Fin254.7 Group Report

NORTH SOUTH UNIVERSITY
SCHOOL OF BUSINESS
AND ECONOMICS
Introduction to Financial Management
(FIN 254.7)
Submission Date: 14.01.21
GROUP REPORT
Topic: Ratio Analysis for InTech Ltd. & IT Consultants Ltd.
Submitted To (Lecturer):
Humaira Haque (HHq1)
Department of Accounting and Finance
Submitted By:
Name ID
Md Shafiqul Islam 1620184630

Yassin Jah 1721003020
Jannatul Ferdousi Prity 1911654630
Introduction
1
The Ratio Analysis is a method of accomplishing insight into a company's liquidity,
solvency, and profitability by studying its financial statements in a quantitative way such
as the balance sheet and income statement. It is done through calculations and
interpretations of the ratios to analyze and monitor a business performance of a company.
If the company’s financial ratios are good then, the investors and creditors would be
interested to invest in a company so that they know the company is enough efficient to
pay back over a short period of time. Also, the intension of this calculation and
interpretation is to find whether the current and prospective shareholders will be
interested in the firm’s current and future level of risk and return, which directly affect
their share price. Suppliers of long term debt are concerned with the firms’ long term
solvency and survival in the IT sector. INTECH Ltd Company and IT Consultant Ltd
Company are the part of IT industry, which are listed in the Dhaka Stock Exchange. The
emphasis is given on the ratio analysis of these two companies to find their efficiency and
effectiveness use of resources (e.g. Assets).
The primary objective of this report is to analyze the financial statements of the two
selected companies which are listed in DSE, Bangladesh of IT sector to know about
performance, credit risk and future prospect. The currents ratios, quick ratios, total assets
turnover ratios, inventory turnover ratios, return on assets, return on equity, earnings per
share and etc are calculated to overview the liquidity position of the company and
profitability of these two companies over two business years (2018 & 2019).
OVERVIEW OF THE COMPANIES
2
INFORMATION TECHNOLOGY CONSULTANTS LIMITED (IT Consultants
limited)
Established in 2000, IT Consultants Limited (ITCL--owns payment processing

consortium, which is popularly known as ‘Q-Cash’) is the local leader in the rapidly
evolving arena of Electronic Payment & Transaction Processing System. The company
size in about 201-500 employees. The company has its headquarters in Dhaka. The
Company has converted to Public Limited Company under The Registrar of Joint Stock
Companies and Firms (RJSC) in 2009. Over the last 15 years ITC Ltd has earned the title
of being one of the market leader for delivering outstanding product‚ services and as well
as performances. ITC provides banks and retailers with advanced infrastructure for
Transaction Processing while operating the largest independent ATM network "Q-Cash"
in Bangladesh. ITC also operates a wide POS Network in Bangladesh. ITC is building a
growing electronic transaction processing capacity in Bangladesh through further
investment and R&D. ITC offers a suite of integrated retail banking products that include
ATM management, POS and merchant systems, credit and debit card systems and
exclusive Islamic Credit Card Management system in Bangladesh. Currently, ITC is
serving 30+ commercial banks in Bangladesh. PCI DSS certified and Licensed Payment
Switch Operator "PSO".
Their specialties include: Payment System Processor, Online Transaction Processing,

ATM Network, POS Network, Card Management Software, KIOSK, E-Commerce, M-
Commerce, Internet Banking, Data Storage, Consultancy, Postal Money Order EFT,
Government Revenue Collection, and Mobile Financial Services.
INTECH LIMITED
Intech limited is an Internet solutions company offering a comprehensive set of products

and services to residential and commercial customers throughout Bangladesh. Its office is
located in Dhaka. The company was incorporated as a Public Limited Company on
February 02, 2000 under the Companies act 1994 & subsequently started its Commercial
operations on November 15, 2000. Through its Initial Public Offer made on 12 October,
3
2002. Intech Limited has become an A-category Public Limited Company enlisted with
DSE (Dhaka Stock Exchange Limited) and CSE (Chittagong Stock Exchange Limited).
Intech Limited has throughout the years, since its inception of business, continued to
provide Broadband Internet and Data Connectivity, Comprehensive Digital service
solutions that include Systems integration, Information system outsourcing, ERP,
Telecom-VAS, IT & different kinds of IT-enabled services, Network solutions, Printed
Circuit Board (PCB) designing, and Amazon Web Services (AWS) in Bangladesh. Their
main activities are data processing, hosting, and related services, wired
telecommunications carriers and computer systems design services.
Intech Limited has developed its business model over the time through careful analyzing
the emerging market trends of the Asia-Pacific region. The company is investing in
capacity and technology that will lead to sustainable, long-term growth and profitability
based on the value offered to clients.
Further, apart from IT and ISP business, Intech Limited also vibrantly engaged in
Integrated Agro/fish farming in its own agricultural/fish farm at Tarakanda, Mymensingh
since early 2014. Along with this, Intech is working with various companies to establish
solar grid project in its land at Tarakanda, Mymensingh.
The vision of the company is “To be a market leader in providing Internet Services and
Comprehensive communication, Information Technology solutions through a highly
motivated, creative, experienced, seasoned and talented team of professionals
contributing to the success with special focus on creating values for our clients,
shareholders, employees and communities.”
4
RATIO ANALYSIS FOR IT CONSULTANTS LIMITED
1. Current ratio = current assets/current liabilities
LIQUIDITY RATIOS
Details Current assets Current liabilities

2018 1,374,410,026 745,506,781
2019 1,459,759,620 653,300.428
Current ratio =
2018 1.81 times

