Introduction to Financial Management

FIN 254.22

GROUP PROJECT: Ratio Analysis of

Meghna Condensed Milk Ltd. &
FU WANG Foods Ltd.

Submitted To
Muhammad Nasiruddin (MN)
Lecturer,
Department of Accounting & Finance, North South University

Submitted by:
Name ID
Jahida Akter Lovna 1610106630
Akram Hossain 1620093030
Salahuddin Badhon 1620773630

Date of Submission: 29th October, 2017

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 TABLE OF CONTENTS

SERIAL NO TITLE PAGE NO

01 Executive Summary 4
02 Current Ratio 6
03 Quick Ratio 7

04 Inventory Turnover 8
05 Total Asset Turnover 9
06 Fixed Asset Turnover 10
07 Accounts Receivables Turnover 11
08 Average Collection Period 12
09 Average payment period 13

10 Gross Profit margin 14

11 Operating Profit Margin 15
12 Net profit margin 16
13 Basic Earning Power 17
14 Return on total assets 18
15 Return on total equity 19
16 Earnings per share 20

17 Debt ratio 21
18 Times Interest Earned 22
19 Price Earnings ratio 23

20 Market to book ratio 24

21 DuPont Analysis 25-26

22 Collected Data 29-32

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 Letter of Transmittal

29 October, 2017
Muhammad Nasiruddin
Department of Accounting and Finance,
School of Business and Economics (SBE),
North South University
Subject: Submission of the final report.
Dear Sir,
It is an honor and great pleasure for us to present our report on Ratio Analysis of Meghna
Condensed Milk Ltd. & FU WANG Foods Ltd.as the part of our course requirement. Through this
report, we have perceived the opportunity to surf and implement our theoretical experiences,
views and ideas. We have also got the scope to match them with the real world experience
which will be beneficial for our future professional career.
Thank you for your supportive consideration and Inspiration without which this report would
have been an incomplete one. Lastly we would like to request you to please give your judicious
advice on our effort.

Yours’ sincerely,
Jahida Akter Lovna
Akram Hossain
Salahuddin Badhon

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 Acknowledgement

In the name of Allah, the most Gracious and the most Merciful we can state that we have finally
been able to draw a conclusion to the assigned project which was to ‘Prepare a Financial
Statement’ and is of grave importance in our Introduction to Financial Management course.
Every one of us would like to express our heartiest gratitude and recognition to our respectable
lecturer, Md. Muhammad Nasiruddin who gave his all for us to get a clear understanding of our
course and which will hopefully reflect on this amazing project she gave us the chance to work
on. This project gave us the opportunity to go far and beyond in researches which will prove
useful in our upcoming further education. And we cannot thank him enough for the extensive
guiding and mentoring that he has provide us throughout entire course which will surely help
us all in us paving the way for our degree to complete our Bachelors in Business Administration.
Though we faced some inconvenience but at very last we finished our report as our course in a
wanted structure. We believe our course instructor will be compassionate enough to accept
this positively.

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 Executive Summary

This testimony is a ratio analysis of Meghna Condensed Milk Ltd. and FU WANG Foods Ltd. and
their cross sectional analysis. The importance of implication of farsighted planning and effective
financial management are the secret to operating a successful financial business or a public
corporation. Not only to measure the financial state of two companies and how they are doing
over time periods, but also to identify the trends of them operating can be understood by ratio
analysis. On top of it, Lenders of fund and Future potential investors of these two companies
can look at their ratio analysis to determine which company is safest bet with maximum return.

All companies are not of same stature in size, might not be even in the same industry. So in
order to understand them better and compare between them, financial ratios are very useful
and necessary which are valuable inclusion to the financial statements.

Ratio analysis is prepared from the Information contained in a company’s financial statements
on the line items of the aforementioned statement like the income sheet, balance sheet and
cash flow statement; using them as a variable of an equation, ratios are calculated.

The purpose of Ratio analysis is to assess the multiple aspects of a company’s operating and
financial performance such as its efficiency, liquidity, profitability, solvency etc. The end goal is
to see how the company is doing over time period, whether it is improving or deteriorating.

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 Liquidity Ratios
Liquidity ratios measure a company's ability to pay its short-term debt obligations. Liquidity
refers to the solvency of the firms overall financial position. These ratios establish relation
between cash and other current asset and current liabilities. Low liquidity ratio is an early
warning of financial distress and bankruptcy.

