Working Capital Management

Sec: 02

Submitted To:
Abdullah Al Mamun
Lecture
School of Business and Economics
North South University

Name ID

MD. Mahmudul Hasan 1511660630

Sajedul Islam 1520280630
Fahim Faisal 1510715030

Due Date: 02-05-2019

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Table of Contents

Letter of Transmittal .................................................................................................................................. 3

Acknowledgement ....................................................................................................................................... 4
Financial Ratios........................................................................................................................................... 5
Liquidity Ratio: ....................................................................................................................................... 5
Financial Flexibility Ratio:..................................................................................................................... 5
1.Food Industry ........................................................................................................................................... 6
1.1 Liquidity Ratio ............................................................................................................................ 6
1.2 Solvency Ratio ............................................................................................................................. 8
1.3Financial Flexibility Ratio ................................................................................................................. 9
2.Steel Industry ......................................................................................................................................... 11
2.1 Liquidity Ratio: ............................................................................................................................... 11
2.2 Solvency Ratio: ................................................................................................................................ 13
2.3 Flexibility Ratio:.............................................................................................................................. 14
3. Cement Industry ................................................................................................................................... 16
3.1 Liquidity Ratio ................................................................................................................................ 16
3.2 Solvency Ratio ................................................................................................................................. 17
3.3 Flexibility Ratio:.............................................................................................................................. 18
4. Telecommunication Industry ............................................................................................................... 19
4.1 Liquidity Ratio ................................................................................................................................ 20
4.2 Solvency Ratio ................................................................................................................................. 22
4.3 Financial Flexibility Ratio .............................................................................................................. 24
Summary: .................................................................................................................................................. 26
Bangladeshi industry: ........................................................................................................................... 26
USA Industry: ....................................................................................................................................... 27
Commodity Shop....................................................................................................................................... 28
Recommendation: ................................................................................................................................. 28
Appendix .................................................................................................................................................... 29

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 Letter of Transmittal
Mr. Abdullah Al Mamun
Lecturer of Finance and Accounting Department
School of Business
North South University

Subject: Report submission of FIN-340

Sir,

We would like to thank you for assigning us for this project. This report has given us the
opportunity to combine our theoretical knowledge with a practical scenario. We got a vast
knowledge of short-term working capital, inventory management and payment method in this
course. We worked as a team to analyze the ratio as you taught us in class. All the group members
have worked hard and have shown equal dedication for completing this project according to your
instructions.

We therefore, hope that you will like our work. Furthermore, if you have any question regarding
this project, feel free to ask any of our group members. We will be glad clarifying your doubts.

Sincerely,
Sajedul Islam
Md. Mahmudul Hasan
Fahim faisal

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 Acknowledgement

First and foremost, we would like to thank the Almighty for giving us the moral integrity, devotion,
patience, and the ability to carry out this project.

We are greatly indebted to our course instructor, Mr. Abdullah Al Mamun, for giving us the
opportunity to work on this Term Project, which is the final and most important group project of
the course FIN340. His direction, encouragement, guidance, in particular has been invaluable for
the improvement of this assignment. This report has enabled us to apply all that we have learned
in class.

We are also genuinely thankful to all our friends and classmates, who have been co-operative in
every aspect. Our each group member has given almost equal dedication to this project. All the
other group leaders have also been equally supportive. It was indeed pleasurable working in the
friendly environment.

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 Financial Ratios

Solvency Ratio:

Interest coverage = EBIT/ Interest expenses

Debt to asset ratio= Total asset / Total equity

Debt to Equity = Total Liability / Owners Equity

Liquidity Ratio:
Current Ratio = Current Asset / Current Liability

Quick Ratio= (Total Current Asset Inventory- Prepaid Expense) / Current Liability

Cash Ratio= (cash + marketable securities) / current liabilities

Account Receivable Ratio = Net Annual Credit Sales/ Average account receivables.

Days sales outstanding = (A/R)/ Sales / 365

Financial Flexibility Ratio:

Profit Margin= Net Income /Sales

Gross Profit= Gross profit/sales

Return on Asset= Net income/Average total asset

Return on equity= Net income/ shareholders’ equity

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 1.Food Industry
Based on the financial statement, we actually focus on the relevant ratio that covers the firm’s
solvency, liquidity and flexibility. Here we have selected the food industry under the listed of
Dhaka Stock Exchange (DSE) of Bangladesh and the listed of New York Stock Exchange (NYSE).
From this industry, we have chosen four renown companies. Among them, two are from DSE and
two from NYSE. These are Fu Wang food and Apex food under DSE and McDonald’s and Subway
under NYSE. These companies’ entire ratio is given below.