2019 2.23 times
Interpretation:
2018: for every 1 current liability, the business has 1.81 times the current assets
available to meet obligations.
Analysis: this ratio show the liquidity position of a business (whether the
company could meet their obligations or not). The benchmark of the ratio is 2:1.
The company had a good ratio in 2018, they were able to meet their obligation as
well as efficiently using their cash/assets. In 2019 the company could as well meet
their obligation since they had more current assets than current liabilities, but one
could say that they are not using their assets efficiently. They have cash that is
remaining idle in the business.
2. Quick ratio (acid-test ratio) = current assets – inventory/current liabilities
5
Details Current assets Inventory Current Liabilities
2018 1,374,410,026 361,679,138 745,506,781
2019 1,459,759,620 369,900,214 653,300.428
Quick ratio =
2018 1.32 times

2019 1.67 times
Interpretation:
2018: for every 1 current liability, the company has 1.32 times the liquid current assets
Analysis: this ratio is also used to determine the liquidity of the company as well as the
current ratio, but here the inventory which is the least liquid asset is subtracted from the
calculation. The bench mark of the ratio is 1:1. The lower the level of inventory, better
the liquidity position. So the company had a better ratio in 2018 than in 2019 but that
does not mean the ratio is bad in 2019, because in both years, the company is able to meet
obligation. In 2018 the company had more cash readily available.
ACTIVITY RATIOS
3. Inventory turnover = cost of goods sold/inventory
Details Cost of goods sold Inventory

2018 442,779,667 361,679,138
2019 507,156,274 369,900,214
6
Inventory turnover=
2018 1.22 times

2019 1.37 times
Interpretation:
2018: the company restocked their inventories 1.22 times in that annual year.
Analysis: it tells us the number of times a company have restocked its inventory. In an
annual year, how many times has the company changed their inventory? In both years the
inventory turnover is too low. The higher the level of inventory turnover, the better. So
you can say the company had a better ratio in 2019 than in 2018 but that does not mean
the ratio is bad in 2018. Though their inventory turnover is low, but this do not
necessarily affect their profit margin. This is an IT (technology) company, they provide
services, and so high inventory turnover is not their primary concern.
4. Average age of inventory= 365/inventory turnover
2018 365/1.22 299.2 days

2019 365/1.37 266.4 days
Interpretation:
2018: the company is changing its inventories every 299 days.
7
Analysis: this is the same as inventory turnover but here it is calculated in days. It
shows in how many days does the company reshelf their inventories. The lower
the number of days the better because one would say it is better to change their
inventory as early as possible. So the result is better in 2019 (but still high). But
this is not always the case. Even though the result is so high in both years, this is
not their primary concern because of the industry it is in. it does not determine the
profitability of the company.
5. Average collection period = accounts receivable/average sales per day
Details Accounts receivable Average sales per day

2018 411,061,604 802,592,068/365
2019 452,110,539 925,430,760/365
Average collection period=
2018 186.9 days

2019 178.3 days
Interpretation:
2018: the company receive money from its accounts receivable every 187days.
Analysis:
This shows the number of days the company receive their money from those
owing them. So the lower the number of days the better for the company. Which
means that the amount of days is better in 2019 than in 2018 but it is high in both
years.
6. Average payment period = accounts payable/ average purchases per day
Details Accounts payable Average purchases per
8
day
2018 86,372,767 0.70(442,779,667)/365
2019 26,255,225 0.70 (507,156,274)/365
Average payment period=
2018 101.7 days

2019 26.99 days
Interpretation:
2018: it takes the company 102 days to repay their obligation.
Analysis: it shows the number of days it takes the company to pay their creditors.
The company would want the average payment period to be as high as possible.
The payment period in 2018 was much more favorable to the company than in
2019 due to lower amount of days to repay their obligations.
7. Total assets turnover = sales/ total assets
Details Sales Total Assets

2018 802,592,068 2,463,191,060
2019 925,430,760 2,537,413,600
Total assets turnover=
2018 0.33
2019 0.36
Interpretation:
2018: for every 1tk of assets, the company generates 0.33tk in sales.
9
Analysis: this ratio helps investors understand how efficiently assets are utilized to
generate sales. The company has a low TAT in 2018 as well as in 2019. Because they
have a huge asset base, so they will become slow in turning over their assets through
sales/revenue. This might mean they require a longer time to generate sales/revenue. It
might also mean that they are not utilizing their inventory.
DEBT RATIOS
8. Debt ratio = Total liabilities ÷ Total assets
Details 2019 2018
Total liabilities 675,135,996 781,664,790
Total asset 2,537,413,600 2,463,191,060
Year Calculation Result
2019 (675,135,996 / 26.61%

2,537,413,600) × 100%
2018 (781,664,790 / 31.73%

2,463,191,060) × 100%
Interpretation:
In 2019 for IT Consultants Limited, 26.61% of assets are being financed by debt, while it
is 31.73% in 2018.
Analysis:
10
Debt ratio less than or equal to 15% is considered as healthy for any company. Compared
to the slandered IT Consultants Limited is not performing well for the year 2018 and
2019. Because their debt ration are much higher than 15%. On the other hand we can also
see that the debt ratio is decreasing for this company which is a positive sign.
In terms of investment If we compare between IT Consultants Limited and INTECH

limited then INTECH Limited would be the best option because their debt ratio is lower
than its competitor.
9. Times interest earned ratio
Times interest earned ratio = EBIT ÷ Interest Expense
Details 2019 2018
EBIT 233,746,565 182,452,295
Interest expense 51,424,851 48,217,354
2019 233,746,565 / 51,424,851 4.55 times
2018 182,452,295 / 48,217,354 3.78 times
Interpretation:
In 2019 earnings of IT Consultants Limited is 4.55 times more than its annual interest
obligations. Which was 3.78 in 2018.
Analysis:
Usually the higher the ratio the better the company’s performance. If we compare
between 2018 and 2019 we can see that the company is performing better than its
previous year. Which is a good sign for the investor to invest in this business.
11
If we consider between these two companies in terms of future investment the IT
consultants limited would be safer option. Because INTECH is very unpredictable.
PROFITABILITY RATIOS
10. Gross Profit Margin= (Sales – Cost of goods sold) ÷ Sales
= Gross profit ÷ Sales
Details 2019 2018
Gross Profit 418,274,486 359,812,401
Sales 925,430,760 802,592,068
2019 (418,274,486/ 45.2%

