Report on:

Sub:
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Group:
Submitted to
Submitted by
Name ID

December 6, 2018

Lecturer,
School of Business and Economics
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North South University, Dhaka.

Subject: Submission of project.

Dear ,
We are very happy to submit our fin 254 project on ratio analysis. We have concentrated on the
successful completion of our report. It was a great opportunity to get a chance to work on this
challenging project and to complete the report in time. We are very grateful for your guidelines
and lessons.
We have tried to put our best effort for the preparation of this report. Yet if any shortcomings or
flaws arise, it will be our pleasure to answer any clarification and suggestion regarding this
report.

Sincerely yours,

Name ID

Executive Summary

This report is prepared as a part of Fin 254 course that comes with the sole purpose of exploring

and analyzing the ratio calculation and analysis of this ratios of Heidelberg and Confidence

cement. As the work came to an end it gives a better view on company’s financial position and

how the company manages their operations and their stockholders. To complete this report we

calculated liquidity ratio, debt ratio, activity ratio, profitability ratio, market value ratio and

dividend per share of both of this company. Then we came with a recommendation to choose

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which company is the best suitable one for investment. After our calculations we can see that

Heidelberg company is more investment friendly enough from various perspective such as

liquidity, inventory management etc. We finally came out with a conclusion for these two

company and has given some suggestion regarding the issues.

Contents
LIQUIDITY RATIO........................................................................................................................6

DEBT RATIO................................................................................................................................10

ACTIVITY RATIO.......................................................................................................................13

PROFITABILITY RATIO............................................................................................................20

MARKET RATIO.........................................................................................................................23

DIVIDEND PER SHARE.............................................................................................................26

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RECOMMENDATION.................................................................................................................28

CONCLUSION..............................................................................................................................30

Bibliography..................................................................................................................................31

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 RATIO ANALYSIS ON HEIDELBERG AND

CONFIDENCE CEMENT

LIQUIDITY RATIO

CASH RATIO
Definition: Cash ratio is the ratio of the liquid assets of a company to its current liabilities.
Calculation: The formula for calculating is (Cash + Cash equivalent)/ Current liabilities

Interpretation: A cash ratio of 1.00 and above means that the business will be able to pay all its
current liabilities in immediate short term. Therefore, creditors usually prefer high cash ratio.

Analysis:

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Time series and Cross section: we see here Heidelberg cash ratio gradually decreasing over the
four years. In 2014 to 2016 its cash ratio was good as because its over the ratio of 1.00 but in
2017 it falls under the ratio of 1.00 which was facing a problem to pay its current liabilities with
its cash. Also, Confidence cash ratio have less than 1.00 cash ratio over the four years which
indicates this company had less cash that it pay off its current liabilities. Moreover, Confidence
had increased cash ratio over the year of 2017 but its until below the heidelberg which indicate
heidelberg was doing better than confidence.

CURRENT RATIO

Definition: The current ratio is a liquidity ratio that measures a company's ability to pay short-
term and long-term obligations.

Calculation: The formula for calculating Current Ratio: (Current Assets / Current Liabilities)

Interpretation: The current ratio is the classic measure of liquidity. It indicates whether the
business can pay debts due within one year out of the current assets. For example, a ratio of 1.5
would mean that a business has $1.50 of current assets for every $1 of current liabilities.

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Analysis:

Time Series & Cross section: In the above graph we see the current ratio of Heidelberg is
decreasing over the four years 2014 to 2017 which indicates that the company’s ability to pay its
debt with its current assets is deteriorating. On the other hand, confidence had fluctuated its
current ration over the years which indicate the company did not perform well in the year of
2014 to 2017. Which impact on the company’s operations and management team had to faced a
problem regarding this issue. Moreover, we have seen both of the companies had faced
decreasing in its ratio but Heidelberg comparatively doing better in the market; because the
current ratio of Heidelberg is higher than the confidence.

QUICK RATIO

Definition: The quick ratio is an indicator of a company’s short-term liquidity and measures a
company’s ability to meet its short-term obligations with its most liquid assets. Because it is only
concerned with the most liquid assets, the ratio excludes inventories from current assets. It is also
known as “Acid-test ratio”.

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Calculation: Quick ratio is calculated as follows: (Current Assets - Inventories / Current
Liabilities)

Interpretation: The quick ratio measures the dollar amount of most liquid assets available for
each dollar of current liabilities. So, we deduct inventories from current assets. Thus, a quick
ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current
liabilities.

