SINGER BANGLADESH LIMITED

The Company & Its Significance Accounting Policies

The Company

Singer Bangladesh Limited was incorporated as a Private limited Company on 4

September, 1979 under the Companies Act 1913. It was converted into a public limited

company in 1983 when it offered its shares to the public with the requisite permission

from the Government. It has been direct subsidiary of The Singer Bhold BV, The

Netherlands since 2003. The Shares of the Company are publicly traded in Dhaka Stock

Exchange and Chittagong Stock Exchange. The address of the registered office is 39

Dilkusha Commercial Area, Dhaka-1000, Bangladesh.

Basis of accounting

The financial statements have been drawn up, in accordance with Bangladesh Accounting

Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), the Companies

Act 1994, the Security and Exchange Rules 1987 and other applicable laws and

regulations.

1

COMMON SIZE STATEMENT ANALYSIS

Table 1: BALANCE SHEET OF THREE YEARS OF SINGER BANGLADESH LIMITED

Comparative Balance Sheet Amounts in TakaItems 2007 2008 2009

Current Assets:      Inventories 1075153713 1234109868 740366128Debtors 526332938 672657280 453377365Advances, Deposits and prepayments 108935833 126038944 124979073Income tax- refund receivable 31647678 22921795 259467Cash and bank balance 104496604 75511477 69615459

Total Current Assets 1846566766 2131239364 1388597492

Fixed Assets:      

Property, Plant & Equipment 354309440 483496291 472463387

Investments 92446134 345126582 328580882

Total Fixed Assets 446755574 828622873 801044269

Total Assets 2293322340 2959862237 2189641761Current Liabilities:       Short –Term Borrowings 384352894 440198828 439807282Creditors and accruals 1141931702 1188838551 234444603Total Current Liabilities 1526284596 1629037379 674251885Non-current liabilities Term loan 78111889 127214306 80202477Deferred tax liabilities - 4909081 6282361Retirement benefit obligations 49531072 46108821 41094369

Due to Singer Bhold B.V.-BD MGT. 266407142 266605573 306980203

Total Non-current liabilities 394050103 444837781 434559410Total Liabilities 1920334699 2073875160 1108811295

Sources of funds:

Share Capital 166212000 224386200 224386200

Reserves 47854406 141688010 141688010

Retained Earnings 158921235 519912867 714756256

Shareholder's fund 372987641 885987077 1080830466

Total Liabilities & Equities 2293322340 2959862237 2189641761

2

Table 2: COMMON SIZE BALANCE SHEET OF SINGER BANGLADESH LIMITED

Comparative Balance Sheet Common size (%)

Items 2007 2008 2009

Current Assets:      Inventories 46.88 41.69 33.81

Debtors 22.94 22.72 20.72

Advances, Deposits and prepayments 4.75 4.26 5.71

Income tax- refund receivable 1.38 .78 .01

Cash and bank balance 4.55 2.55 3.18Total Current Assets 80.52 72 63.42

Fixed Assets:Property, Plant & Equipment 15.45 16.34 21.58Investments 4.03 11.66 15

Total Fixed Assets 19.48 28 36.58Total Assets 100 100 100

Current Liabilities: Short –Term Borrowings 16.76 14.87 20.08Creditors and accruals 49.80 40.17 10.71

Total Current Liabilities 66.56 55.04 30.79Non-current liabilities

Term loan 3.41 4.30 3.66

Deferred tax liabilities - .17 .29

Retirement benefit obligations 2.16 1.56 1.88

Due to Singer Bhold B.V.-BD MGT. 11.61 9 14.02

Total Non-current liabilities 17.18 15.03 19.85Total Liabilities 83.74 70.07 50.64

Sources of funds:Share Capital 7.25 7.58 10.25Reserves 2.09 4.79 6.47

Retained Earnings 6.92 17.56 32.64

Shareholder's fund 16.26 29.93 49.36

Total Liabilities & Equities 100 100 100

INTERPRETATION

3

Looking at the common size balance sheet we immediately see that:

Cash position of the company has decreased from 2007 to 2008; it indicates

the company’s decrease reserve of cash to increase its liabilities both current

and future. But cash position increased next year 2009.

Singer Bangladesh Limited has the highest ratio (49.36%) in year 2009 of

equity to total assets.

It has higher accounts receivable in 2007 & 2008 and lower accounts

receivable in 2009. Company’s accounts receivable has been decreasing, it

indicates in future there will be less cash flow firm is able to generate.

Company has the lowest ratio of accounts payable in 2009 and highest ratio in

2007.

Short term debts are higher in year 2009 than other years. Long term debts are

higher in year 2008 than other years. So the company is more risk full than

other years.

Company has investment in 2009 is higher than other years.

