Submitted to

Dr. Fahim Faisal

Associate Professor
Department of Accounting and Finance
School of Business and Economics
North South University

Submitted By

Date of submission: 28th September 2020

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Letter of Transmittal

28th September 2020

Dr. Fahim Faisal

Associate Professor
Department of Accounting and Finance
School of Business and Economics
North South University
Subject: Submission of Project Report on ‘Ratio Analysis on three years of
Confidence Cement Limited.

Dear Sir,
We are pleased to submit our group project as a requirement to fulfill this FIN254 course. In
this report, we have tried to implement all the knowledge we have gathered from this course.
Despite many limitations, we have tried our best to make this report accurate, reliable and
informative. We believe the experience we have acquired while working on this report will
be a valuable asset in our life. The contents of this report concentrate on everything as per the
outline. However, there may be some mistakes or lacking due to some limitations. Therefore,
we would be highly gratified if you would kindly consider our mistakes and overlook them.
Moreover, if you have any enquiry or suggestions to improve regarding the contents of the
projects, we would be grateful to receive your advice. Thank you for giving us the
opportunity to have a practical knowledge about business skills. We are looking forward to
work under your honorable supervision in our future. And we all are intrigued to use the
knowledge we have gained while doing this report in our future.
If you have any query regarding this project, please feel free to ask any of our group
members.

Sincerely Yours,

Acknowledgement

We would like to express our deepest gratitude to our Almighty Allah, the most merciful for
blessing us with great patience to complete the assignment successfully. Then we would like

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to express our appreciation to our instructor, Dr. Fahim Faisal (FFA), Associate Professor,
Department of Accounting & Finance, North South University, for his guidance in
preparing this paper. He assisted us throughout the whole process to prepare this report. This
project report is fit based on the financial analysis & statements of The Confidence Cement
limited. We have prepared ratio analysis for this company for the years 2015-2017.
Combined analysis of the ratios and Interpretation are provided. We have collected our
necessary data from the official websites of The Confidence Cement limited. Our reading
resources also helped us to prepare the report. Our team mates have made dynamic
contributions to this assignment, and hence we could construct this report today.

Executive Summary
In the world of opportunities and competition in financial sector, Ratio Analysis has made a
great impact. For the organizations who look forward for simple process calculations in their
financial directory, Ratio Analysis there plays the important role.

Its main strength is its easy calculation process, which ensures an organization to get a clear
vision of action that needs a structure in the nearby future.

However, the main drawback for Ratio Analysis becomes a main concern when we see
manipulation on the financial reports that organization does up to some extent.

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Firstly, we have tried to collect the annual reports Confidence Cement Limited from 2015 to
2017. Right after getting all the essential information, we have inserted all of them in the
excel sheet.
We have calculated the required ratios and in the other blank excel sheet, we tried to show
the ratio in graphs which later on presented in the Microsoft Word.

Finally, with all the pool of data’s in our hand, we finally tried to compare the ratio of three
years and also we calculate the average of 3 years of each ratio and consider it as the
benchmark, gave our interpretations regarding each ratio.

To note precisely, here we have the information about the financial report of July-June
Session of 2015, 2016, 2017 of Confidence Cement limited.

Table of Contents

Executive Summary..............................................................................................................................3
Introduction...........................................................................................................................................5
Liquidity ratios:.....................................................................................................................................6
1. Current ratio..............................................................................................................................6
2 Quick ratio.................................................................................................................................6
Activity ratios........................................................................................................................................7
3 Inventory turnover:...................................................................................................................7
4 Average Age of Inventory:.........................................................................................................7

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5 Receivable Turnover Ratio:........................................................................................................8

6 Payable Turnover Ratio:.............................................................................................................8
7 Fixed asset turnover ratio:.........................................................................................................9
8 Total Asset Turnover Ratio:.......................................................................................................9
9 Average collection period:.........................................................................................................9
Profitability Ratios..............................................................................................................................10
10 Gross Profit Margin:.............................................................................................................10
11 Operating Profit Margin:......................................................................................................11
13 Basic Earning Power:............................................................................................................12
15 Return on Total Equity:........................................................................................................13
16 Earnings per Share (EPS):.....................................................................................................13
Debt ratios..........................................................................................................................................14
17 Debt ratio:............................................................................................................................14
18 Time Interest Earned...........................................................................................................14
Market Ratios......................................................................................................................................15
19 Price /Earnings (P/E) Ratio:..................................................................................................15
20 The market/book ratio.........................................................................................................15
Conclusion...........................................................................................................................................16
Appendix.............................................................................................................................................17