Analysis:

Time series & Cross section: Heidelberg quick ratio is decreasing over the year. That means it
has less ability to pay off its current liabilities with its liquid assets. Also, Confidence quick ratio
had decreased in 2015; but in 2016-17 its cover up its ability to pay off its current liabilities with
its liquid assets. Thus, stockholder of Heidelberg may adversely affect for its decreasing its ratio
over the years. Heidelberg industry average is higher than confidence. That means Heidelberg
has more liquid assets than confidence and its capable to pay off short term debt.

NET WORKING CAPITAL RATIO

Definition: Net working capital measures the differences between a company’s current asset and
current liabilities.
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Calculation: Net working capital calculated by (Current asset – Current liabilities)

Interpretation: Net working capital indicates liquidity of the company. If the company have
positive net working capital than It means that the company has enough current assets to meet its
current liabilities.

Analysis

Cross section & Time series: In the above chart we see that Heidelberg Net working capital
ratio gradually decreased over the year. It indicated the negative view of the firm even though it
had positive ratio. On the other hand, Confidence net working capital ratio decreased in 2015
which means negative result for the firm. In the following years Pran’s ratio increase again
which indicate positive outcome for the company. Although confidence net working capital had
more fluctuate over the years which adversely affected to its stockholders. From the both
company Heidelberg had more net working capital than Confidence. Which indicate Heidelberg
had more chances to meet its current liabilities with its enough current asset than Confidence.

DEBT RATIO

TOTAL DEBT RATIO

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Definition: The debt ratio is a financial ratio that measures the extent of a company’s leverage.

Calculation: The formula for calculating Debt Ratio is Total Debt divided by Total Asset

Interpretation: The debt ratio is defined as the ratio of total debt to total assets, expressed as a
decimal or percentage. It can be interpreted as the proportion of a company’s assets that are
financed by debt

Analysis

Time series & Cross section: In the above chat we see Heidelberg total debt ratio had gradually
increased over the four years. Which indicates the company had used more debt for financing to
its assets. It could impact on the company and its stockholders as because it had increasing total
debt over the year which adversely affected to the company’s assets and liabilities. On the other
hand, confidence cement had also gradually increasing its total debt which affected to its
company’s stockholders and to company’s asset and liability management. Moreover,
Heidelberg had more total debt ratio than Confidence means confidence did better in market over
the years.

DEBT TO EQUITY RATIO

Definition: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion
of shareholders' equity and debt used to finance a company's assets. 
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Calculation: The formula for calculating Debt to Equity Ratio is Total Liability divided by
Share Holders Equity

Interpretation: The debt to Equity ratio is used to evaluate a company's financial leverage. The
debt/equity ratio is also referred to as a risk or gearing ratio. The formula for calculating the D/E
ratio is:

Analysis

Time series & Cross section: In the above chart we see both of the companies had increased
over the four years. Which negatively affected to the both of the companies. Though the ratio of
1.5 is considerable to all of the companies and the above companies’ ratio had below 1.5 which
means that both of the companies had good position comparatively to market ratio. Also, the
increasing of the debt to equity ratio had affected to the stockholders because of the more debt
means the company have more risk. Moreover, Heidelberg had less ratio than confidence which
indicate Heidelberg had doing better in the market over the four years.

LONG TERM DEBT RATIO

Definition: The long-term debt ratio is a measurement representing the percentage of a

corporation's assets financed with loans or other debt obligations lasting more than one year

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Calculation: The formula for calculating Long Term Debt Ratio is Total Long Term Liability
divided by Net Asset.

Interpretation:  This ratio provides a general measure of the long-term financial position of a
company, including its ability to meet financial requirements for outstanding loans. A higher
percentage ratio means that the company is more leveraged and owns less of the assets on
balance sheet.

Analysis

Time series & Cross section: In the above chart we see Heidelberg had more ratio than
confidence which indicates Heidelberg had more leveraged and own less of the asset compare to
the Confidence. Also, Heidelberg high ratio adversely affected to the stockholder; because more
long-term debt refers to equal liable to the stockholders. Moreover, Heidelberg had more than
double of the debt ratio compare to confidence that means Confidence had doing better in the
market position over the years.

ACTIVITY RATIO

RECIEVABLE TURNOVER
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Definition: Receivable turnover measures used to quantify a firm's effectiveness in extending
credit and in collecting debts on that credit.

Calculation: Receivable turnover calculated by (Net credit sales/Average account receivables)

Interpretation: Receivables Turnover Ratio is one of the efficiency ratios and measures the
number of times receivables are collected, on average, during the fiscal year. This ratio takes in
consideration only the credit sales a high ratio reflects a short lapse of time between sales and the
collection of cash, while a low number means collection takes longer.