Current Ratio
Current ratio determines how much assets companies have in terms of its liabilities. So the
more value it has is the better.

Current Ratio = Current Assets / Current Liabilities

Current Ratio 2011 2012 2013 2014 2015
MEGHNA CONDENSED MILK LTD. 0.68 0.75 0.80 0.79 0.82
FU WANG Foods Ltd. 1.83 2.05 2.47 2.40 2.26

2.5
2.47 2.4
2.26
2 2.05
1.83
1.5

0.75 0.8 0.79 0.82

0.5 0.68

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed bad as they had more liabilities & had ups
& downs. Fu Wang did very good in all years.

 We can see between these two companies Fu wang’s current ratio is far better
than Meghna condensed milk.

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 Quick Ratio
Quick ratio is very much same to the current ratio; the only difference is that in quick ratio we
have to deduct inventories. Many times inventories cannot be sold and some inventories sold
on credit and its take time to turn into cash. By the help of quick ratio, a company can measure
liquidity when company or firm faces direst need of liquidity. So the more value it has is the
better.

Quick ration = (Current assets – Inventory) / Current liabilities

Quick Ratio 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 1.23 1.20 1.20 1.21 1.15
FU WANG Foods Ltd. 3.35 3.55 3.93 3.59 3.21

4.5

4
3.93
3.5 3.59
3.55
3.35
3 3.21

2.5

1.5

1 1.23 1.2 1.2 1.21 1.15

0.5

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had more or less the same number and did good in
every year. Fu wang started to perform gradually better till 2013 and started to
decrease after that but performed very well in every year.

 We can see between these two companies Fu wang’s quick ratio is far better
than Meghna condensed milk.

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 Asset Management Efficiency Ratio
Inventory Turnover
It helps a firm to define the liquidity of a firm’s inventory. Inventory turnover is a ratio showing
how many times a company's inventory is sold and replaced over a period of time. The days in
the period can then be divided by the inventory turnover formula to calculate the days it takes
to sell the inventory on hand. It is calculated as sales divided by average inventory. So the more
value it has is the better.

Inventory turnover = Cost of goods sold / Inventory

Inventory Turnover 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. .80 1.08 1.20 2.09 1.94
FU WANG Foods Ltd. 4.48 4.28 4.21 3.29 2.98

4.5
4.48
4 4.28 4.21

3.5

3 3.29
2.98
2.5

2 2.09
1.94
1.5

1 1.08 1.2

0.5 0.8

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had increasing numbers till 2014 and a slight decrease in the last
year and performed good in every year except 2011 whereas Fu Wang started to perform
gradually worse all the years but have very good Inventory turnover in every year.

 We can see between these two companies Fu wang’s inventory turnover is far better than
Meghna condensed milk.

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Total Asset Turnover
Asset turnover ratio is the ratio of the value of a company's sales or revenues generated
relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator of
the efficiency with which a company is deploying its assets in generating revenue. So the more
value it has is the better.

Total Asset Turnover 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. .21 .24 .18 .19 .21
FU WANG Foods Ltd. .76 .73 .67 .61 .54
Total Asset Turnover = Sales / Total assets

0.8
0.76
0.7 0.73
0.67
0.6
0.61
0.5 0.54

0.4

0.3

0.2 0.24
0.21 0.21
0.18 0.19
0.1

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had pretty much the same number with ups and
downs and didn’t perform so well. Fu wang started to perform gradually worse
all the years but the ratio is good for every year.

 We can see between these two companies Fu wang’s total asset turnover is far
better than Meghna condensed milk.

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 Fixed Asset Turnover
Fixed-asset turnover is the ratio of sales (on the profit and loss account) to the value of fixed
assets (on the balance sheet). It indicates how well the business is using its fixed assets to
generate sales. So the more value it has is the better.

Fixed Asset Turnover Ratio = Net Sales / (Fixed Assets – Accumulated Depreciation)

Fixed Asset Turnover 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 0.38 0.49 0.44 0.46 0.62
FU WANG Foods Ltd. 1.44 1.47 1.50 1.46 1.37

1.6

1.4 1.47 1.5

1.44 1.46
1.37
1.2

0.8

0.6
0.62
0.4 0.49 0.46
0.44
0.38
0.2

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had ups and downs & performed bad in every year.
Fu Wang performed very good in every year.

