REPORT ON FINANCIAL RATIO ANALYSIS OF

PREMIER CEMENT MILLS LIMITED

&
MI CEMENT FACTORY (CROWN CEMENT)

FIN254
Section: 01
Summer’18

Instructor:
Shahran Abu Sayeed (Asy)
Lecturer
Department of Accounting and Finance

Submitted by:

Name ID
Titon Saha 1712411030
Kawchar Ahmed 1711884630
Rahnuma Islam 1712641630
Wahida Nasrin 1620364030
 Acknowledgement

We would like to thank Sir Shahran Abu Sayeed, lecturer of Accounting and Finance

Department of North South University for giving us the chance to apply ourselves

using the knowledge we’ve gotten from him classes. This is for the first time; we

worked with the annual reports of industry giants for the purpose of educational

purposes. Without him, we would not be able to finish this project properly.
 Executive Summary

The prime motto of this project is to evaluate the performance of, two giant Cement
industries of Bangladesh, Premier Cement & crown cement. Performance evaluation
of a company mainly depends on its usage of asset, liabilities, shareholders’ equity,
revenue, expense etc. Financial ratio analysis is the best way to evaluate company’s
performance and to determine its financial position.

Liquidity Ratios, Asset management ratios, Leverage ratios, Profitability ratios, and
Market ratios are used to conduct the ratios of previous years and appraise the
efficiency of these two companies.
 Table of Content

S/L Number Topic Page

1 Company Profile 01

2 01
Premier Cement
3 01
Crown Cement
4
Liquidity Ratios 02-03
7
Activity Ratios 04-08
8
Leverage Ratios 09-10
9
Profitability Ratios 11-16
10
Market Ratios 17-18
11
Recommendations 19
12
Conclusion 20
13
References 21
 Company Profile

Premier Cement
Premier Cement Introduced itself as a private limited company in 2001. Later in 2010, it listed as a Public
limited company under the company act 1994 with an authorized capital of 5000 million. Initially, premier
cement’s production capacity was 0.6 million Metric Tons per annum but in April 2017, it signed an
agreement with FL Smith Denmark in order to increase its production 5 million tons per year. Its first and
foremost objective is to manufacture European standard product using best raw material combined with state
of art and technology. It has three core products: Portland Cement (PC), Portland Composite Cement (PCC)
and Portland Pozzalana Cement (PPC).

Crown Cement
Crown Cement started its’ journey in 1994. Initially it had the capacity of producing 600 Ton per day of
Portland cement. Gradually it improved its’ capacity of producing more cement. It has been listed in the
Dhaka Stock Exchange and Chittagong Stock Exchange in 2011. Now, it is one the leading manufacturers of
Cement in Bangladesh.

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 Liquidity Ratios
Current ratio:
The current ratio is calculated by dividing current assets by current liabilities. Current assets include
inventory, trade debtors, advances, deposits and repayment, investment in marketable securities in a short-
term loan, cash, and cash equivalents, and current liabilities are comprised short term banks loan, long-term
loans-current portion, trade creditors liabilities for other finance etc. Generally, the current ratio is acceptable
of short-term creditors for any company. In general, Current ratio within 1 to 3 is good for a company.

Current ratio = Current assets /Current liabilities

Current ratio 2014 2015 2016 2017

Premier Cement 0.84 1.02 1.05 0.94

Crown Cement 1.66 1.45 1.28 1.21

Current Ratio
1.80 1.66
1.60 1.45
1.40 1.28 1.21
1.20
1.00
0.80 1.02 1.05
0.94
0.60 0.84
0.40
0.20
0.00
2014 2015 2016 2017

Crown Cement Premier Cement

From2014 to 2017, the overall current ratio for crown cement shows that it has sufficient amount of asset to
repay its liabilities as its current ratio is above 1. But its current ratio is decreasing consistently in every year
which is not a good sign. For premier cement, in 2014 and 2017 its current ratio is below 1. It means the
company is not in good health.
Crown cement is in much better position than Premier cement as it has a higher ratio in all years from 2014 –
2017.

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Quick ratio:
The quick ratio is estimating the current assets minus inventories then divide by current liabilities. It is easily
converted into cash at turns to their book values and it also indicates the ability of a company to use its near
cash. A quick ratio above 1 is good for a company.

