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School of Business & Economics

A Report On:
Financial Ratio Analysis

Submitted to:
Rushdy MD. Bakth(RMB)
Department of Finance & Accounting

Submitted by:

NAME ID
Mrittika Saha 1510364030
Lamisa Haider 1510638030
Sadia Risa Anika 1510819030
Sabiha Sultana 1511240030

Date of Submission: 2nd August, 2016.

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Date: 2.08.2016

Mr. Rushdy MD. Bakth

Lecturer

School of Business

Department of Finance & Accounting

North South University, Bangladesh

Subject: Submission of the project report.

Dear Sir

With due respect, we are glad to submit this report on financial analysis of Crown cement and
Premier cement industry for five years starting from 2011-2015.This report also contains
combined ratio analysis and recommendations that we come up with based on calculations &
findings. While preparing the report we learn the basics of analyzing corporate financial
statements. We thank you for sincere cooperation throughout the study

We, therefore, would like to request you to accept our project report & oblige thereby.

Sincerely yours

Mrittika Saha 1510364030


Lamisa Haider 1510638030
Sadia Risa Anika 1510819030
Sabiha Sultana1511240030

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Acknowledgement

In writing our report we had to take help & guideline of Mr. Rushdy MD. Bakht, Fin254, North
South University. We would like to show our gratitude to him for giving us the good guideline
for report throughout the entire semester. Without his immense support we would not be able to
compete the report.

We would also like to thank our group members who have worked so hard for this project. We
are grateful for their cooperation& suggestion, while writing the report.

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Executive Summary:

The objective of this report is to project the financial volatility of a specific company, as in this
case M.I. Cement Factory Limited (Crown Cement) through different financial analysis, which
started off with identifying variables affecting the stock price and then through Stock Valuation.

This analysis is done based on the information collected from the annual report issued by M.I
Cement Factory Limited (Crown Cement) in the fiscal years 2011-2015. Stock price was
collected from DSE.

It has been observed empirically that a good number of variables affect the variations of Stock
Price & the proceedings have been discussed in the report.

This report provides an analysis and evaluation of the current and prospective profitability,
liquidity and financial stability, ratio analysis and the comparison of two companies that is M.I
Cement Factory Limited (Crown Cement) and Premier Cement Mills Limited.

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Table of Contents

Serial No. Contents Page no.


1. Background of Crown Cement and Premier 6-7
Cement
2. Ratios of Crown Cement and Premier Cement 8-9
3. Ratio Analysis 10
Liquidity Ratio 10
1. Current Ratio 10
2. Quick Ratio 11
Activity Ratio 12
3. Inventory Turnover 12
4. Average Collection Period 13
5. Average payment Period 14
6. Total Asser Turnover 15
Solvency Ratio 17
7. Debt Ratio 17
8. Times Interest Earned Ratio 18
Profitability Ratio 19
9. Gross Profit Margin 19
10. Operating Profit margin 20
11. Net Profit Margin 22
12. Earnings per Share 23
13. Return on Total Asset(ROA) 24
14. Return on Equity (ROE) 25
Market Ratio 26
15. Price Earnings(P/E) Ratio 26
16. Market/Book (M/B) Ratio 28
4. Recommendation 30
5. References 31

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Background of Crown Cement &Premier Cement

Crown Cement: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
renown both at home &abroad. It soon gained acceptability both at home and abroad which
raised the necessity for expanding the plant from initial 600 tpd (ton per day),800tpd 2 nd unit in
2002,1400 tpd 3rd unit in 2006 and 3000 tpd 4th unit in 2011 thereby raising the total production
capacity to 5800 tpd i.e. 1.740 million metric tons per annum. The company has been listed with
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. Recently Crown
cement achieved the National Export Trophy (Gold) twice for attaining the top most place
among cement exporters in Bangladesh. It is located at West Mukterpur, Munshiganj on the bank
of Dhaleswari.