1.1 Liquidity Ratio

Dhaka Stock Exchange New York Stock Exchange

Fu Wang Food Apex food McDonalds Hershey

Current Ratio 1.64% .3.25% 1.36 .92%

Quick Ratio 0.74% 0.73% 1.12 .48%

Cash Ratio .03 .07 .05 .19%

A/R ratio 17.56 9.57 15.56 8.95

Days Sales In 24.75 23.65 24.89

27.25
Outstanding

Fu Wang Food: By doing the analysis of Fu Wang’s financial report we have got to know that
Fu Wang has a Current ratio of 2.58%; Quick Ratio of 2.04% and Cash ratio of .11%. That is
comparatively good considering the business environment of Bangladesh. But they have an
account receivable of 9.50 and DSO of 42.75. They should work on it and try to improve it.

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Apex Food: We have got some information by doing the ratio analysis of Apex food. We have
got to know that they have Current ratio of 1.29%; Quick Ratio of 0.37% and Cash ratio of .26%.
This can be improved if they work on it. Their Accounts receivable is slightly better compared to
Fu Wang food. But it should also be improved. Their DSO is 10.61. This is much better compared
to Fu Wang food.

McDonalds: McDonalds is NYSE listed company. This company has a current ratio of 1.36;
quick ratio of 1.35 and cash ratio of .52. Being a well reputed company they should try to improve
their situation. They have a receivable turnover of 8.61 and DSO of 11.61. And this quite good.
But being a well reputed company they should be more careful in managing their liquidity ratio.

Hershey: Hershey is also a well-reputed NYSE listed company. They have current ratio; quick
ratio; cash ratio of .92%; .48% and .19% respectively. Even they have Accounts receivable of 8.95
and 27.25 respectively. So they are in vulnerable situation from all side. They should try to improve
their situation.

Here we have tried to distinguish the liquidity condition of US food industry with Bangladeshi
food industry. We have out that that interestingly there are not much difference between US food
industry and Bangladesh Food industry. Even in some way they are better that These US Food
industry except the DSO and Liquidity.

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 1.2 Solvency Ratio
1.3

Dhaka Stock Exchange New York Stock Exchange

Fu-Wang Apex food McDonalds Hershey

food(%) (%) (%) (%)

Interest coverage
6.79 3.25 7.76 -10.16

Debt to Asset
Ratio .46 .12 5.24 5.52

Debt to Equity
Ratio 1.75 2.12 6.24 4.52

Fu Wang Food Limited: Fu Wang has interest coverage of 4; debt to asset ratio of 1.44 and
debt to equity ratio of .44% in year 2018. They have very poor solvency ratio. And they are mostly
dependent on debt. Their interest coverage ratio is also quite poor.

Apex food limited: Apex food has interest coverage ratio of 1.27; debt to asset ratio of 2.78
and debt to equity ratio of 1.77. Though they are slightly better than Fu Wang but still they have a
very poor solvency record.

McDonalds: They have interest coverage ratio of 4.16; debt to asset ratio of 5.24 and debt to
equity ratio of 6. 24. They have a moderate solvency position. But they should try to improve their
situation.

Hershey: Hershey has interest coverage ratio of negative 10.16; they have debt to asset ratio of
5.52 and debt to equity ratio of 4.52. Their interest coverage ratio is quite poor. It may increase the
expense. But they have a good situation in debt to asset and debt to equity ratio.

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By contrasting US Food Company with Bangladesh Food Company we have come to a conclusion
that in terms of solvency foreign company is slightly more solvent that Bangladeshi company.
Though situation is not so good for the US Company also.

1.3Financial Flexibility Ratio

By using financial flexibility ration we can describe a company's ability to react to unexpected
expenses and investment opportunities. Companies with superior financial flexibility are both able
to survive tough economic times as well as take advantage of unexpected investment opportunities.

