Report On Summit Power

Limited

SUMMIT POWER LIMITED

RATIO ANALYSIS & INTERPRETATION OF SUMMIT POWER LIMITED

Solvency Ratios:
Quick Ratio:
Particulars
Quick Ratio

2009
0.32

2008
0.41

2007
0.16

2006
0.14

2005
0.23

Here this box showing the quick ratio of Summit Power Limited, from the year of
2006 to 2008 there was a continuous increase. But just right after that in 2009 there
was a decrease. So now the question is Why this increase and decrease occurred?
Now if we take a look on the deviation between year 2007 and 2008, this box
showing that cash had a huge increase in 2008 and on the other hand account
receivable had a huge decrease. So ultimately the cash plus account receivable
amount was close to same. But the main cause of that increase in quick ratio was a
huge decrease in current liability. And till 2008 this ratio was good for the company.
In the year 2009 there was a huge decrease in this ratio of SPL. And it was occurred
because of a huge increase in current liability. And this current liability increased
because of a huge increase in provision of corporate tax. But in this box the trend
line of quick ratio is up ward sloping and it is an overall good sign for Summit Power
Limited. It indicates that their liquid asset increased comparatively current liability.

Report On Summit Power

Limited

Current Ratio:

Particulars

2009

2008

2007

2006

2005

Current Ratio

0.89

0.87

0.39

0.39

1.88

Here this box showing the current ratio of Summit Power Limited, from the year of
2006 to 2009 there was a continuous increase. And here we notice that the
movement of this current ratio was exactly same like quick ratio of this company. So
now the question is Why this increase and decrease occurred?
In 2006 this ratio was too bad situation. Because it was below 1 and it indicate that
current asset was lower than current liability. And it was too riskier. In 2007 though
there was a same in current asset, current ratio dont increased. In 2008 there was
a huge increase in the both element of current liability. But increase in current asset
was comparatively high. Thats why current ratio increased. Like quick ratio, current
ratios trend line was also up ward sloping and that was a good sign for the
company.

Current Liability to Net Worth:

Particulars
Current Liability to Net
Worth

2009
1.32

2008
0.20

2007
0.86

2006
0.57

2005
0.20

Current liability to net worth ratio contrasts the amount due creditors within a year
with funds permanently invested by the owners. The smaller the net worth and the
larger the current liability, the greater the risk.
Here in this box, this figure showing that there was a continuous increase of this
ratio for Summit Power Limited. Only 2008 there was a decrease. At the starting of
this box in 2009, current liability was almost double of net worth, which was a very
risky situation for the company. In 2008 it decreased a lot that means the gap

Report On Summit Power

Limited
between this two components decreased. And that was a good sign.

Current Liability to Inventory:

Particulars
Current
Inventory

Liability

to

2009

2008

2007

2006

2005

6.44

4.23

7.12

5.86

4.18

Current liability to inventory ratio tells how much a firm relies on funds from
disposal of unsold inventories to meet debt.
Here in this box there was a continuous increase in this ratio of Summit Power
Limited. In 2006, there was a decrease in inventories and a huge increase in current
liabilities. And this decrease in inventory occurred because this year they collected
leaf more than the previous year. Thats why SPLs current liability to inventory ratio
increased in 2006. After 2006 & 2007, in 2008 there was a huge decrease in this
ratio. And the reason was a good amount of increase in inventory and a very little
increase in current liability. And the cause of increase in inventory was an increase
in their finish goods and raw materials. That 2008 year they had hold a big amount
of finish goods than previous year.

