Assignment

On

Financial Analysis of

Apex Adelchi Footwear Limited

Prepared For:

Najifa Teesha
Lecturer on Principal of Finance
BBA Program
Southeast University.

Prepared By:

Afrid sarwar khan

ID: 2018210000099
Section: 05
01June 2020
 Executive summary

Apex Adelchi Footwear Limited is a leading manufacturer and exporter of leather

footwear from Bangladesh to major shoe retailers in Western Europe, North
America and Japan. AAFL pioneered the export of value added finished products
in the leather sector of Bangladesh and is also involved in the local footwear retail
business with the second largest shoe retail network in the country. AAFL has
equity, technical and marketing participation from La Nuova Adelchi one of the
largest footwear manufacturers of Italy. The report emphasizes with the analysis
of the footwear industry, company in focus, presenting the mission & vision, the
values & product, description of 8 associates companies, finance related issues
are discussed in detail along with their results and possibilities. Along with the
report contains my practical observation and experience in Apex Adelchi
Footwear Limited at Head office. The overall performance of AAFL shows a
satisfactory position although they have been suffering last few years. It is
gradually expanding its asset base and able to proper utilize assets. No business
stays at the top if it doesn’t maintain its performance. Thus it is very important to
fulfill the demand of the consumers through competitive advantage. Since their
policy is very well-formed we can hope that the growth of the company’s will
increase and this company will bring success for our country in the leather
footwear in future.
Table of contents:

1. Introduction

2. Objective of the report

3. Methodology

4. Bangladesh footwear industry analysis

5. Company profile

6. Mission

7. Vision

8. Future values

9. Product

10.SWOT analysis

11.Performance analysis

12.Conclusion

1. Introduction:
In 1990, Mr. Syed Manzur Elahi, the chairman of Apex group started a new
venture known as Apex Footwear. (Nasiruddin) In 2006, Apex Footwear Limited
collaborated with Adelchi- an Italian company and changed the name to Apex
Adelchi Footwear Limited (AAFL), initiating a joint venture with a new business
spirit. (Nasiruddin) Apex Adelchi Footwear Limited is a leading manufacturer and
exporter of leather footwear from Bangladesh to major shoe retailers in Western
Europe, North America and Japan. (apexadelchi.com, 2010)AAFL pioneered the
export of value added finished products in the leather sector of Bangladesh and is
also involved in the local footwear retail business with the second largest shoe
retail network in the country. AAFL has equity, technical and marketing
participation from La Nuova Adelchi one of the largest footwear manufacturers of
Italy. Public listed and traded since 1993, AAFL is professionally managed,
currently employees more than 6800 persons and is in full compliance with
Corporate Governance Compliance Report under section 2CC of Securities
Exchange Commission Notification Order.

2. Objectives of the report:

General Objective:

The primary objective of this report is to explore of financial performance

analysis of Apex Adelchi Footwear Ltd.

Secondary Objective:

To show an overview of the company(vision, mission, value, product

offerings, associates companies)
To present an overview of Department of Gallerie Apex.
To present an overview of footwear industry, economic condition of
Bangladesh & worldwide.
3. Methodology
While conducting the report, sources were explored for primary information and
data. But hardly any updated data could be found. In the absence of updated
information or data dependence on secondary has been inevitable.
*Secondary Data Collection:

Annual report of AAFL.

Published documents.
Website.