Dhaka Stock Exchange New York Stock Exchange

Fu Wang food Apex food McDonalds Hershey

(%) (%) (%) (%)
Gross Profit
8.35 6.25 52.2 45.89%

Net Profit
7.84 11.45 27 15.11
Margin
Operating Profit
36.42 28.97 33.97 21.83
Margin
Return On
22.75 17.56 18.01 15.28
Asset
Return On
68.70 54.84 16.13 84.13
Equity

Fu Wang Food: In 2018 Fu Wang has a gross profit of 30.38; net profit margin of 12.56’
operating profit of 20.35’ ROA of 2.52 and ROE of 3.62. So by analyzing the information we can
say Fu Wang has done relatively good job in managing their asset and they have generated good
amount of profit. Though their return of asset and return on equity are slightly poor. That means
they fail to generate enough profit by utilizing their asset and shareholder’s wealth.

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Apex food: In 2018 Apex food has a gross profit of 9.83; net profit margin of 8.61 and operating
profit of 4.6. They have ROA of 4.36 and ROE of 11.99. So by analyzing the information we can
say that Apex food has failed in managing their asset and couldn’t be able to generate good amount
of profit. Though their return of asset and return on equity are much better compared to Fu Wang
food that means they have generated enough profit by utilizing their asset and shareholder’s
wealth.

McDonalds: In 2018 McDonalds have a gross profit of 51.3%; net profit margin of 28.17
operating profit of 41.96%. They have ROA of 18.06 and ROE of 94.66. So we can say they are
managing their wealth quite efficiently and effectively. Because they are making huge amount of
profit. Not only this; they are also generating good amount of money by utilizing the asset and
shareholder’s wealth.

Hershey: Hershey in 2018 has a gross profit of 45.89%; net profit margin of 15.11%; operating
profit of 21.83%. They have ROA of 15.28and ROE of 84.13. So we can say like McDonald’s;
Hershey area also managing their wealth quite amazingly. Because they are making huge amount
of profit. Not only this; they are also generating good amount of money by using the asset and
shareholder’s wealth.

So if we try to distinguish between US Company and local company then we can say US Company
is doing far better than local company, they are much more flexible. And they know how to
generate god amount of profit.

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 2.Steel Industry

Based on financial statement here we have discussed about four company’s liquidity ratio,
solvency ratio & financial flexibility ratio of 2018. BSRM & RSRM are listed on Dhaka Stock
Exchange and United States Steel & Arcelor Mittal is listed on New York Stock Exchange.

2.1 Liquidity Ratio:

Dhaka Stock Exchange New York Stock Exchange

ARCELO
BSRM (%) RSRM (%) USS (%)
MITTAL (%)

Current Ratio 1.06 2.27 1.51 2.67

Quick Ratio 0.58 1.38 0.86 1.37

A/R ratio 3.60 4.14 8.32 7.8

BSRM: BSRM has current ratio of 1.06% which is lower than RSRM but its more than 1%. It
means it can pay its obligation with its current asset easily. They are efficient in asset management.
quick ratio of 2018 is 0.58. it means their assets are not enough to quickly convertible. Here we
can see that A/R of BSRM is 3.60. Higher A/R are bad for business but in the condition of
Bangladesh, it’s in good condition.

RSRM: Current ratio of RSRM in 2018 is 2.27%, which indicates that it can pay its debts with
current asset more than 2 times. Quick ratio is 1.38%, which is greater than BSRM. A/R of RSRM
in 2018 is 4.14 which is greater than BSRM. It means that their accounts receivable is not much
efficient in contrast of BSRM.

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United States Steel: Here we can see that the current ratio of USS is 1.30 it means that they
have enough asset to pay their short term obligations. Quick ratio of USS is .86 it means that it
cannot pay its obligation with the assets which are in their hands.

ARCELOR Mittal: Current ratios of Am in 2018 is 2.67% which is much higher than USS. It
means they are much more efficient in terms of short term asset. In 2018 the quick ratio of AM
was 1.37 it means they can meet their short term obligations with all their asset. In 2018 the A/R
of AM was 7.8 means they are using their asset very efficiently and they it is extending their credit
with effectively.

We find that the overall liquidity of USA industry is better than the Bangladeshi steel industry. It
could be for macroeconomic factor that greatly affect liquidity conditions. On the other hand, their
economic structure is different and the consumer buying patterns is different. They are totally
credit based but we are totally cash based that’s why Bangladeshi industry don’t have to maintain
higher liquidity.