Table 3: THREE YEARS INCOME STATEMENT OF SINGER BANGLADESH LIMITED

Comparative Income Statements Amount in Taka

4

Items 2007 2008 2009

Turnover

Sales 3417095964 4281291373 4261076215

Earned carrying charges 139312364 154834692 130184466

Total Turnover 3556408328 4436126065 4391260681

Cost of goods sold (2735493220) (3418695710) (3289986387)

Gross Profit 820915108 1017430355 1101274294

Operating expenses (565293823) (659950253) (686981460)

Operating Profit 255621285 357480102 414292834

Interest expenses (142221743) (156308887) (125988258)

Non-operating income 33150432 52996658 213813297

Profit for the year 146549974 254167873 502117855

Contribution to Workers Profit Participation Fund (WPPF) (7327499) (11361849) (22278286)

Profit before taxes 139222475 242806024 479839569

Provisions for taxes (37402547) (62798852) (83048600)

Net profit after tax 101819928 180007172 396790969

Table 4: COMMON SIZE INCOME STATEMENT OF SINGER BANGLADESH LIMITED

Comparative Income Statements Amount in Taka

Items 2007 2008 2009

5

Turnover

Sales 96.08 96.51 97.04

Earned carrying charges 3.92 3.49 2.96

Total Turnover 100 100 100

Cost of goods sold (76.92) (77.06) (74.92)

Gross Profit 23.08 22.93 25.08

Operating expenses (15.90) (14.88) (15.64)

Operating Profit 7.19 8.06 9.44

Interest expenses (4) (3.52) (2.87)

Non-operating income .93 1.19 4.87

Profit for the year 4.12 5.73 11.44

Contribution to Workers Profit Participation Fund (WPPF) (.21) (.26) (.51)

Profit before taxes 3.91 5.47 10.93

Provisions for taxes (1.05) (1.42) (1.89)

Net profit after tax 2.86 4.05 9.04

INTERPRETATION

Turning to the income statement we find that:

6

1. Singer Bangladesh limited has the lower ratio of Costs of Goods Sold to sale in

2009(74.92%). In this year the company is more efficient to manage direct cost.

2. Singer Bangladesh limited has lowest ratio of operating expenses in

2008 (14.88%).

3. Singer Bangladesh limited has the highest operating profit in 2009 (9.44%)

RATIO ANALYSIS

Table 5: RATIO ANALYSIS OF SINGER BANGLADESH LIMITED

7

RATIO ANALYSIS 2007 2008 2009

Inventory Turnover 2.99 3.44 5.03

Average no. of days inventory in stock 122.07 106.25 72.56

Receivables Turnover 7.53 7.14 7.57

Average no. of days receivable outstanding 49.66 51.12 48.23

Payables Turnover 3.17 2.41 1.58

Average no. of days payable outstanding 115 151 231.04

Fixed Asset Turnover 7.82 6.71 5.23

Total Asset Turnover 1.67 1.94 1.65

Current Ratio 1.21 1.31 2.06

Quick Ratio .41 .46 .78

Cash Ratio .07 .05 .10

Debt to Total Capital 7.34 5.87 1.40

Debt to Equity 430.15 198.78 70.38

Time Interest Earned 1.98 2.55 4.81

CFO to Debt .09 .06 .22

Gross Margin .24 .24 .26

Operating Margin .07 .08 .10

Margin Before Interest & Tax .08 .09 .14

Profit Margin .03 .04 .09

Return on Asset (ROA) .04 .06 .18

Return on Equity (ROE) .29 .29 .40

Debt to total Assets .70 .44 .14

Times Interest Earned 1.98 2.55 4.81

1. ACTIVITY ANALYSIS

Short Term Activity Ratio:

8

2007 2008 2009

2.99 3.44 5.03

Interpretation: It measures the firm’s ability to convert its inventory into sale. The ratio

is highest in 2009 which is 5.03 times. This shows that there are fewer inventories in

2009 than other years. This suggests that this company was holding less stocks of

inventory in 2009 comparing to other years.

2007 2008 2009

122 106 73

Interpretation: It measures on an average after how many days inventories are kept, just

to sell. The low ratio is good because it indicates inventory produce and sold quickly.

In 2009 the company has the lowest ratio of 73 days.

2007 2008 20097.53 7.14 7.57

Interpretation: It measures how many times in a year a firm collect its account receivable

on an average. In fact it indicates collection efficiency of the firm. The higher ratio is

good. The higher the ratio, the many times receivable turnover in a year. In 2009 the

company has highest ratio of 7.57 times.

2007 2008 200949.66 51.12 48.23

9

Interpretation: It measures within how many days amount of credit sale is collected from

clients. The lower the ratio is good. In 2009 the average number of day’s receivable

outstanding is low. It indicates that it require less time to collect account receivable.

