ACN 305 Final Assignment

Submitted By:
“Team Rocket”
1. Rubaia Sultana Mrittika – 2021477
2. Abdullah Md Towhid Kamal – 2021713

Submitted To:
Dr. Rushdi Razzaque

Department of Accounting,

School of Business and Entrepreneurship

 Table of Contents
Executive Summary.........................................................................................................................2
Comparative Analysis......................................................................................................................3
Composition of the non-current liabilities.......................................................................................5
Computation of Ratios.....................................................................................................................6
Technical Analysis...........................................................................................................................9

Table of Figures
Table 1 Changes in Equity as per the requirements of paragraph 79 of IAS 1 checklist................5
Table 2 Segregation of Non-current liabilities................................................................................6
Table 3 Computations of ratios........................................................................................................7
Executive Summary
The following report provides a report on Aftab Automobiles and Anwar Galvanizing’s
compliance on presentation of the equity section in the Balance Sheet/Statement of Financial
Position and/or in the Statement of Changes in Equity as per the requirements of paragraph 79 of
IAS 1. The report examines the non-current liabilities reported by the companies and segregates
them into distinct categories. The report further calculates and analyses key financial ratios from
the information provided on the financial statements in order to evaluate the financial position of
the company and provide reasonable justifications on investment decisions regarding the
companies discussed.
Comparative Analysis
A comparative analysis of the chosen two companies on presentation of the equity section in the
Balance Sheet/Statement of Financial Position and/or in the Statement of Changes in Equity as
per the requirements of paragraph 79 of IAS 1.

A. Aftab Automobiles Anwar Galvanizing

Criteria 2021 2022 2021 2022
The number of shares Ordinary shares: Ordinary shares: Ordinary Ordinary
authorized 120,000,000 120,000,000 shares: shares:
Preference shares: Preference shares: 5,00,00,000 5,00,00,000
180,000,000 180,000,000
The number of shares issued Common Shares: Common Shares: Ordinary Ordinary
and fully paid, and issued but 95,732,422 100,519,043 shares: shares:
not fully paid 1,45,20,000 15,246,000
Bonus Bonus
Shares: Shares:
7,26,000 1,524,600
Par value per share, or that the 10tk 10tk 10tk 10tk
shares have no par value
A reconciliation of the number Beginning: Beginning: Beginning: Beginning:
of shares outstanding at the 95,732,422 95,732,422 1,45,20,000 152,460,00
beginning and at the end of the Ending: Ending: Ending: Ending:
period 95,732,422 95,732,422 152,460,00 167,706,000
The rights, preferences and N/a because no N/a because no N/a because N/a because
restrictions attaching to that preference shares. preference shares. no no
class including restrictions on preference preference
the distribution of dividends
and the repayment of capital shares. shares.
Shares in the entity held by the 6,000,000 6,000,000 N/a N/a
entity or by its subsidiaries or
associates
Shares reserved for issue under N/a N/a N/a N/a
options and contracts for the
sale of shares, including terms
and amounts
B.
Criteria 2021 2022 2021 2022
A description of the nature and Tax Holiday Tax Holiday N/a N/a
purpose of each reserve within Reserve: Reserve:
equity 12,338,231 12,338,231
Dividend Dividend
Equalization Equalization
Fund: 4,000,000 Fund: 4,000,000
General Reserve: General Reserve:
51,000,000 51,000,000
Table 1 Changes in Equity as per the requirements of paragraph 79 of IAS 1 checklist.

As per the analysis the companies meet all the requirements as per paragraph 79 of IAS 1 (A).
Except that Anwar Galvanizing doesn’t disclose a description of the nature and purpose of each
reserve within equity as per paragraph 79 of IAS 1 (B). None of the selected companies has any
outstanding preference shares so the requirements regarding such equity don’t apply to the
companies discussed.
Composition of the non-current liabilities
The following table segregates the non-current liabilities of Aftab Automobiles and Anwar Galvanizing
into five categories:

 Long term debts

 Employee related liabilities
 Tax liability
 Lease related liability
 Other Non-Current Liabilities.

Aftab Automobiles Anwar Galvanizing

Non-current liabilities 2021 2022 2021 2022
Long term debts 2,753,835,081 3,046,622,430 0 15,537,855
Employee related
liabilities 0 0 0 0
Tax liability 22,599,405 -64,754,175 8,639,338 7,686,012
Lease related liability 2,597,595 35,534,600 0 0
Other liabilities 25,310,440 25,310,440 0 0
Table 2 Segregation of Non-current liabilities

As per the table Aftab Automobiles had a steadier increase in their long-term debts while Anwar
Galvanizing had conjured a Long-term debt of BDT 15,537,855 during 2022 while they had
none in 2021. None of the companies had any employee related liabilities during 2021-2022.
From 2021 to 2022 Anwar Galvanizing’s tax liabilities decreased by almost BDT 1,000,000
while Aftab Automobile posted a negative tax liability of 64 million BDT in 2022. Aftab
Automobiles’ Lease related liabilities increased by14x from 2021 to 2022 while other liabilities
remained the same. Anwar Galvanizing did not post any such liabilities on their annual reports
for the discussed fiscal years.
Computation of Ratios
Aftab Automobiles Anwar Galvanizing
Criteria 2021 2022 2021 2022
No. of Shareholders 95,732,422 100,519,043 15,246,000 16,770,600
Net Income -185,514,274 1,092,907 59,725,897 193,479,986
Total Asset 17,800,211,829 18,677,628,391 436,427,391 729,351,959
Total Debt 2779145521 3071932870 233,554,093 363,560,740
Total Shareholder's Equity 2,591,845,473 2,518,356,396 202,873,298 365,791,219
Mkt Value per share 27.9 27.8 208.2 423.9
Total Dividends 33505875 33505875 14,520,000 30,492,000
EPS (Actual) -1.94 0.01 3.92 11.54