Analysis

Cross section & Time series: In the graph we see that Heidelberg receivables turnover had
increased in the year of 2014-2015 which indicates Heidelberg had collected more its credit sales
compare to the following the year. in the following years it falls more drastically and leads to
over the years. It’s also impacted an affect to the stockholders; because less ratio means company
need to take long time to receive its credit which negatively affected to company balance sheet
and its operations. Also, Confidence had not changed its receivable ratio compare to Heidelberg.
Moreover, Heidelberg had high ratio than Confidence which indicates Heidelberg need less time

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to collect their receivables than Confidence. So that Heidelberg had boing better than confidence
over the years.

DAYS SALES RECEIVABLES

Definition: Days sales receivable is a measure of the average number of days that it takes a
company to collect payment after a sale has been made.

Calculation: Days sales receivable is calculated by (Receivables turnover/365)

Interpretation: A high days sales receivables shows that a company is selling its product to
customers on credit and taking longer to collect money. This may lead to cash flow problems
because of the long duration between the time of a sale and the time the company receives
payment. A low day’s sales receivables value means that it takes a company fewer days to
collect its accounts receivable. In effect, the ability to determine the average length of time that a
company’s outstanding balances are carried in receivables can in some cases tell a great deal
about the nature of the company’s cash flow.

Analysis:

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Cross section and time series: In the above chart we see that both of the companies had faced
more fluctuations over the four years which adversely affected to both of the companies. In the
year of 2014-2015 Confidence had good position but in 2015 it decreased from 76.52 to 50.34
which indicates the company had need to take long time for collecting its sales. It could face a
cash flow problem for the company and so on adversely affected to the stockholder minds. In the
following years confidence had increased and again it takes it position on good condition. On the
other hand, Heidelberg had faced a problem in the year of 2015 and in the following years it
improved and takes good condition. Moreover, Confidence had more day’s sales in receivables
than Heidelberg indicates Confidence had doing better than Heidelberg in the market.

INVENTORY TURNOVER

Definition: Inventory turnover is a ratio showing how many times a company's inventory is sold
and replaced over a period of time (generally a year).

Calculation: The formula for calculating Inventory turnover is: (Cost of goods sold / Average
inventory)

Interpretation: Inventory Turnover Ratio is one of the efficiency ratios and measures the
number of times on average the inventory is sold and replaced during the fiscal year.

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Analysis:

Time series & Cross section: In the above chart Heidelberg inventory turnover has increase in
2014-2015; but decreased in 2016 and following years. That means it held more inventories in
fiscal years 2015. Which indicates company did better and its positively impact on balance sheet
and stockholders. Also, Confidence inventory turnover gradually increased over the year that
means it held less inventories over the year. Moreover, Heidelberg faced a great increasing ratio
in 2015 but it decreasing in such a way that its ratio going down from Confidence which
indicates both of the companies are more volatile to measure which company is doing well in
this time.

DAYS SALES IN INVENTORY

Definition: Days sales inventory measures the number of days it will take a company to sell all

of its inventory

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Calculation: Days sales inventory calculated by (Ending inventory/Cost of good-sold) * 365

Interpretation: The days' sales in inventory measure the average number of days that it took to

sell the average inventory held during the specified one-year period.

Analysis

Time series & Cross section: In the above chart we see that both of the company had more

fluctuations over the years which means both of the company were volatile in these years.

Heidelberg days sales inventory had fallen more drastically in 2015 which indicates the company

had less inventory sales in this particular year. which negatively affected to the company’s

operation and its stockholder minds by reducing inventory sales ratio. In the following years its

had increased with more ratio and then again go down in 2017. On the other hand, Confidence

had decreased in the year of 2014-2016 and increased its sales in 2017. Moreover, over the years

both of the company had faced more fluctuation so its difficult to measure which company were

good position in the market in 2014-2017.

FIXED ASSET TURNOVER

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Definition: Fixed asset turnover measures a company's ability to generate net sales from fixed-
asset.

Calculation: Fixed asset turnover calculated by (net sales/average fixed assets.)

Interpretation: Fixed asset turnover is a commonly used activity ratio that measures the
efficiency with which a company uses its fixed assets to generate its sales revenue. A higher ratio
is indicative of greater efficiency in managing fixed-asset investments, but there is not an exact
number or range that dictates whether a company has been efficient at generating revenue from
such investments.

Analysis

Time series & Cross section: we in Heidelberg had increased their fixed asset turnover ratio in
2015 which indicate high efficiency for the company and decreased in 2016 and the following
year which adversely affected to the company. On the other hand, Confidence had relatively
stable ratio over the four years which greater efficiency for the company. Moreover, Heidelberg
doing better than Confidence for having higher ratio in the industry.