Introduction

Confidence Cement Limited (CCL) is a private sector cement manufacturing company in

Bangladesh which was established in early 90’s, having 4,80,000 M/T annual production
capacity at Chittagong. Confidence Cement Ltd. is the first ISO-9002 certified Cement
Manufacturer in Bangladesh. It has a unique management system in Quality Assurance,
Marketing, sales and procurements. Confidence Cement Limited, the flagship company of
Confidence Group of Companies is one of the largest producers of cement in the country. It is
also a leading Blue-Chip company in both Dhaka & Chittagong Stock Exchange and there it
is among the top 20 performing companies for the last 15 years. It is also the first ISO 9002
certified cement manufacturing company in Bangladesh. Confidence Cement Limited itself

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and vide its sister concerns are present in cement, paint, steel fabrication, forgoing &
galvanizing, power generation, Battery, Transformer, electrical item manufacturing and
concrete product manufacturing sector.

Established: 2nd May, 1991

Chairman: Engr. Rezaul Karim
Chief Financial Officer: Newaz Mohammed Iqbal Yousuf
DSE sector: Cement
Trading code: CONFIDCEM
Listing year: 1995
Market category: A
Financial year end: 30-June

Liquidity ratios:

1. Current ratio: The current ratio gives an idea of a company's ability to pay back its
liabilities (debt and accounts payable) with its assets (cash, marketable securities, inventory,
and accounts receivable). As such, current ratio can be used to make a rough estimate of a
company's financial health. A higher current ratio is usually favorable.

Current Ratio:
1.40
1.19 For every
1.20
1.01 1 taka
1.00
0.84 liability,
0.80
0.60
0.40
0.20
0.00
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confidence cement had 1.19 taka asset in 2015, 1.01 taka assets in 2016 and 0.84 asset in
2017. The benchmark is 1.01. Considering these 3 years, the 2015 was the best year in terms
of current ratio. The Company is decreasing its ability to meet the short term obligation which
indicates that the company is not able to pay their bills. The ratio under 1 indicates that the
liabilities are greater than its assets. In 2015 and 2016, the ratio was above 1 or equals to 1 but
in 2017, it was under 1. They had to struggle to pay off their short run debts in 2017.

2 Quick ratio: Quick ratio

Quick Ratio: compares the liquid assets
1.20 with the current liabilities. It
1.04
1.00 is a measure of how well a
0.87
company can meet its short-
0.80
0.70
term financial liabilities
0.60
0.40
The quick ratio of
0.20
Confidence Cement Ltd was
0.00
1 2 3 1.04, 0.87, and 0.70 in
consecutive year 2015, 2016,
and 2017 which means it was
decreasing every year. The benchmark of 3 years is 0.87. In 2015, it was in a decent position
and above benchmark, in 2016, it was equals to benchmark but 2017, the ratio was under the
benchmark, it reflects its inability to meet short-term financial liability which can cause a lot
of problems. The Company should increase their quick ratio to meet the benchmark 1:1.

Activity ratios
3 Inventory turnover: Inventory
Inventory Turnover: turnover is a measure of how
10.00 9.23 often inventory is turned into
9.00 sales. A low turnover implies
8.00 7.40
7.00 weak sales and, therefore, excess
5.71
6.00 inventory. A high ratio implies
5.00 strong sales thus it is preferable.
4.00
3.00
2.00 The inventory turnover ratio of
1.00 Confidence Cement Ltd was 9.23
0.00 times in 2015 which indicates
1 2 3
higher sales and 7.40 times in
2016 and 5.71 in 2017. The benchmark of these 3 years was 7.44. The inventory turnover is
gradually decreasing which implies weak sales of the company and, therefore, excess
inventory which is known as overstocking. It may specify a problem with the products being
offered for sale or be a consequence of too little promotion.

Average age of Inventory 4 Average Age of Inventory: It

measures the average length of
70.00
time (number of days) it takes a
60.00
63.92 firm to sell their inventory. This
50.00 measurement is necessary as this
49.32
will help to determine the average
Axis Title

40.00
39.54
30.00
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20.00
10.00
0.00
1 2 3
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age of inventories, and will help to solve problems of perishable inventory. A business always
tries to maintain a lower average age of their inventories.

The Average Age of Inventory of Confidence Cement Ltd was 39.55 days in 2015, 49.32days
in 2016, and 63.92 times in 2017. The benchmark was 50.93. In 2015, they took the lowest
time and lower than the benchmark, which was a profitable sign for their company but
gradually, the days had increased. As their average age of inventory had increased, its
exposure to obsolescence risk also increased. This high average age of inventory can specify
that confidence cement is not properly managing its inventory or that it has an inventory that
is difficult to sell.