Quick ratio = (Current asset- Inventories)/Current liabilities

Quick Ratio 2014 2015 2016 2017

Premier Cement 0.58 0.74 0.83 0.77

Crown Cement 1.51 1.32 1.16 1.09

Quick Ratio
1.51
1.60
1.32
1.40
1.16
1.20 1.09

1.00 0.83
0.74 0.77
0.80
0.58
0.60
0.40
0.20
0.00
2014 2015 2016 2017

Crown Cement Premier Cement

According to the quick ratio, premier cement is not in good position and they were relying much on
inventory and less liquid current assets to repay short-term debt as in all years’ premier cement’s quick ratio
is very low. Crown cement is in very good position in terms of activity as they were relying more on quick
assets rather than less current assets to pay their short-term debt.
Between this two companies, crown cement is in a better position than premier cement as it has a higher
amount of liquid ratio to cover short-term debt.

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 Activity Ratios
Activity ratios measure a firm's ability to convert different accounts within its balance sheets into cash or
sales. Activity ratios measure the relative efficiency of a firm based on its use of its assets, leverage or other
such balance sheet items and are important in determining whether a company's management is doing a good
enough job of generating revenues and cash from its resources.
Inventory Turnover:

Company Name 2014 2015 2016 2017

Premier Cement 5.07 6.09 7.97 8.63
Crown Cement 10.74 9.49 9.22 7.99

The higher the Inventory Turnover is, the more capable the firm is to turn its’ least liquid asset. Premier
Cement has shown significant improvement in their Inventory Turnover Rate and in advised to keep
continuing this performance. Crown cement had a much better rate in 2014, but gradually decreased to lower
than Premier Cement’s rate in 2017. So, we can say that Crown Cement’s Inventory Turnover was better
than Premier Cement.

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Average Age of Inventory:

Year 2014 2015 2016 2017

Premier Cement 33.97 38.48 39.58 45.70
Crown Cement 71.92 59.92 45.77 42.31

Average Age of Inventory

80

60
Days

40

20

0
2014 2015 2016 2017
Year

Crown Cement Premier Cement

The lower the average age of inventory ratio the better it is for the firm. Crown Cements’ average age in
inventory was lower than Premier Cement for all the 4 years. So they were holding their inventory less than
Premier Cement. Crown Cement is doing better than Premier Cement. Premier Cement can improve this ratio
by reducing the number of days they hold their inventories.

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Average Collection Period:
The average collection period is the approximate amount of time that it takes for a business to receive
payments owed in terms of accounts receivable. The average collection period is calculated by dividing the
average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by
the number of days in the period. Average collection period lower than benchmark is good for the company
Average collection period = 365 / (Sales / Accounts receivable)

Average collection period 2014 2015 2016 2017

Premier Cement 61.66 61.47 72.07 83.30
Crown Cement 56.04 54.04 46.16 69.66

Average collection period

90.00 83.30
80.00 72.07
70.00 61.66 61.47
60.00 69.66
50.00 56.04 54.04
40.00 46.16
30.00
20.00
10.00
0.00
2014 2015 2016 2017

Crown Cement Premier Cement

Since 2014 to 2017 in every year premier cement’s average collection period is higher than Crown cement
that means premier cement's management is not well enough to collect money from their creditors and also
premier cement's collection days have been increased in every year which indicates in future that might have
face difficulty to operate daily expenses. But crown cement’s average collation period has decreased in every
year apart from 2017 that means crown cement has faced some difficulties in collecting money from
creditors.

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Average payment period:

Average payment period means the average period taken by the company in making payments to its
creditors. It is computed by dividing the number of working days in a year by creditor’s turnover ratio.
Average payment period = 365 / (Net credit purchases / Average accounts payable)

Average payment Period 2014 2015 2016 2017

Premier Cement 14.92 12.43 22.11 16.39
Crown Cement 13.17 14.72 30.77 22.81

Average payment Period

35.00 30.77
30.00
22.81
25.00
20.00 13.17 14.72
15.00
16.39
10.00 14.92 22.11
12.43
5.00
0.00
2014 2015 2016 2017

Crown Cement Premier Cement

Average payments period for Crown cement is decreased in 2014 and in 2016 it increases in a large number
and again in 2017, it decreased. The low ratio does not necessarily mean bad for a company if the company
is using the money elsewhere. So, in 2016 Premier cement might have used the money for other purposes.
For Crown cement, the ratio decreased in 2015 and 2016 and decreases in 2017. As it is increased in 2015
and 2016 it means Crown cement emphasis on other purposes rather the payment and lower ratio is very
good for creditors.

