Bangladesh University of Professionals

Term Paper on:

Analysis of Financial Statements of BSRM Steels Limited

Submitted to:

Maliha Rabeta
Lecturer
Department of Business Administration in Finance & Banking
Bangladesh University of Professionals

Submitted by:

Group: 4
Section: A
Department of Business Administration in Finance & Banking
Batch: 2022

Course Code & Title: ALD1103- Principles of Accounting

Date of Submission: October 23, 2022

1
 GROUP MEMBERS

Name ID Section Group Semester Batch

Sazuti Rahman 2222151053

Simanto Roy Pidim 2222151057
Al-Amin Rahman Sourav 2222151073 A 4 1st 7th
Mahbuba Sultana Sarah 2222151119
Samiul Hoque Zubair 2222151151

2
 LETTER OF TRANSMITTAL

23 October, 2022
Maliha Rabeta
Lecturer
Department of Business Administration in Finance and Banking 
Bangladesh University of Professionals

Subject: Submission of Term Paper (Principles of Accounting) for the 1st semester.

Dear Ma'am,

We are pleased to submit the report of our term paper titled "Financial Analysis of BSRM Steels
Limited" for 1st semester Principles of Accounting(ALD1103) that you asked for and gave us
the authorization to work on. We tried our best to work on it carefully and sincerely to make the
report informative.

The study we conducted enhanced our knowledge to make an executive report. This report has
given us an exceptional experience that might have immense uses in the future endeavors and we
sincerely hope that it would be able to fulfill your expectations.

We, therefore, request you to permit us to submit our term paper and take necessary steps for the
evaluation of the paper. 

Sincerely yours,
On behalf of the group members, 
Al-Amin Rahman Sourav 

3
 TABLE OF CONTENTS
Executive Summery……………………………………………………………………………… 5

1. Introduction…………………………………………………………………………………... 6
1.1. Origin of the Report………………………………………………………………….…...
6
1.2. Scopes and Objectives……………………………………………………………………
6
1.3. Rationale.…………...…………………………………………………………………… 6
1.4. Methodology…………………………………………………………………………….. 6
Research Design………………………………………………………………….....……
6
Research Approach………………………..…………………………………………….. 6
Data Collection & Analysis……………………………………………………………... 6
1.5. Limitations………………………………………………………………………………. 7

2. BSRM Steels Limited…………………………………………………………………….…...

8
Overview……………………………………………………………………………………... 8
Products and Markets………………………………………………………………………… 8
Vision………………………………………………………………………………………… 8

3. Ratio Analysis………………………………………………………………………………... 9
3.1. Liquidity Ratio…………………………………………………………………………... 9
3.1.1. Current Ratio………………...………………………………………………….... 9
3.1.2. Quick Ratio………………………………………………………………………
10
3.1.3. Inventory Turnover Ratio………………………………………………………..
10
3.1.4. Receivable Turnover Ratio…………………………………………………… ...
11
3.1.5. Asset Turnover Ratio…………………………………………………………….
12
3.2. Probability Ratio……………………………………………………………………….. 12
3.2.1. Net Profit Margin………………………………………………………………..
13
3.2.2. Return on Assets…………………………………………………………………
13
3.2.3. Return on Equity…………………………………………………………………
14
3.2.4. EPS……………………………………………………………………………… 15

4
 3.2.5. Price-Earnings Ratio…..…………………………………………………………
15
3.2.6. Payout Ratio…………………………………...………………………………... 16
3.3. Solvency Ratio…………………………………………………………………………. 17
3.3.1. Debt to Asset Ratio………………………………………………………………
17
3.3.2. Times Interest Earned……………………………………………………………
18

4. Findings……………………………………………………………………………………... 19

5. Conclusion…………………………………………………………………………………...
20

5
 EXECUTIVE SUMMERY

Ratio Analysis is used to getting insights into a company's liquidity, profitability and efficiency
by analyzing financial statements such as income statement and balance sheet. In this study we
have analyzed about the overall financial performance through ratio analysis of BSRM Steel
Limited. The data needed were collected from the annual reports of the BSRM Steels over the
last 4 years, which were provided in the website of the company.

We found out their Current Ratio, Acid-Test Ratio, Inventory Turnover, Receivable Turnover,
Profit Margin, Asset Turnover, Debt to Asset Ratio, Return on Asset, Return on Common
Stockholder’s Equity, EPS, Times Interest Earned, Price-earnings and Payout Ratio after
studying their financial statements and reports thoroughly. The Current Ratio measures whether
a firm has enough resources to meet its short-term obligations or not. Then there is Acid-Test or
Quick Ratio that measures the dollar amount of liquid assets available against the dollar amount
of current liabilities of a company.

On next, profit margin or it can be called Net Margin or Net Profit Margin (NPM) or Profit
Margin Ratio. It is the measure of profitability. On next, the ROA is the profitability ratio which
indicates the ability of the company to generate profit from assets. After that the Return on
Common Shareholder's Equity is the percentage the owner will get of the investment. Then,
Earnings per Share (EPS) indicate how much money a company makes for each share of its
stock. It is a widely used metric for estimating corporate value.

Further moving on, Debt to Assets Ratio indicates the percentage of a company's assets which
are provided via debt. It is the ratio of total debt and total assets. The Asset Turnover
ratio measures the efficiency of a company's assets in generating revenue or sales. The payout
ratio shows the proportion of earnings a company pays its shareholders in the form of dividends.
Lastly, Times Interest Earned indicates the firm's ability to satisfy its long-term obligations based
on its current assets.

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 1. INTRODUCTION

1.1 Origin of the Report

The report is prepared as an academic requirement of the course "Principles of Accounting"
under the supervision of Ms. Maliha Rabeta, Department of Business Administration in Finance
and Banking, Bangladesh University of Professionals (BUP).

1.2 Scopes and Objectives

The main research purpose of this report was to analyze the financial statements of BSRM Steels
Ltd. through ratio analysis.
So, in term of the analysis, the objectives of this report are as follows:
 To take a qualitative approach to explore the existing formulas to determine the
financial state of BSRM Steels Ltd.
 To analyze the factors that affect BSRM Steel’s liquidity, profitability and
solvency.
 To contribute in interpreting the ratios of the recent years, 2017-2018, 2018-2019,
2019-2020, 2020-2021.

1.3 Rationale
This report intent to show the comparative analysis of the ratios to depict the overall
development through its operations. This comparison helps the company to point out their
lacking where they need to improve.

1.4 Methodology
Research Design
This paper was weaved in a manner to gain an understanding of the BSRM Steel’s
liquidity,profitability and solvency. It recognized the various kinds of ratios in the process.

Research Approach
The research aimed to produce abstract knowledge on the company’s periodical growth.It
explores the main aspects of previously under-researched statements. For this particularresearch,
primary data was taken from the company’s website.

Data Collection & Analysis

Firstly, the research sources were selected based on the topic. It was then categorized todepict
the ratios explicitly. The paper was made without any field study. It involved particularsfrom
previousreports. Finally, the data were analyzed both quantitatively and qualitatively.

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Theanalysis was made flexibly and validly from BSRM Steel’s balance sheet and income
statement.

1.5 Limitations

In the process of making the report, it was intended to make the report a liable one. However, we
faced many problems during this process.
 Information collection
 The unreliability of the analysis
 Date of different format
 This our first report on financial analysis
 Communication
 Technological issues
 In-depth idea and analytical ability lacking to write such report

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 2. BSRM STEELS LIMITED

Overview
The BSRM began the first re-rolling mills to emerge in the then East Bengal in 1952. Shares of
BSRM Steels limited, the flagship company of BSRM group was listed with the country's
premier bourses DSE Ltd and CSE Ltd as on 18 January 2009. BSRM has been recognized as the
best brand of Bangladesh in the Steel Category at the Best Brand Award Bangladesh 2011 and
2013 ceremony, organized by Bangladesh Brand Forum. BSRM Steels Limited is a high-grade
steel manufacturing company and only producer of EMF tested ductile rod in Bangladesh. EMF
(Elongation at Maximum Force) is the parameter of measuring of ductility of steel which has
taken the country's construction sector to a new era. BSRM is the market leader in the steel
industry.

Products and markets

BSRM Steels Limited is a high-grade steel manufacturing company and only producer of EMF
tested ductile rod in Bangladesh. EMF (Elongation at Maximum Force) is the parameter of
measuring of ductility of steel which has taken the county's construction sector to a new era.
Products of BSRM Steels are:
1 XtremeSOOW: Size (mm) — 8,10,12,14,16,20,22,25,28,29,32 & 40
2 Grade — 400
BSRM is the market leader in the steel industry.

Vision
We at BSRM group aspire to...
Maintain our leadership position in the steel industry by producing the best quality steel
products, continuously enhancing customer satisfaction and becoming a reliable business partner
of our customers and suppliers. Be an employer of choice, with focus on nurturing talent and
developing future leaders of the organization. Protect the interest of our shareholders through
sustainable growth and value creation. Preserve the trust of all our stakeholders by adopting
ethical business practices. Support the society through Corporate Social Responsibility
initiatives.

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 3. RATIO ANALYSIS

3.1 Liquidity Ratio

We can know how liquid the firm is by the liquidity ratios. By this ratio, we get to know how a
firm can satisfy its short time obligations. The kind of liquidity ratios are:
Current Ratio, Quick Ratio and Inventory Turnover.

3.1.1 Current Ratio

Current Ratio = Current Assets/ Current Liabilities

Year Current Ratio

2018 1.06
2019 1.15
2020 1.11
2021 1.16

Current Ratio
1.18
1.16
1.16
1.14 1.15
1.12
1.10 1.11
1.08
1.06
1.06
1.04
1.02
1.00
2018 2019 2020 2021

Series1

In 2021, the current ratio is higher than that of the other three years which indicates that BSRM
Steel has lower ability to pay its short-term obligations on time in 2018 and 2020 than 2021.
Although, it was almost similar in 2019.

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3.1.2 Quick Ratio
Acid test Ratio = Cash + Short Term Investments +Receivables (net) /Current Liabilities

Year Quick Ratio

2018 0.58
2019 0.71
2020 0.67
2021 0.82

Acid Test Ratio

0.90
0.80 0.82
0.70
0.71
0.60 0.67
0.50 0.58
0.40
0.30
0.20
0.10
0.00
2018 2019 2020 2021

Series1

In 2021, the quick ratio is higher than that of the other three years which indicates that BSRM
Steel has lower ability to pay its short-term obligations without relying on inventories in any
other years than 2021.

3.1.3 Inventory Turnover Ratio

Inventory Turnover Ratio=Cost of Goods sold/Average Inventory

Year Inventory Turnover Ratio

2018 3.71 times
2019 3.8 times
2020 2.25 times
2021 3.35 times

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 Inventory Turnover Ratio
4.00
3.50 3.71 3.80
3.00 3.35
2.50
2.00 2.25
1.50
1.00
0.50
0.00
2018 2019 2020 2021

Series1

Here we can see the ratio going higher from 2018 to 2019 but the ratio slumped in 2020 and
again started gaining momentum in 2021. We can assume that the company became less
effective in inventory management in 2020 possibly due to Covid 19 pandemic but we can also
see betterment with the waning of the pandemic effects in 2021.

3.1.4 Receivable Turnover Ratio

Receivable Turnover Ratio=Net credit sales/Average Net Receivables

Year Inventory Turnover Ratio

2018 8.93
2019 7.36
2020 4.35
2021 7.16

Receievable Turnover Ratio

10.00
9.00
8.00 8.93
7.00 7.36 7.16
6.00
5.00
4.00 4.35
3.00
2.00
1.00
0.00
2018 2019 2020 2021

Series1

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We can see that throughout the years, BSRM Steels maintained a good Receivable Turnover
Ratio. It means it can quickly collect all its receivables and maintain a steady flow of return.
Even though it got a bit low in 2020 during Covid, it got right back up the next year.

3.1.5 Asset Turnover Ratio

Asset turnover = Net sales/Average Total Asset

Year Asset Turnover Ratio

2018 1.16
2019 1.10
2020 0.59
2021 0.80

1.40
Asset Turnover Ratio
1.20
1.16
1.00 1.10

0.80
0.80
0.60
0.59
0.40
0.20
0.00
2018 2019 2020 2021

Series1

This ratio represents the efficiency of a company’s use of its assets in generating sales revenue or
sales income. Again, BSRM Steel had maintained a moderate Asset Turnover in the past but
experienced a blow in 2020 for Covid. Now, it is slowly getting back to the track.

3.2 Profitability Ratio

We can know how profitable the firm is by the profitability ratios. These ratios evaluate the
firm’s profits regarding a given level of sales, a certain level of assets, or the owner’s investment.
There are many measures of profitability-
Profit Margin Ratio, Asset Turnover Ratio, Payout Ratio, Return on Asset Ratio,Return on
common Stockholder's equity, and Earnings Per Share.

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3.2.1 Net Profit Margin
Net Profit Margin = Net Income/ Net Sales

Year Net Profit Margin Ratio

2018 3.73%
2019 2.83%
2020 1.92%
2021 5.54%

6.00%
Profit Margin Ratio
5.00% 5.54%

4.00%
3.73%
3.00%
2.83%
2.00%
1.92%
1.00%

0.00%
2018 2019 2020 2021

Series1

In 2021, the net profit margin is higher than that of the other three years which indicates better
income to shareholders compared to any other years. There was a rapid growth in the profit
margin from 2020 to 2021.

3.2.2 Return on Assets

Return on Assets = Net Income /Average total Assets

Year Return on Assets

2018 4.32%
2019 3.10%
2020 1.14%
2021 4.45%

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 Return on Asset
5.00%
4.50%
4.00% 4.32% 4.45%
3.50%
3.00%
3.10%
2.50%
2.00%
1.50%
1.00% 1.14%
0.50%
0.00%
2018 2019 2020 2021

Series1

In 2021, the return on assets is higher than that of the other three years which indicates higher
return on firm’s investment. There was a steady fall in return on assets from 2018 to 2020 but a
rapid growth from 2020 to 2021.

3.2.3 Return on Equity

Return on Equity = Net Income − Preference Dividends /Average Common Shareholder ′s
Equity

Year Return on Equity

2018 14.74%
2019 10.25%
2020 3.51%
2021 13.60%

16.00%
Return on common Stockholder's equity
14.00% 14.74%
12.00% 13.60%
10.00%
10.25%
8.00%
6.00%
4.00%
2.00% 3.51%
0.00%
2018 2019 2020 2021

Series1

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In 2021, the higher return on Equity than that of the other two years indicates the company gave
higher return to their shareholders compared to 2019 and 2020. But we can see that this rate was
highest in 2018.

3.2.4 Earnings Per Share

Earnings Per Share = Net Income / Weighted Avg. Common Shares
Year Earnings Per Share
2018 $4.79
2019 $4.60
2020 $1.97
2021 $8.11

9.00
EPS
8.00
8.11
7.00
6.00
5.00
4.00 4.79 4.6
3.00
2.00
1.97
1.00
0.00
2018 2019 2020 2021

Series1

In 2021, the earning per share was highest. Which means BSRM Steel Ltd. was able to give
higher income to its shareholders than the previous years.
From 2018 to 2019 we don’t see much difference in this section. But in 2020 there was a sudden
fall which was probably due to Covid.

3.2.5 Price-earnings Ratio

Price-earnings Ratio = Market Price Per Share / EPS

Year Price Earnings Ratio

2018 14.63
2019 12.67
2020 17.06
2021 6.91

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 Price-Earnings Ratio
18.00
16.00 17.06
14.00 14.63
12.00 12.67
10.00
8.00
6.00 6.91
4.00
2.00
0.00
2018 2019 2020 2021
Series1

This ratio is used for valuing companies and to find out whether they are overvalued or
undervalued. BSRM Steel had a moderate amount in Price-earnings in the past. But in 2021 they
saw a major slump in this section. Which is a concern for both the shareholders and the
company.

3.2.6 Payout Ratio

Payout Ratio=Cash Dividends/Net Income

Year Payout Ratio

2018 28.47%
2019 39.55%
2020 36.88%
2021 30.85%

Payout Ratio
0.45
0.40
39.55%
0.35 36.88%
0.30
30.85%
0.25 28.47%
0.20
0.15
0.10
0.05
0.00
2018 2019 2020 2021
Series1

17
The Dividend Payout Ratio is the fraction of net income a firm pays to its stockholders in
dividends. BSRM Steel always maintained a steady and good Payout Ratio. This is a sign that
the company is determined to sustain shareholder trust.

3.3 Solvency Ratio

The Solvency Ration helps the firm to depict how the firm is financing its assets and how much
leverage it has in its assets. Such as:
Debt to Asset Ratio, and Times Interest Earned.

3.3.1 Debt to Asset Ratio

Debt to Assets Ratio = Total Liabilities/ Total Assets

Year Debt to Asset Ratio

2018 61.15%
2019 53.46%
2020 56.70%
2021 58.45%

62.00%
Debt to Assests Ratio
60.00% 61.15%

58.00% 58.45%
56.00% 56.70%
54.00%
53.46%
52.00%
50.00%
48.00%
2018 2019 2020 2021

Series1

In all the 4 years the debt to assets ratios were quite balanced which indicates the total assets
provided by creditors were quite stable in the 3 years. However, the level got a little decrease in
2021which indicates lower assets provided by creditors in business. The percentage shows how
much of a business is owned by creditors.

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3.3.2 Times Interest Earned
Times Interest Earned Ratio=Income Before Tax & Interest Expense/Interest Expense

Year Times Interest Earned

2018 1.56 times
2019 1.51 times
2020 1.91 times
2021 10.44 times

12.00
Times Interest Earned Ratio
10.00 10.44
8.00

6.00

4.00

2.00
1.56 1.51 1.91
0.00
2018 2019 2020 2021

Series1

In 2021, BSRM Steel's operating profits is 10.44 times the annual interest expense which is the
highest in the recent years and a huge jump. The term means that in 2021, the interest can be
well covered 10.44 times. This change was not steady, rather than a surprise.

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 4. FINDINGS

The accumulated results for Ratio Analysis:

Ratios 2018 2019 2020 2021

Liquidity Current Ratio 1.06 1.15 1.11 1.16
Ratio Acid Test Ratio 0.58 0.71 0.67 0.82
Inventory Turnover Ratio 3.71 3.80 2.25 3.35
Receivable Turnover Ratio 8.93 7.36 4.35 7.16
Asset Turnover Ratio 1.16 1.10 0.59 0.82
Probability Profit Margin Ratio 3.73% 2.83% 1.92% 5.54%
Ratio Return on Asset 4.32% 3.10% 1.14% 4.45%
Return on common
Stockholder's equity 14.74% 10.25% 3.51% 13.60%
EPS $4.79 $4.60 $1.97 $8.11
Price-Earnings Ratio 14.63 12.67 17.06 6.91
Payout Ratio 28.47% 39.55% 36.88% 30.85%
Solvency Debt to total Assets Ratio 61.15% 53.46% 56.70% 58.45%
Ratio Times Interest Earned Ratio 1.56 1.51 1.91 10.44

From the above chart, we can say that BSRM Steel is doing quite well in all the sectors
generally. Even though it saw some major downfalls in 2020, it’s quickly getting back on track
in the span of a year. We can say that after looking at the increased Profit Margin Ratio which
had a jump from 1.92% to 5.54%, the highest in recent years. Also, Return on Assets peaked in
this period again. That’s because the demand increased significantly. Times Interest Earned
Ratio is also another aspect to notice. BSRM has now the ability to pay their interest 10 times
over which signifies how much the company is not at risk. The Covid pandemic has took a toll
on everyone’s life and even big corporations were not unaffected by it. But with proper
management and work plan and strength, it is possible to overcome the damages. BSRM is a
shining example of that.

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 5. CONCLUSION

BSRM is an epitome of industrial success in the customer of Bangladesh. From a very modest
beginning the company has reached its present status of glory. As abar rolling steel making
manufacturing, and processing unit, the company's ability to sustain a steady and time bound
supply schedule coupled with its constant striving for excellence has given it that extra edge over
all its competitors in the field. The combined effort of the management and workers has ensured
that the companies never lose its course. Today the firm is well known for its consistent
performance and the quality of its products and work force. In Bangladesh that is notorious for
its militant trade unionism,BSRM has succeeded in maintaining a peaceful industrial climate.
The company's working capital position shows a positive trend which shows good or satisfactory
existences in current period.

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