AN ASSAIGNMENT ON FINANCIAL RATIO

ANALYSIS OF M.I.F. CEMENT FACTORY LIMITED

Prepared for

Mohammad Ali

Prepared by

Sk. Md. Rahman

Sequence of Contents
FINANCIAL RATIO &
ALTMAN Z- SCORE ANALYSIS

Introduction
Company Overview
Financial Ratio Classification
Statement of Financial Position of
M.I. Cement Factory Limited
Statement of Comprehensive Income of
M.I. Cement Factory Limited
Ratios & Analysis
Liquidity
Profitability
Solvency
Analysis of Altman Z- Score
Conclusion
Appendix

Introduction
Financial statement analysis (or financial analysis) the process of understanding the risk and
profitability of a firm (business, sub-business or project) through analysis of reported financial
information, particularly annual and quarterly reports.
Financial statement analysis consists of 1) reformulating reported financial statements, 2) analysis and
adjustments of measurement errors, and 3) financial ratio analysis on the basis of reformulated and
adjusted financial statements. The two first steps are often dropped in practice, meaning that financial
ratios are just calculated on the basis of the reported numbers, perhaps with some adjustments.
Financial statement analysis is the foundation for evaluating and pricing credit risk and for doing
fundamental company valuation.
Financial ratio analysis should be based on regrouped and adjusted financial statements. Two types
of ratio analysis are performed: 1) Analysis of risk and 2) Analysis of profitability
Analysis of risk typically aims at detecting the underlying credit risk of the firm. Risk analysis
consists of liquidity and solvency analysis. Liquidity analysis aims at analyzing whether the firm has
enough liquidity to meet its obligations when they should be paid. A usual technique to analyze
illiquidity risk is to focus on ratios such as the current ratio and interest coverage. Cash flow analysis
is also useful. Solvency analysis aims at analyzing whether the firm is financed so that it is able to
recover from a losses or a period of losses. A usual technique to analyze insolvency risk is to focus on
ratios such as the equity in percentage of total capital and other ratios of capital structure. Based on the
risk analysis the analyzed firm could be rated, i.e. given a grade on the riskiness, a process called
synthetic rating.
Ratios of risk such as the current ratio, the interest coverage and the equity percentage have no
theoretical benchmarks. It is therefore common to compare them with the industry average over time.
If a firm has a higher equity ratio than the industry, this is considered less risky than if it is above the
average. Similarly, if the equity ratio increases over time, it is a good sign in relation to insolvency
risk.
Analysis of profitability refers to the analysis of return on capital, for example return on equity, ROE,
defined as earnings divided by average equity. Return on equity, ROE, could be decomposed: ROE =
RNOA + (RNOA - NFIR) * NFD/E, where RNOA is return on net operating assets, NFIR is the net
financial interest rate, NFD is net financial debt and E is equity. In this way, the sources of ROE could
be clarified.
Ratio analysis expresses the relationship among selected items of financial statement data. A ratio
expresses the mathematical relationship between one quantity and another. A single ratio by itself is
not very meaningful, in the upcoming illustrations we will use:
Intracompany
Industry average
Intercompany

Financial
Ratio
Classifications

Liquidity Ratio
Solvency Ratio
Profitability Ratio

COMPANY OVERVIEW
M. I. Cement Factory Ltd. is a public limited company and one of the leading manufacturers of
cement in Bangladesh. On December 31, 1994 it started its journey with the commitment for
providing high quality cement to the country. Its brand "Crown Cement" has own renowned both at
home and abroad.
Initially the plant was installed with a capacity of producing 600tpd (ton per day) of Portland cement.
With the passing of time the demand of Crown Cement increased day by day. Therefore the sponsors
expanded the project thrice. By dint of quality Crown Cement soon gained acceptability both at
home and abroad which raised the necessity for expanding the plant from initial 600tpd (ton per day),
800tpd 2nd unit in 2002, 1400tpd 3rd unit in 2006 and 3000tpd 4th unit in 2011 thereby raising the
total production capacity to 5800tpd i.e. 1.740 million metric ton per annum.
The company has been listed in Dhaka Stock Exchange and Chittagong Stock Exchange in 2011. Its
high growth agenda have been highly appreciated by the shareholders, and have won investors trust.
Its backward and forward integration endeavors have given new dimensions to its growth platform.
With this end in view, the associate industrial units' viz., Crown Polymer Bagging Ltd., Crown Power
Generation Ltd., Crown Mariners Ltd., Crown Transportation & Logistics Ltd., Crown Cement
Concrete & Building Materials Ltd. have been set up and are already in operation. The company has
also acquired a handy max size ocean going ship to facilitate transportation of raw materials from
abroad. It is hopefully expected that these new growth platforms will facilitate creation of new
dimensions and frontiers to the mother company M. I. Cement Factory Limited.
Crown Cement pioneered in export of cement in 2003 and paved the way for earning hard-earned
foreign currency. Recently Crown Cement Achieved the National Export Trophy (Gold) twice for
attaining the top most place among the cement exporters in Bangladesh.
The factory possesses well communications facility both through water and road. It is located as West
Mukterpur, Munshigonj on the bank of the river Dhaleswari. It is connected by a metallic road
(Dhaka-Munshigonj Highway) linked with the whole country.