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Total Asset Turnover:

Company Name 2014 2015 2016 2017

Premier Cement 0.81 0.86 0.93 0.89
Crown Cement 0.70 0.69 0.64 0.53

A high Total Asset Turnover means a higher ratio of sales compared to the Total asset. Premier Cement had
a growing rate whereas Crown Cement’s ratio was decreasing. Premier Cements’ Total Asset Turnover was
better than Crown Cement.

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 Leverage Ratios

Leverage ratios, also familiar as solvency ratios, are proportions to measure the ability of a business to meet
its long-term debt commitments such as interest payments, principal payments, and other long-term debts.

Three major solvency ratios are considered to compare the ability of premier cement and Crown cement to
meet their long-term debt obligations.

Debt ratio:

The debt ratio is a part of solvency ratio that measures the extent of company’s leverage. It is calculated by
dividing firm’s total debt by its total assets that refer the percentage of firm’s assets that are financed by its
debt. A firm that has debt ratio less than 1 or 100 % is in a favorable position to pay back its creditors.

Debt Ratio 2014 2015 2016 2017

Crown Cement 49.98% 51.26% 52.51% 60.39%
Premier Cement 63.23% 62.18% 58.58% 60.71%

Debt ratio
70.00% 63.23% 62.18% 60.71%
58.58%
60.00%
50.00% 60.39%
49.98% 51.26% 52.51%
40.00%
30.00%
20.00%
10.00%
0.00%
2014 2015 2016 2017

Crown Cement Premier Cement

For Premier cement the debt ratio had been gradually decreased and less than 1 from 2014 to 2016 which is a
good thing but in 2017 its debt ratio has slightly increased that means its assets on debt has increased. For
Crown cement, the ratio has fallen in all years from 2014 to 2017 which is not a good sign in terms of risk.
But in comparison to the two companies crown cement is in the better position as its debt ratio is much lower
than premier cement in all years from 2014 to 2017.

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Times Interest Earned Ratio:
Times interest earned ratio also known as interest coverage ratio measures firms’ ability to pay back its
interest from its earning. The ratio is calculated by dividing firm’s EBIT by its interest expense. It defines
how many times a company pays interest on its operating profit. Higher ratio means the Company is in a
better position to pay back its interest.

Times Interest Earned Ratio 2014 2015 2016 2017

Premier Cement 3.14 2.07 3.40 3.16
Crown Cement 14.15 7.48 2.57 2.22

Time Interest Earned

16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
2014 2015 2016 2017

Premier Cement Crown Cement

Times interest earned ratio for premier cement is good. Premier cement’s time’s interest ratio had been
fluctuating since 2014. It rises from 2014 to 2015 then fell from 2015 to 2016 and again rises in 2017. For
crown cement, the ratio is drastically decreasing. In 2014 the company was in very good position in terms of
interest repayment but since then it has been falling at a huge rate. So Crown cement might have been facing
issues with paying interest.
In comparison, Premier cement is better than crown cement as they paid interest number of times more, in
terms of EBIT apart from the year 2014.

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 Profitability Ratios

Profitability Ratios show firms ability to gain profit compared to its expenses and other relevant costs.
Earning profit from sales, assets and shareholders’ equity are measured by profitability ratios. In most cases,
it is better to have higher profitability ratios.
Gross profit margin, Net profit margin, ROA, ROE are considered to measure the condition of profit of
Premier Cement and Crown cement

Gross Profit Margin:

Gross profit margin simply represents the portion of company’s revenue after deducting the cost of goods
sold. It measures for each dollar of revenue how much profit is generated by its sales and other revenues. It’s
better to have higher gross profit as mostly firms with higher gross profits have sufficient amount of money
to bear their operating expenses.
Gross Profit Margin=Gross profit/ Sales

Gross Profit Margin 2014 2015 2016 2017

Premier Cement 17.13% 15.42% 21.68% 16.41%
Crown Cement 15.75% 17.11% 18.40% 17.06%

Gross Profit Margin

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2014 2015 2016 2017

Premier Cement Crown Cement

Premier cement is not in good position in terms of gross profit margin. From 2014 to 2015 the gross profit
margin falls, in 2016 it increased at a high rate but again falls at 2017.
In 2014 and 2016 Gross profit margin for crown cement is lower than premier cement but in all years from
2014 to 2017 it changes in a balanced way which is a good sign for crown cement.

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Net Profit Margin:

The net profit margin measures the percentage of each sales dollar remaining after all costs and expenses,

including interest, taxes and preferred stock dividends have been deducted. The higher the firms net profit

margin, the better.

Net Profit Margin=Net Income after Tax / Sales

Net Profit Margin 2014 2015 2016 2017

Premier Cement 7.31% 5.25% 7.52% 5.29%
Crown Cement 8.44% 7.85% 8.25% 7.00%

Net Profit margin

18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2014 2015 2016 2017
Premier Cement 7.31% 5.25% 7.52% 5.29%
Crown Cement 8.44% 7.85% 8.25% 7.00%

Here we can see that Crown Cement's Net Profit Margin decreased from 2014-2015 from 8.44% to 7.85%

whereas in case of Premier Cement it also decreased from 7.31% to 5.25%. However, both the companies

faced high Net Profit Margin during 2016, but it decreased again during 2017. From the chart we can clearly

see that Crown Cements Net Profit Margin is higher than that of Premier Cement.

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Earnings per Share:
Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's profitability.
EPS = Net Income after Tax / No. of Stockholders Equity

Year 2014 2015 2016 2017

Premier Cement 14.53 13.98 16.04 14.24
Crown Cement 7.41 5.57 12.66 7.3

EPS
18
16
14
12
10
EPS

8
6
4
2
0
2014 2015 2016 2017
Year

Crown Cement Premier Cement

The higher the EPS, the better it is for the firm. Crown Cements’ EPS was better than Premier Cement’s for
all the 4 years. So Crown Cement had better earnings than Premier Cement.

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Dividend per Share:

Year 2014 2015 2016 2017

Premier Cement 6.27 4.71 3.14 2.35
Crown Cement 12.80 9.60 8.00 6.40

Dividend Per Share

14.00
12.00
10.00
8.00
DPS

6.00
4.00
2.00
0.00
2014 2015 2016 2017
Year

Crown Cement Premier Cement

Dividend per share (DPS) is the sum of total dividend paid by a company for every common share
outstanding. For year 2014 to 2017 both companies reduced their paying out of dividend. We can say that,
either their net income went down or they reinvest their profit into their company or somewhere else. These
cases occurred more for Premier Cement than Crown Cement. So, generally we can say that Crown Cement
is making more profit or paying more dividends than Premier Cement. From shareholder’s perspective,
Premier Cements DPS need to be increased by paying more dividends or increasing net income.

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Return on Assets (ROA):

The return on total asset, often called the return on investment (ROI) measures the overall effectiveness of

management in generating profits with its available assets. The higher the firm’s return on total assets, the

better.

ROA = Net Income after Tax / Total Asset

Return on Asset 2014 2015 2016 2017

Premier Cement 5.93% 4.50% 6.99% 4.73%
Crown Cement 5.94% 5.38% 5.26% 3.69%

Return on Asset
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2014 2015 2016 2017
Crown Cement 5.94% 5.38% 5.26% 3.69%
Premier Cement 5.93% 4.50% 6.99% 4.73%

In case of Crown Cement, the ROA decreased during 2014 to 2015. Even though they increased in ROA in

2016, it again decreased in 2017 to 3.69. On the other hand, even though Premier cements ROA was less

than the Crown cement in 2014 and 2015, it increased more in 2016 and even though they also faced low

ROA in 2017 it’s still higher than the Crown cement at present .

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Return on Equity (ROE):
The return on equity measures the return earned on the common stockholders’ investment in the firm.
Generally, the owners are better off the higher is return.
ROE = Net Income after Tax / Stockholders Equity

Return on Equity 2014 2015 2016 2017

Premier Cement 16.13% 11.89% 16.88% 12.04%
Crown Cement 11.88% 11.04% 11.07% 9.31%

Return on Equity
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2014 2015 2016 2017
Crown Cement 11.88% 11.04% 11.07% 9.31%
Premier Cement 16.13% 11.89% 16.88% 12.04%

Here we can clearly see that Premier Cements ROE is in a better position than Crown cement. Even though

both the companies faced declining ROE during 2014 to 2015 Premier cement's ROE was much higher. Even

though Crown Cement's ROE increased in 2017, it was still less than Premier Cement. Therefore, Premier

Cement has a higher return on the stockholder’s equity than Crown Cement.

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 Market Ratios
These ratios give understanding into how investors believe that the firm is doing in terms of risk and return.
These ratios also reflect common stockholders’ assessment of all aspects of the firm’s past and expected
future performance.