925,430,760) × 100%
2018 (359,812,401/ 44.8%

802,592,068) × 100%
Interpretation and analysis: IT Consultants Ltd. has earned 0.452 taka of gross
profit for every 1 taka of sales in 2019, which was 0.448 taka in 2018.
As shown in table given above, IT Consultants Ltd. Company has a higher gross
profit margin 45% which indicates that they are making a reasonable profit on sales.
So, the investors would want to pay for this company. The company had almost same
gross profit margin in both years 2018 and 2019, which is a good indicator that their
profitability of gross profit margin is not fluctuating so much.
11. Operating Profit Margin
Operating profit margin= Operating profits ÷ Sales
12
Details 2019 2018
Operating profits 237,244,621 181,848,734
Sales 925,430,760 802,592,068
2019 (233,746,565 / 25.64%

925,430,760) x 100
2018 (181,848,734/ 22.66%

802,592,068) x 100
Interpretation and analysis:
IT Consultants Ltd. Company has earned 0.2564 taka before interest and taxes for
every 1 taka of sales, which were 0.2266 taka in 2018.
Usually the higher the ratio is, the better the company’s performance. The above table
shows us that the company has earned a good operating profit ratio of 25.64 cents per
taka sales after paying all the operating expenses of the company. The ratio has
increased by 2.98 cents from year 2018 to 2019, which a good indicator for the
company.
12. Net Profit Margin
Net profit margin = Earnings available for common stockholders ÷ Sales
Details 2019 2018
13
Earnings available for 179,944,694 136,616,573
common stockholders
Sales 925,430,760 802,592,068
2019 (179,944,694 / 19.44%

925,430,760) x 100
2018 (136,616,573 / 17.02%

802,592,068) x 100
Interpretation and analysis: From the above table, we can see that IT Consultants
had a net profit margin ratio 17.02 in 2018, which is now 0.1944 taka sales in 2019.
This is a good indicator that the company is having a good net profit margin ratio in
terms of the profitability of the company. This company might be spending too much
on operating expenses which should be reduced. Otherwise the company may face
loss in the upcoming years, which might affect their financial position in the market
as well.
13. Return On total Assets
Return on Total Assets (ROA) = Earnings available for common stockholders ÷ Total
assets
Details 2019 2018

common stockholders
Total Assets 2,537,413,600 2,463,191,060
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2019 (179,944,694 / 7.09%

2,537,413,600) x 100
2018 (136,616,573 / 5.55%

2,463,191,060) x 100
Interpretation and analysis: IT Consultants had earned 7.09% return using its assets
in 2019, which were 5.55% in 2018.
Return On total Assets shows how profitable a firm is relative to its assets. This is a
key indicator that a company is profitable or not. That means, Intech has efficiently
used its assets in 2018 to generate 9.9% return. The industry average rate of return on
total assets is approximately 6% to 8%. In this case, Intech had better position in 2018
(9.9); whereas it could not use its assets efficiently in 2019 to generate that return. It
reflects that, ITC Ltd. had earned better returns in 2019 than the previous year using
their assets efficiently. ITC need to hold this position and do better in the future to
increase its Return on total assets.
14. Return on Equity
Return on Equity (ROE) = Earnings available for common stockholders ÷ Common

stock equity
Details 2019 2018

common stockholders
Common stock equity 1,862,277,604 1,681,526,270
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2019 (179,944,694 / 9.66

1,862,277,604) x 100
2018 (136,616,573 / 8.12

1,681,526,270) x 100
Interpretation and analysis: ITC had 9.66% return on its investment or equity in
2019 and 8.12% in 2018. It shows that, the company has almost near amount of return
from its equity or investment. This is a bad indication that ITC has a lower Return on
equity, where industrial rate is 11% return on equity.
15. Earnings per Share
Earnings per Share (EPS) = Earnings available for common stockholders ÷ Number
of shares of common stock outstanding
Details 2019 2018

common stockholders
Common stock equity 1,144,572,000 1,040,520,000
2019 (179,944,694/ 1.57

1,144,572,000)x 10
2018 (136,616,573 / 1.31
16
1,040,520,000) x 10
Interpretation and analysis: for every share, the company is earning 1.57 taka in
2019 and 1.31 taka in 2018. ITC had a good EPS in both years 2018 and 2019
respectively as 1.31 and 1.57, which is almost same.
Market Ratios
16. Price Earnings (P/E) Ratio = Market price per share of common Stock ÷ Earnings per
share
IT Consultants limited:
Details 2019 2018

Market price per share of 16.27 14.69
common
Stock
Earnings per share 1.57 1.19
year Calculation result