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Premier Cement:Back in 2001, when Premier Cement Mills Limited had been ventured by
reckoning the ideas of a group of renowned business leaders was yet to established. But soon in
2004, after all of necessary organizations, the company started its commercial production with
only 0.6 million metric tons annual production capacity. From then it never has to look back as
growth became its usual phenomenon. And after being listed in stock exchanges on February
2013 and having more than a decade of commercial production the company is now proudly
providing almost 7% pf countrys total demand for cement. The company manufactures
European standard cement as its sole product using best raw materials and technical excellence
available. The durability and dependability of premier cement made the company fairly popular
both in local and foreign markets.

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Ratios of Crown Cement and Premier Cement for five years at a glance.

Crown Cement
2011 2012 2013 2014 2015
Current ratio 3.47 2.26 2.23 1.65 1.45
Quick ratio 3.04 2.08 2.05 1.51 1.32
Inventory turnover 5.54 11.10 13.13 10.74 9.49
Average collection 31.16 52.59 42.06 56.04 54.04
period
Average payment 13.53 12.64 10.79 11.10 12.02
period
Total asset turnover 0.57 0.57 0.69 0.70 0.69
Debt ratio 28% 46% 43% 50% 51%
Times interest earned 7.37 4.18 11.80 13.43 6.51%
ratio
Gross profit margin 19% 13% 17% 16% 17%
Operating profit 15% 10% 12% 12% 12%
margin
Net profit margin 11% 10% 10% 8% 8%
Earnings per share 5 4 4 5 4.37
Return on asset 6% 6% 7% 7% 5%
(ROA)
Return on 9% 10% 12% 12% 11%
Equity(ROE)
Price Earnings ratio 32.84 18.90 19.15 19.65 16.77
Market Book ratio 3.5 1.96 2.28 2.33 1.85

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Premier Cement
2011 2012 2013 2014 2015
Current ratio 0.98 0.69 0.86 0.83 1.01
Quick ratio 0.62 0.54 0.67 0.58 0.74
Inventory turnover 4.07 7.15 7.23 5.6 6.92
Average collection 52.13 55.1 57.55 55.77 54.14
period
Average payment 17.63 23.38 44.11 11.18 9.26
period
Total asset turnover 0.83 0.69 0.88 0.89 0.97
Debt ratio 50% 62% 59% 63% 62%
Times interest earned 6.22 2.53 2.32 1.84 0.94
ratio
Gross profit margin 18% 12% 17% 18% 15%
Operating profit 15% 12% 18% 15% 11%
margin
Net profit margin 9% 5% 8% 7% 5%
Earnings per share 4.05 2 5 4.7 3.83
Return on asset 15% 3% 7% 6% 5%
(ROA)
Return on 16% 9% 17% 16% 13%
Equity(ROE)
Price Earnings ratio - - 20.18 16.94 14.93
Market Book ratio - - 3.31 2.58 0.22

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Ratio Analysis:
Liquidity Ratio Analysis
Liquidity ratio refers to the ability of a firm to meet its short term financial obligations when and
as they fall due (Foster, 1986). Two of the most frequent used liquidity ratios are Current ratio
and Quick ratio. Here is the trend of four years of these two ratios.

1. Current Ratio:

Current Ratio measures the firms ability to meet its short-term obligations.

Current Ratio
2011 2012 2013 2014 2015
Crown Cement 3.47 2.29 2.23 1.65 1.45
Premier cement 0.98 0.69 0.86 0.84 1.02

Current Ratio
4

3.5

2.5

1.5

0.5

0
2011 2012 2013 2014 2015

Crown Cement Premier cement

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Interpretation:From the above table & graph we see that current ratio of crown cement is
decreasing day by day. Similar trend is also seen for Premier Cement.

Both of the companys current ratio are decreasing due to the fact that they have high current
liabilities i.e. they have high obligations to fulfill

The Crown Cement is doing bad.