Total Liability to Net Worth:

Particulars
Total Liability
Worth

to

Net

2009

2008

2007

2006

2005

1.32

0.83

2.13

1.43

0.52

Here in this graph, there was a continuous increase in the total liability to net worth
ratio of Summit Power Limited except the year 2008. In 2006 the condition of SPLs
this ratio was too riskier because their total liability was more than 2.25 times

Report On Summit Power

Limited
higher than their net worth. And it was an abnormal deviation. The biggest increase
was happened in 2007 (from 1.43 to 2.13). That means the gap between these two
components increased. And that was a bad sign. In that year total liability increased
and net worth decreased by a good amount. And it was occurred because of a
decrease in revenue reserve. As it has been mentioned before, there was an only
decrease in 2008. And it occurred because of a huge decrease in current liability
which was a cause of a huge decrease in total liability. And this decrease of current
liability occurred because of a decrease in provision for corporate tax and a
decrease in intercompany payable and in sundry creditors. Now in this box, the
trend line is up ward sloping which indicates that SPL is not able to reduce their
financial risk.

Fixed Asset to Net Worth:

Particulars
Fixed Asset to Net Worth

2009
2.05

2008
1.66

2007
2.80

2006
2.21

2005
1.15

Fixed asset to net worth ratio is very important ratio for a manufacturing firm which
shows the solvency condition of a firm. So, here this box showing that, in the year
2007 their fixed asset was almost 1.5 times greater than their equity. And that was
a good sign for the company which indicated that they ware solvent. But just right
after that period, in 2008 it got a huge decrease. And the reason was a really good
amount of reduction of fixed asset.

Inventory Turnover Ratio:

Particulars
Inventory Turnover Ratio

2009
6.51

2008
4.55

2007
3.31

2006
2.45

2005
4.82

Report On Summit Power

Limited
Here in this inventory turnover ratio of Summit Power Limited, this box showing that
their inventory turnover rate was on in average 4 to 6 days. Summit Power Limiteds
sales condition and inventory condition both was very good during the year 2005 to
2009. Both of the components were increasing during those years. But sales (gross
turnover) increased a huge during those years. In 2008 it was 791926625 BDT
which increased at 1339839274 BDT in 2009. It was a huge. It was indicating a huge
growth of the companys.

Asset to Sales Ratio:

Particulars

2009

2008

2007

2006

2005

Assets to Sales

7.55

8.47

7.86

10.15

6.70

Here in this box it is showing the movement of asset to sales ratio of Summit Power
Limited. In the year of 2007 there was a big decrease in this ratio. And the reason
was a huge increase in sales and a slide decrease in total asset. And that decrease
in asset occurred because of the decrease in advances, deposit and prepayments of
2007. In the next year 2008 there was a very slide increase in this ratio which
occurred because the deviation of asset and sales of year 2008 was a bit lower than
the deviation of year 2007. After 2008, in 2009 there was a slide decrease in sales.

Sales to Net Working Capital Ratio:

Report On Summit Power

Limited
Particulars
Sales to
Capital

Net

Working

2009

2008

2007

2006

2005

8.87

8.42

0.76

0.68

-1.32

Working capital is a very important component for an organization to continue their

further production. Working capital is just like blood for an organization.
Here I calculate the sales to net working capital ratio for Summit Power Ratio. Here
this box showing that in 2005 the sales to net working capital ratio was negative
because in that year their current liability was greater than their current asset which
wasnt a good sign for SPL. But in 2008 it got an unbelievable increase. It increased
at 8.42 from -1.32 which was a massive. And that happened because of a decrease
in current liability and a huge increase in sales.

Account Payable to Sales Ratio:

Particulars

2009

2008

2007

2006

2005

Accounts Payable to Sales

0.17

0.11

0.20

0.32

0.12

Here this box showing the movement of account payable to sales ratio. This ratio
measures the extent to which the suppliers money is being used to generate sales.
When this ratio is multiplied by 365 days, it reflects the average number of days it
takes to pay its suppliers. So it is good to lower this ratio, because any time
suppliers can pressurize the company for money which is risky because, if it is
happen, company will suffer to generate sales. Here this box showing a continuous

Report On Summit Power

Limited
decreased in this ratio of Summit Power Limited. And this continuous decrease
occurred only because of a continuous huge increase in sales. Here this box also
presenting a trend line of this ratio which is down words sloping. And it is indicating
that in long run this ratio was also good for SPL.