2019 16.27/1.57 10.36
2018 14.69/1.19 12.34
Interpretation:
A premium of 10.36 times greater than the average earnings in 2019 and 12.34 in 2018.
P/E ratio shows what the market willing to pay for any stock based on its past or future earnings.
For INTECH the value was 10.36 in 2019 and 12.34 in 2018
Analysis:
The higher the value the better the performance. 15 is the slandered value of P/E ratio. Bellow
15 is considered as cheap and over 18 is considered as expensive. For IT Consultants both 2019
and 2018 the value is very low. So it is considered as cheap stock.
Based on the value investors should go for INTECH limited because it’s showing promising value
in 2019.
17. Market/Book (M/B) ratio:
17
Market price per share of common Stock / Book value per share of common Stock
Book value per share of common Stock = Common stock equity / number of shares of common
stock outstanding
IT consultants = 1,862,277,604 / 294,578,430 = 6.32
= 1,681,526,270 / 294,578,430 = 5.71
IT Consultants Limited:
Details 2019 2018

common
Stock
Book value per share of 5.71 6.32
common
Stock
Year calculation result

2019 16.27/ 5.71 2.84
2018 14.69/ 6.32 2.32
Interpretation:
It seeks to determine the value (overvalued / undervalued) of a stock a stock compared to the
market value. Here the value for INTECH in 2019 is 2.84 and 2.32 in 2018.
Analysis:
Traditionally any value under 1.0 is considered as a good book value but investors often consider
3.00 as a slandered value and both in 2019 and 2018 IT consultants is performing well in terms
of book value.
Between these two companies INTECH is showing good book value ratio so investors should
invest in INTECH rather than IT Consultants.
RATIO ANALYSIS FOR INTECH LIMITED
LIQUIDITY RATIOS
1. Current ratio = current assets/current liabilities
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Details Current assets Current liabilities
2018 207,588,098 22,569,645
2019 230,129,559 23,408,714
Current ratio =
2018 9.20 times

2019 9.83 times
Interpretation:
Analysis: this ratio show the liquidity position of a business (whether the
company could meet their obligations or not). The benchmark of the ratio is 2:1.
The company ratio in 2018 is not good, they were able to meet their obligation but
it shows that they had a lot cash idling in the business. In 2019 the company could
as well meet their obligation since they had more current assets than current
liabilities, but one could say that they are not using their assets efficiently because
the cash is idling in the business. They have cash that is remaining idle in the
business, so they are not utilizing their assets efficiently. Given the fact that the
company have been in business for a long time now.
2. Quick ratio (acid-test ratio) = current assets – inventory/current liabilities
Details Current assets Inventory Current Liabilities

2018 207,588,098 38,323,394 22,569,645
2019 230,129,559 48,169,002 23,408,714
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Quick ratio =
2018 7.50 times

2019 7.77 times
Interpretation:
Analysis: this ratio is also used to determine the liquidity of the company, but here the
inventory which is the least liquid asset is subtracted from the calculation. The bench
mark of the ratio is 1:1. The lower the level of inventory, the better the liquidity position.
So the company had a better ratio in 2018 than in 2019 but that the ratio is bad in both
2018 and 2019, even though the company is able to meet obligation. But they are not
utilizing their assets efficiently.
ACTIVITY RATIOS
3. Inventory turnover = cost of goods sold/inventory
Details Cost of goods sold Inventory

2018 57,664,378 38,323,394
2019 50,853,285 48,169,002
Inventory turnover=
2018 1.50 times

2019 1.06 times
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Interpretation:
Analysis: it tells us the number of times a company have restocked its inventory. In an
annual year, how many times has the company changed their inventory? In both years the
inventory turnover is too low. The higher the level of inventory turnover, the better. So
you can say the company had a better ratio in 2018 than in 2019 but that does not mean
the ratio is bad in 2019. Though their inventory turnover is low, but this do not
necessarily affect their profit margin. This is an IT (technology) company, they provide
services, and so high inventory turnover is not their primary concern.
4. Average age of inventory= 365/inventory turnover
2018 365/1.50 243.3 days

2019 365/1.06 344.3 days
Interpretation:
Analysis: this is the same as inventory turnover but here it is calculated in days. It
shows in how many days does the company reshelf their inventories. The lower
the number of days the better because one would say it is better to change their
inventory as early as possible. So the result is better in 2018 (but still high). But
this is not always the case. Even though the result is so high in both years, this is
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not their primary concern because of the industry it is in. it does not determine the
profitability of the company.
5. Average collection period = accounts receivable/average sales per day
Details Accounts receivable Average sales per day

2018 47,352,164 136,476,604
2019 64,388,583 119,113,752
Average collection period=
2018 126.64 days

2019 197.31 days
Interpretation:
Analysis:
This shows the number of days the company receive their money from those
owing them. So the lower the number of days the better for the company. Which
means that the amount of days is better in 2018 than in 2019 but it is still high in
both years.
6. Average payment period = accounts payable/ average purchases per day
Details Accounts payable Average purchases per

day
2018 18,159,907 0.70(57,664,378)/365
22
2019 14,002,884 0.70(50,853,285)/365
Average payment period=
2018 164.2 days

2019 143.6 days
Interpretation:
Analysis: it shows the number of days it takes the company to pay their creditors.
The company would want the average payment period to be as high as possible.
The payment period in 2018 was better than the payment period in 2019 because
they had more time in 2018 to pay back their obligations. The higher the days, the
better for the company.
7. Total assets turnover = sales/ total assets
Details Sales Total Assets