2. Quick Ratio:

Quick ratio is a measure of liquidity calculated by dividing the firms current asset minus
inventory by its current liability

Quick Ratio
2011 2012 2013 2014 2015
Crown Cement 3.04 2.11 2.05 1.51 1.31
Premier cement 0.62 0.54 0.67 0.58 0.74

Quick Ratio
3.5
3
2.5
2
1.5
1
0.5
0
2011 2012 2013 2014 2015

Crown Cement Premier cement

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Interpretation:

Time Series:From the graph and table, we see that quick ratio of crown cement ltd is lower in
2015 and 2014 whereas it was highest in 2011.Quick ratio of Premier Cement decreased in 2012
& increased in 2013.But it again decreased in 2014 and increased in 2015.

Cross Sectional:Decreasing trend of crown cement shows that they have less capability to pay
their obligations. On the other hand, increasing and decreasing trend of Premier cement shows
that it is able to meet their obligations

Therefore, Crown Cement is doing better than Premier Cement.

Activity Ratio:
Measures the speed with which various accounts are converted into sales or cash, or inflows or
outflows.

3. Inventory Turnover:

Inventory turnover commonly measures the activity, or liquidity of a firms inventory

Inventory turnover
2011 2012 2013 2014 2015
Crown Cement 5.53 11.10 13.13 10.74 9.48
Premier cement 4.02 7.15 7.23 5.61 6.92

Inventory Turnover
14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00
2011 2012 2013 2014 2015

Crown Cement Premier cement

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Interpretation:

Time Series:Inventory turnover for crown cement ltd is highest in 2013 and lowest in 2011.In
2014 and 2015 it decreased.For Premier cement inventory turnover was high in 2014 and 2013
but it was low in2012.

Cross Sectional:The reasons of high inventory turnover for crown cement are that their sales of
good haveincreased. On the other hand, low inventory turnover for Premier Cement is due to the
fact that they have either poor sales or excess inventory.

The crown cement ltd is doing good

4. Average Collection Period:

Average collection period indicates the average amount of time needed to collect account
receivable. Higher average collection period is good and it means that company is efficient in
collecting receivable. But it might reflect losing important supplier because of strict collection.

Average collection period


2011 2012 2013 2014 2015
Crown Cement 31.16 52.59 42.06 56.04 54.04
Premier cement 52.13 55.1 57.55 55.77 54.14

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Average Collection Period
70

60

50

40

30

20

10

0
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Time Series:

Crown Cement: Crown Cements collected receivable within 31.18 days in 2011 and than 2012
to 2014, efficiency of collecting money decreasing gradually- 52.59 days in 2012, 42.06 days in
2013, 56.04 days in 2014 and in 2015 it remained mostly constant 54.04.

Premier Cement: Premier Cement collected its receivable within 52.13 days in 2011. In 2012
its receivable collection period increased in 55.10 days. Then in 2013 its collection period was
57.55 days, in 2014 decreased 55.77 days in 2015 it remained constant 54.14 days.

So, both companies are doing bad.

Cross Sectional: Crown Cements collection period was good in 2011. But latter Crown Cement
and Premier Cement are collecting receivable averagely in sametime. It is not good for both
Crown Cement and Premier Cement because that might not so efficient to collect money and
they have an effect in long run to loss creditor because of strict collection.

So Crown Cement is doing bad.

5. Average Payment Period:

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Average payment period measures the average amount of time needed to pay accounts payable.
Paying payment quickly is good so lower average payment period is better and it reflects that
firm is paying payable quickly.

Average payment period


2011 2012 2013 2014 2015
Crown Cement 13.53 12.64 10.79 11.1 12.2
Premier cement 17.63 23.38 44.11 11.18 9.26

Average Payment Period


50
45
40
35
30
25
20
15
10
5
0
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Time Series: Average payment period of crown cement was highest in 2011.it started to
decrease from 2012 -2014.In 2014 it was 11.10 and in 2015 it was 12.20 which was little bit
increased.

Average payment period of Premier cement was highest in 2013 and was lowest in 2015.