5 Receivable Turnover Ratio:

Receivables Tunrover: The ratio demonstrations how well
a company uses and manages the
8.60
8.40 credit it extends to customers and
8.20 8.35 how quickly that short-term debt is
8.00 8.20
7.80 collected or is paid [ CITATION
7.60 CHR20 \l 1033 ]. It is also known
7.40
7.20
7.35 as accounts receivable turnover
7.00 ratio.
6.80
1 2 3
The Receivable Turnover Ratio of
Confidence Cement Ltd was 8.35 times in 2015, 8.20 times in 2016, and 7.35 times in 2017.
The benchmark of the 3years 7.97. We can see that, the receivable turnover ratio was
decreased in 2017 and it was below the benchmark. It is bad for the company. A low ratio
indicates a few things about the company, such as, that the company may have poor collecting
processes, a bad credit policy or none at all, or bad customers or customers with financial
difficulty. It should improve its collection processes and the company should reassess its
credit policies in order to ensure the timely collection of imparted credit that is not earning
interest for the firm.
6 Payable Turnover Ratio:
Payables Turnover: The accounts payable
turnover ratio, also known as
16.00
the payable’s turnover or the
14.00 15.04 14.35 creditor’s turnover ratio, is a
12.00
10.00
liquidity ratio that measures
10.87
8.00 the average number of times
6.00 a company pays its creditors
4.00 over an accounting period.
2.00 The ratio is a short-term
0.00 liquidity indicator, the higher
1 2 3
the ratio, the better for the
company.

Payable turnover ratio of confidence cement was 14.35 in 2015, 15.04 in 2016, 10.87 in 2017,
thus, it was decreasing over years. The benchmark was 13.41. In 2017 it was below the
benchmark. That indicates that the company is paying its supplier slowly; a pointer of
deteriorating financial situation.

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7 Fixed asset turnover

Fixed Asset Turnover: ratio: The fixed turnover ratio
2.10 shows the strength at which a
2.05 company generates sales from
2.05
2.00
its existing fixed assets. A
greater ratio ensures that
1.95
1.95 management makes more
1.90 1.92 profitable use of the fixed
1.85 assets.
1.80
1 2 3 The Fixed asset turnover ratio
of Confidence Cement Ltd
was 1.92, 1.95, 2.05 in the respective years 2015, 2016 and 2017. The benchmark was 1.97.
Here, we can see that the company is doing well gradually. Their fixed asset turnover ratio is
increasing day by day. It is good for the company. It means they are trying to utilize their
asset more to generate more sales.

8 Total Asset Turnover

Total Asset Turnover: Ratio: It measures the ability
to generate revenues by
0.70
utilizing the assets of the firm.
0.60 0.65
0.58 It’s an efficiently ratio and a
0.50 higher value is desired.
0.47
0.40
0.30 The total asset turnover ratio
0.20 of Confidence Cement Ltd is
0.10 0.65, 0.58, and 0.47 in the
0.00 respective years 2015, 2016
1 2 3 and 2017 and it is decreasing
chronologically over years. The benchmark was .56. It indicates the efficiency of the
company in generating sales using its total assets is quite low.

9 Average collection
Average Collection Period period: It measures the
88
length of time (number of
86 days) it takes to collect debts
84 on average. It shows how
82 efficiently the business
Axis Title

80 collects its debts. Businesses

78
often vary in the amount of
76
74
time they give customers to
72 pay for goods and services.
70 Debt period may be 30, 60,
1 2 3
90 or even 120 days.
However, a business prefers a short-term debt collection period.
The average collection period of Confidence Cement Ltd was 77, 77, 86 in the respective
years 2015, 2016 and 2017. The benchmark 80. Their collection period is more than 80days
in 2017, in this situation they need to adopt some aggressive collection policy to shorten the

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period so that they get time to pay off its obligation. This increasing period can work in favor
for Confidence cement ltd in the long run to increase sales.

Profitability Ratios
10 Gross Profit Margin: It
Gross Profit Margin: reveals the proportion of
money left over from
25.00
revenues after accounting for
20.00 21.89 the cost of goods sold. Gross
profit margin is the first level
17.51
15.00 15.68 of profitability and tells
10.00 analysts how good a
company is at creating a
5.00 product or providing a
0.00
service compared to its
1 2 3 competitors. A higher
percentage value is
preferred.

The gross profit margin of Confidence Cement Ltd was 15.68% in 2015, 21.89% in 2016, and
17.51% in 2017. The benchmark was 18.36. They improved their gross profit margin in 2016.
It means the company enjoys the most cost-efficient production. Investors tend to pay more
for a company with higher gross profit. But in 2017 since gross profit margin declines and it
got under the benchmark, the efficiency of the company also declines.

11 Operating Profit Margin: It measures the proportion of each sales dollar remaining after
the cost of goods sold and operating expenses are deducted from the revenues. It is also
expressed as a percentage of sales and shows the efficiency of a company controlling the
costs and expenses associated with business operations. It represents the “pure profits” earned

on each sales dollar.

The operating profit margin of Confidence Cement Ltd is 9.25% in 2015, 10.54% in 2016,
and 2.73% in 2017. The benchmark is 7.506. The ratio is decreasing tremendously in 2017
and it was below the benchmark which is bad for the company. Because it indicates that the

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company is now earning much lower per dollar of sales. The company is failing to control the
costs and expenses associated its operations and gain profit.

12 Net profit margin: It

Net Profit Margin measures the percentage of
each sales dollar remaining
16.00
13.72 after all costs and
14.00 12.72 expenses, including taxes,
12.00 interest and preferred stock
10.00 8.97 dividends have been
8.00 deducted. The
6.00 measurement reveals the
4.00 amount of profit that a
2.00 business can extract from
0.00 its total sales. The higher
1 2 3
the firm’s net profit
margin, the better.

The net profit margin of Confidence Cement Ltd is 8.97% in 2015, 12.72% in 2016, and
13.72% in 2017. The benchmark is 11.80. In 2015 it was below the benchmark but after that
we can see that net profit margin is increasing significantly yearly which means that the
company is more efficient at converting sales into actual profit. It’s good for the company.
They have an increasing rate of sales.

13 Basic Earning Power:

Basic Earnings Power (BEP): BEP's aim is to decide
how efficiently an
0.07
organization uses its assets
0.06 to generate income.
0.06 0.06
0.05
0.04 The Basic Earning Power
0.03 of Confidence Cement Ltd
0.02
is 0.06% in 2015, 0.06% in
2016, and 0.01% in 2017.
0.01
0.01 The benchmark is 0.4%. It
0.00
1 2 3 is decreasing after 2016
and became 0.02 which
was below the benchmark. That means the company is not able to use its assets to generate
income and gain profit. The company is not worthy of investing.

14 Return on asset (ROA): It measures the overall effectiveness of management in

generating profits with its available assets. A higher return on total assets would mean the
firm is utilizing its assets more efficiently to generate profits. Above we can see that (ROA)
increases in 3 years. Till 2016 they generate the total asset properly. But all of a sudden return
on asset decreases in
Return on Asset (ROA): 2017. It seems they are
8.00 not utilizing the total
7.00 asset properly to generate
7.37
6.00
6.45
sales
5.00 5.86
4.00
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2.00
1.00
0.00
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The Return on asset of Confidence Cement Ltd is 10.51% in 2015, 7.37% in 2016, and,
6.45% in 2017. The benchmark is 8.11. They have performed poorly in terms of ROA in the
after 2016 which reflecting the inefficiency in utilizing its assets. 2015 was the best year for
Confidence Cement Ltd in terms of its return on assets.

15 Return on Total Equity:

Return on Equity (ROE): It measures the return
earned on the common
16.00
stockholders’ investment in
14.00
13.16
13.86 a firm. Return on equity
12.00
10.00
measures a corporation's
10.51
8.00 profitability by revealing
6.00 how much profit a company
4.00 generates with the money
2.00 shareholders have invested.
0.00
1 2 3

The Return on total equity of Confidence Cement Ltd is 10.51% in 2015, 13.86% in 2016,
and, 13.16% in 2017. The benchmark is 12.51. It increased 3.35% from 2015 to 2016 which
means the company was using its investors’ funds effectively but in 2017 it slightly
decreased.

16 Earnings per Share

Earning Per Share (EPS): (EPS): A firm’s earnings
per share is generally of
1.60
interest to present or
1.40
1.49
prospective stockholders
1.20
and management. It
1.00
represents the dollar amount
0.80
0.82 earned on behalf of each
0.60
0.63 outstanding share of
0.40
common stock. It reflects
0.20
the profitability and the
0.00
1 2 3 return of the investors.