2018 136,476,604 358,752,682
2019 119,113,752 388,445,967
Total assets turnover=
2018 0.38
2019 0.31
Interpretation:
23
Analysis: this ratio helps investors understand how efficiently assets are utilized to
generate sales. The company has a low TAT in 2018 as well as in 2019. Because they
have a huge asset base, so they will become slow in turning over their assets through
sales/revenue. This might mean they require a longer time to generate sales/revenue. It
might also mean that they are not utilizing their inventory.
DEBT RATIOS
8. Debt ratio = Total liabilities ÷ Total assets
Details 2019 2018
Total liabilities 53,266,198 35,931,117
Total asset 388,445,967 358,752,682
2019 (53,266,198 / 388,445,967) 13.71%

× 100%
2018 (35,931,117 / 358,752,682) 10.02%

× 100%
Interpretation:
In 2019 for INTECH 13.71% of income went toward paying all recurring debt payments.
Which was 10.02% in 2018.
Analysis:
Debt ratio less than or equal to 15% is considered as healthy for any company. Compared
to the slandered INTECH is performing well for the year 2018 and 2019. But we can see
that the ratio increased in 2019 by 3.69% which is a red sign for the company.
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9. Times interest earned ratio
Times interest earned ratio = EBIT ÷ Interest Expense
Details 2019 2018
EBIT 13,148,074 33,742,878
Interest expense 4,256,313 1,754,704
2019 13,148,074 / 4,256,313 3.09 times
2018 33,742,878 / 1,754,704 19.23 times
Interpretation:
In 2019 earnings of INTECH is 3.09 times more than its annual interest obligations.
Which was 19.23 in 2018.
Analysis: usually the higher ‘the ratio the better’ the company’s performance. If we
compare between 2018 and 2019 we can see that the company is losing its performance.
The ability to meet the interest obligations were higher in 2018 which drastically declined
in 2019. And the change is very unpredictable.
PROFITABILITY RATIOS
10. Gross Profit Margin= (Sales – Cost of goods sold) ÷ Sales
= Gross profit ÷ Sales
Details 2019 2018
Gross Profit 68,260,468 78,812,226
25
Sales 119,113,752 136,476,604
2019 (68,260,468/ 57.3%

119,113,752) × 100%
2018 (78,812,226/ 57.7%

136,476,604) × 100%
Interpretation and analysis:
INTECH has earned 57.3% of gross profit for every 1 taka of sales in 2019, which
was 57.7% in 2018.
The gross profit margin ratio analysis is an indicator of a company’s financial health.
It tells investors how much gross profit every dollar of revenue a company is earning.
As shown in table given above, Intech Ltd. Company has a higher gross profit margin
which indicates that they are making a reasonable profit on sales. So, the investors
would want to pay for this company. INTECH had the same gross profit margin in
both years 2018 and 2019, which is a good indicator that their profitability of gross
profit margin is not fluctuating.
11. Operating Profit Margin
Operating profit margin= Operating profits ÷ Sales
Details 2019 2018
Operating profits 13,148,074 33,742,878
Sales 119,113,752 136,476,604
26
2019 (13,148,074 / 11.03%

119,113,752) x 100
2018 (33,742,878 / 24.7%

136,476,604) x 100
Interpretation and analysis: Intech Ltd. Company has earned 11.03% before
interest and taxes for every 1 taka of sales, which were 24.7 % in 2018.
As we can see from the table that, Intech has made 24.7 % operating profit per taka
sales in 2019; which decreased to 11.03% in 2019. However, it indicates that Intech
Company has a higher risk to lose its operating profit in the next year that generated
from this year after paying all the operating costs. It shows that, Intech’s efficiency in
controlling the costs and expenses associated with the business operations is not
good. The company needs to increase its efficiency in order to maintain operating
profit margin as high as possible.
12. Net Profit Margin
Net profit margin = Earnings available for common stockholders ÷ Sales
Details 2019 2018

common stockholders
Sales 119,113,752 136,476,604
2019 (12,358,205 / 10.83%
27
119,113,752) x 100
2018 (35,411,205 / 25.95%

136,476,604) x 100
Interpretation and analysis: The net profit margin is equal to how much net income
or profit is generated as a percentage of revenue. Net profit margin is typically
expressed as a percentage but can also be represented in decimal form. The net profit
margin illustrates how much of each dollar in revenue collected by a company
translates into profit after paying all the operating expenses as well as taxes and
interests. From the above table, we can see that INTECH had a net profit margin ratio
25.95 in 2018, which is now half of the previous ratio only 10.83 cents per taka sales
in 2019. It indicates that this company might be spending too much on operating
expenses which should be reduced. Otherwise the company may face loss in the
upcoming years, which might affect their financial position in the market.
13. Return on total Assets
Return on Total Assets (ROA) = Earnings available for common stockholders ÷ Total
assets
Details 2019 2018

common stockholders
Total Assets 388,445,967 358,752,682
2019 (12,358,205 / 3.2%

388,445,967) x 100
28
2018 (35,411,205 / 9.9%
358,752,682) x 100
Interpretation and analysis: Intech had earned 3.2% on return using its assets in
2019, which were 9.9% in 2018. That means, Intech had 3 times better return on their
assets in 2018 than return on assets in 2019.
Return On total Assets shows how profitable a firm is relative to its assets. This is a
key indicator that a company is profitable or not. That means, Intech has efficiently
used its assets in 2018 to generate 9.9% return. The industry average rate of return on
total assets is approximately 6% to 8%. In this case, Intech had better position in 2018
(9.9); whereas it could not use its assets efficiently in 2019 to generate that return.
14. Return on Equity
Return on Equity (ROE) = Earnings available for common stockholders ÷ Common

stock equity
Details 2019 2018

common stockholders
Common stock equity 335,179,770 322,821,565
2019 (12,358,205 / 3.69%