Vision
Our vision is to make a contribution to the nation by creating opportunities in the arena of industrial
growth and development of Bangladesh, and to provide a solid foundation for society's future.

Mission
As a modern cement company, we manufacture cement (Brand name: Crown Cement) to meet the
needs of clients through innovative products & services that create value for all our stakeholders.

Values
Commitment
Shareholders - Create sustainable economic value for our shareholders by utilizing an honest and
efficient business methodology.
Community Committed to serve the society through employment creation, support community
projects & events, and be a responsible corporate citizen.
Customers Render service to our customers by using state-of-the-art technology, offering diversified
products and aspiring to fulfill their needs to the best of our abilities.
Employees Be reliant on the inherent merit of the employees and honor our relationships. Work
together to celebrate and reward the unique backgrounds, viewpoints, skills, and talents of everyone at
the work place, at each level.

Accountability
We are accountable for providing quality products & excellent services along with meeting the strict
requirements of regulatory standards and ethical business practices.
Inspiring, Motivating & Compelling
We're ambitious and innovative. We get excited about our work. We bring energy and imagination to
our work in order to achieve a level of performance, not achieved before. We achieve a higher
standard of excellence. Everything we produce should look fresh and modern.
Ability
We have the ability to undertake the responsibility to materialize our commitment, and goals. In all
matters we think ahead & take new initiatives. We can see things from different perspectives; we are
open to change and not bounded by how we have done things in the past. We can respond rapidly and
adjust our mode of operation to meet stakeholder needs and achieve our goals.
Keep Promises
Everything we do should work perfectly. In all matters we maintain integrity & excellence. We
believe in actions, not in words.
Be Respectful
We respect our customers, shareholders & others stakeholders and want to fulfill their needs. We are
respectful in regard to all our interactions with them. We always appreciate comments & suggestions
from our stakeholders. We are open, helpful & friendly. We have total commitment to customer
satisfaction.
Goals
Our goals are to:
Continually set the latest standards of modern technology in our industry to satisfy the
needs of customers through innovative products and services.
Contribute to the national economy and the infrastructure development of the country.
Secure the strongest competitive position in our relevant market places through making
quality product and operational excellence.
Be partner with the best suppliers, delivering increased value for both the company and
our customers.
Be recognized as a respected & attractive company & an employer of first choice.
Provide extensive career opportunities through competitive pay & benefits, training &
development & a congenial working environment.
Empower our employees at every level, and integrate them fully into our network.
Continually demonstrate our commitment to sustainable environmental performance, and
play a pro-active role in Corporate Social Responsibility (CSR) within our sphere of
influence.
Achieve long-term financial performance,
Create secured investment opportunity within the country.
Enhance versatility, & diversification through the penetration of new market segments.
Improve administrative & organization structures to review all business lines regularly &
develop the best practice in the industry.
Earn foreign currency through export.

Milestones
Our job is to identify ways to increase productivity and efficiency and to promote a sustainable future.
No matter how good we are at service, our success depends more than anything on being able to
connect with customers.
In our journey the following years are the symbol of prosperity and progress::
2012: Procured a mother vessel (Crown Voyager) for transportation of raw materials
2011: Launched operation of 4th unit to double the production capacity
2011: Listed with Dhaka Stock Exchange (DSE) & Chittagong Stock Exchange (CSE)
2010: Awarded National Export Trophy (Gold) for the year 2009-10
2009: Awarded National Export Trophy (Gold) for the year 2008-09
2008: Launched operation of 3rd unit with production capacity of 1400MT/Day
2002: Launched operation of 2nd unit with production capacity of 800MT/Day
2000: Started commercial operation with production capacity of 600MT/Day
1994: Incorporated as a public limited company
Corporate Profile
Status:

Public Limited Company

Incorporation of the Company:

31st December 1994

Date of Commencement:

31st December 1994

Subscription Open on:

9th January 2011

Subscription closed:

13th January 2011

Listed in Dhaka Stock Exchange: 18th May 2011

Listed in Chittagong Stock
Exchange:

5th May 2011

Commercial Production:

13th October 2000

Nature of Business:

Manufacturing and marketing of Ordinary Portland Cement and

Portland Composite Cement.