Profitability Ratios:
Return on Sales:
Particulars
Return on Sales

2009
0.25

2008
0.26

2007
0.23

2006
0.27

2005
0.33

Here this box giving us a complete idea about the return on sales ratio of Summit
Power Limited. This ratio is measure percentage return of company on the basis of
sales. It finds out the portion of return in sales. So the higher is this ratio indicates
good sign for company. In 2005 there was a huge increase in this ratio and that
happened only because of a huge increase in profit after tax which was
proportionately bigger than the increase in sales. Then the biggest change or
decrease was occurred in 2007 and it was a huge which was huger than the
previous decrease. Than in 2008 there was a slide increase because in that year
there was a huge increase in sales but in profit after tax the increase was not that
much bigger comparatively to sales.

Return on Assets:

Particulars

2009

2008

2007

2006

2005

Return on Assets

0.07

0.07

0.06

0.06

0.11

Here this box giving us a complete idea about the return on assets ratio of Summit

Report On Summit Power

Limited
Power Limited. This ratio is the key indicator of profitability for a firm. It matched
operating profits with the assets available to earn a return. This ratio is measure
percentage return of company on the basis of assets. It finds out the portion of
return in assets. So the higher is this ratio indicates good sign for company. In 2005
there was a huge increase in this ratio and that happened only because of a huge
increase in profit after tax which was proportionately bigger than the increase in
total assets. Then the biggest change or decrease was occurred in 2006 and it was
a huge which was huger than the previous decrease. Then in 2008 there was a slide
increase in this ratio because in that year there was a huge increase in total assets
but in profit after tax the increase was not that much bigger comparatively to total
assets. And that occurred because of a huge increase in current assets which
happened because of a good amount of increase in inventory. Here this box also
providing us a trend line which providing an idea about the long run condition of this
ratio of the company. And here the trend line of this ratio is up word sloping. And it
was a good sign for Summit Power Limited.

Return on Net worth (ROE):

Particulars
Return on Net Worth

2009
0.16

2008
0.13

2007
0.19

2006
0.14

2005
0.17

Here this box giving us a complete idea about the return on equity ratio of Summit
Power Limited. This is the most important ratio for a firm. This ratio analyzes the
ability of the firms management to realize an adequate return on the capital
invested by the owners of the firm. This ratio is measure percentage return of
company on the basis of shareholders equity. It finds out the portion of return in
shareholders equity. So the higher is this ratio indicates good sign for company. In
2007 there was a huge increase in this ratio and that happened only because of a
huge increase in profit after tax which was proportionately bigger than the increase
in shareholders equity. Then the biggest change or decrease was occurred in 2008
and it was a huge which was huger than the previous decrease. Than in 2009 there
was a slide increase because in that year there was a huge increase in
shareholders equity but in profit after tax the increase was not that much bigger
comparatively to shareholders equity.

Report On Summit Power

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Efficiency Ratios:
Collection Period:

Particulars

2009

2008

2007

2006

2005

Collection Period

107.1
9

93.21

122.43

97.33

73.93

This collection period is a really important ratio for a firm. This collection period
reflecting the average number of days it takes to collect receivables. Here quality of
receivables can be determined when compared with selling terms.
Here this box reflecting the condition of the collection period of Summit Power
Limited. According to this box this is the most flexible ratio of Summit Power
Limited. In 2008 there was a huge decrease in this ratio. And it was occurred
because of a decrease in accounts receivables and increase in sales. In 2009,
though there was a decrease in accounts payable, there was a huge increase in this
ratio. And that was occurred because of a relatively huge increase in accounts
receivables.

Cash Flow Ratios:

Current Liability Coverage:

Particulars

2009

2008

2007

2006

2005

Current Liability Coverage

0.59

0.70

0.21

0.05

0.89

Current liability ratio is a better indicator of a companys actual ability to meet

current liabilities than more widely known ratios such as the current ratio & quick
ratio.
Here this box reflecting the overall condition of current liability coverage ratio of
Summit Power Limited. Here this box showing that in 2006 this ratio was .05. Right
after that in 2007 it got a tremendous increase and gone up to 0.21 which was
really fantastic. And it was happened because of increase in CFO, decrease in
dividend payment and a huge decrease in current liability which occurred because
of a decrease in accounts payable. In 2009 a slide decrease occurred in this ratio of
SPL. And it was happened because of a slide increase in dividend payment and
increase in current liability. Now the trend line is showing a positive movement of
this ratio of Summit Power Limited. Their trend line (2006-2009) was up word

Report On Summit Power

Limited
sloping.

Long Term Debt Coverage:

Particulars

2009

2008

2007

2006

2005

Long Term Debt Coverage

0.18

0.22

0.14

0.03

0.54

Long term debt coverage ratio is a very important ratio for a firm. The long term
debt coverage ratio measure the solvency of a company by indicating the time it
would take to pay back debts assuming that no new long term debts were incurred.
A trend of decreasing coverage signifies a much risker environment.
Here this box of long term debt coverage ratio is giving an overall idea about SPLs
this ratio. This box showing that in 2006 this ratio was very low. Then in 2007 it had
got an enormous increase. And that increase occurred because of a vast increase in
CFO and decrease in dividend payment and in long term debt. In 2009 there was a
slide decrease in this ratio of SPL. And it was occurred because of a good increase in
long term debt and dividend payment. This trend line is showing a positive picture
for this ratio of SPL because it was up word sloping through 2006 to 2008.

Interest Coverage:
Particulars
Interest Coverage

2009
2.40

2008
2.57

2007
2.34

2006
3.09

2005
5.09

Interest coverage ratio is a ratio which provides a realistic indicator of liquidity and
an organizations ability to service firms debt. A very low ratio signifies an
increased risk that a company might not have enough cash available to meet its
obligation to pay interest on its debt.
Here this box showing the movement of interest coverage ratio of Summit Power
Limited. Here this box displaying that in 2005 SPLs this ratio was 5.09 and just right
after that in 2006 it decreased to 3.09 which was a huge. And that was occurred
because of a decrease in CFO and a huge increase in interest payment.

Report On Summit Power

Limited

Earning Quality:
Particulars
Earnings Quality

2009
2.04

2008
1.47

2007
1.40

2006
0.93

2005
1.31

Earning quality ratio is basically a cash flow statement based ratio. This ratio
provides a realistic indication of the extent of deviation between operating cash flow
and reported earnings. This is really a problematic thing to having a below 1 earning
quality ratio. It is really riskier to having it.
According to this box of SPLs earning quality ratio, in 2005 it was 1.31. But in 2006
it decreased a bit. Since a fantastic increase in net income this ratio decreased that
period. Then in the year 2008 the maximum decrease occurred in this ratio of BAT.
And that was happened because of the maximum increase in net income and a tiny
decrease in CFO. And it was decreased to 0.93 which was really riskier. In 2008 the
happy scenario occurred. There was an increase which was one and only increasing
situation on this box. Since a good amount of increase in CFO and cash payment of
tax this increase occurred. Now lets concentrate on the trend line of this ratio which
was up word sloping. And that was really a good sign for the company.
Asset Efficiency Ratio:
Particulars
Asset Efficiency Ratio

2009
0.13

2008
0.12

2007
0.10

2006
0.05

2005
0.15

The asset efficiency ratio provides an indication of how well the assets of a company
are utilized to generate a cash flow return. This is not a good indication to having a
lower asset efficiency ratio.
According to this box of asset efficiency ratio in 2006 it was .05 which got an
increase in 2007 and that was .10. Since an increase in CFO and a decrease in total
assets this increase was occurred for this ratio. This decrease in total asset occurred
because of a big decrease in advances, deposits & prepayments. After the year
2006 there wasnt any further decline for this ratio. There was a continuous increase

Report On Summit Power

Limited
for this ratio in the year 2007, 2008 & 2009. In those three years, both of the
elements of this ratio increased. But the increasing rate of CFO was higher than the
increasing rate of total assets. Now the question is what about the trend line of this
ratio. It was up word sloping which indicating something good for Summit Power
Limited.