335,179,770) x 100
29
2018 (35,411,205 / 11%
322,821,565) x 100
Interpretation and analysis: Intech had earned 3.69% return on its equity or through
its investment, where it had 11% returns on equity in 2018.
ROE is an indicator of expected or future growth estimate of stock and dividend;

which shows whether the company is earning good or bad amount of return on its
equity or investment. The above table shows us that the company had a good growth
of stock and dividend in 2018 (11%) but it decreased to 3.69% in 2019 because of the
decrease in earnings available for common stockholders.
15. Earnings per Share
Earnings per Share (EPS) = Earnings available for common stockholders ÷ Number
of shares of common stock outstanding
Details 2019 2018

common stockholders
Common stock equity 313,212,260 282,173,210
2019 (12,358,205 / 0.39

313,212,260) x 10
2018 (35,411,205 / 1.13

282,173,210) x 10
30
Interpretation and analysis: The Intech Company had healthy earnings per share
(1.13) in 2018 but it decreased to 0.39 in 2019 as the net income after paying taxes
and interests were lower than the previous year.
Market Ratios
16. Price Earnings (P/E) Ratio = Market price per share of common Stock ÷ Earnings per
share
INTECH Limited:
Details 2019 2018

common
Stock
Earnings per share 0.39 1.13

2019 10.7/0.39 27.44
2018 11.44/1.13 10.12
Interpretation:
A premium of 27.44 times greater than the average earnings in 2019 and 10.12 in 2018.
P/E ratio shows what the market willing to pay for any stock based on its past or future earnings.
For INTECH the value was 27.44 in 2019 and 10.12 in 2018
Analysis:
The higher the value the better the performance. 15 is the slandered value of P/E ratio. Bellow
15 is considered as cheap and over 18 is considered as expensive. For INTECH 2019 was good
year because the value is very high on the other hand in 2018 it was very cheap.
17. Market/Book (M/B) ratio

Formula:
Market price per share of common Stock / Book value per share of common Stock
Book value per share of common Stock = Common stock equity / number of shares of common
stock outstanding
INTECH = 313212260 ÷ 31039050 = 10.1 (2019)
= 282173210 ÷ 25652110 = 11 (2018)
31
INTECH Limited:
Details 2019 2018

common
Stock
Book value per share of 10.1 11
common
Stock

2019 10.7/10.1 1.06
2018 11.44/11 1.04
Interpretation:
It seeks to determine the value (overvalued / undervalued) of a stock a stock compared to the
market value. Here the value for INTECH in 2019 is 1.06 and 1.04 in 2018.
Analysis:
traditionally any value under 1.0 is considered as a good book value but investors often consider
3.00 as a slandered value and both in 2019 and 2018 INTECH is performing well in terms of book
value.
32
SUMMARY OF THE RATIOS FOR IT CONSULTANTS LIMITED
DETAILS Y EAR: 2018 YEAR: 2019
1. Current ratio 1.81 times 2.23 times
2. Quick ratio 1.32 times 1.67 times
3. Inventory turnover 1.22 times 1.37 times
4. Average age of 299.2 days 266.4 days

inventory
5. Average collection 186.9 days 178.3 days
period
6. Average payment 102 days 27 days
period
7. Total assets 0.33 0.36
turnover
8. Debt ratio 31.73% 26.61%
9. Times interest 3.78 times 4.55 times

earned ratio
33
10. Gross profit margin 44.8% 45.2%
11. Operating profit 22.66% 25.64%

margin
12. Net profit margin 17.02% 19.44%
13. Return on total 5.55% 7.09%

assets
14. Return on common 8.12 9.66
equity
15. Earnings per share 1.31 1.57
16. Price/earnings (P/E) 12.34 times 10.36 times

ratio
17. Market/book (M/B) 2.32 2.84
ratio
34
SUMMARY OF THE RATIOS FOR INTECH LIMITED
DETAILS YEAR: 2018 YEAR: 2019
1. Current ratio 9.20 times 9.83 times
2. Quick ratio 7.50 times 7.77 times
3. Inventory turnover 1.50 times 1.06 times
4. Average age of 243.3 days 344.3 days

inventory
35
5. Average collection 126.64 days 197.31 days
period
6. Average payment 164 days 144 days
period
7. Total assets 0.38 0.31
turnover
8. Debt ratio 10.02% 13.71%
9. Times interest 19.23 times 3.09 times

earned ratio
10. Gross profit margin 57.7% 57.3%
11. Operating profit 24.7% 11.03%

margin
12. Net profit margin 25.95% 10.83%
13. Return on total 9.9% 3.2%

assets
14. Return on common 11% 3.69%
equity
15. Earnings per share 1.13 0.39
16. Price/earnings (P/E) 10.12 times 27.44 times