2007 2008 20093.17 2.41 1.58

Interpretation: In 2009, the payable turnover is lower. It is better than other years,

because it makes the payment delayed.

2007 2008 2009115 151 231

Interpretation: In 2009, the average number of day’s payable outstanding ratio is higher.

It indicates long times are required to pay the liability.

Long Term Activity Ratio:

2007 2008 2009

10

7.82 6.71 5.23

Interpretation: The higher ratio is good. It means the company has better efficiency in

operations. Here the higher ratio in 2007 representing that the company used fixed assets

more efficiently in 2007 than other years. This mainly occurs for the huge amount of sale

in 2007 than other years.

2007 2008 20091.67 1.94 1.65

Interpretation: It measures the firm’s ability to use its assets for productive way. The

higher ratio is good. It means the company has better efficiency in operations. The

company’s ratio shows that the company generating better volume of business in 2008

(1.94 times) than other years. This occurs for large amount of sales in 2008 than other

years.

2. LIQUIDITY ANALYSIS

2007 2008 2009

1.21 1.31 2.06

Interpretation: Current ratio measures firm’s ability to pay current liabilities from

11

current assets. The higher current ratio is good. Among the three years, in 2009 the

current ratio is highest (2.06 times), it indicates better liquidity position to meet up

current obligations.

2007 2008 2009.41 .46 .78

Interpretation: Quick ratio measures firm’s ability to pay current liabilities from quick

assets (QA). Quick ratio is a more conservative measure of liquidity. The quick ratio of

the company is better in 2009 (0.78 times) than that of other years.

2007 2008 2009.07 .05 .10

Interpretation: Among the three years the cash ratio is higher in 2009 which is 0.10

times. In 2009 the company has the higher ability to meet the current obligations. The

cash ratio is the most conservative measure of cash resources.

3. LONG TERM DEBT & SOLVENCY ANALYSIS

2007 2008 2009

7.34 5.87 1.40

Interpretation: It measures the lender’s contribution part into the assets. The percentage

of 2009 is smaller than other years. Creditors prefer low debt ratio, because the lower the

ratio, the greater the cushion against creditor’s losses in the event of liquidation.

12

2007 2008 2009

430.15 198.78 70.38

Interpretation: It measures the proportion of lender’s contribution and owner’s

contribution to the business. Among the three years, in 2007 the company has the lower

ratio which is 70.38 times. The lower ratio is better, because shareholder bear for every

Tk. 1, lower amount of liability, less obligation, less risky.

2007 2008 2009

.09 .06 .22

Interpretation: Among the three years, in 2008 the ratio is lower and higher in 2009. The

higher the ratio is good. In 2009 the company has more ability to meet debt and capital

expenditure.

4. PROFITABILITY ANALYSIS

Return on Sales:

2007 2008 2009

.24 .24 .26

Interpretation: It measure gross profit portion in sale. It may be calculated is fraction or

percentage. The higher ratio is better. In 2009 the company has highest gross margin of

26% on sales.

13

2007 2008 2009.07 .08 .10

Interpretation: The operating margin provides information about a firm’s profitability

from the operations of its core business. The higher the ratio is good. We found that in

2009 the company has highest ratio of .10. The ratio indicates the margin of the company

from central operations.

2007 2008 2009.08 .09 .14

Interpretation: The ratio is higher in 2009 which is 0.14. The higher ratio indicates the

higher efficiency before interests and taxes.

2007 2008 2009.03 .04 .09

Interpretation: The ratios are higher in 2009 (.09). The higher ratio indicates higher

efficiency before taxes are paid.

Return on Investment:

14

2007 2008 2009.04 .06 .18

Interpretation: The ratios are higher in 2009 than other years. The higher ratio is good. It

indicates higher efficiency of the company in terms of asset. It also indicates higher

return available to all capital providers.

2007 2008 200929% 29% 40%

Interpretation: It measures the % of earning that a company can earn on its equity. The

ratios are higher in the year 2009 and lower in the years2007 & 2008. The higher ratio

indicates the higher return available to the equity holders only.

Leverage:

2007 2008 2009.70 .44 .14

Interpretation: Debt to Total Assets measures the amount of total debt ratio to total

assets. The lower ratio is in the year 2009 and higher ratio is in the year 2007. It means

15

the condition of the company is so well in the year 2009 than 2007.

2007 2008 2009

1.98 2.55 4.81

Interpretation: It measures the firm’s ability to pay its interest expense from it earning.

Among the three years the company has highest ratio in 2009(4.81 times). The higher

ratio means higher the ability of the company to pay interest expense.

16