TOTAL ASSET TURNOVER

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Definition: Asset turnover ratio measures the value of a company’s sales or revenues generated
relative to the value of its assets.

Calculation: Total asset turnover calculated by (Sales / Average Total Assets)

Interpretation: The total asset turnover ratio calculates net sales as a percentage of assets to
show how much sales are generated from each dollar of company assets. For instance, a ratio of .
5 means that each dollar of assets generates 50 cents of sales.

Analysis

Time series & Cross section: In the above chart Confidence had Total Asset turnover decreased
over its fiscal years which indicates its performance reduced to generate more sales for each
Taka of assets. Also, Heidelberg Total Asset turnover increased in 2015 which indicates its
performance to generate sales for each Taka of assets also it indicates company’s operations did
well. In the following years its falls more drastically, which negatively affected to its operation
and stockholders mind. Moreover, Heidelberg had more turnover than Confidence which means
Heidelberg had good position compare to Confidence.

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PROFITABILITY RATIO

RETURN ON SALES (PROFIT MARGIN)

Definition: Net profit margin is the percentage of revenue left after all expenses have been
deducted from sales.

Calculation: (Net profit / Net sales)

Interpretation: The net profit margin indicates how much net income a company makes with
total sales achieved. A higher net profit margin means that a company is more efficient at
converting sales into actual profit.

Analysis

Time series & Cross section: The net profit margin of Heidelberg increased over its fiscal years
2014-2016. That means Heidelberg has more profit than its expenses and is efficient in
converting sales to actual profit also its indicated company’s operation did well in these years. In
the year of 2017 the company’s ratio had decreased which negatively affected to the company
and its stockholders. On the other hand, Confidence had increased its profit over the four years

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and in the year 2017 its overcome Heidelberg profit. Moreover, Confidence had good position in
the market because of it continues increasing over the years.

RETURN ON ASSET

Definition: It is a financial ratio that shows the percentage of profit a company earns in relation
to its overall resources (Total Assets).

Calculation: (Net income / Total assets)

Interpretation:  ROA tells us what earnings were generated from invested capital (assets). The
higher the ROA, the better it is.

Analysis

Time series & Cross section: The ROA of Heidelberg increased in 2015 and then decreased in
the following years. That means Heidelberg had good capability of using its assets to generate
profit in 2015. But it decreased in the following years which negatively affected to its operations.
On the other hand, Confidence had increasing its ratio over the three years and did well its
operations in these years and in the last years it fallen from 0.11 to 0.06. Moreover, Heidelberg
ROA had more than Confidence which means Heidelberg had good condition than Confidence in
these years.

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RETURN ON EQUITY

Definition: It is the amount of net income returned as a percentage of shareholders equity.

Calculation: Return on equity ratio calculated by (Net income / Total assets)

Interpretation Return on equity measures a corporation's profitability by revealing how much

profit a company generates with the money shareholders have invested. The higher the ROE, the
better it is.

Analysis

Time series & Cross section: In the above ROE had increased in 2015 and then decreased over
its fiscal years. That means Heidelberg had more capability of using its shareholder money to
generate profit in 2015. But in the following years it had less capability to using its shareholder
money to generate profit. On the other hand, Confidence had increased its ratio over the three
years and then it decreased in the last years. That means in three years company had capability to
generate profit gradually by using shareholders money which positively impact on shareholders
mind. Moreover, Heidelberg had good condition over the four years than Confidence which
means it had better position in the market.

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MARKET RATIO

PRICE-EARNING RATIO

Definition: It is the ratio which measure share price relative to annual net income earned by
firms per share

Calculation: P/E ratio calculated by (Market price per share of common stock/Earnings per
share)

Interpretation It measures the market price per share of common stock by its Earning per share

Analysis

Time series & Cross section: Confidence P/E RATIO have decreased over its fiscal years 2014-
2016. That means it had bad market price per share in relative to EPS. It also negatively affected
to the shareholder mind. In the year of 2017 it increased again which positively affected
shareholders mind. P/E ratio of Heidelberg decreased in the fiscal years 2014-2016. That means
it had bad market price per share in relative to EPS but compared to Heidelberg its higher.
Moreover, Confidence had greater industry average than Heidelberg.

MARKET TO BOOK RATIO

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Definition It is the ratio which measure by a company to comparing its book value to its market
value.