4. Bangladesh Footwear Industry analysis:

Export promotion bureau statistics show that footwear exports had 20 percent
market rises during 2009July- 10 March fiscal year. The country fetched 144.69
million dollar from export of the item in nine months a sharp rise from 131.52
million dollar in the July -March period. Nowadays many countries like China
and India are failing to produce high quality but low-cost leather items due to
the WTO anti dumping rules. So orders from Germany, Italy, France, Japan and
Canada are shifting to the local manufactures. Crushed leather is the main raw
material for locally produced. Earlier China, India and Vietnam are the largest
shoe exporters in the world. The demand for fashionable and high end leather
shoes has decline in international markets because of the recession. But it has
also given rise to an opportunity for the county to produce shoes that are
ordinary but essential. The county started exporting leather footwear in 1994
on small scale to neighboring countries including India and Nepal. The
footwear business grew in recent years. Currently the total market size of
Bangladesh made leather footwear stands at tk1700 corer of which about 45
percent is exported. The country exports around six million pairs of leather
footwear a year. Apex Adelchi Footwear Limited is the country’s leading
footwear exporter claiming more than half of the total exports The company
earned taka 450 corer last year. Bangladesh mainly exports men’s footwear,
lady’s sandals and sports shoes to European nations China, Canada, Saudi
Arabia, Iraq, Jordan, India and Nepal. Mr. Syed Nasim Manzur, managing
director of Apex Adelchi Footwear Ltd, said “the recession has taken a toll on
the demand for luxury fashion accessories. The additional fall out of the global
financial crisis on AAFL has been the adverse impact on the Euro & as the
majority of our revenues are in Euros, the continued slide of the Euro and the
reflection in the Taka versus Euro conversion rate has severely affected our
taka revenues as seen above. The Bangladesh Taka has remained unchanged
against the US$ in 2009 where the currencies of our competitor nations such
as the Indian Rupee & Pakistan Rupee have been devalued repeatedly in 2009
in order to boost their export competitiveness. Despite many pleas from
exporters in Bangladesh, the government of Bangladesh has not adjusted the
Taka against the USD. Therefore the adverse effects of the global financial
crisis were exaggerated for AAFL as we realized on average Tk 94 versus 1Euro
of export in 2009 as compared to Tk 100 versus 1 Euro of export in 2008.” The
country’s present work orders have slowed by 50 percent, Mr. Syed Manzur
Elahi, chairman of Apex Adelchi Footwear Ltd, said. Appreciating the
government’s move to increase cash incentive for the leather and leather
goods exports by 2.5 percentage points to 17.5 percent from the previous 15
percent, he said the government needs to immediately implement the
package, to safeguard the industry. But it problem we face is the government’s
lack of initiative to devaluate our local currency against the US dollar. High
interest rates have also slowed our present growth.) Indian entrepreneurs are
enjoying credit facilities at a5.5 percent rate of interest; while in contrast,
Bangladesh government lowered bank interest to 13 percent last month. The
government to ensure an uninterrupted supply of power that would help
increases the sectors competitiveness and ensure higher productivity.
Therefore we realized early on in 2009 that we would have to face this crisis
on our own and turn crisis into opportunity. So we embarked on a major drive
to boost efficiency and reduce cost of production. The first area that we
attacked was rejection rate where innovative and bold ideas from the senior
management team helped bring about more than 50% reduction in the total
rejection rate and thereby reduced our cost of production. The second area
was the use of overtime where we once again targeted companywide
reductions without loss of output. The third area was rationalization of our
human resources where we imposed a hiring freeze and did not replace
attrition losses. The sharp fall off in demand for leather globally especially in
the largest manufacturer in the world China, caused all leather prices including
Bangladesh to also drop significantly. So as a result the average buying price
for our single largest input also fell. It must be remembered that the huge
reduction in global trade volumes as well as crashing oil prices also caused
freight rates to come down. All together these forces combined to reduce our
total cost of goods sold and thereby improve our gross margin. Export
promotion increased in 2009 as we attacked the market even more
aggressively especially after the huge dip at the end of the first quarter of
 2009. The global financial crisis also forced many more retailers of footwear to
seek more “exotic” sources and forced them to look at new options like
Bangladesh.

5.Company Profile:
Name of the Company: Apex Adelchi Footwear Limited.
Date of Commencement of Business as Apex Footwear Limited: January 4
1990.
Name Change to Apex Adelchi Footwear Limited: December 27, 2006.
Type of Company: Public Limited Company

Board of Directors:

Mr. Syed Manzur Elahi – Chairman

Mr. Syed Nasim Manzur - Managing Director
Mr. Syed Gias Hussain - Deputy Managing Director
Ms. Munize Manzur Khasru – Director
Mr. Niaz Ahmed Choudhury – Director
Mr. Adelchi Sergio – Director
Mr. Samson H. Chowdhury - Independent Director

Management Team:

Mr. Syed Manzur Elahi– Chairman

Mr. Adelchi Sergio – President
Mr. Syed Nasim Manzur - Managing Director
Mr. Syed Gias Hussain - Deputy Managing Director
Mr. Abdul Momen Bhuiyan - Executive Director
Mr. AA Mosaddeque - Executive Director ( GAPX )
Mr. Syed Md. Mustaque - GM ( Factory )
Md. Mominul Ahsan - Head of HR
Mr. Atiqul Islam - GM ( Leather)

Associates Companies:

Apex Tannery Limited.

Adelchi Footwear Bangladesh Limited.
Apex Pharma Limited.
Grey Advertising Bangladesh Limited.
Quantum Marketing Research BD Limited.
Mutual Trust Bank limited.
Pioneer Insurance Company Limited.
Gallerie Apex.