Price/Earnings (P/E) Ratio:

The price-earnings ratio (P/E Ratio) is the ratio for valuing a company that measures its current share price
relative to its per-share earnings.
Price/Earnings (P/E) Ratio = Market Price per Share / EPS

Year 2014 2015 2016 2017

Premier Cement 10 10 7 12
Crown Cement 5.38 5.11 4.42 6.42

P/E Ratio
15

10
Ratio

0
2014 2015 2016 2017
Year

Crown Cement Premier Cement

Generally, the lower P/E ratio is expected by the investors. Crown Cements’ P/E was lower than Premier
Cements’ than for all the 4 years. So Crown Cement had better P/E than Premier Cement.

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Market/Book (M/B) Ratio:

Year 2014 2015 2016 2017

Premier Cement 1.89 1.31 1.75 1.62
Crown Cement 0.78 0.68 0.58 0.70

Market/Book Ratio
2.00

1.50
M/B ratio

1.00

0.50

0.00
2014 2015 2016 2017
Year

Crown Cement Premier Cement

As Premier Cement’s M/B ratios were greater than 1 for all the 4 years. We can say that their stock price was
overvalued. It is not a good sign for the Premier Cement’s investors. Crown Cement’s M/B ratios were less
than 1 for all the 4 years. So, we can say that their stock price was undervalued. It is a good sign for investors
of Crown Cement. From the perspective of the investors, Premier Cement needs to reduce their M/B ratio
and keep it less than 1.

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 Recommendation

If we consider all the financial ratios that are calculated and analyzed above, we can say that both of the

companies are doing well financially. But Crown Cement is doing better than Premier Cement in most of the

cases. Crown Cements ability to meet its current short term debt obligations, speed with which various

accounts are converted into sales or cash, ability to meet its long term obligation and its profitability and

market conditions are in much better condition than Premier Cement. So, it would be wise to purchase a

share of Crown Cement. But that doesn’t mean that purchasing Premier Cements stock won’t be wise. Both

of the companies’ stocks are purchasable but Crown Cement wins the battle if we have to buy only one.

On the other hand, in order to improve the financial position of Premier Cement they need to improve their

working capital management. Their credit and collection department has to work more proactively. They

need to decrease their short and long term liabilities so that they can improve in solvency. In order to earn

satisfactory income Premier Cement also has to ensure that the firm is being managed well and that it can

earn a satisfactory return on their equity and assets. By this their market condition will also improve which

will help Premier cement to be more financially strong than Crown Cement.

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 Conclusion

Crown Cement and Premier Cement are both established and successful company in our country's Cement

industry. They both contribute much in our country's economy by providing employment and market value.

Both the companies are great in their financial sector as well. From all the calculations conducted we figured

out how these two companies differed in their financial sector. Under liquidity ratio we found that Crown

Cement is much more efficient in their working capital management than Premier Cement with higher

current and quick ratios. Also in case of activity ratios Crown Cement showed efficiency in their turnovers,

collections and payments. Premier Cement showed higher Leverage ratios than Crown Cement which

indicates that they have more funds tied up in debts. Profitability ratios indicated that Crown Cement was

much efficient in earning returns from their asset, equity and market conditions than Premier Cement.

However indifferent they are in their ratios, they are very close in competition. But in conclusion we can

view that the Crown Cement Company is the better in performance than the Premier Cement Company.

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 Reference

• Smallbusiness.chron.com. (2018). What Are Activity Ratios? [online] Available

at:http://smallbusiness.chron.com/activity-ratios-57298.html [Accessed 17 Apr. 2018]
• Staff, I. (2018). Activity Ratios. [online] Investopedia. Available at:
https://www.investopedia.com/terms/a/activityratio.asp [Accessed 17 Apr. 2018].
• Staff, I. (2018). Average Collection Period. [online] Investopedia. Available at:
https://www.investopedia.com/terms/a/average_collection_period.asp [Accessed 17 Apr. 2018].
• Financeformulas.net. (2018). Average Collection Period Formula and Calculator. [online] Available
at: http://financeformulas.net/Average-Collection-Period.html [Accessed 17 Apr. 2018].
• Crowncement.com. (2018). Annual Report – Crown Cement. [online] Available at:
http://www.crowncement.com/investor-relations/financial-statements/annual-report/ [Accessed 17
Apr. 2018].
• Premiercement.com. (2018). Premier Cement | Investors. [online] Available at:
http://www.premiercement.com/yearly.html [Accessed 17 Apr. 2018

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