Calculation: M/B ratio calculated by (Market price per share of common stock/Book value per
share of common stock)

Interpretation: It measures market price per share of common stock by its book value per share
of common stock.

Analysis

Time series & Cross section: Heidelberg M/B RATIO had increased over its fiscal years. That
means Olympic has good market price per share in relative to Book value per share of common
stock which positively affected to the shareholders mind. The M/B ratio of Confidence had in the
fiscal year from 2014-2016. That means Confidence had bad market price per share of common
stock in relative to Book value per share of common stock but compared to Heidelberg its
relative to lower. Moreover, Heidelberg had greater industry average than Confidence.

PRICE PER SHARE

Definition The market price per share of stock usually termed simply "share price" is the dollar
amount that investors are willing to pay for one share of a company's stock

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Calculation: Actually, don't have to calculate the current market price per share because it's
readily available.

Interpretation: It's the figure that represents the company's current share price.

Analysis

Time series & Cross section: In the above chart we see Heidelberg share price more than
double compare to Confidence. Also, Heidelberg price per share did not fluctuate more which
indicate that the company had stable and did well its operations over the following years. Also,
we see Confidence had same condition like Heidelberg which was good for its company. But in
the year of 2017 Confidence had increased its share price from 109 to 152 which positively
affected to its operations.

DIVIDEND PER SHARE

DIVIDEND PER SHARE

Definition: is the sum of declared dividends issued by a company for every ordinary share

outstanding.
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Calculation: Dividend per share calculated by (Dividend/No of shares)

Interpretation: A growing DPS over time can also be a sign that a company's management

believes that its earnings growth can be sustained.

Analysis:

Time series and cross section: in the above graph we see that Heidelberg had given more than

double DPS compare to Confidence to its stockholders. Heidelberg DPS had decreased over the

years but not by a big amount also Confidence had not more fluctuate to its DPS which was good

for the company and its shareholders. Moreover, Heidelberg had given more DPS than

Confidence which positively affected to the shareholders and influenced to invest in that

company over the years and Heidelberg had greater industry average than Confidence.

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RECOMMENDATION

RATIOS HIGH LOW

Liquidity Ratio
Cash Ratio Heidelberg Confidence
Current Ratio Heidelberg Confidence
Quick Ratio Heidelberg Confidence
Net Working Capital Ratio Heidelberg Confidence
Debt Ratio
Total Debt Ratio Confidence Heidelberg
Debt/Equity Ratio Confidence Heidelberg
Long-Term Debt Ratio Heidelberg Confidence
Activity Ratio
Receivable Turnover Heidelberg Confidence
Days Sales in Receivables Confidence Heidelberg
Inventory Turnover Heidelberg Confidence
Days sales in inventory Heidelberg Confidence
Fixed Asset Turnover Heidelberg Confidence
Total Asset Turnover Heidelberg Confidence
Profitability Ratio
Return on Sales (Profit Confidence Heidelberg

Margin)
Return on Assets Heidelberg Confidence
Return on Equity Heidelberg Confidence
Market Value Ratio
Price-Earnings Ratio Confidence Heidelberg
Market to Book Ratio Heidelberg Confidence
Price per share Heidelberg Confidence
Dividend per share Heidelberg Confidence
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From the above table we see that Heidelberg has greater ratio than Confidence. Also, Heidelberg
has taken higher position in liquidity ratio and majority part in activity ratio. Beside that its also
take higher position in profitability ratio. So, we can conclude that Heidelberg is the best option
for investment.

CONCLUSION

From the above discussion we identify which company perform well and which company

perform bad in particular step in financial position. We see Heidelberg leads in maximum part of

their financial position compare to Confidence. Heidelberg has better liquidity position which

helps them to perform better in market. So, our suggestion for confidence is focusing more in

their liquidity position and managing their operations properly. Also, Confidence need focusing

more in their activity ratio because they are lack behind from Heidelberg in this platform and this

lacking adversely affected their stockholders. Moreover, Confidence has more debt ratio

compared to Heidelberg which is not good for a company and leads to more risky company. So,

they need to reduce their debt and managing their operation properly. Furthermore, Heidelberg

had given the more dividend than Confidence which influenced shareholder to invest in

Heidelberg. So, Confidence should increase their dividend for attracting shareholder to invest in

Confidence.

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Bibliography

 http://lankabd.com/dse/stock-market/HEIDELBCEM/heidelberg-cement-bangladesh-

limited/stock-price?stockId=4

 http://lankabd.com/dse/stock-market/CONFIDCEM/confidence-cement-limited/stock-

price?stockId=3

 https://www.investopedia.com/

 https://accountingexplained.com/

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