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Cross Sectional:Crown Cement is more efficient in paying payable than Premier Cement with a
lower average collection period. Premier average collection period is higher than Crown cement
so it is not paying payable quickly than crown cement.

So, Crown Cement is doing better.

6. Total Asset Turnover:

Total assets turnover indicates the efficiency with which the firm uses its assets to generate sales.
The higher a firms total assets turnover, the more efficiently its assets have been used.

Total asset turnover


2011 2012 2013 2014 2015
Crown Cement 0.57 0.57 0.69 0.7 0.68
Premier cement 0.83 0.69 0.88 0.89 0.97

Total Asset Turnover


1.2

0.8

0.6

0.4

0.2

0
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Time Series:

Crown Cement: Crown Cements total assets turnover was in 2015 with 0.68 times. Then in
2014 it was with 0.7 which was higher and in 2014 with 0.69 times, and it has used its total

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assets more efficiently in 2013 and 2014 than 2012 and 2011. In 2011 and 2012 its efficiency
was low and from 2011 to 2014 it has increased and used assets effectively to generate cash.

Premier Cement: Premier Cements total assets turnover was high in 2011 with 0.83 times. It
has decreased in 2012 with 0.68 times and then 2013 to 2014 as total assets turnover increased.
0.88 times was in 2013, in 2014 was with 0.90 times and 2015 it was with 0.97 times. It was
increasing efficiency of using total assets year to year.
Both company doing well.
Cross Sectional: Premier Cement is more efficient in generating cash by using total assets than
Crown Cement because Premier Cements total assets turnover is higher times than Crown
Cement.

So Crown Cement is doing well.

Solvency Ratio:

7. Debt Ratio:

The debt position of a firm indicates the amount of other peoples money being used to generate
profits.

Debt ratio
2011 2012 2013 2014 2015
Crown Cement 28% 45% 43% 50% 51%
Premier cement 50% 63% 59% 63% 62%

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Debt Ratio
70%

60%

50%

40%

30%

20%

10%

0%
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Time Series:

Crown Cement: In 2011 the total liability was 0.28 times higher than the total assets. In 2012
the ratio was suddenly increased 0.45 times then the 2011. In 2013 the ratio decreased 0.43 time
because of the both total assets and total liabilities decreased but decreased in total liabilities
were higher than the decrease in total assets. In 2014 and 2015 it also increased 0.50 time as the
same way.

Premier Cement: In 2011 the total liability was 50%. Then it increased to 63% in 2012 because
the total liability increased. In 2013 a little bit decreased. In 2014 it becomes same as 2012 and in
2015 it remained constant.

Both are not doing good.

Cross Sectional:Debt ratio for Premier cement is higher than crown cement. As premier cement
has higher liabilities than crown cement its debt ratio is high. Debt ratio of crown cement is low
as they have fewer liabilities.

Therefore, Crown cement is doing good.

8. Times Interest Earned Ratio:

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Measures the firms ability to make contractual interest payments; sometimes called the interest
coverage ratio.

Times interest earned ratio


2011 2012 2013 2014 2015
Crown Cement 7.37 4.18 11.80 13.43 6.50
Premier cement 6.22 2.53 2.32 1.84 0.94

Times Interest Earned Ratio


16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:
Time Series:
Crown Cement:In 2015 its time interest earned ratio was 6.50 which was half of 2014. In 2014
the time interest earned was 13.43 that was higher than 2013. In 2013 the ratio was significantly
11.80. In 2012 the ratio was 4.18 and the 2011 ratio was 7.37 which was higher than 2012.
Premier Cement: In 2014 the time interest earned was 1.84. In 2013 the ratio was 2.32. In 2012
the ratio was 2.53 and the 2011 ratio was 6.22 which was higher than 2012. This was decreasing.

So, Crown Cement is doing good till 2014 but in 2015 it falls too much. Premier Cement is also
doing bad.