Capital Asset Ratio:

Particulars
Capital Asset Ratio

2009
901.9
0

2008
82.59

2007
-

2006
-

2005
-

The capital asset ratio shows a companys ability to meet its capital expenditure
need from cash generated by operating activities rather from financing activities. A
ratio of 1.0 or greater means that debt financing is not necessary for capital
expenditure.
According to this box in 2009 there was a huge increase for this ratio of Summit
Power Limited. Since occurring huge increase in CFO and cash inflow from capital
asset disposal & decrease in dividend payment and cash out flow from capital asset
acquisition, this ratio increased. Now lets concentrate over the trend line of this
ratio of Summit Power Limited. And it was positively sloped which was a really good
indication for the firm.

Cash Generating Power:

Particulars
Cash Generating Power

2009
1.14

2008
1.80

2007
0.45

2006
0.75

2005
1.00

The cash generating power ratio demonstrate a companys ability to generate cash
and the proportion of the cash generated solely by operations compared to the total

Report On Summit Power

Limited
cash inflow. The large the ratio, the more dependent a company is on external
funding and this can lead to higher level of financial risk.
According to this box of cash generating power ratio, in 2008 there was a huge
increase in this ratio of Summit Power Limited. Since a vast increase in CFO, this
increase in this ratio was occurred. But right before the year 2008, in 2007 there
was a huge decrease occurred for this ratio of SPL. And it was happened because of
a tremendous decline occurred in CFO and total cash flow got an increased. The
trend line of this ratio indicating that company was getting less dependent on
external funding because the trend line was down word sloping. And this trend line
also indicating that this firm has a lower financial risk.

Operating Cash Margin:

Particulars
Operating Cash Margin

2009
1.00

2008
1.04

2007
0.78

2006
0.52

2005
1.02

The operating cash margin ratio is somewhat similar to a traditional profit margin
ratio. The operating cash margin ratio highlights the timing of cash flows with
respect to the timing of sales. Therefore, this ratio can provide useful as part of a
process to evaluate cash management performance, as well as, credit granting
policies and receivable collections.
According to this box of operating cash margin of Summit Power Limited, in 2008
there was a good amount of increase occurred in this ratio and this happened
because of a huge increase CFO. Though sales also increased but that was
ineffective because increasing rate was respectively less. In 2006 there was a
decline in this box. Since a huge decline in CFO this decline occurred. According to
box, after the year 2007 there was no decline for this ratio till 2009. There was a
continuous increase in this ratio of SPL. Since huge increase in CFO this continuous
increase for this ratio was occurred. The trend line of this ratio was up word sloping.
So its indicating that, for long run the firm condition was good.

Report On Summit Power

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Cash Flow Per-Share:
Particulars
Cash Flow Per Share

2009
0.60

2008
0.37

2007
0.20

2006
0.06

2005
0.11

Cash flow per share incorporates the same demonstrator used for computing
earnings per share. Cash flow per share provides a relevant basis for tracking
substantive change in a company over time.
According to this box of cash flow per share of Summit Power Limited, through 2006
to 2009, all the years this ratio got continuous increase. In 2007 it got a good
amount of increase because of an increase in CFO. In 2008, the increasing rate was
very lower because of a decrease in CFO. Then in the year 2009 there was a
tremendous increase in this ratio of Summit Power Limited. Since a vast increase in
CFO through these years, this ratio continuously increased. And through all over the
year, there was no change in common stock outstanding. The trend line of this ratio
of SPL was up word sloping which was a good sign for the company.