Basic EPS -1.937841644 0.01087263634 3.9174798 11.5368553

Debt to asset ratio 0.1561299128 0.164471249 0.53514994 0.49847092
Debt to equity ratio 1.072265129 1.219816574 1.15123131 0.99390232
Return on equity -0.07157613212 0.0004339763036 0.33138721 0.68047146
Price to earnings ratio -14.3814433 2780 53.1122449 36.7331023
Dividend Payout Ratio -0.1806107653 30.65757196 0.24507984 0.1575977
Table 3 Computations of ratios

Basic EPS:

Basic EPS consists of the company’s net income divided by its outstanding shares. It is the figure
most reported in the financial media and is also the simplest definition of EPS. Here Aftab
Automobiles had a negative Basic EPS in 2021 and it had a barely positive value in 2022 which
was still very low. While Anwar Galvanizing has seen 4x growth in their EPS Value.
Debt to Asset Ratio:
The total-debt-to-total-assets ratio is calculated by dividing a company's total amount of debt by
the company's total amount of assets. Here Aftab Automobiles has a low Debt to asset ratio
which means in 2021 15.6% of the asset was financed by the creditors which increased to 16.4%
in 2022. For Anwar Galvanizing had 54% of its assets financed by creditors in 2021 which
decreased to 49% in 2022.

Debt to Equity Ratio

The debt-to-equity (D/E) ratio, which measures a company's financial leverage, is determined by
dividing its total liabilities by the value of its shareholders. The D/E ratio is a crucial indicator in
corporate finance. It gauges how much debt a business is using to fund operations as opposed to
using cash on hand.

Both Aftab Automobiles and Anwar Galvanizing had their debt-to-equity ratio lower than 2 in
2021 and 2022, which is considered as the general consensus. But in 2022 Anwar Galvanizing
had the lowest among all which indicates that this company's equity is greater, and it doesn't
need any money to support its operations or business to grow.

Return on Equity Ratio

Return on Equity is a metric of financial performance that is obtained by dividing net income by
shareholders' equity. ROE is referred to as the return on net assets since shareholders' equity is
determined by subtracting a company's debt from its assets. ROE is regarded as a barometer of a
company's profitability and how well it produces profits.

Among the companies, in 2021 Aftab Automobiles saw a negative outcome in their ROE ratio,
as there was negative net income for that period. This implies that shareholders were losing on
their investment in the company. Overall, Anwar Galvanizing had the best ROE in 2022 which
indicates that they are more efficient at generating income and growth from its equity financing.

Price to Earnings Ratio

P/E ratio is used to determine a company's value that compares its current share price to its
earnings per share (EPS) is known as the price-to-earnings ratio. The price multiple or earnings
multiple are other names for the price-to-earnings ratio. Investors and analysts use P/E ratios to
assess the relative value of a company's shares to compare other companies in the same industry.
It can also be used to compare a company to its past performance or to compare broad markets
over time or to one another.

In 2021, Aftab Automobiles experienced a negative P/E ratio because of negative net income.
Anwar Galvanizing has pretty good P/E ratios in both 2021 and 2022, although many investors
would prefer a P/E ratio between 20% to 25%.

In 2022, Aftab Automobiles has a incredibly high P/E ratio as their EPS was extraordinarily low.

Dividend Payout Ratio

The ratio between the total amount of dividends given to shareholders and the company's net
income is known as the dividend payout ratio. It is the portion of earnings that are distributed as
dividends to shareholders. The corporation keeps the money that is not distributed to
shareholders to pay down debt or to reinvest in its core businesses.

In 2021, Aftab Automobiles witnessed a negative dividend payout ratio which means they paid
out more dividends than their net income. However, in 2022, Aftab Automobiles had more than
100% dividend payout ratio which indicates that the company is paying its dividends from cash
reserve. This situation is not sustainable and may result in the eventual termination of all
dividends. Anwar Galvanizing had below 50% of dividend payout ratio which usually gives a
company enough flexibility to reward shareholders while holding the reserve to reinvest in new
projects.
Technical Analysis
From the ratios discussed above it would be preferable to invest in Anwar Galvanizing instead of
Aftab Automobiles as Anwar Galvanizing has a good return on equity, Price to Earnings ratio.
Even though they have a high Debt to Asset ratio they are able to post good EPS each year and a
properly used debt that could increase the value of the company’s overall value, benefiting the
shareholders. Lastly, Anwar Galvanizing has a more stable dividend payout ratio as per
company’s financial position while Aftab Automobiles is providing dividends even when they
are making losses and their dividend payout ratio is way too high compared to the profits, they
made in 2022.