ratio
17. Market/book (M/B) 1.04 1.06
ratio
36
37
Cross section analysis
We do this analysis to compare the ratios between the two companies.
Current ratio: We can see that IT Consultants has a better ratio than Intech
limited because Intech has a very high ratio. So IT Consultants are utilizing
their assets more efficiently than Intech limited. Intech has lower current
assets and low amount of current liabilities compared to IT Consultants.
They can both meet their obligations.
Quick ratio: like the current ratio, the quick ratio is also far better for IT
Consultants. And they can both meet their obligations.
Inventory turnover: the ratio of both countries are not that different, but the
trend is better in IT Consultants because they are improving from 1.22 to
1.37 times but Intech limited declined from 1.50 to 1.06 times.
Average age of inventory: the ratio is high, showing that they take longer
days to restock their inventories. It is reduced from 2018 to 2019 for IT
Consultants but the days it takes for Intech to restock their inventories is
increasing.
Average collection period: the lower the ratio the better for the companies.
Even though they both have high ratios, but the ratio is reducing with time
for IT Consultants and increasing with time for Intech limited.
Average payment period:
Total assets turnover: the TAT ratio is lower for both companies and they
both were in business for a long time, so they have a large asset base,
meaning they are not utilizing their inventories or their non-current assets
are not used at full capacity.
38
Debt ratio: having a low debt ratio means ownership is going away from the
business, and that is not a good thing, it is better to make a balance, because
debt is more cost effective. Both companies have a low debt ratio. IT
Consultants is better than Intech still but their ratio declined from 2018 to
2019.
Times interest earned ratio: Intech had a high ratio of 19.23times in 2018 but
in 2019 it declined to 3.09 times. Which IT Consultant, even though it is low
but they managed to have an increase from 3.78 times in 2018 to 4.55 times
in 2019. It is better to experience growth, than going backwards.
Gross profit margin: the ratio was better for Intech even though they have a
slight decline in 2019. IT consultants had an increase from 2018 to 2019 (but
the ratio is still lower that Intech limited.
Operating profit margin: Intech having a little bit higher ratio is not
noticeable because it declined so badly in 2019. While IT Consultants
maintained a growth in the ratio.
Net profit margin: it show that Intech limited has a high operating expenses
which reduces their profit margin. They experience a large drop from 2018
to 2019. While IT Consultants improved. IT Consultants and a better net
profit margin.
Return on total assets: the higher the better Intech had a higher ROA in 2018
but it declined a lot. They are not efficiently using their assets to generate
earnings. IT Consultants is doing better from 2018 to 2019.
Return on equity: like the ROA, Intech as well had a decline and IT
consultants increased, but the ratio are still low. So they are not using their
equity efficiently to generate earnings.
39
Earnings per share: the higher the better but they are quite low for both
companies. This indicates that the company performances is not too good.
Price earnings ratio: Intech’s stock is overvalued because it is high in 2019,

seeing the performance of the company, one could only say it is overvalued
because they are not doing so well, in fact they are declining from 2018 to
2019. As for IT Consultants, the stocks are undervalued or selling at their
true values. They experienced a declined while Intech increased so much.
Market /book ratio: the higher the ratio, the better for the company. IT
Consultants is in better position than Intech because they have a higher ratio.
40
DU-Pont Analysis
INTECH LTD. (Calculations)
Return On total Assets:
Year
Details
2019 2018
Net Profit Margin (NPM) 10.83 25.95
Total Assets Turnover

0.31 0.38
(TAT)
Formula: Return On total Assets (ROA) = NPM x TAT
2019 10.38 x 0.31 3.2
2018 25.95 x 0.38 9.9
Financial Leverage Multiplier (FLM):
Formula: FLM= Total Assets ÷ Common Stock Equity
Details 2019 2018
Total Assets 388,445,967 358,752,682
41
Common Stock Equity 335,179,770 322,821,565
Financial Leverage 1.111303336

1.158918293
Multiplier
Return on Equity (ROE):
Formula: ROE= ROA x FLM
Details 2019 2018
Return On total Assets 3.2 9.9
Financial Leverage
1.158918293 1.111303336
Multiplier
Return On Equity 3.7 11
IT Consultants LTD. (Calculations)
Return On total Assets:
Year
Details
2019 2018
Net Profit Margin (NPM) 19.44 17.02
Total Assets Turnover