The earnings per share of Confidence Cement Ltd is 0.63 in 2015 and 0.82Tk in 2016 and
1.49 in 2017. The benchmark is 0.98. In 2015 and 2016, it was below the benchmark but after
that it increased. This positive change in earnings per share reflects the profitability and it is
because of the decrease in the earnings available for common stockholders and no change in
the number of common shares outstanding during the period. It will attract an investor to buy
their share.

Debt ratios

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17 Debt ratio: it can be

Debt Ratio: interpreted as the proportion
0.52
0.51 of a company's assets that are
0.50 financed by debt. The higher
the debt ratio, the more
0.48 0.47 leveraged a company is,
0.46 implying greater financial
0.44
0.44 risk. At the same time,
leverage is an important tool
0.42
that companies use to grow,
0.40 and many businesses find
1 2 3
sustainable uses for debt.

The debt ratio of Confidence Cement is 44% in 2015, 47.00% in 2016 and 51% in 2017. The
benchmark is 47.33%. The debt ratio of the company is still very higher than the benchmark
in 2017 as more than half the firm’s assets are financed by its debts. As a consequence, the
firm should seek to decrease the debt ratio further.

18 Time Interest Earned:

Times Interest Earned (TIE): Times interest earned is a
metric used to measure a
6.00 company's ability to meet
5.00 5.62 its debt obligations.
4.00
4.78 Generating cash flow to
make interest payments
3.00 and avoiding bankruptcy
2.47
2.00 depends on a company's
1.00 ability to produce
earnings. Therefore, a
0.00 higher times interest
1 2 3
earned ratio is preferred.

The Time Interest Earned of Confidence Cement Ltd. is 4.78 in 2015, 5.62 in 2016 and 2.47
in 2017. The benchmark of these 3 years is 4.29. Time interest earned ratio of confidence
cement has decreased tremendously in 2017. That means the company is facing difficulties to
come up with the money to pay the interest on the debt. The company may not be in a
position to meet its debt obligations.

Market Ratios

19 Price /Earnings (P/E)

Price/Earning Ratio (P/E): Ratio: it compares the
160.00 market price of the
140.00 ordinary shares with the
120.00
137.96 earnings per share. A high
100.00
price/earnings ratio means
97.86 the stocks of the company
90.33
80.00
is highly valued. This
60.00 reflects the reputation that
40.00 the company has in the
20.00
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market. It also reflects the investors’ confidence on the shares of the company. A
price/earnings ratio of 1 would mean the market price and the earnings per share is equal.

The Price /Earnings (P/E) Ratio of Confidence Cement Ltd. is 137.96 in 2015, 97.86 in 2016
and 90.33 in 2017. The benchmark is 108.71 of these 3 years. The ratio is in decreasing rate
from the benchmark in after 2015 which indicates a negative reputation in the market of the
company and this rate is not attractive to the investors.

20 The market/book
Market Book Ratio (M/E): ratio: It is used to find
the value of a company
16.00 by comparing the book
14.00 14.50 value of a firm to its
12.00 13.56 market value. If the
11.89 market value of a
10.00
8.00
company is trading
higher than its book value
6.00
per share, it is considered
4.00 to be overvalued.
2.00
0.00
1 2 3 The Price /Earnings (P/E)
Ratio of Confidence
Cement Ltd. is 14.50 in
2015, 13.56 in 2016 and 11.89 in 2017. The benchmark of these 3 years is 13.36. The book
value per share is 5.97 in 2015, 5.94 in 2016, and 11.34 in 2017. Since market value is
trading higher than the book values, it is considered to be overvalued.

Conclusion
Analysis and interpretation of financial statements is a standard way to analyze the
performance of any company. It helps to make advance processes and identify problems. This
assistances investors to decide the probable risks and returns that they can assume from
investing in a company. The aim of this report is to examine the financial situation of the
Confidence Cement Ltd and to take a closer look at Bangladesh's cement industry.
From the above analysis of the ratios of consecutive three years; 2015 was the best year for
confidence cement ltd. But has sufficient liquid to cover up their current liabilities. The
Company is using more debt compared to its total assets, resulting higher interest obligations
that could reduce its ability to meet other financial obligations. The company had raised
enough cash flow to fulfill its costs and expenses. The overall view of the company’s market
ratio is uncertain. Confidence cement was earning a good profit and most of the time their
ratio was high than previous years. But in some cases, they were still lacking and struggling
therefore, they have to look after these sectors for the wellbeing of the company.

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Appendix
Income statement of Confidence cement:

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Balanced sheet of confidence cement:

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