52%

2012 1,888,439,411 36,365,025,246 5.19%

2013 3,250,148,580 32,978,902,353 9.85%

INTERPRETATION:Mark up is at its highest in the year 2013 with a ratio of 9.85% and lowest in the year 2012 with a ratio of 5.19%. The above figure shows an increasing and decreasing trend from 2011 to 2013.

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4.Return on capital employed = (Net profit x 100)/Capital employed YEAR Net Profit Capital Employed Return On Capital

Employed

2011 839,205,050 3,846,786,000 21.82%

2012 865,331,036 6,276,104,000 13.79%

2013 1,196,113,781 7,549,537,000 15.84%

INTERPRETATION: Return on Capital Employed is at its highest in the year 2011 with a ratio of 21.82% and lowest in the year 2012 with a ratio of 13.79%. The above figure shows an increasing and decreasing trend from 2011 to 2013,

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5.Return on capital invested = (Net profit x 100)/Owner’s CapitalYEAR Net Profit Owner’s Capital Return On Capital

invested

2011 839,205,050 2,974,081,000 28.22%

2012 865,331,036 5,540,654,000 15.62%

2013 1,196,113,781 6,417,895,000 18.64%

INTERPRETATION: In above the graph,there is a up and down trend over the years. In 2011 the company got the highest return on capital invested and lowest in 2012.Overall better position For BSRM

Efficiency Ratio 23

Stock turnover = Cost of goods sold / Average stockYear Cost of Good sold Average Stock Stock Turnover

2011 29,320,135,356 2554478121 11Times

2012 36,365,025,246 4257367195 8.54 Times

2013 32,978,902,353 5979274403 5.52 Times

INTERPRETATION: One of the most Important Ratio , the highest stock turnover in 2011 and lowest in 2013,there are downward trend in stock turnover over the years.

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BSRM Steels LimitedStatement of Financial PositionAs at 31 December 2012

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BSRM Steels LimitedStatement of Comprehensive Income For the year ended 31st December 2012

FINDINGS 28

The current ratio of the firm though not an ideal one (2:1), because the company did not attain the satisfactory ratio in any year . The current ratio shows a satisfactory position in meeting short term obligation . Quick ratio is not satisfactory; BSRM can not attain the satisfactory level of 1:1 almost all the years. quick ratio is very high during the year 2013.In Gross-profit ratio higher the ratio, the better it is. The company can achieve a high ratio of 8.97% during the year 2013.but we can see that the ratio is increasing in year to year . Net profit ratio explains per Taka profit generating capacity of sales. The amount of net profit and volume of sales increased year by year but the ratio shown an upward and downward trend . Return on employed is not satisfactory,need to increase the equity investment . Stock turnover is satisfactory

RECOMMENDATION 29

The company should concentrate on the long-term solvency of the business. Company should make effective measures to reduce the total deb t.The market condition should be properly analyzed before procurement of material. Liquid and long term solvency is satisfactory and the company should try to keep more liquid assets. Low rate of gross profit is due to the increase in the operating expense. The company should give more focus on general financial strength.The company should pay more attention towards the gross profit ratio and net profit ratio because both of these are showing a upward and downward trend.Return on capital Employed ratio is satisfactory. The company should give more attention to attain a higher ratio that will increase the profitability. Efficiency ratio shows a mixed trend so the company should take the necessary steps to meet the higher ratio..

CONCLUSION 30

BSRM is an epitome of industrial success in the customer of Bangladesh. From a very modest beginning the company has reached its present status of glory. As a Bar rolling,Steel making manufacturing, and processing unit, the company’s ability to sustain a steady and time bound supply schedule coupled with its constant striving for excellence has given it that extra edge over all its competitors in the field. The combined effort of the management and workers has ensured that the company never lost its course. Today the firm is well known for its consistent performance and the quality of its products and work force. In Bangladesh that is notorious for its militant trade unionism BSRM has succeeded in maintaining a peaceful industrial climate.The company’s working capital position shows a positive trend which shows good or satisfactory existences in current period. But we can see that the amount of sales is increasing at a healthy rate, but the amount of net profit after depreciation and tax going in a decreasing trend. This is mainly due to the increase in the cost of goods sold and increase in the manufacturing and labour cost. We can also see that an increase in the amount of share capital from 68.70 in 2013 to 67.90 in 2012, this will help to make more and more fund flowing towards the fixed assts and other manufacturing facilities.

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