0.36 0.33
(TAT)
Formula: Return On total Assets (ROA) = NPM x TAT
42
2019 19.44 x 0.36 7.09
2018 17.02 x 0.33 5.55
Financial Leverage Multiplier (FLM):
Formula: FLM= Total Assets ÷ Common Stock Equity
Details 2019 2018
Total Assets 2,537,413,600 2,463,191,060
Common Stock Equity 1,862,277,604 1,681,526,270
Financial Leverage
1.362532414 1.464854343
Multiplier
Return on Equity (ROE):
Formula: ROE= ROA x FLM
Details 2019 2018
Return On total Assets 7.09 5.55
Financial Leverage
1.362532414 1.464854343
Multiplier
Return On Equity 9.66 8.12
DuPont Analysis is the in-detailed expression of Return on Equity. The analysis itself
gives the knowledge about the companies’ financial performances in certain key factors
and the idea for investors to invest in the best possible companies. Following the
DUPONT Analysis of the two companies (INTECH Ltd. Company & IT Consultants Ltd.
43
Company), it is worth noting that operating well in a certain key factor would not
necessarily yield higher return on equity, meaning the companies have to perform well in
all three aspects to achieve higher return on equity.
According to the calculations shown above if we consider the year 2018, we can see that
INTECH had a better return on their assets than ITC, meaning INTECH has efficiently
used their assets to generate higher return or earnings. However, their assets turnover
ratios were almost same but INTECH had higher net profit margin than ITC. INTECH
had net profit margin of 25.95; whereas, the net profit margin for ITC was 17.02.
Investors willing to invest in the ITC Company should know that, it was having issues
with cost minimization or it had lower sales for the year 2018 and that is why, it has
lower net profit margin. INTECH has higher net profit margin because it has better
bargaining power with its suppliers or it has generated better amount of sales. On the
other hand, ITC had greater return on assets than INTECH in 2019; meaning ITC has
efficiently used their assets to generate higher return or earnings in that year. In this case,
their total assets turnovers were almost same but, ITC had 19.44 net profit margins and
INTECH had net profit margin of 10.83 which is quite lower than ITC. So, ITC has
higher ROA because of the higher net profit margin.
Modified DuPont Formula Analysis:
If we look into the Return on Equity (ROE) for INTECH and ITC, INTECH (11) had a
higher Return on Equity than ITC (8.12) in 2018. The Financial Leverage Multiplier for
both companies were very close (1.4 & 1.1), but there was a difference between their
return on assets of about (9.9- 5.55) = 4.4% which lead ITC to have lower return on
equity. INTECH is utilizing their assets more efficiently than ITC is. So, INTECH
LTD COMPANY is more profitable than ITC LTD COMPANY for the investors to
invest in the IT industry.
44
RECOMMENDATION AND CONCLUTION
As we can see Intech limited has a very high current ratio and quick ratio. This is not a
good condition compared to IT Consultants, the company is far away from the
benchmark in both 2018 and 2019. They should try to work on these ratios because the
fact is that they have being in business for more than 20 years now. So which means they
have cash that remains idle in the business (not utilizing their assets efficiently). They can
use this to go for further investment/ expansion of the business or rather buy more non-
current assets. This will reduce current assets and then helps reduce the ratios.
The debt ratio for Intech limited is quite low compared to IT consultants. Only 10% of
their assets are being financed by debt in 2018 and 13.7% in 2019. One could say this is a
safe margin for the company in terms of getting loans easily form creditors, like nobody
would gauge it as a risky company. But in this case, ownership is going away, so keeping
a balance would be advisable. As long as the debt ratio is not too high, it is better for the
company to take more loans because debt is more cost effective, there are tax benefits out
of it.
The companies are not that profitable, their profitability ratios are low, low profit
margins. Intech had a decrease in ROA from 2018 to 2019, while IT Consultants had an
increase from 2018 to 2019. The companies should work on efficiently using their assets
to generate earnings, in order to raise the ratio.
45
The companies needs to take opportunity of the short-term financing through loans
because it has huge scope to meet its short term liabilities. It could also be implied that
the company does not utilize their current assets more by paying off current debts. Both
companies should focus on the collection of their receivables earlier maybe by offering
discounts and calibrate with the average payment and increase payment period
significantly to stabilize their cash inflow. For the companies to maintain positive cash
flow, they should take more time in paying their payables, for a balance since their
collection periods are high. They should also focus on adopting new cost minimization
strategies to reduce their operating expenses.
Looking at all the financial aspects of our chosen companies, considering the fact that the
characteristics and approaches may vary from both companies, (even though they are in
the same industry) and financial performances may have changed in the recent year. But,
following the analysis of our report, IT Consultants Limited is far ahead of the
competition in terms of financial management and also one can arguably say that they are
also ahead in terms of profitability because we see they are improving from 2018 to 2019.
Compared to Intech Limited, they are declining so badly in terms of profitability of the
company. In terms of solvency (financial risk), both companies are in good health. They
are not efficient enough. It Consultants limited is also leading in terms of market position.
Reasons might be that they are utilizing their resources more efficiently, because we see
that Intech limited has a high current and quick ratios.
46

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NORTH SOUTH UNIVERSITY

Submission Date: 14.01.21

Topic: Ratio Analysis for InTech Ltd. & IT Consultants Ltd.

Department of Accounting and Finance

Md Shafiqul Islam 1620184630

OVERVIEW OF THE COMPANIES

Established in 2000, IT Consultants Limited (ITCL--owns payment processing

Their specialties include: Payment System Processor, Online Transaction Processing,

Intech limited is an Internet solutions company offering a comprehensive set of products

1. Current ratio = current assets/current liabilities

Details Current assets Current liabilities

2018 1.81 times

2. Quick ratio (acid-test ratio) = current assets – inventory/current liabilities

2018 1.32 times

3. Inventory turnover = cost of goods sold/inventory

Details Cost of goods sold Inventory

2018 1.22 times

4. Average age of inventory= 365/inventory turnover

2018 365/1.22 299.2 days

5. Average collection period = accounts receivable/average sales per day

Details Accounts receivable Average sales per day

Average collection period=

2018 186.9 days

6. Average payment period = accounts payable/ average purchases per day

Details Accounts payable Average purchases per

Average payment period=

2018 101.7 days

7. Total assets turnover = sales/ total assets

Details Sales Total Assets

Total assets turnover=

8. Debt ratio = Total liabilities ÷ Total assets

Details 2019 2018

Total liabilities 675,135,996 781,664,790

Total asset 2,537,413,600 2,463,191,060

Year Calculation Result

2019 (675,135,996 / 26.61%

2018 (781,664,790 / 31.73%

In terms of investment If we compare between IT Consultants Limited and INTECH

9. Times interest earned ratio

Times interest earned ratio = EBIT ÷ Interest Expense

Details 2019 2018

EBIT 233,746,565 182,452,295

Interest expense 51,424,851 48,217,354

Year Calculation Result

2019 233,746,565 / 51,424,851 4.55 times

2018 182,452,295 / 48,217,354 3.78 times

10. Gross Profit Margin= (Sales – Cost of goods sold) ÷ Sales

= Gross profit ÷ Sales

Details 2019 2018

Gross Profit 418,274,486 359,812,401

Sales 925,430,760 802,592,068

Year Calculation Result

2019 (418,274,486/ 45.2%

2018 (359,812,401/ 44.8%

11. Operating Profit Margin

Operating profit margin= Operating profits ÷ Sales

Operating profits 237,244,621 181,848,734

Sales 925,430,760 802,592,068

Year Calculation Result

2019 (233,746,565 / 25.64%

2018 (181,848,734/ 22.66%

Interpretation and analysis: