Principles of Accounting

Term Paper

Course Code: ALD1103

Topic: Analysis of Financial Statements of Crown Cement

Submitted To :
Maliha Rabeta
Lecturer
Department of Business Administration in Finance and Banking
Bangladesh University of Professionals

Submitted By:
Group 11
Section: A
Department of Business Administration in Finance and Banking
Bangladesh University of Professionals
Batch-2022

Submission Deadline: 23/10/2022

 Team Members’ Information

Name Id Number Section Semester

Enamul Haque 2222151013 A 1st

Tareq Rahman 2222151023 A 1st

Dianah Amirah 2222151033 A 1st

Abdullah Al Imran 2222151089 A 1st

Rafiul Alam Shahriar 2222151059 A 1st

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 Letter of Transmittal

23rd October , 2022

To
Maliha Rabeta
Lecturer
Department of Business Administration in Finance and Banking
Faculty of Business Studies
Bangladesh University of Professionals
Mirpur Cantonment, Dhaka-1216

Subject: Submitting term paper for the course “Principles of Accounting”

Respected Ma’am,
We are students of the Department of Business Administration in Finance and Banking, batch-
07, section A. Our task was to analyze the financial statements of Crown Cement for the last
three years and do ratio analysis on them. We have tried our best to analyze the available
information and prepare the report. We hope that the report will meet your expectations.

We, therefore, pray and hope that you would be kind enough to accept our report and give us
feedback about it.

Sincerely,
Group 11 Members.

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Table of Contents

1.Executive Summary…………………………………………………….4

2. Report Preliminaries……………………………………………………5

2.1. Origin…………………………………………………………….5

2.2. Objective…………………………………………………………5

2.3. Scope…………………………………………………………….5

2.4. Methodology…………………………………………………….6

2.4.1. Description……………………………………………….6

2.4.2. Data Description………………………………………….7

2.5. Limitation………………………………………………………9

3.Company Profile………………………………………………………..10

4. Ratio Analysis…………………………………………………………

5. Conclusion / Findings………………………………………………….

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1. Executive Summary

This report has made about financial performance of the company for the year of 2018-
2019,2019-2020,2020-2021. The company is: M. I. Cement Factory Ltd. To understand and
evaluate their financial performance we had to collect the latest ‘Annual Report of 2018,2019
and 2020 for this company. We derived some useful ratios by compiling the most recent reports.
In all of the ratio sectors, this study will undoubtedly assist in determining which firm is in a
stronger situation and which is in jeopardy. We'll be able to see how this corporation planned its
funds, including debt, equity, number of shareholders, current share price, income, spending,
interest, and other costs.
This report was created using the most recent Annual Reports for 2018, 2019 and 2020, which
are currently accessible. To calculate efficiently, all of the money has been converted to BDT
(Bangladesh).. They should have increased the ratio of their firm and worked more; they should
have implemented a new plan to enhance themselves.

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2. Report Preliminaries

2.1 Origin:
The term paper was prepared as an academic requirement of the course (Principles of
Accounting) of Bangladesh University of Professionals (BUP). It was assigned by Maliha
Rabeta, lecturer of Bangladesh University of Professionals.

2.2 Objective:
Financial Ratio Analysis is a beneficial management mechanism which provides key indicators
of organizational performance. Managers can form strategies and take initiatives after
pinpointing strengths and weaknesses by doing ratio analysis.
The main purpose of financial ratio analysis is to let everyone know about present and future
profit.
By analyzing ratios we can know the liquidity position of Crown Cement.
We can define Crown Cement’s long term solvency by analyzing financial ratios.
By analyzing the financial ratio we can get an idea about the operating efficiency of Crown
Cement.
By analyzing financial ratios we can know about the future plan and forecasting of Crown
Cement.

2.3 Scope:
We are analyzing the financial ratios to perceive Crown Cement’s finance from a different point
of view.

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2.4 Methodology:

2.4.1 Description:
We conducted liquidity ratios, profitability ratios, and solvency ratios for the study. A
brief description of each test as follows:
1. Liquidity Ratios:
The liquidity of a firm is measured by its ability to satisfy its short-term
obligations as they come due. The two basic measures of liquidity are:-
A. Current Ratio: It indicates the extent to which current liabilities
are covered by assets expected to be converted in cash in the near
future.
B. Acid-Test (quick) Ratio: It measures a company’s ability to meet
its short-term obligations with its most liquid assets.
C. Accounts Receivable Turnover: This ratio is used to assess the
liquidity of the receivables.
D. Inventory Turnover: It measures the number of times, on
average, the inventory is sold during a period.

2. Profitability Ratios:
This profit evaluates 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:-
A. Profit Margin: It is a measure of the percentage of each dollar of
sales that results in net income.
B. Asset Turnover: It measures how efficiently a company uses its
assets to generate sales.
C. Return on Assets: It indicates an overall measure of profitability.
D. Return on Ordinary Shareholders’ Equity: It measures
profitability ratio from the common stockholders’ viewpoint.
E. Earnings per Share: It represents the number of dollars earned
throughout the period on behalf of each outstanding share of
common stock.
F. Price-Earnings Ratio: It is used to measure the ratio of the market
price of each share of common stock to the earnings per share.

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 G. Payout Ratio: It measures the percentage of earnings distributed
in the form of cash dividends.

3. Solvency Ratios:
It indicates whether a company’s cash flow is sufficient to meet its long-term
liabilities and thus is a measure of its financial health. Solvency ratio is also
known as leverage ratio. The main financial solvency ratio are-
A. Debt to Assets Ratio: It measures the percentage of the total
assets that creditors provide.
B. Times Interest Earned: It provides an indication of the
company’s ability to meet interest payments as they come due.

2.4.2 Data Description:

Ratio Description

Current ratio It measures short-term debt-paying

ability.
Current ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡
𝑎𝑠𝑠𝑒𝑡𝑠/𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Acid-test ratio It measures immediate short-term

liquidity.
Acid-test ratio =
(𝐶𝑎𝑠ℎ+𝑆ℎ𝑜𝑟𝑡−𝑡𝑒𝑟𝑚
𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠+𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠
𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒) / 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑒𝑠

Accounts It measures liquidity of accounts

receivable turnover (ACT) receivable.
ACT = 𝑁𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠 /
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠
𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

Inventory turnover It measures liquidity of inventory.

Inventory turnover = 𝐶𝑜𝑠𝑡 𝑜𝑓

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 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑 / 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Profit Margin It measures net income generated by

each dollar of sales.
Profit margin = 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 /
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

Asset turnover It measures how efficiently assets are

used to generate sales.
Asset turnover = 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 /
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

Return on assets (ROA) It measures overall profitability of

assets.
ROA = 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒𝑠 / 𝐴𝑣𝑒𝑟𝑎𝑔𝑒
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

Return on common stockholders’ It measures profitability of an owner's

equity (RCSE) investment.
RCSE = 𝑁𝑒𝑡
𝑖𝑛𝑐𝑜𝑚𝑒−𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 / 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑚𝑚𝑜𝑛
𝑠𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟𝑠′𝑒𝑞𝑢𝑖𝑡𝑦

Earnings per share (EPS) It measures net income earned on each

share of common stock.
EPS = 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒−𝑃𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑
𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠 /
𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑−𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑜𝑚𝑚𝑜𝑛
𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Price-earnings ratio (P.E) It measures the ratio of the market

price per share to earnings per share.
P.E = 𝑀𝑎𝑟𝑘𝑒𝑡 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟
𝑠ℎ𝑎𝑟𝑒 / 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

Payout ratio It measures the percentage of earnings

distributed in the form of cash
dividends.
Payout ratio = 𝐶𝑎𝑠ℎ 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠

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 𝑑𝑒𝑐𝑙𝑎𝑟𝑒𝑑 𝑜𝑛 𝑐𝑜𝑚𝑚𝑜𝑛 𝑠𝑡𝑜𝑐𝑘 /
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒

Debt to assets ratio It measures the percentage of total

assets provided by creditors.

Debt to assets ratio = 𝑇𝑜𝑡𝑎𝑙

𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 / 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

Times interest earned(TIE) It measures ability to meet interest

payments as they come due.
TIE =( 𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒+𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
𝑒𝑥𝑝𝑒𝑛𝑠𝑒+𝐼𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥 𝑒𝑥𝑝𝑒𝑛𝑠𝑒) /
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒

2.5 Limitations:
During the ratio analyzation we faced following complications:
A. Due to having limited time and inability to collect data, what we
have found is secondary data.
B. As data is collected through the internet so those data may not be
authentic.

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3. Company Profile:
M. I. Cement Factory Ltd. is a public limited company and one of the leading manufacturers of
cement in Bangladesh. On December 31, 1994 it started its journey with the commitment of
providing high quality cement to the country. Its brand “Crown Cement” is renowned both at
home and abroad. Initially the plant was installed with a capacity of producing 600tpd (ton per
day) of Portland cement. With the passing of time the demand for Crown Cement increased day
by day. Therefore, the sponsors expanded the project thrice. By dint of quality Crown Cement
soon gained acceptability both at home and abroad which raised the necessity for expanding the
plant from initial 600tpd (ton per day), 800tpd 2nd unit in 2002, 1400tpd 3rd unit in 2006 and
3000tpd 4th unit in 2011 thereby raising the total production capacity to 5800tpd i.e. 1.740
million metric tons per annum. The company has been listed in Dhaka Stock Exchange and
Chittagong Stock Exchange in 2011. Its high growth agenda has been highly appreciated by the
shareholders, and has won investors' trust. Its backward and forward integration endeavors have
given new dimensions to its growth platform. With this end in view, the associate industrial
units’ viz., Crown Polymer Bagging Ltd., Crown Power Generation Ltd., Crown Mariners Ltd.,
Crown Transportation & Logistics Ltd., Crown Cement Concrete & Building Materials Ltd. have
been set up and are already in operation. The company has also acquired a handy max size ocean
going ship to facilitate transportation of raw materials from abroad. It is hopefully expected that
these new growth platforms will facilitate creation of new dimensions and frontiers to the mother
company M. I. Cement Factory Limited. Crown Cement pioneered the export of cement in 2003
and paved the way for earning hard-earned foreign currency. Recently Crown Cement Achieved
the National Export Trophy (Gold) twice for attaining the top most place among the cement
exporters in Bangladesh. The factory possesses well communications facilities both through
water and road. It is located as West Muktarpur, Munshigonj on the bank of the river
Dhaleswari. It is connected by a metallic road (Dhaka-Munshigonj Highway) linked with the
whole country.

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4.Ratio Analysis:

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1. Liquidity Ratio:
Ratio 2018-2019 2019-2020 2020-2021

Current Ratio 1.10:1 1.008: 1 1.14: 1

Acid Test Ratio 0.96:1 0.83:1 12.93

Inventory Turnover 14.94 11.86 12.93

Ratio

Acid test Ratio

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Inventory turnover Ratio

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2. Profitability Ratio
Ratio 2018-2019 2019-2020 2020-2021

Profit Margin Ratio 1.71% 0.95% 1.14%

Asset turnover 1.75 times 1.67 times 1.7 times

Return on Asset 1.3% 0.69% 1.0545%

Return on Common 3.5% 1.92% 2.73%

Stockholders’ Equity
Earnings Per Share 44.24 BDT 42.53 BDT 46.12BDT

Payout Ratio 59.12% -112.11% 34.57%

Profit Margin Ratio

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Return on Common Stockholders’ equity

Price Earnings Ratio

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3. Solvency Ratio

Ratio 2018-2019 2019-2020 2020-2021

Debt-to-Total Assets 39.83% 34.05% 35.08%
Ratio
Times Interest Earned 0.028 times 2.30 times 3.1 times
Ratio

Times interest Earned

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 Conclusion
We can say that in business for the foreseeable future, we may state that financial analysis has a
wide range of applications. Financial assessments, which provide a detailed financial image of
any corporate organizations are used to examine any business condition. This aids in determining
the organization's direction and state.
Crown Cement Ltd.’s overall performance is good, despite the fact that they have struggled in
recent years. In crown cement, there are some points that were found in their financial
performance analysis was presented below:

● The total profitability was quite good and on an upward trend. Which is a good signal for
the company. They had increased the ratio a lot in the past three years, even made a better
control in expense and cost of goods sold.
● Their liquidity ratio was not satisfactory. Because the company’s current ratio and quick
ratios are on a decreasing trend. But last year they improved a bit. The liquidity ratios show
that they have very alarming conditions for meeting the outside liabilities from their current
assets.

Here this ratio indicates that Crown Cement Ltd is a good growing company & if they maintain
the cost of production and relative cost of operating then Crown Cement Ltd will hold a good
position in the near future.
Finally, one can measure how significant financial analysis is in today's business environment. It
provides an accurate view of a company's financial situation and aids in future projections.

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