 We can see between these two companies Fu wang’s fixed asset turnover is
far better than Meghna condensed milk.

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 Accounts Receivables Turnover
It measures the number of times, on average; the company collects receivables during the
period. The higher the ratio, the faster is the cash collections. So the more value it has is the
better.

Account Receivable Turnover 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 1.77 1.44 0.61 0.57 0.72
FU WANG Foods Ltd. 6.52 5.82 4.78 3.43 2.65
Accounts Receivables Turnover = Net Sales /Accounts receivables

6.52
6
5.82
5
4.78
4

3 3.43

2.65
2
1.77
1 1.44

0.61 0.57 0.72

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed good in 2011 & 2012 but performed bad
in other years. Fu wang began to fall at a decreasing rate all these years but
performed good in every year.

 We can see between these two companies Fu wang’s Account receivable

turnover is far better than Meghna condensed milk.

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Average Collection Period
Average Collection Period measures the number of days it takes the firm to
collects its accounts receivables. So the lower the number is the better.
Average collection period= 365/Accounts receivable turnover
Average Collection Period 2011 2012 2013 2014 2015
MEGHNA CONDENSED MILK LTD. 206 253 598 636 510
FU WANG Foods Ltd. 56 63 76 107 138

700

600 636
598

500
510

400

300

253
200
206

100 138
107
63 76
56
0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed good in all these years. Fu Wang performed bad
in every year.

 We can see between these two companies Fu wang’s Average collection period is far
worse than Meghna condensed milk.

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 Average payment period means 
Average payment period means the average period taken by the company in
making payments to its creditors. So the lower value is the better.

Average payment period = Accounts payable / daily credit sales

Average Payment Period 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 0.00 2.21 2.82 0.00 0.00

FU WANG Foods Ltd. 2.54 19.63 18.73 18.93 17.54

25

20
19.63
18.73 18.93
17.54
15

10

2.54 2.82
0 2.21 0 0
0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed very good in all these years with three years
without any payment. Fu Wang performed good in every year.

 We can see between these two companies Fu Wang’s Average collection period is
worse than Meghna condensed milk.

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 PROFITIBALITY RATIO
Gross Profit margin
Gross profit margin is a financial metric used to assess a company's financial health and
business model by revealing the proportion of money left over from revenues after accounting
for the cost of goods sold. So the higher value is the better.

Gross Profit margin ratio = (Sales - cost of goods sold) / Sales

Gross Profit Margin 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 28.57% 17.73% 19.22% 18.37% 19.28%

FU WANG Foods Ltd. 23.90% 22.89% 22.59% 29.29% 26.52%

35.00%

30.00% 28.57% 29.29%

26.52%
25.00% 23.90%
22.89% 22.59%

20.00% 19.22% 19.28%

17.73% 18.37%

15.00%

10.00%

5.00%

0.00%
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Both these Companies performed almost same good in every year.

 Between these two companies Fu Wang performed slightly better than Meghna.

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 Operating Profit Margin

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

Operating Profit Margin = Operating Profits / Sales

Operating Profit Margin 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 2.30% -7.57% -9.73% -11.20% -5.67%

FU WANG Foods Ltd. 15.04% 13.72% 13.21% 20.72% 17.52%

25.00%
20.72%
20.00%
17.52%
15.04%
15.00% 13.72% 13.21%

10.00%

5.00%
2.30%

0.00%
2011 2012 2013 2014 2015
-5.00%
-5.67%
-7.57%
-10.00%
-9.73%
-11.20%
-15.00%

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had positive operating profit only in 2011, otherwise it had
negative numbers all these years. Fu Wang performed good in every year.

 We can see between these two companies FU wang had way better numbers than
Meghan condensed milk.

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 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 is the remaining
profit after paying tax, interest and preferred stock dividends. It is the final profit remaining for
common stock holder. Its showing how efficient the company is. So the higher value is the
better.

Net profit margin = Earnings available for common stock holder / sales

Net profit Margin 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. -26.06% -39.11% -57.43% -15.36% -15.88%

FU WANG Foods Ltd. 9.91% 7.86% 7.51% 13.42% 11.23%

20.00%
13.42%
9.91% 11.23%
10.00% 7.86% 7.51%

0.00%
2011 2012 2013 2014 2015
-10.00%

-20.00% -15.36% -15.88%

-30.00% -26.06%

-40.00%
-39.11%
-50.00%

-60.00% -57.43%

-70.00%

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had negative numbers as it incurred losses throughout

these years. Fu wang performed at a decreasing rate till 2013 and had the best
percentage at 2014 and slowed down a bit in 2015 but performed good in all these
years.
 We can see between these two companies FU wang had way better numbers than
meghna condensed milk as meghna incurred losses all these years.

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Basic Earning Power

Basic earning power (BEP) ratio is a measure that calculates the earning power of a business
before the effect of the business' income taxes and its financial leverage. It is calculated by
dividing earnings before interest and taxes (EBIT) by total assets. So the higher the number is
the better. So the higher value is the better.

Basic earning power: EBIT/Total assets.

Basic Earning Power 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. -0.05 -0.10 -0.10 -0.03 -0.03
FU WANG Foods Ltd. 0.08 0.06 0.05 0.08 0.06

0.1
0.08 0.08
0.06 0.06
0.05
0.05

0
2011 2012 2013 2014 2015

-0.03 -0.03
-0.05
-0.05

-0.1
-0.1 -0.1

-0.15

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condense milk had negative numbers throughout the years as it incurred losses and
negative EBIT numbers in the period. Fu Wang had performed good in all these years.

 Fu Wang performed way better than Meghna condensed milk throughout the years.

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 Return on total assets
It measures how effectively a company is using its assets to generate earnings. The higher the
number is, the better it is for the company. So the higher value is the better.

Return on total assets (ROA) = Earnings available for common stockholders / Total assets

Return on Asset 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. -5.48% -9.51% -10.46% -2.84% -3.40%
FU WANG Foods Ltd. 7.52% 5.77% 5.06% 8.19% 6.02%

10.00%
8.19%
7.52%
5.77% 6.02%
5.06%
5.00%

0.00%
2011 2012 2013 2014 2015
-2.84% -3.40%
-5.00%
-5.48%

-10.00% -9.51%
-10.46%

-15.00%

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had negative percentage as it incurred losses throughout

these years. Fu Wang performed very good in all these years.

 We can see between these two companies FU wang had way better percentage than
Meghna condensed milk as Meghna incurred losses all these years.

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 Return on total equity
It measures a company’s profitability by how much a company makes profit by the money
shareholder invested. The higher the number is, the better it is for the company.

Return on total equity (ROE) = Earnings available for common stockholders / Common Stock Equity

Return on Equity 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 47.39% 42.44% 31.55% 7.00% 7.57%

FU WANG Foods Ltd. 10.16% 7.94% 7.12% 11.56% 8.29%

50.00% 47.39%
45.00% 42.44%
40.00%

35.00%
31.55%
30.00%

25.00%

20.00%

15.00%
11.56%
10.16%
10.00% 7.94% 7.12% 7.00% 7.57% 8.29%
5.00%

0.00%
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed very good & had ups and downs throughout all these
years where it performed good very good except 2014 & 2015. Fu Wang performed slightly
good in all these years.
 Overall Meghna is far better than Fu Wang.

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 Earnings per share 
Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding
share of common stock. Earnings per share serves as an indicator of a company's profitability.
So the higher value is the better.

Earnings per share= Net income- preferred dividend/Average shares outstanding

Earnings per Share 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 4.43 6.88 7.48 1.78 2.09

FU WANG Foods Ltd. 1.02 0.79 0.71 1.16 0.83

8
7.48
6.88
7

5
4.43
4

3
2.09
2 1.78
1.02 1.16
1 0.79 0.71 0.83

0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed very good at an increasing rate till 2013 and started to
fall down in 2014 & a slight upward in 2015. Fu wang had ups and downs throughout all
these years and didn’t do so good in 2012 & 2013.

 Meghna condensed milk had way better EPS than Fu wang foods.

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 DEBT MANAGEMENT RATIOS

Debt ratio
The debt position of a firm that indicates the amount of others people’s money being used to
generate Profit. Normally financial specialists are concern with long term debt because these
commit the firm to a stream of contractual payments over long run. More debt will cause a firm
to remain in danger. Because creditors claim must be satisfied before distributing dividends. So
the lower value is the better.