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 2.2 Solvency Ratio:

Solvency ratio is the indicator of measuring company’s long term obligation. It reflects the
company’s profitability and compares it with liability

Dhaka Stock Exchange New York Stock Exchange

BSRM RSRM USS ARCELO Mittal

(%) (%) (%) (%)

Interest coverage
3.14 6.13 -4.89 O.31

Debt to Asset Ratio

3.34 1.22 .89 .77

Debt to Equity
Ratio .28 .32 .56 .41

BSRM: BSRM has interest coverage of 3.14 which indicates that BSRM has more earnings then
their interest payment. It’s a good sign for a company. Debt to asset ratio of BSRM in 2018 is 3.14
which indicates that they have they have more debt than their asset. Which is risky for long term
of the company. Here we can see that the debt to equity ratio of BSRM is 28% that means with the
equity BSRM has they can pay their debt 28 times.

RSRM: RSRM has interest coverage of 6.13 in 2018 it means they are able to pay its debt more
than 6 times. They are good at earning their interests. Their Debt to asset ratio in 2018 was 1.22
that means with their all asset they can pay their debts more than 1 times. In 2018 their debt to
equity was .32 it means with all their equity they can pay their debts .32 time. It means they can’t
pay their debt with their equity.

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USS: USS has interest coverage of -4.88 it means they can’t pay its debt with their asset. Their
debt to equity was .41 that means their debt to equity is lower than 1. It means with their all equity
they can’t pay their debt.

Here we can see that there are lots of difference between DSE and NYSE. Bangladeshi companies
are not efficient to maintain their solvency. They are not solvent. But on the other hand American
companies are more solvent. They are efficient in asset management.

2.3 Flexibility Ratio:

Dhaka Stock Exchange New York Stock Exchange

BSRM RSRM USS ARCELOR

MITTAL

Gross Profit 10.10% 16.67% 18% 19%

Net Profit Margin 3.73% 9.26% 7.86% 7.02%

ROA 11.34% 10.47% 10.71% 6.04%

ROE 14.34% 15.76% 29.36% 12.73%

BSRM: Gross profit of BSRM in 2018 is 10.10% which means they are making a good profit.
After paying all cost. On the other hand we can see that Net Profit Margin of BSRM in 2018 is
3.73%. as it is a positive figure we can say that its good for the company but its lower then industry
average. ROA of BSRM is 11.34% which indicates their return asset is in a good percentage. ROE
of BSRM is 14.34%. for every dollar of equity, they are getting return of 14 dollars. It’s a high
percentage

RSRM: in 2018 the gross profit of RSRM was 16.67% which is greater than BSRM it indicates
they are making good profits.9.26% is their Net Profit Margin its quite high than industry average
and it indicates that they are making good profit after paying all cost. ROA of RSRM is 10.47 %

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which is close to BSRM. Their return on equity is 15%. It means they are utilizing their equity
efficiently.

USS: the gross profit of USS in 2018 was 18% which means after paying their variable cost they
are earning 18% profit. Net profit margin of USS is 7.86% which is little bit high which means
they can control their cost very well. ROA of USS is 10.71% it means they are using their assets
efficiently.

Arcelor Mittal: Gross profit of AM in 2018 is 19% which means they are controlling their
costs and earning a good revenue. Net profit margin is 6.04% its lower then USS that means they
are after paying all cost they are earning 6.04%. though it’s a positive ratio it’s good for the
company.

By comparing of two market we can see that in gross profit they are making almost same
percentage. Both market have some good side and flaws. In US companies are managed more
efficiently. Both the US companies have much higher gross profit but Bangladeshi companies had
more ROA and net profit margin.

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 3. Cement Industry

3.1 Liquidity Ratio

Dhaka Stock Exchange New York Stock Exchange

Confidence Premier Cement Eagle Crop. USG Corp.

Cement(%) (%) (%) (%)

Current Ratio 1.013 0.80 3.15 2.24

Quick Ratio .29 0.74 1.088 1.68

DSO 3.77 8.07 2.88 3.10

Confidence Cement: Confidence current ratio is lower than Premier which indicating that
Premier has more ability to cover payables than Confidence. Confidence has more ability to pay
current obligation with its most liquid asset than Premier Cement. Days sales of outstanding of
confidence cement is 3.77 which means they have average outstanding sales of average 3 days.
According to Bangladesh it’s not high. And its lower than Premier Cements DSO.

Premier Cement: Confidence has more ability to pay current obligation with its most liquid
asset than Premier Cement. Confidence has positive net working capital where Premier has
negative net working capital. Confidence has better ability to cover payables. Premier Cement has
a positive liquid balance which is good. In the solvency ratios we have seen Confidence is more
under debt than Premier. That is why Confidence is more at risk because they are highly leveraged
by debt.

Eagle: Current ratio of Eagle in 2018 is 3.15. which means they are able to pay their short term
obligation with their current asset and they can increase their asset within one year. Quick ratio of

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Eagle corp. is 1.68 which means it means they can pay their short term debt with the asset in their
hands. It is more than 1 means they don’t relies only on their assets to pay their debt

3.2 Solvency Ratio

Dhaka Stock Exchange New York Stock Exchange

Confidence Premier Eagle Crop. USG Corp.

Cement(%) Cement (%) (%)
(%)

Interest coverage .88 4.73 0.80 1.051

Debt to Asset Ratio 1.88 5.73 1.81 2.051

Debt to Equity
Ratio 6.48 6.15 14.80 13.73

Confidence Cement: As the debt to equity ratio expresses the relationship between external
equity (liabilities) and internal equity (stockholder’s equity), it is also known as “external-internal
equity ratio”. Confidence 42% assets has been financed by debt on the other hand 66% of Premier
asset has been financed by debt. This indicates that Premier is more risky and less solvent than
Eagle

Premier Cement: As the debt to equity ratio expresses the relationship between external equity
(liabilities) and internal equity (stockholder’s equity), it is also known as “external-internal equity
ratio”. In 2018 Debt to asset ratio of Premier cements was 5.73. Premier cements asset has been
financed by debt. This indicates that Premier is riskier and less solvent than Confidence. Debt to
equity ratio of Premier ratio was 6.15 that means they are taking debts to financing the company.

Eagle Cement: As the debt to equity ratio expresses the relationship between external equity
(liabilities) and internal equity (stockholder’s equity), it is also known as “external-internal equity
ratio”. Interest Coverage Ratio : If the coverage measurement is above 1, it means that the company

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is making more than enough money to pay its interest obligations with some extra earnings left
over to make the principle payments. Confidence percentage is 5.70. It is making enough money
from its current operations to pay her current interest rate. Premier has less ability

USG Corp: the debt to equity ratio expresses the relationship between external equity
(liabilities) and internal equity (stockholder’s equity), it is also known as “external-internal equity
ratio”. USGs debt to asset ratio is 2.05 it means they can pay their obligations with their current
asset.

3.3 Flexibility Ratio:

Dhaka Stock Exchange New York Stock

Exchange

Confidence Premier Eagle Crop. USG Corp.

Cement(%) Cement (%) (%)
(%)
Gross Profit 16 15.1% 20.20 22.86

Net Profit Margin 12.0 4.4% 13.33 11.14

ROA
9.80 3.3% 7.98 8.31

ROE
12.56 9.7% 10.86 13.69

Confidence Cement: Gross profit of confidence cement in 2018 is 16%. It means that their
asset is well managed and they are efficient it cost management. Net profit margin is 12. It means
that their profit after paying all the cost they are earning a good margin of profit.

Premier Cement: ROE of premier cement in 2018 was 13.69 it means their return on equity
is high. They are using their equity very efficiently. ROA of Premier cement is 8.31 which is higher

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than Eagle cement.it means their return on asset is higher and they are using their asset very
efficiently. Gross profit of premier cement in 2018 was 15% which is a high percentage.

Eagle Cement: Debt to Asset Ratio: As the debt to equity ratio expresses the relationship
between external equity (liabilities) and internal equity (stockholder’s equity), it is also known as
“external-internal equity ratio”. Eagle Materials Inc.’s 44.99% assets has been financed by debt on
the other hand 71% of CEMEX’s asset has been financed by debt.

4. Telecommunication Industry

Based on the financial statement, we actually focus on the relevant ratio that cover the firm
solvency, liquidity and flexibility. Here we choose the telecommunication industry under the listed
of Dhaka Stock Exchange (DSE) of Bangladesh and the listed of New York Stock Exchange
(NYSE). From this industry, we choose four prominent companies. Among them, two from DSE
and two from NYSEC. These are Grameen Phone and Bangla link under DSEC and AT & T and
Verizon under NYSE. All of these companies’ ratio are depicted following.

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 4.1 Liquidity Ratio

Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to
pay off current debt obligations without raising external capital. Liquidity ratios measure a
company's ability to pay debt obligations and its margin of safety through the calculation of metrics
including the current ratio, quick ratio, and operating cash flow ratio like account receivable turn
over and sales days in outstanding etc. Current liabilities are analysed in relation to liquid assets
to evaluate the coverage of short-term debts in an emergency.

Dhaka Stock Exchange New York Stock Exchange

Grameen Phone Banglalink AT & T Verizon

Current Ratio .17 .21 .80 .91

Quick Ratio .14 .12 .49 .73

Cash Ratio .08 .05 .08 .07

A/R ratio 20.6 19.2 4.85 5.21

Grameen Phone: Here we find that the current ratio of Grameen phone is 17% and quick ratio
is 14% and cash ratio is 8% in 2018.Here their liquidity ratio is better comparatively But their
account receivable ratio is not better than others and also the DSO which one is respectively 20.6
days and 72.4 days.

Banglalink: As a telecommunication company in Bangladesh, they are performing better than

other though are not getting the significant market share. Here their current ratio is 21% and quick
ratio is 12% and cash ratio is 5%. Therefore, when we compare with the Grameen phone they are
doing well. However, their DSO is slickly greater than the Grameen phone, which one is 75.5 days
though their A/R ratio is lower than Grameen phone.

AT & T: is a USA company which one current ratio is 80% and quick ratio is 49% and the cash
ratio is 8% which one says that as marinating the liquidity ratio’s they are doing well. Moreover

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their A/R ratio also well which one is 4.58%. However, they need a long time to collect the money
which indicating by DSO 56.59 days.

Verizon: Though they are doing well but they have to maintain the high liquidity like in 2018
their current ratio is 91% and quick ratio is 73% but their cash ratio is 7% that indicating that they
must hold high current asset rather than cash. That’s why their current ratio is greater which one
is 5.21 and DSO is 70.01 days.

We are trying to find out USA telecommunication’s industries liquidity condition and compare
with our local industry. We find that the overall liquidity of USA industry is better than the
Bangladeshi telecommunication’s industry. It could be for macroeconomic factor that greatly
affect liquidity conditions. On the other hand, their economic structure is different and the
consumer buying patterns is different. They are totally credit based but we are totally cash based
that’s why Bangladeshi industry don’t have to maintain higher liquidity.

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 4.2 Solvency Ratio

The solvency ratio is a key metric used to measure an enterprise’s ability to meet its debt
obligations and is used often by prospective business lenders. The lower a company's solvency
ratio, the greater the probability that it will default on its debt obligations.

Dhaka Stock Exchange New York Stock Exchange

Grameen Phone Banglalink AT & T Verizon

(%) (%) (%) (%)
Interest
28.21 32.21 2.94 4.36
coverage
Debt to Asset
9.79 11.59 .33 43
Ratio
Debt to Equity
32.06 28.2 96 2.13
Ratio

Grameen Phone: In 2018, their interest coverage ratio is 28.21%, debt to asset ratio is 9.79%,
and debt to equity ratio is 32.06 %. That means that they have the high solvency and they are
mostly equity and asset based company. Their debt is 9.79% of total capital that indicating that
they did not take too much loan that is why their interest coverage ratio is high.

Banglalink : Their interest coverage ratio is 32.21 % , debt to asset ratio is 11.59% and the debt
to equity ratio is 28.2%. Which indicating that their debt coverage ratio is also better when we
compare with Grameen phone. They have high covered of debt by asset which one is 11.59% and
by equity 28.2%. So their solvency to cover the debt is comparatively high or enough.

AT & T: In solvency measurement of 2018 their interest coverage ratio 2.94% and debt to asset
ratio is .33%, which one is lower than the Verizon. On the other hand, their debt to equity ratio is

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96%. The entire ratio saying that the overall solvency to cover the debt is not enough to compare
with the industry.

Verizon: Their interest coverage ratio is 4.36% and the debt to asset ratio is 43%. That indicating
that their debt cover ability by asset is high that’s why their interest coverage is high compare with
AT & T. Moreover, their debt coverage ratio by equity is 2.13%.

Comparing with Bangladeshi Telecommunication industry with USA industry it very different.
This is for their regulation about capital structure and their Accounting including the reporting
system is different. They are following GAAP accounting standard and we are following GAAP
and IFRS both. On the other hand, our national economic structure is different. They are credit-
based country but we are cash based country so they are usually taking high loan compare with
Bangladesh.

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 4.3 Financial Flexibility Ratio

The accounting term financial flexibility is used to describe a company's ability to react to
unexpected expenses and investment opportunities. Financial flexibility is usually assessed by
examining the company's use of leverage as well as cash holdings.

Dhaka Stock Exchange New York Stock Exchange

Grameen Phone Banglalink AT & T Verizon

(%) (%) (%) (%)
Gross Profit
57.10 61.10 53.49 57.58
Net Profit
26.47 22.45 11.34 11.87
Margin
Operating
43.00 38.4 15.31 20.53
Profit Margin
Return On
26.15 23.04 3.97 5.95
Asset
Return On
90.75 84.45 11.92 32.27
Equity

Grameen Phone: In 2018 their 57.10% and their operating profit margin is 43%. Which
indicating that they are efficiently handle their fixed cost that’s why their operating profit margin
is high. Which one we also greatly seeing that their net profit margin is 26.47%. Moreover, their
return on asset is comparatively lower than return on equity that is 26.15% to 90.75%.

Banglalink: Their gross profit ratio of 2018 is 61.10% and operate profit margin is 38.4%, which
one indicating that they are not efficiently handing the fixed cost compare to the Grameen
phone.On the other hand their Net profit margin also lower which one is 38.4%. Their return on

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asset is 23.04% and return on equity is 84.48%. Which indicating that their return on equity is
higher so they can attract the investor to invest.

AT & T: In 2018, their gross profit margin is 53.49% and operating profit margin is 15.31% that
indicating that they are not efficient in managed the fixed cost that’s why their operating cost is
lower.Net profit margin is 11.34% which one is almost same compare to Verizon. Their return on
asset is 3.97% and return on equity is 11.92%. Therefore, their return on asset is lower.

Verizon: Their gross profit margin ratio is 57.58% and operating profit margin is 20.53%, which
one indicating that their fixed cost are efficiently handled compare to the AT & T and their net
profit margin is 11.87%. Their return on asset is 5.95%, their return on equity is 32.27% .When
we compare with AT & T their return on asset, and equity is lower.

Here the ratios of this industry greatly vary between two countries. This is for the economic
structure and the variance of cost structure. USA Company have to invest more on variable cost
as their marketing strategy is different and geographically they are scattered. Their market is large
and though their sell is high but their operating profit and net profit margin is lower compare to
Bangladeshi company.

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 Summary:
Bangladeshi industry:
Food Industry: Bangladeshi companies are not so far behind Than US Company in terms of food
industry. We have tried to find out overall ratio of local company. And we have figured out that
Bangladeshi companies are doing relatively well. We have done the analysis of Both Fu Wang
food and Apex food. And we have got to see they are doing quite well in maintaining liquidity;
solvency; and flexibility. Though there are some areas where they can improve. Like : They can
improve their daily sales outstanding; Accounts receivable. But if we consider the socio economic
perspective and the business environment of Bangladesh then we can say they are doing their job
perfectly.

Steel Industry: Here in terms of liquidity we can say Bangladeshi industries are not doing so
well. It could be for macroeconomic factor that greatly affect liquidity conditions. On the other
hand, their economic structure is different and the consumer buying patterns is different. We are
totally cash based that’s why Bangladeshi industry don’t have to maintain higher liquidity. In terms
of solvency we can say that Bangladeshi companies are not efficient to maintain their solvency.
They are not solvent. They are failing to manage their company effectively. In terms of flexibility
we can say that Bangladeshi companies are in a better position. Bangladeshi companies had more
ROA and net profit margin. But they should try to generate more gross profit and operating profit.

Cement industry: In terms of Cement industry we can say that Bangladeshi companies are
doing relatively well. They are maintaining good liquidity; Solvency and flexibility. But still there
are some areas where they have to focus. Like: They need to be a bit more creative to managing
daily sales outstanding; gross profit and other operating profit. They should be a bit more astute in
managing their working capital a bit more carefully.

Telecommunication industry: Overall liquidity situation of Bangladesh Company are not

so good. It could be for macroeconomic factor that greatly affect liquidity conditions. On the other
hand, their economic structure is different and the consumer buying patterns is different. We are
totally cash based that’s why Bangladeshi industry don’t have to maintain higher liquidity. In
terms of solvency the condition of Bangladeshi Industry are quite different. We are following
GAAP and IFRS both. On the other hand, our national economic structure is different. In terms of
flexibility Bangladeshi company are doing well but they still can improve. So overall we can say

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that Bangladeshi industries are trying their level best to do well but due to some challenges they
cannot go to the peak.

USA Industry:
Food Industry: In terms of liquidity US based companies are lacking behind. They are failing to
maintain proper liquidity. In some extent they are failing to maintain good liquidity. In terms of
solvency US companies are quite solvent. They are managing their resources quite effectively.
They are quite solvent. In terms of flexibility we can say US Company is doing far better than
local company, they are much more flexible. And they know how to generate god amount of profit.

Steel Industry: In terms of liquidity USA industry is better than the Bangladeshi steel industry.
It could be for macroeconomic factor that greatly affect liquidity conditions. On the other hand,
their economic structure is different and the consumer buying patterns is different. They are totally
credit based that can be a reason. In terms of solvency we can say American companies are more
solvent. They are efficient in asset management. In terms of flexibility in US companies are
managed more efficiently. Both the US companies have much higher gross profit

Cement Industry: In terms of liquidity USA industry is better than the Bangladeshi cement
industry. It could be for macroeconomic factor that greatly affect liquidity conditions. On the other
hand, their economic structure is different and the consumer buying patterns is different. They are
totally credit based that can be a reason. In terms of solvency we can say American companies are
more solvent. They are efficient in asset management. In terms of flexibility in US companies are
managed more efficiently. Both the US companies have much higher gross profit.

Telecommunication industry: Based on our analysis we have found out that the overall
liquidity of USA industry is much better. It could be for macroeconomic factor that greatly affect
liquidity conditions. On the other hand, their economic structure is different and the consumer
buying patterns is different. They are totally credit based. In terms of solvency we can say US
companies are much more solvent. They are effectively managing their resources. . In terms of
flexibility in US companies are managed more efficiently. Both the US companies have much
higher gross profit. So overall, we can say US companies are doing quite well.

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 Commodity Shop

Shop Name: Rahman Shop

Owner: Malek Rahman

Commodity shop: When we spoke with the local commodity shop, owner he told us that he has to
keep sufficient number of inventory in stock to avoid any sort of uncertain situation. Because any
unusual occurrence can occur at any time. That time he might not get the desired outcomes. It can
affect the profitability of his business. He said he tries to keep a good number of stock of that
inventory which can remain fresh for a long time. Like Rice; pulse; wheat; sugar; different types
of spices. But he tries to sell those products quite frequently which are quite difficult to preserve.
These items can be rotten quite easily. Like ready food; loafs; other food items that get spoiled
very quickly. They try to sell it as soon as possible. Those products, which remain unsold; are
being taken away by the suppliers. Suppliers only take the money for those sold products. For
account receivable part; the shopkeeper said he has to sell on credit quite frequently. He told me
that he is about to get around 80 thousand BDT from multiple customer. They have not paid back
the money.

Before selling product in due he generally spectates about the person. He generally wants to know
about the person’s financial condition. If the person is a land owner and if his behavior is well
known to all.

Recommendation:

To deal with this problem I have come up with some solution which can be feasible from
Bangladesh’s contest. Firstly, the shopkeeper can say if a particular customer pays back the money
within 10 days then he/she will receive a 10% discount on payment, It might work for him. 2ndly
the shopkeeper should try to maintain a good equation with the customer. It might help to get the
money back quickly; He can tell if a particular customer pays back the money within a certain date
then from next time he/she will get a discount on purchase.

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Appendix

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AT & T

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