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Cross Sectional:Crown cement has higher times interest earned ratio compared to premier
cement. It is very high in 2013 & 2014 and falls in 2015 which has a very bad effect on
company.Though high times interest earned ratio is good. This means the crown cement is not
utilizing excess income for reinvestment in the company through expansion or new projects, but
rather paying down debt obligations too quickly. So it may lose favor with investors.

Therefore, crown cement is doing bad.

Profitability Ratio:
Profitability ratio is an indication of good financial health and how effectively the firm is being
managed is the companys ability to earn satisfactory profit and return on investment.
9. Gross Profit Margin:

Measures the percentage of each sales dollar remaining after the firm has paid for its goods.

Gross profit margin


2011 2012 2013 2014 2015
Crown Cement 19% 13% 17% 17% 17%
Premier cement 18% 13% 18% 17% 15%

Gross Profit Margin


25%

20%

15%

10%

5%

0%
2011 2012 2013 2014 2015

Crown Cement Premier cement

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Interpretation:

Times Series:Crown cement has maintained gross profit from 2011 and 2012 was 19% and
13%. Form 2013-2015 it increased and remained constant in 17%. Premier Cement has gross
profit margin from 13%-18% in 2011-2014 and in 2015 it decreased a little.

Therefore, both companiesare doing good.

Cross Sectional: We can see that Crown Cement has average same gross profit margin compare
to Premier Cement. It means that Crown Cement and Premier Cement had more TK remaining
after the firms had paid for its goods. And we know that the higher gross profit margin the better
and the lower the relative cost of merchandise sold.

So Crown Cement doing better in gross profit margin.

10. Operating Profit Margin:

Measures the percentage of each sales dollar remaining after all costs and expenses other than
interest, taxes, and preferred stock dividends are deducted; the pure profits earned on each sales
dollar.

Operating profit margin


2011 2012 2013 2014 2015
Crown Cement 15% 10% 12% 12% 12%
Premier cement 15% 12% 18% 15% 11%

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Operating Profit
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:
Time Series:
Crown Cementin 2011 operating profit was 0.15 of every 1 TK of sales. But in 2012 suddenly it
decreased from 0.10. But it little bit increased in 2013 and remained same in 2014 and 2015 it
was 0.12 of every TK of sales. For Premier Cement the operating profit was 0.15 in 2011. But it
also started decrease from 2012. In 2013 it suddenly increased 0.18 of every 1 TK of sales and in
2014 and 2015 it decreased again in 0.15 and 0.11 per TK sales..
So, Crown Cement is doing averagely good but after falling of operating profit in 2015 Premier
Cement is doing bad.

Cross sectional:Crown cement has lower operating profit than Premier cement till 2014. It is
due to the fact that crown cement has increased its expenses. After 2014 operating profit of
Premier Cement falls down.

Therefore, crown cement is doing not so good comparing to Premier.

11. Net Profit Margin:

Measures the percentage of each sales dollar remaining after all costs and expenses, including
interest, taxes, and preferred stock dividends, have been deducted.

Net profit margin

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2011 2012 2013 2014 2015
Crown Cement 11% 10% 10% 8% 8%
Premier cement 9% 5% 8% 7% 5%

Net Profit Margin


12%

10%

8%

6%

4%

2%

0%
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Time series: Net profit margin of crown cement is higher than Premier cement. Crown Cements
net profit was higher in 2014 and 2015. For Premier cement it was highest in 2011.But it started
to decrease from 2012.

Therefore, crown cement is doing good.

Cross sectional: From the graph and table we see that net profit margin of crown cement is
comparatively higher than Premier cement. It means that crown cement has generated more net
income.

Therefore, crown cement is doing good.

12. Earnings per Share:

Firms earnings per share (EPS) is generally of interest to present or prospective stockholders
and management.

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Earnings per share
2011 2012 2013 2014 2015
Crown Cement 5.36 4.14 4.48 4.54 4.37
Premier cement 4.05 2.25 5 4.78 3.83

Earning Per Share


6

0
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Crown cement has higher EPS ratio value than Premier cement from 2011-2015.In 2014 it is a
little bit lower than Premier cement. On the other hand, for Premier cement it is very low in
2012.Higher EPS ratio of crown cement means earnings is higher and it has more profits to
distribute to its shareholders.

Therefore, Crown cement is doing good.

13. Returns on Total Asset (ROA):

Measures the overall effectiveness of management in generating profits with its available assets;
also called return on investment (ROA).

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Returns on total asset (ROA)
2011 2012 2013 2014 2015
Crown Cement 6% 6% 7% 6% 5%
Premier cement 15% 3% 7% 6% 5%

Returns On Total Asset(ROA)


16%
14%
12%
10%
8%
6%
4%
2%
0%
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:

Time Series: Crown cement in 2011 square is generating 0.06 of every 1 TK of sales. In 2012 it
was the same. But from 2013 it started to increase and it was 0.07. In 2014 it became same as
2012 and in 2015 it was 0.05 per 1 TK sales.

Premier Cements ROA was 0.15 per 1 TK sales in 2011 but in 2012 it decreased largely but it
increased little bit in 2013, 2014 and 2015.

So Crown Cement is doing well but Premier Cement is doing so bad

Cross sectional:Crown cement has lower ROA ratio than Premier cement in 2011. The reason
behind it is that crown cement is unable to use assets to generate net income effectively. But
form 2012-2015 their ROA is averagely same.

Therefore, Crown Cement is doing good

14. Return on Equity (ROE):


The return on equity measures the return earned on the owners investment in the company.
Generally the higher the returns the better off are the owners.

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Return on equity (ROE)

2011 2012 2013 2014 2015


Crown Cement 9% 10% 12% 12% 11%
Premier Cement 16% 9% 17% 16% 13%

Return on Equity
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
2011 2012 2013 2014 2015

Crown Cement Premier Cement

Interpretation:
Time Series:
Crown Cement: In 2011 owners have earned 0.09 TK per 1 TK of sales. In 2012 it increased a
little 0.10. In 2013 it increased again 0.12and it remained constant in 2014. In 2015 owners
earned 0.11 TK per 1 TK sales.
Premier Cement: In 2011 owners of Premier Cement have earned 0.16 per 1 TK of sales. In
2012 it decreased but in 2013 it increased. And in 2014 it remained constant which is 0.16 per 1
TK sales. In 2015 it was 0.13 per 1 TK sales.
Cross Sectional: We can see that the owners of Premier Cement have more equity than owners
of Crown Cement. Though ROE of both companys ROE were increasing but still Premier
Cement doing better more than Crown Cement. So owners of Premier Cement have more return
on equity than owners of Crown Cement.
Crown Cement doing bad.

Market Ratio:
Market ratio compares the current stock to a financial indicator on the firms financial
statements. Its basically used to determine if a firm is over or undervalued.
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15. Price Earning or P/E Ratio:
The price earnings ratio measures how much investors are willing to pay. When the P/E ratio is
high that means risk is low and when the P/E ratio is low means perceived risk is high & the
market price is correctly reflects the stocks earning ability.

Price earning (P/E) ratio


2011 2012 2013 2014 2015
Crown Cement 32.84 18.9 19.15 19.65 16.77
Premier cement - - 20.18 16.94 14.93

Price Earning Ratio


35

30

25

20

15

10

0
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:
Time Series:
Crown Cement: In 2011 the Crown Cements investors paid more 32.84 TK of every share and
in 2012 and 2013 it decreased which was 18.9 and 19.65 per share and remained constant in
2014. In 2015 it decreased in 16.77 per share.As the revenue was higher than the decrease in
price earning.

Premier Cement: In 2013 the Premier Cements investors are paid 20.18 TKper share. The ratio
decreased from 2014. In 2014 investors paid 16.95 TK of every share and in 2015 14.93 TK.