Debt ratio = Total liabilities / Total assets

Debt Ratio 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 111.57% 122.42% 133.15% 140.59% 144.90%
FU WANG Foods Ltd. 26.01% 27.34% 28.89% 29.14% 27.46%

160.00%
144.90%
140.59%
140.00% 133.15%
122.42%
120.00% 111.57%

100.00%

80.00%

60.00%

40.00%
26.01% 27.34% 28.89% 29.14% 27.46%
20.00%

0.00%
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed very very bad throughout the years as the less the ratio is,
the better for the company. FU Wang performed very good in all these years.
 Between these two companies Fu wang’s ratio is far better than Meghna condensed milk
throughout the years.

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 Times Interest Earned
Times Interest Earned Ratio is a coverage ratio that measures the proportionate amount of
income that can be used to cover interest expenses in the future. In some respects, the times
interest ratio is considered a solvency ratio because it measures a firm's ability to make interest
and debt service payments. The ratio indicates how many times a company could pay the
interest with it’s before tax income, so obviously the larger ratios are considered more
favorable than smaller ratios. So the higher value is the better.

ratio = EBIT / interest expense

Times Interest Earned 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 0.08 -0.23 -0.20 -1.65 -0.46

FU WANG Foods Ltd. 21.89 9.22 8.55 10.74 9.78

25
21.89

20

15

10.74
9.22 9.78
10 8.55

0.08
0
-0.23 -0.2 -0.46
-1.65
-5

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk performed very bad throughout the years as the less the ratio is, the
better for the company. FU Wang performed very good in all these years.
 Between these two companies Fu wang’s ratio is far better than Meghna condensed milk
throughout the years.

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 Market Ratios
Price Earnings ratio
The price-earnings ratio is the ratio for valuing a company that measures its current share price
relative to its per-share earnings. So the lower value is the better.

Price Earnings ratio: Market Value per Share/ Earnings per Share

P/E Ratio 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 18.62 3.36 1.30 5.56 4.11
FU WANG Foods Ltd. 29.59 41.75 26.11 16.63 23.53

45
41.75
40

35
29.59
30
26.11
25 23.53

20 18.62
16.63
15

10
5.56
5 3.36 4.11
1.3
0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk had ups had downs throughout the years but performed good
enough in all years. Fu wang had its ups and downs too but performed bad in all these years.

 Between these two companies Meghna condensed milk performed way better than Fu wang
foods.

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 Market to book ratio
The book-to-market ratio is a ratio used to find the value of a company by comparing
the book value of a firm to its market value. Book value is calculated by looking at the firm's
historical cost, or accounting value. Market value is determined in the stock market through
its market capitalization.

Market to book ratio: Market price per share/book value per share

M/B Ratio 2011 2012 2013 2014 2015

MEGHNA CONDENSED MILK LTD. 8.83 1.42 0.41 0.39 0.31

FU WANG Foods Ltd. 2.18 2.54 1.46 1.47 1.56

10

9 8.83

3 2.54
2.18
2 1.42 1.46 1.47 1.56
1 0.41 0.39 0.31
0
2011 2012 2013 2014 2015

MEGHNA CONDENSE MILK FU WANG FOODS

 Meghna condensed milk started with the worst performance and began to perform better
gradually after 2011 as the lower the ratio is the better. Fu wang had ups and downs in the
period where it performed the best in 2013 and worst in 2012 but performed slightly good in
all these years.

 Meghna condensed milk performed way better than Fu wang foods all these years except in
2011 where Fu wang had better performance than meghna condensed milk.

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 DuPont Analysis
DuPont method analyzes the firm’s ROE by decomposing it into three parts; profitability,
efficiency and an equity multiplier.

Return on Equity = Profit margin x total asset turnover x Equity multiplier

DU PONT ANALYSIS FOR MEGHNA CONDENSED MILK

MEGHNA PM TAT EM ROE = (ROA X EM)
CONDENSED MILK
2011 -26.06% 0.21 -8.65 47.39%
2012 -39.11% 0.24 -4.46 42.44%
2013 -57.43% 0.18 -3.02 31.55%
2014 -15.36% 0.19 -2.46 7.00%
2015 -15.88% 0.21 -2.33 7.57%

 Here we can see that MEGHNA CONDENSED MILK Ltd. Has very good amount of Return
on Equity. But when we do the DuPont analysis we get that it has negative Profit margin
& very low Total Asset Turnover. That means, though This company has high Return on
Equity but it’s actually performing very bad as Profit Margin is negative.

DU PONT ANALYSIS FOR FU WANG FOODS LTD.

FU WANG FOODS PM TAT EM ROE = (ROA X EM)
LTD.
2011 9.91% 0.76 1.35 10.16%
2012 7.86% 0.73 1.38 7.94%

2013 7.51% 0.67 1.41 7.12%

2014 13.42% 0.61 1.41 11.56%

2015 11.23% 0.54 1.38 8.29%

 Here we can see that FU WANG FOODS LTD. Has very good amount of Return on Equity.
When we do the DuPont analysis we get that FU WANG FOODS LTD. has very good
amount Profit Margin as well as good Total Asset Turnover. That means, this company is
doing very good in reality.

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 DuPont Analysis Comparison

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%
2011 2012 2013 2014 2015

-20.00%

-40.00%

-60.00%

-80.00%

Though MEGHNA CONDENSED MILK Ltd. Has very good amount of Return on Equity. But when we do
the DuPont analysis we get that it has negative Profit margin & very low Total Asset Turnover. That
means, though This company has high Return on Equity but it’s actually performing very bad as Profit
Margin is negative. But FU WANG FOODS LTD. has very good amount Profit Margin as well as good Total
Asset Turnover. That means, this company is doing very good in reality.

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 Conclusion

The purpose of finance is to maximize the profit of the shareholders so that they have the
incentive to invest more. Now thinking from a financial manager’s perspective, it’s also our duty
to suggest our potential stockholders to buy stocks which will yield them maximum profit
bearing minimum risks; following the primary rules i.e., keeping the risk same, targeting more
profit or downsizing risk and keeping the target profit same.

From the above analysis we see that MEGHNA CONDENSED MILK LTD. Is doing worse than FU
WANG Foods Ltd. in terms of liquidity, asset management debt and profitability. FU WANG
Foods Ltd. is doing far better than MEGHNA CONDENSED MILK LTD.

Ratio analysis is just numbers derived from the numbers obtained from the annual reports.
It really doesn’t mean much till we interpret and analyze them the way it should be. A good
policy is to judge the ratios to some standards, which could be anything; from industry
average to the trend of how the particular has done over the last few years. Usually analysis
of the ratio is done over 4 different classifications which in turns provide different kinds of
information each; liquidity, turnover, profitability and debt. And to compare them against
standardized results should be good idea of which industry averages could be a good
example. But then again we need the industry performance information for that.

28 | P a g e
 References

Gitman, L. J. &Zutter, C. J. (2012). Principles of Managerial Finance (14thed.).

http://www.fuwanggroup.com/

http://www.mgoldbd.com/index.php?option=com_content&view=article&id=3&Itemid=6

http://lankabd.com/dse/stock-market/FUWANGFOOD/fu-wang-foods-limited/stock-price?
stockId=93

http://lankabd.com/dse/stock-market/MEGCONMILK/meghna-condensed-milk-industries-
limited/stock-price?stockId=95

29 | P a g e
Balance Sheet (FU 2011-2012
2012-2013 2013-2014 2014-2015 2015-2016
(Year) (Year) (Year) (Year)
WANG FOODS) (Year)

Property Plant & Equipment 413,901,715 450,840,954 443,409,191 474,686,460 519,885,201.00

Intangible Assets 7,000 7,000 -- -- --

Other long term investments 50,000,000 50,000,000 50,000,000 50,000,000 --

Capital Work in Progress 61,256,934 32,578,922 36,573,149 37,593,160 38,668,261.00

Deferred Tax Assets -- -- -- -- --

Total Non-Current Assets 525,165,649 533,426,876 529,982,340 562,279,620 558,553,462

Inventory 128,761,124 141,512,216 146,214,130 176,038,929 189,444,994.00

Trade & other receivables 116,404,833 134,991,873 166,131,435 239,314,432 289,124,512.00

Cash & cash equivalents 10,136,831 19,445,912 30,380,089 27,015,804 8,014,797.00

Advance, Deposits & Prepayment 219,428,454 241,017,807 306,593,129 338,584,199 387,066,057.00

Total Current Assets 474,731,242 536,967,808 649,318,783 780,953,364 873,650,360

Total Assets 999,896,891 1,070,394,684 1,179,301,123 1,343,232,984 1,432,203,822

Stated capital 534,336,000 598,456,320 658,301,950 724,132,140 832,751,960.00

Revaluation Reserve -- -- 59,473,923 58,448,511 55,526,086

Capital reserve 90,895,288 62,604,130 -- -- --

Retained Earnings 96,310,787 98,459,386 102,625,070 150,950,715 132,387,244.00

Tax holiday reserve 18,245,470 18,245,470 18,245,470 18,245,470 18,245,470.00

Shareholders' funds 739,787,545 777,765,306 838,646,413 951,776,836 1,038,910,760

Total Equity 739,787,545 777,765,306 838,646,413 951,776,836 1,038,910,760

Interest Bearing Borrowings -- -- -- -- 19,727,642

Deferred Tax Liabilities -- 30,915,741 34,782,254 33,479,747 36,963,287

Other non-current liabilities -- -- 43,309,127 32,524,811 --

Total Non-Current Liabilities -- 30,915,741 78,091,381 66,004,558 56,690,929

Trade & other payables 5,269,145 42,218,570 40,758,892 42,519,493 36,860,247.00

Short term loans 66,497,124 53,324,095 32,413,924 59,878,788 100,344,571.00

Tax payable 135,555,415 158,807,564 182,297,424 217,208,421 241,470,667.00

Other current liabilities 52,787,662 7,363,408 7,093,089 5,844,888 7,926,648.00

Total Current Liabilities 260,109,346 261,713,637 262,563,329 325,451,590 386,602,133

Total Owners Equity & Liabilities 999,896,891 1,070,394,684 1,179,301,123 1,343,232,984 1,482,203,822

Book Value Per Share 13.84 13 12.74 13.14 12.48

30 | P a g e
INCOME STATEMENT 2012-2013 2013-2014 2014-2015 2015-2016
2011-2012
(Year) (Year) (Year) (Year)
(Year)
(FU WANG FOODS)

Revenue 758,459,050 785,126,525 794,406,014 819,851,850 767,109,392

Costs of Sales 577,224,631 605,396,108 614,938,638 579,692,313 563,649,060.00

Gross Profit 181,234,419 179,730,417 179,467,376 240,159,537 203,460,332

Distribution expenses 23,780,348 26,927,255 26,583,551 25,478,609 25,025,817.00

Administrative expenses 36,842,790 45,090,877 47,961,794 44,777,133 44,069,573.00

Depreciation and amortization 6,510,737 -- -- -- --

Operating Profit/ (loss) 114,100,544 107,712,285 104,922,031 169,903,795 134,364,942

Employee benefits expenses 5,185,092 4,607,283 4,411,874 7,336,946 5,743,985.00

Finance Expenses 5,213,605 11,682,763 12,272,676 15,827,936 13,741,247.00

Other revenues and profits -- 723,411 -- -- --

Profit / (loss) Before Tax 103,701,847 92,145,650 88,237,481 146,738,913 114,879,710

Income Tax Expense 28,518,008 30,421,496 28,543,692 36,684,728 28,719,928.00

Profit / (loss) for the Period 75,183,839 61,724,154 59,693,789 110,054,185 86,159,782

Earnings Per Share - Basic 1.02 0.79 0.71 1.16 0.83

Short term loans/Investments 3,492,891 (13,173,029) 22,398,956 -- --

BALANCE SHEET
2011-2012 2012-2013 2013-2014 2014-2015
(MEGNA CONDENSE 2010-2011
(Year) (Year) (Year) (Year)
(Year)
MILK LTD.)
Property Plant & Equipment 676,874,126 569,446,899 477,204,354 400,010,514 340,648,301.00

Fixed Deposits 34,196,974 -- -- -- --

Other long term investments -- 75,000 -- -- --

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BALANCE SHEET
2011-2012 2012-2013 2013-2014 2014-2015
(MEGNA CONDENSE 2010-2011
(Year) (Year) (Year) (Year)
(Year)
MILK LTD.)
Other non-current assets 75,000 -- -- -- --