6. Vision:
“Honest Growth”

7. Mission:
1. Sustainable Growth.
2. Creating value for our shareholders.
3. Proactive compliance.
4. Corporate Social Responsibility.

8. Future and values:

*Future:
Apex Adelchi Footwear Limited has regained their focus on productivity and they
have been forced to reassess their business model. They have made efficiency a
byword, starting from wastage of materials to improving line wise productivity and
this focus will remain. They have sought out and developed new and better sources
of raw materials; they have identified new markets and segments where they have
huge potential for growth. They have also actively begun the process of reducing
their financial expenses by exploring new innovative funding options. On the
domestic front they are reinforcing their retail format with new formats in the
wholesale space. They have launched several very large format stores which are
generating good returns and also begun a phased renovation of older stores. They
will continue to refresh and renew their product range to ensure that they deliver
on their promise to maximize customer delight and choice. As the global markets
emerge slowly, from recession they are ready to take full advantage of the new
opportunities that emerge. The power situation in Bangladesh has already reached
crisis proportions and Apex Adelchi Footwear Limited averaged more than 7 hours
of load shedding per day in March 2010. Adelchi Footwear Limited is equipped
with sufficient diesel standby generators but they are not designed to run for such
long hours at a stretch and the wear and tear and operating costs are very high. This
is a serious threat to their ability to meet their production targets and operate their
plant optimally and profitably. They must now actively explore immediate power
solutions like switching to alternative energy sources such as HSFO based captive
power generation. The global shift towards green sourcing is a reality and it has
already started in the footwear industry.
Today their entire supply chain must be environmental sustainable and obviously
the present tannery industry in Hazaribagh is unable to meet these standards. (Apex
annual report, 2009) They must start to plan for an alternative production source of
environmentally friendly finished leather from raw hides that can meet global
standards. The global footwear market is forecasted to reach USD 272.5 billion by
2013 and Europe is the single largest market accounting for 42.3 percent of global
value. Bangladesh enjoys preferential access to this market, has a competitive and
young labor force and is blessed with a domestic raw material advantage in terms
of locally available hides and skins. Apex Adelchi Footwear Limited must now
turn its focus on maximizing these strengths and ensuring that they are prepared to
meet the new challenges of power supply, developing capability and offering
shorter lead times to market. Apex Adelchi Footwear Limited has established its
credentials in the global market as a forerunner in this industry in Bangladesh but
they must now redouble their pace to maintain their leadership position and
achieve their goal of global standards of excellence.

*Values:

Respect for people:

- Demonstrate respect by developing our people and helping them to achieve high
performance standards.
- Treat all people with dignity.
Integrity:
- Honesty
- Walk the talk.
Sense of Urgency:
- Strive for speed and simplicity in everything we do.
Empowerment:
- Encourage and reward self-confidence and initiative
- Require accountability

9. Products:
Since the beginning of the retailing business, in 1990, AAFL received a remarkable
response from the local market which motivated the company to expand over the
years. Today, the company offers the local consumers of Bangladesh a much
wider range of products than before. Most of the products that are offered in the
local market by AAFL are relatively different from the ones that are exported,
especially in terms of design and material. The reason behind this is the different
climate, culture and the demand of the consumers of local and foreign markets.
For example, AAFL exports products like ladies boots which are not available in
the local market because the boots do not complement with neither the clothes
that most of the ladies wear nor the culture of the country. So, AAFL offers ladies
open sandal to meet the demand of the local market which, on the other hand is
not exported as it would not satisfy the taste of foreign consumers. Thus, the
product development unit of AAFL is continuously working to develop products
based on the needs and wants of the local consumers.
In the local market AAFL is mainly known for men’s footwear and sandals but
recently the company has extended the product range with ladies and kids
products. The table above clearly shows that the emphasis is more on the of
men’s products than the ladies and children products. However, recently AAFL
launched genuine Disney branded footwear through the retail stores to furnish to
the kids segment. Disney provided the license to AAFL to launch footwear for
children designed with for instance the Disney characters like Pooh bear, Mickey
Mouse, etc. According to men’s shoes, there are three products brand like
Venturing, Apex and Sprint are common and ladies sandals; Sandra Rosa, Nino
Rossi and Apex are common. Men’s shoes size starts from 39-44 and sandal size
starts from 35-41. There have different row to display particular brand product
like shoes, sandals, socks, kid’s sandals etc. Price of men’s shoes starts from
1250Tk-5500Tk, sandals 400Tk-1950Tk, ladies sandals 380Tk-2250Tk, comfort
socks 150Tk-250Tk. Price of leather Goods is 600Tk.
*Components of Manufacturing Shoes:
There are some components required for making a pair of shoes. These
components assemble with each other step by step. The manufacturing procedure
depends on some components which need to make a pair of shoes.
UPPER: Upper is the main part of shoes. This upper made by leather, synthetic,
fabric, rubber. In upper side different components or parts of leather are combined
by stitch. This stitch is various types like lock stitch, chain stitch, jhik jhak stitch,
heavy stitch and moccasin.
LINIING: This is the inside part of upper, it can be also leather, synthetic, fabrics
(depends on shoe design).
SOCK: Sock is to comfort the inner part of shoes. It can be synthetic, foam.
IN-SOLE: This in-sole placed at upper side of sole. It can be leather board,
cellulose board, fiber board, Ethyl Vinyl Acetate (EVA).
SOLE: It stands the lower part of shoes to adjust upper body. It can be rubber,
leather board and wood, PU (Poly Uri thane), Thermo Plastic Rubber (TPR) and
Poly Vinyl Chloride (PVC).
HILL: Hill is to balance the body of shoes and it can be rubber, wood.
ADHESIVE: This is a gum which can use with sole to fit the upper side of shoes.
There are different types of adhesives like:
Neo prine (yellow color)
Latex (White color)
PU (Poly Uri thin)
Hot Melt