Credit Rating:

Entity AA3 Short Team ST-2

Authorized Capital:

Tk. 500,00,00,000

Paid up Capital:

Tk. 100,00,00,000

Man Power:

937 permanent, 516 Casual, 1200 Unskilled Labor

No. of Shareholders:

93,616

Board of Directors

Md. Jahangir Alam - Chairman

Al-haj Md. Khabiruddin Molla Managing Director
Md. Alamgir Kabir Additional Managing Director
Molla Mohammed Moznu Additional Managing Director
Md. Mizanur Rahman Molla Director
Md. Almas Shimul Drector
Golam Mohammed Independent Director

M.I. CEMENT FACTORY LIMITED

STATEMENT OF FINANCIAL POSITION
ASSETS

NOTE

Non-current Assets

30.06.2011
TAKA

30.06.2010
TAKA

30.06.2009
TAKA

2232034926

1147167252

814870265

Property, Plant and

Equipments
Capital work in progress

1118455992

1069098640

814682054

1113578932

78068612

188211

Investment in Associate
Companies

376367941

192128891

89421413

4752218577

943139748

617067443

Current Assets
Inventories

587645695

352650104

187204468

Trade Receivables

343047480

316068872

251502609

Other Receivables

303651

4812864

3021163

343351131

320881736

254523772

Total Receivables
Advance, deposit &
prepayments

10

273873313

48673917

51520966

Advance Income Tax

11

323817217

160755959

96295768

Cash and bank balance

12

2867368280

60178033

27522469

7004458502

2282435892

1521359121

5028493703

1335997883

740319869

1000000000

700000000

200000000

Total Assets
Equity and Liabilities
Shareholders Equity
Share capital

13

Share Premium

2956560000

112794312

Retained earnings

803370870

364500643

Revaluation Reserve

268562833

271497240

568853411

64659320

103745980

427525557

Liabilities
Non-current liabilities
Long term borrowing net off
current maturity

14

513434222

15805067

70782117

Deferred tax liability

15

55419189

48854253

32963863

1407111388

881778689

677293272

Current liabilities and

provision
Trade payables

16

110537447

359115797

93882602

Other payables

17

107980584

31037931

22500083

Current portion of long term

loan

18

26076000

12016000

89787675

Short term loan

19

607876193

162452469

338140786

Provision for tax liabilities

Total liabilities
Total equity and liabilities

20

554641164
1975964799
7004458502

316356492
946438009
2282435892

132982127
781039252
1521359121

M.I. CEMENT FACTORY LIMITED

Statement of Comprehensive Income
Note

2010-2011
Taka

2009-2010
Taka

2008-2009
Taka

Net sales

21

4022271063

3127352627

2290358000

Cost of goods sold

22

3254014308

2425806260

1893229773

768256755

701546367

397128228

Gross profit
Other Operating Income

23

62781523

44173662

57804867

Administrative expenses

24

68181658

47717350

14742902

Selling And distribution expenses

25

152220573

127072672

39345115

610636047

570930007

400845078

Operating profit
Other non-operating Income

26

196619465

8925801

2663258

Financial expenses

27

92430813

48483129

103137448

Profit before WPPF & Income tax

714824699

531372679

300370888

Workers Profit Participation Fund

34039271

Net profit before income tax

680785428

531372679

300370888

Current tax

238284672

183374365

89337114

Deferred tax

6564936

15890390

23301969

Net profit after tax for the year

435935820

332107924

187731805

5.36

4.99

3.00

Income tax expenses

28

Earning per share

29

RATIOS & ANALYSIS:

The most significant item in the cash flow under investing and financing items were purchase of fixed
assets and short term loan received, respectively. This reflects M.I. cement factory Limited was
focusing on expanding their business by increasing their output.
Evaluations:

Liquidity:
Ratio

Formula

2011

2010

2009

Current ratio

CA/CL

3.38

1.07

0.91

Acid test or quick ratio

(CA-inventory)/CL

2.96

0.67

0.63

Receivable turnover

Sales/Average receivable

12.11

10.87

7.86

Inventory turnover

COGS/AVG Inventory

6.92

8.99

9.88

Analysis: The current ratio of M.I. cement factory Limited has shown steady growth over the threeyear period, from 0.91 (in 2009) to 3.38 (in 2011). This indicates that M.I. cement factory Limited
now has more current assets to cover its current liabilities. It can also be inferred that working capital
of M.I. cement factory Limited finally became positive in 2010, possibly allowing the company to use
the amount in various long-term asset financing schemes. Again we see that the quick ratio of M.I.

cement factory Limited has also shown steady growth over the three-year period, from 0.63 (in 2009)
to 2.96 (in 2011). This indicates that now the companys immediate short-term liquidity is at good
position.
M.I. cement factory Limited has a receivables turnover of 10.28 over the 2009 2011 periods, with
2011 being the highest. This means the company is able, on average, to quickly and efficiently collect
its outstanding receivables 10.28 times a year, which shows good liquidity position.
The inventory turnover of M.I. cement factory Limited is gradually increased 6.92 to 9.88 which show
that the liquidity of the companys inventory is at good position.
Liquidity and activity wise, M.I. cement factory Limited is currently in a stable.