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NOTE: In 2012 and 2011 Premier Cement has no P/E ratio because it was not registered in
Dhaka Stock Exchange then.

Cross Sectional:

We can see that Crown Cement has same price earning as Premier Cement. It means that more
investors are willing to pay for each stock of both cement though Crown Cement price is
decreasing. And we know that the higher P/E ratio perceived risk is low.

Therefore, Crown Cement is doing better.

16. Market/Book (M/B) Ratio:

Market/Book ratio is another indicator of how investors regard the company; how much
investors are willing to pay book value of par share.Higher the M/B ratio means share is
overvalued and investors expectations is very high and lower the M/B ratio means investors
expectation is low.

Market/book (M/B) ratio


2011 2012 2013 2014 2015
Crown Cement 3.5 1.95 2.27 2.33 1.85
Premier cement - - 3.3 2.58 0.22

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Market/Book Ratio
4
3.5
3
2.5
2
1.5
1
0.5
0
2011 2012 2013 2014 2015

Crown Cement Premier cement

Interpretation:
Time Series:
Crown Cement: In 2015 the Crown Cements market value of shares 1.85 times higher than the
book value. In 2011 the ratio was 3.50 and then it decreased in 2012 and 2013 which was 1.95
and 2.58. In 2014 it was 2.33.
Premier Cement: In 2013 Premier Cements market value of shares was 3.3 times higher than
the book value. The ratio decreased in 2014 and in 2015 M/B ratio was 2.58 and 0.22.
So Crown Cement is doing bad because their Market/Book ratio is on decreasing. On the other
hand Premier Cement is also doing bad for same reason.

Cross Sectional:

We can see that Crown cement has lower market/book value ratio than Premier in contest of
2013 and 2014. It means that investors are willing to pay more in Premier Cement shares then
Crown Cement shares. In 2015 Crown Cement improved a little and we also know that the
higher M/B ratio means share is overvalued and expectation of investors is also high.

So Crown Cement is not doing better.

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Recommendations:
Form the financial ratio analysis of Crown Cement and Premier Cement we have found that
crown cement is doing bad in Liquidity Ratio, Average Collection Period, Debt ratio, Time
interest Earned Ratio, ROA, ROE, P/E Ratio.

1. Crown Cements liquidity ratio is in decreasing trend. One way to improve its current
ratio is by using sweep accounts that transfer funds into higher interest rate accounts
when they're not needed and back to readily accessible accounts when necessary. Paying
off liabilities also improves current. The quick ratio includes using long-term financing
rather than cash on hand to acquire inventory or selling unnecessary assets. They can
improve their Quick in same way of Current ratio.
2. Crown Cements cash collection time is getting higher day by day. So they have to find
out some useful techniques for reducing the collection period and improving cash flow.
They have to provide customers credit terms with 30 days to pay their bills.
3. For reducing their debt ratio crown cement have to reduce their loan by paying it. Debt is
a one kind of liability which is against company. Common debts include accounts
payable, notes payable, bank loans, and bond issuances.
4. Reducing debt sometimes effect on time interest earned ratio. A ratio 1.00 means one
company earns enough revenue to cover its interest payments. Thus Crown Cements
ratio is decreasing that means their revenue is also decreasing.
5. Though Crown Cements ROA is averagely same but they can improve it more by
reducing asset costs and increase income.
6. Crown Cement should find the way to lower its taxes. They have to their asset turnover to
have positive impact on return on equity.
7. For improving Crown Cements P/E ratio they have to turn their attentions to market
price of their share because higher price give higher profit. Higher profit indicates the
future profit levels.

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References:
1. Crown Cement (M.I Cement Factory Limited)
Link: http://www.crowncement.com/
2. Premier Cement ( Premier Cement Mills Limited)
Link: http://www.premiercement.com/
3. Dhaka Stock Exchange
Link: http://www.dsebd.org/
4. Principles of Managerial Finance
Written by Lawrence J. Gitman & Chad J. Zutter.

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