10. SWOT analysis:

Strengths: AAFL has advanced machines and skilled manpower which make it
possible to produce high quality footwear. As a SBU of Apex group, it also has
good financial backup. As a partner company of Adelchi, Apex gets product
designs from them which make it possible for them to follow Italian fashion trend.
They have renowned brand image in the footwear market.

Weakness: AAFL‟s product price is comparatively high. On the other hand, their
ladies and kids footwear brands are not that much strong. Furthermore, they have
to depend on foreign suppliers for raw materials and design support.

Opportunities: The quality of the leather available in Bangladesh is really very

good. Furthermore, here labor cost is low which makes it possible to produce the
products more cheaply. On the other hand, young generation is now more fashion
oriented and brand conscious.

Threats: Consumers are now more prices sensitive day by day. Furthermore, most
of the raw materials are not locally available. Beside this, leather price is
increasing day by day due to high demand. Production is also hampering due to
electricity crisis.

11. performance analysis:

*Financial Statement Analysis: Analysis is the process of critically examining in

detail accounting information given in the financial statements. For the purpose of
analysis, individual items are studied; their relationships with other related figures
established, the data is sometimes rearranged to have better understanding of the
information with the help of different techniques or tools for the purpose.
Analyzing financial statements is a process of evaluating relationship between
component parts of financial statement to obtain a better understanding of firm’s
position and performance. Financial statements analysis is largely a study of
relationship among the various financial factors in a business as disclosed by a
single set of statements and a study of the trend of these factors as shown in a
series of statements. The analysis of financial statements thus refers to the
treatment of the information contained in the financial statements in a way so as to
afford a full diagnosis of the profitability and financial position of the firm
concerned. For this purpose financial statements are classified methodically,
analyzed and compared with the figures of previous years or other similar firms.
*Income statement: The income statement, often called the statement of income
or statement of earnings, is the report that measures the success of enterprise
operations for a given period of time. The business and investment community
uses this report to determine profitability, investment value and credit worthiness.
It provides investors and creditors with information that helps them predict the
amounts, timing and uncertainty of future cash flows.

*Balance sheet: The balance sheet sometimes referred to as the statement of

financial position, reports the assets, liabilities, and stockholders‟ equity of a
business enterprise at a specified date. This financial statement provides
information about the nature and amounts of investments in enterprise resources,
obligations to creditors, and the owners‟ equity in net resources. It therefore helps
in predicting the amounts, timing and uncertainty of future cash flows.

*Objective of Financial Analysis: In short, the main objectives of analysis of

financial statements are to assess: the present and future earnings capacity or
profitability of the concerns, the operational efficiency of the concern as a whole
and of its various parts or departments, the short-term and long-term solvency of
the concern for the benefit of the debenture holders and trade creditors, the
comparative study in regard to one firm with another firm or one department with
another department, the possibility of developments in the future by making
forecasts and preparing budgets, the financial stability of a business concern, the
real meaning and significance of financial data.
*Ratio Analysis: A tool used by analysts which utilizes the relationship between
accounting figures and their trends over time to establish values and evaluate risks.
Ratio analysis provides analyst with useful information understand about
developing insights into the economic characteristics of different industries and
different firms in the same economic additional ,different over time in a single firm
or between firms due to operation, financing and investing decision made by
management as well as external economic factor are often highlighted by common-
side statement.

*Purpose and Use of Ratio Analysis: A primary advantage of ratios is that they
can be used to compare the risk and return relationships of firms of different sizes.
Ratios can also provide a profile of a firm, its economic characteristics and
competitive strategies and its unique operating, financial and investment
characteristics. In addition ratios are very informative for both the insiders and
outsiders of the firm. Ratio analysis expresses the relationship among selected
financial statement data. The relationship is expressed in terms of a percentage, a
rate or a simple proportion.
For example: IBM Corporation had current assets of $41,338 million and current
liabilities of $29,226 million. The relationship is determined by dividing current
assets by current liabilities. The alternative means of expression are:
 Percentage: Current assets are 141% of current liabilities.

 Rate: Current assets are 1.41 times as great as current liabilities.

Major types of Ratios:

*Liquidity Ratios: It measures the short term ability of the enterprise to pay its
maturing obligations & to meet unexpected needs for cash. Short term creditors
such as bankers and suppliers are particularly interested in assessing liquidity. The
ratios that can be used to determine the enterprise’s short term debt paying ability
are the current ratio, acid test ratio, receivables turnover.

*Profitability Ratios: It measures the income or operating success of an enterprise

for a given period of time. Income or the lack of it, affects the company’s ability to
obtain debt and equity financing. It also affects the company’s liquidity position
and the company’s ability to grow. As a consequence, both creditors and investors
are interested in evaluating earning power-profitability.

*Solvency Ratios: It measures the ability of the company to survive over a long
period of time. Long term creditors and stockholders are particularly interested in a
company’s ability to pay interest as it comes due and to repay the face value of
debt at maturity.

*Ratio analysis of Apex Adelchi Footwear Limited over the year from
2015 to 2019:

Current Ratio: It is a widely used measure for evaluating a company’s liquidity and
short term debt paying ability. The ratio is computed by dividing current assets by
current liabilities. The current ratio shows us how well a company is able to pay
off it short term debt using its most liquid assets.

Current ratio= current asset/current liabilities

Current Current Current Ratio

Ratio Asset Liabilities
Year (taka) (taka)
 2016 15006050 14864780 1.0095
00 00

2017 24661200 24249520 1.01698

00 00

2018 27703294 26854996 1.03159

39 68

2019 29500217 27520394 1.07194

59 61

Analysis: As we know that the higher the current ratio, the more capable the
company is of paying its obligations. A ratio under 1 suggests that the company
would be unable to pay off its obligations if they came due at that point. While
this shows the company is not in good financial health, it does not necessarily
mean that it will go bankrupt. It is definitely not a good sign. If current liabilities
exceed current assets (the current ratio is below 1), then the company may have
problems meeting its short-term obligations. We also know that this ratio
represents the margin of safety or cushion available to the creditors. It is an index
of the firm’s financial stability. It is also an index of technical solvency and an
index of the strength of working capital. If the current ratio is too high, then the
company may not be efficiently using its current assets or its short-term financing
facilities. This may also indicate problems in working capital management. If a
company has a current ratio of 3 or 4, it may want to be concerned. A number this
high means that management has so much cash on hand; they may be doing a
poor job of investing it. In this graphical representation we have seen that over
the year from 2016 to 2019 their current ratio was increasing & ratio was over
1but less than 3 or 4 that means the company was capable of paying its
obligations. The company was in good financial health & it was definitely a good
sign. The company had used its current assets or its short-term financing facilities
with efficiently. This indicates improvements in working capital management. We
know that an equal increase in both current assets and current liabilities would
decrease the ratio. We have also seen that from 2016 to 2017 current asset was
increasing by 64.34%, from 2017 to 2018 current asset was increasing by 12.34%
& from 2018 to 2019 current asset was increasing by 6.49%. On the other hand
from 2006 to 2007 current liabilities was increasing by 63.13%, from 2007 to 2008
current liabilities was increasing by 10.74% & from 2008 to 2019 current liabilities
was increasing by 2.48%. So we can say that it was not an equal increase in both
current assets and current liabilities as a result it leads to increase the ratio.

Quick Ratio: It is a measure of a company’s immediate short term liquidity. It is

computed by dividing the sum of cash, short term investments and net
receivables by current liabilities.

Quick ratio = Cash + Short Term Investments + Receivables (Net) / Current Liabilities

Year Cash (taka) Short Term Receivables Current Ratio

Investments (Net) (taka) Liabilities
(taka) (taka)
2016 84289000 1000000 536502000 1486478000 0.4182982
2017 62394000 4125000 696438000 2424952000 0.3146277
2018 63568890 4342419 905371364 2685499668 0.3624214
2019 64697015 4574002 709941378 2752039461 0.28314
Analysis:

As we know that the higher the quick ratio, the better the position of the
company. The quick ratio (also called the acid test or liquidity ratio) is the most
excessive and difficult test of a company's financial strength and liquidity. It is a
reflection of the liquidity of a business. It measures the firm's capacity to pay off
current obligations immediately and is more rigorous test of liquidity than the
current ratio. It is used as a complementary ratio to the current ratio. The quick
test ratio does not apply to the handful of companies where inventory is almost
immediately convertible into cash. Instead it measures the ability of the average
company to come up with cold, hard cash literally in a matter of hours or days.
Since inventory is rarely sold that fast in most businesses, it is excluded. Liquid
ratio is more rigorous test of liquidity than the current ratio because it eliminates
inventories and prepaid expenses as a part of current assets. Inventories cannot
be termed as liquid assets because it cannot be converted into cash immediately
without a loss of value. In the same manner, prepaid expenses are also excluded
from the list of liquid assets because they are not expected to be converted into
cash. Usually a high liquid ratio an indication that the firm is liquid and has the
ability to meet its current or liquid liabilities in time and on the other hand a low
liquidity ratio represents that the firm's liquidity position is not good. A low liquid
ratio does not necessarily mean a bad liquidity position as inventories are not
absolutely non-liquid. Hence, a firm having a high liquidity ratio may not have a
satisfactory liquidity position if it has slow-paying debtors. On the other hand, a
firm having a low liquid ratio may have a good liquidity position if it has fast
moving inventories. In this graphical representation we have seen that in 2016
company’s liquid ratio was high & in 2019 company’s liquid ratio was low. We
have also noticed that this ratio declined slightly in 2017 & 2018. Since 2016
company’s liquid ratio was high that means the firm was liquid and had the ability
to meet its current or liquid liabilities in time. On the other hand 2019 company’s
liquid ratio was low that means the firm's liquidity position was not good. We also
noticed that over the year from 2016 to 2019 their current ratio improved that
means the company was capable of paying its obligations but here we saw that
their quick ratio fluctuated from 2016 to 2019. It creates doubt whether company
was capable or not of paying its obligations. From the current ratio we thought
that their financial strength was good but in quick ratio we saw a different picture
which refers their financial strength was not good. In the current ratio we have
got better results because we considered all the components of current asset
(inventories, receivables, cash, investment & prepaid expenses) but here we have
excluded inventories, prepaid expenses from current asset so we have got
different results. In 2019 company’s liquid ratio was low it does not necessarily
mean a bad liquidity position if it has fast moving inventories. In 2016 company’s
liquid ratio was high it may not have a satisfactory liquidity position if it has slow-
paying debtors. From this view point we can say that it is very complicated to say
whether company has good or bad position.

Receivables Turnover:

Liquidity may be measured by how quickly certain assets can be converted to cash. It measures the
number of times, on average receivables are collected during the period. It is computed by dividing
net credit sales by the average net receivables.

Receivables Turnover = Net Credit Sales/ Average Net Receivables

 Year Net Credit Average Ratio
Sales (taka) Receivables
(Net) (taka)
2016 2904486000 353276500 8.221565827
times
2017 4394617000 616470000 7.128679417
times
2018 5621741716 800904682 7.019239421
times
2019 5820869547 807656371 7.207111534
times

Analysis:

As we know that accounts receivable turnover ratio or debtor’s turnover ratio

indicates the number of times the debtors are turned over a year. The higher the
value of debtor’s turnover the more efficient is the management of debtors or
more liquid the debtors are. Similarly, low debtors turnover ratio implies
inefficient management of debtors or less liquid debtors. It is the reliable measure
of the time of cash flow from credit sales. In this graphical representation we have
seen that their receivables turnover improved in 2016. The turnover of 8.22 times
was better than other years. Since in 2016 the value of debtor’s turnover was
higher than other years that mean they were more efficient to convert
receivables into cash. Here we can see that in 2016 the receivables were collected
on average every 44 days, respectively in 2017 (51 days), in 2018 (52 days) & in
2009 (50 days). In this graphical representation we have also seen that over the
year from 2016 to 2019 their net credit sales was increasing because of increasing
the number of stores, widening the product range, developing new customers &
segments, establishing good quality in the market place. From 2007 to 2009 years
they were inefficient in the collection of receivables as we have seen above. There
are some reasons behind this. Massive inflationary pressure, full blown global
financial crisis, the increase in the cost of living in Bangladesh and many other
factors occurred over the year from 2017 to 2019. For this reason they were
unable to collect their receivables as far as I think. Although they faced these
types of diverse challenges, they were capable to increase their sales & profit
growth because they were capable to cut down unnecessary cost from many
sectors with efficiently and they more emphasized on quality of the product as a
result many orders came from domestically and internationally.

Inventory Turnover:

It measures the number of times on average the inventory is sold during the
period. Its purpose is to measure the liquidity of the inventory. It is computed by
dividing cost of goods sold by the average inventory.

Inventory Turnover= Cost of Goods Sold/ Average Inventory

Year Cost of Goods Average Ratio

Sold (taka) Inventory (taka)
2016 2605040000 711911500 3.659218878
times
2017 3849101000 904016500 4.257777375
times
2018 4936926416 1118475771 4.41397708
times
2019 4883463949 1262304486 3.868689373
times
Analysis:

As we know that every firm has to maintain a certain level of inventory of finished
goods so as to be able to meet the requirements of the business. But the level of
inventory should neither be too high nor too low. A too high inventory means
higher carrying costs and higher risk of stocks becoming obsolete whereas too low
inventory may mean the loss of business opportunities. It is very essential to keep
sufficient stock in business. Inventory turnover ratio measures the velocity of
conversion of stock into sales. Usually a high inventory turnover/stock velocity
indicates efficient management of inventory because more frequently the stocks
are sold; the lesser amount of money is required to finance the inventory. A low
inventory turnover ratio indicates an inefficient management of inventory. A low
inventory turnover implies over-investment in inventories, dull business, poor
quality of goods, stock accumulation, accumulation of obsolete and slow moving
goods and low profits as compared to total investment. The inventory turnover
ratio is also an index of profitability, where a high ratio signifies more profit; a low
ratio signifies low profit. Sometimes, a high inventory turnover ratio may not be
accompanied by relatively high profits. Similarly a high turnover ratio may be due
to under-investment in inventories. It may also be mentioned here that there are
no rule of thumb or standard for interpreting the inventory turnover ratio. The
norms may be different for different firms depending upon the nature of industry
and business conditions. In the graphical representation we have seen that their
inventory turnover improved in 2018. The turnover of 4.41 times was better
compared to other years. Since inventory turnover ratio in 2018 was higher than
other years that mean they were more efficient in the management of inventory.
They were more capable to convert the stock into sales. Here we can also see that
in 2016 their inventories were sold on average every 99 days, respectively in 2017
(85 days), in 2018 (82 days) & in 2019 (94 days). An average selling period of 82
days in 2018 & selling period of 85 days in 2017 was comparatively better than
other years. There are some reasons behind this. In 2017 the price of raw hides
and skins increased both domestically and abroad. Similarly price of other basic
raw material TPR granules, the major input for their outsoles also increased
significantly due to rising oil prices. The heavy rain falls and flooding in June- July
as well as the cyclonic rain and floods in October and finally cyclone SIDR in
November wreaked havoc on the economy of Bangladesh. There was significant
loss of livestock, namely cows and goats that affected in their raw supply. For
these above reasons they utilized their inventories with efficiently & they were
forced to build up stocks whenever they had the opportunity as future supplies
were even more uncertain. Previous year’s consecutive natural disasters of SIDR
and 2 rounds of flooding affected again in the price of raw hides and skins badly in
2018. The supply of raw hides and skins was much lower than previous years and
as a result raw hide prices especially for cow in Bangladesh rose to historic highs.
So in 2018 they were again forced to utilize their inventories with efficiently.

Debt to Total Assets Ratio: It measures the percentage of the total assets
provided by creditors. It is computed by dividing total debt by total assets. It
indicates the company’s degree of leverage. It provides some indication of the
company’s ability to withstand losses without impairing the interests of creditors.
The higher the percentage of debt to total assets it leads to the greater the risk
that the company may be unable to meet its maturing obligations.

Debt to Total Assets = Total Debt/Total Assets

Year Total Debts Total Assets Ratio

(taka) (taka)
2016 1521739000 1772490000 85.853178%
2017 2430450000 2794309000 86.978569%
 2018 2685499668 3248434601 82.670578%
2019 2752039461 3487131645 78.919861%

Analysis:

As we know that the higher the ratio, the greater risk will be associated with
the firm's operation. In addition, high debt to assets ratio may indicate low
borrowing capacity of a firm which in turn will lower the firm's financial
flexibility. If the ratio is less than 0.5, most of the company's assets are
financed through equity. If the ratio is greater than 0.5, most of the company's
assets are financed through debt. Companies with high debt/asset ratios are
said to be "highly leveraged" not highly liquid. A company with a high debt
ratio (highly leveraged) could be in danger if creditors start to demand
repayment of debt. In the graphical representation we have seen that debt to
asset ratio in 2019 was lower compared to previous 3 years. That means in
2019 less risk was associated with the firm's operation. In previous 3 years
debt to asset ratio was high which indicates company had low borrowing
capacity, it leads to lower the firm's financial flexibility. Company was in
danger position in those years. We have also noticed that over the year from
2016 to 2019 the ratio was greater than 0.5 that means most of the company's
assets are financed through debt.

Profit Margin:

It is a measure of the percentage of each dollar of sales that results in net

income. It is computed by dividing net income by net sales.
 Profit Margin = Net Income/Net Sales

Year Net Income Net Credit Ratio

(taka) Sales (taka)
2016 49916000 2904486000 1.71858290%
2017 169358000 4394617000 3.85376018%
2018 189828000 5621741716 3.37667594%
2019 211532000 5820869547 3.63402749%

Analysis:

As we know that profit margin is an indicator of a company's pricing strategies

and how well it controls costs. The profit margin ratio provides clues to the
company's pricing, cost structure and production efficiency. The higher the profit
margin the better off the business, the profit margin is an extremely useful
measure of how the business is performing over time. At a glance, company can
see whether their business’s net profit has increased, stayed the same or
decreased over last year. If it’s decreased, company will take steps to cure the
problem such as better controlling the expenses. A low profit margin ratio
indicates that low amount of earnings, low profits is generated from revenues. A
low profit margin ratio indicates that the business is unable to control its
production costs. In the graphical representation we have seen that their profit
margin improved in 2017. In 2018 it declined slightly but again in 2009 it raised.
Over the year from 2016 to 2019 their net profit was increasing that means they
took better pricing strategy, emphasized production efficiency and well controlled
cost structure. Overall their business was performing better as the time progress.
For example in 2017 they embarked on a major drive to boost efficiency and
reduce cost of production. The first area that they attacked was rejection rate
where innovative and bold ideas from the senior management team helped bring
about more than 50% reduction in the total rejection rate and thereby reduced
their cost of production. The second area was the use of overtime where they
once again targeted companywide reductions without loss of output. The third
area was rationalization of their human resources where they imposed a hiring
freeze and did not replace attrition losses. For this reason their profit margin
improved in 2017.

Return on Assets:

It measures overall profitability of assets. It is computed by dividing net income by

average assets.

Return on Assets = Net Income/Average Assets

Year Net Income Average Assets Ratio

(taka) (taka)
2016 49916000 1488401000 3.353666116
%
2017 169358000 2283399500 7.416923758
 %
2018 189828000 3021371801 6.282841455
%
2019 211532000 3367783123 6.281045788
%

Analysis:

As we know that ROA is an indicator of how profitable a company is relative to its

total assets. It gives an idea as to how efficient management is at using its assets
to generate earnings. It gives investors an idea of how effectively the company is
converting the money it has to invest into net income. The higher the ROA
number, the better, because the company is earning more money on less
investment. In this graphical representation we have seen that their ROA
improved from 2006 to 2007. Their ROA unchanged in 2008 & 09. From 2007 to
2009 they performed so well that gives an idea to the investors the company was
earning more money on less investment. They utilized their assets to generate
earnings with efficiently.

12. Conclusion:
Financial analysis is helpful in assessing the financial position and profitability of a
concern. This is done through comparison by ratios for the same concern over a
period of years; or for one concern against another; or for one concern against
the industry as a whole; or for one concern against the predetermined standards;
or for one department of a concern against other departments of the same
concern. Accounting ratios calculated for a number of years show the trend of the
change of position. The trend is upward or downward or static. The ascertainment
of trend helps us in making estimates for the future. Thus we can say that there is
lots of application of financial analysis in the modern days of business. To assess
any business condition financial analysis gives a clear financial picture of any
business organization. This helps to evaluate the trend and condition of
organization. From small to big business organization financial analysis helps a
great deal in decision-making process. As it helps to give idea about the financial
condition, thus it helps in future financial projection and decision making process
of any business house. Eventually one can assess how important is financial
analysis in the modern days of business. It gives the exact picture of the financial
condition and helps future projection of any organization. Apex Footwear Ltd is
leading edge Footwear Company in Bangladesh. It is gradually expanding its asset
base and able to proper utilize assets. No business stays at the top if it doesn’t
maintain its performance. Thus it is very important to fulfill the demand of the
consumers through competitive advantage.