Total Non-Current Assets 711,146,100 569,521,899 477,204,354 400,010,514 340,648,301

Inventory 241,213,665 215,422,017 140,781,333 72,451,630 87,461,661.00

Trade & other receivables 153,473,752 195,320,910 341,510,114 324,161,689 293,797,923.00

Short term investments -- 38,182,429 42,649,908 47,584,350 --

Cash & cash equivalents 732,042 418,423 10,859,959 5,836,768 358,922.00

Other Assets 166,880,486 119,292,832 111,732,681 131,870,000 192,299,127.00

Advance, Deposits & Prepayment 18,476,648 19,571,140 19,250,395 22,689,653 68,058,362.00

Total Current Assets 580,776,593 588,207,751 666,784,390 604,594,090 641,975,995

Total Assets 1,291,922,693 1,157,729,650 1,143,988,744 1,004,604,604 982,624,296

Stated capital 160,000,000 160,000,000 160,000,000 160,000,000 160,000,000.00

Revaluation Reserve 468,830,037 468,830,037 468,830,037 468,830,037 468,830,037.00

Retained Earnings (778,254,467) (888,405,910) (1,008,056,270) (1,036,609,377) (1,069,985,942.00)

Shareholders' funds (149,424,430) (259,575,873) (379,226,233) (407,779,340) (441,155,905)

Total Equity (149,424,430) (259,575,873) (379,226,233) (407,779,340) (441,155,905)

Interest Bearing Borrowings 584,900,625 629,324,215 684,607,047 642,754,545 642,775,645.00

Total Non-Current Liabilities 584,900,625 629,324,215 684,607,047 642,754,545 642,775,645

Trade & other payables -- 1,708,205 1,611,229 -- --

Short term loans -- 76,560,000 73,760,000 50,400,000 --

Tax payable 1,373,300 1,430,478 2,497,697 574,317 1,865,416.00

Dividends payable 1,673,604 1,673,604 1,673,604 1,673,604 1,673,604.00

Other current liabilities 127,863,478 960,089 960,089 2,403,738 2,772,508.00

Bank overdrafts 725,536,116 705,648,932 758,105,311 714,577,739 774,693,028.00

Total Current Liabilities 856,446,498 787,981,308 838,607,930 769,629,398 781,004,556

Total Owners Equity & Liabilities 1,291,922,693 1,157,729,650 1,143,988,744 1,004,604,603 982,624,296

Book Value Per Share (9.34) (16.22) (23.7) (25.49) (27.57)

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INCOME STATEMENT
2011-2012 2012-2013 2013-2014 2014-2015
(MEGNA CONDENSE MILK 2010-2011
(Year) (Year) (Year) (Year)
(Year)
LTD.)

Revenue 271,731,818 281,638,028 208,342,370 185,943,095 210,158,529

33 | P a g e
INCOME STATEMENT
2011-2012 2012-2013 2013-2014 2014-2015
(MEGNA CONDENSE MILK 2010-2011
(Year) (Year) (Year) (Year)
(Year)
LTD.)

Costs of Sales 194,105,040 231,713,120 168,289,481 151,779,381 169,632,706.00

Gross Profit 77,626,778 49,924,908 40,052,889 34,163,714 40,525,823

Administrative expenses 26,066,768 30,835,168 60,329,087 54,988,405 52,436,472.00

Depreciation and amortization 45,319,856 40,421,061 -- -- --

Operating Profit/ (loss) 6,240,154 (21,331,321) (20,276,198) (20,824,691) (11,910,649)

Finance Expenses 78,604,333 91,847,149 103,408,492 12,650,043 25,913,057.00

Other revenues and profits -- 4,457,505 5,101,549 5,495,945 5,092,896

Profit / (loss) Before Tax (69,435,621) (108,720,965) (118,583,141) (27,978,789) (32,730,810)

Income Tax Expense 1,373,300 1,430,478 1,067,219 574,317 645,755.00

Profit / (loss) for the Period (70,808,921) (110,151,443) (119,650,360) (28,553,106) (33,376,565)

Earnings Per Share - Basic (4.43) (6.88) (7.48) (1.78) (2.09)

Short term loans/Investments -- (19,887,184) 52,456,379 (43,527,572) 60,115,289

Finance Income 2,928,558 -- -- -- --

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