Profitability:
Ratio
Profit margin
Asset turnover
Return on asset
Return on Common
Stockholders equity
EPS

Formula
Income/sales
Sales/AVG Asset
Income/AVG Asset
(Income-Dividend)/AVG Common
stockholders equity
Net Income/Number
of share

2011
0.11
0.87
0.09
0.14

2010
0.11
1.64
0.17
0.32

2009
0.08
1.46
0.12
0.29

5.36

4.99

3.00

Analysis: Like previous economic indicators, profit margin of M.I. cement factory Limited has shown
steady growth over the years, peaking at 0.11 in 2011 and 2010. Profit margin was slightly lower in
2009 at 0.08. This indicates that the net income by each taka of sales is at better position.
Asset turnover has steadily increased from 1.46 in 2009 to 1.64 in 2010. However in 2011 it has
shown slightly lower figure that is 0.87, but it not bad. Thus, M.I. cement factory Limited is now more
efficiently using its assets to generate sales, breaking even in 2010 and maintaining the onetoone
sales/asset activity rate.
Return on assets is an overall of profitability. Here return on assets has increased from 0.12 in 2009 to
0.17 in 2010, but in 2011 it shows the figure 0.09. Now M.I. cement factory Limited is at good
position by the overall profitability. But we have to increase our income to increase overall
profitability.
The companys return on equity shows a similar trend, with ROE being highest from 2009 to 2011 at
average of 25%. It should be noted that historically, the rate of return on total assets has been
significantly lower than M.I. cement factorys rate of return on common share holders equity. When
return on asset exceeds return on equity, a company is said to be trading in the equity. Trading on the
equity refers to the practice of borrowing funds at fixed interest rates or issuing preferred stock with
constant dividend rates; preferably rates that are lower than the rate of return obtained on assets. If this
can be done, the money obtained from bond holders (or preferred share holders) earns enough to pay
the interest (or preferred dividends) and to leave some margin for the common share holders, earning
them extra revenue. Since M.I. cement factorys ROE has always been higher than its ROA, it is
unable to take advantage of trading in the equity. This also explains why M.I. cement factory has not
issued preferred shares, as it would prove unprofitable.
Earnings per share has also increased over 2009-2011.An earnings was highest in 2011 at 5.36.
Overall, M.I. cement factorys profitability position has strengthened over time. All indicators show
positive growth, indicating that the company is pursuing the right strategy in term so fusing its assets
to create revenue.

Solvency:
Ratio

Formula

2011

2010

2009

Debt to total assets ratio

Total debt/Total asset

0.28

0.41

0.51

Analysis: From 2009 to 2011, M.I. cement factory has gotten better at financing its total asset needs
with fewer liabilities, as debt to asset ratio has slowly dropped over the 3 year period.
Overall, except the cash debt coverage M.I. cement factory seems to be doing a good job of covering
its financial obligations with its assets and revenue sources.

Altman Z- Score analysis:

The five weighted financial ratios:
Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
A = Working Capital/Total Assets
B = Retained Earnings/Total Assets
C = Earnings Before Interest & Tax/Total Assets
D = Market Value of Equity/Total Liabilities
E = Sales/Total Assets
Ratio

Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

2011
11.4945

2010
36.9755

The year wise value of A, B, C, D & E are:

Year
A
B
C
D
2009
0.048
0.281
0.197
19.19
2010
0.167
0.160
0.233
57.352
2011
0.562
0.115
0.097
16.275
Market price of the share was in 2009-146.00, 2010-187.00 & 2011-114.00

2009
14.1211

E
1.506
1.371
0.574

The Interpretation of Z - Score:

Z-SCORE ABOVE 3.0 -The Company is safe based on these financial figures only.
Z-SCORE BETWEEN 2.7 and 2.99 - On Alert. This zone is an area where one should exercise
caution.
Z-SCORE BETWEEN 1.8 and 2.7 - Good chances of the company going bankrupt within 2 years of
operations from the date of financial figures given.
Z-SCORE BELOW 1.80- Probability of Financial embarrassment is very high.
Comments
From the above table it is clear that, the Z score value of the company is above 3.0. So, we can make a
comment that, the Company is safe based on these financial figures only.
Conclusion: Since M.I. Cement Factory Limited is currently in a stable in liquidity and activity wise,
profitable, and able to cover its financial obligations with its assets and revenue sources, therefore we
can say that M.I. Cement Factory limited is now at good position.
Appendix:
Financial statement 2011
Statement of Financial Position as at 30 June, 2010
Update company information