Chapter – 1 : Introduction

1.1 Introduction
1.2 Objective of the Study
1.3 Scope of the Study
1.4 Methodology of the Study

Page No: 1
1.1 Introduction
In today’s worldwide competitive environment companies are competing in terms of
product quality, delivery, reliability, after-sales services and customer satisfaction.
Traditionally organizational performance has been dependant on financial performance,
however this is questionable as figures only reflect results of past decisions and do not
take into account the mindset of investors, who are more concerned with likely future
performance.

Thus the importance of assessing and organization’s non-financial performance has

come to the fore in order to accurately assess overall performance and make educated
predictions. There will always be the need for accurate financial data however and this
element should not be discounted. Choosing performance measures is a challenge.
Performance measurement systems and compensating managers.

My topic is “Evaluation of Financial Performance of Confidence Cement Limited”.

In this report, the company’s performance has been evaluated in aspect of financial
performance indicator and overall performance has been summarized.

Page No: 2
1.2 Objective of the Study

The main objective of this study is to evaluate the overall performance of Confidence
Cement Limited. To achieve the main objective the following specific objective are
covered:

To examine the authorities involved in decision making (organization

structure).
To evaluate the non financial performances like as Customers
satisfaction, Employee satisfaction, Production, Sales, Quality and Brand
etc.
To examine the financial performance such as liquidity ratio, Activity
ratio, Profitability ratio, Debt-coverage ratio and Owner’s ratio etc.
To identify the problems of financial performance of Confidence Cement
Limited.
SWOT analysis
To give some policy to improve overall performance of Confidence
Cement Limited.

1.3 Scope of the Study

Confidence Group is one of the largest conglomerates in Bangladesh, involved in the

manufacturing of mid-tech engineering products for both domestic and international use.
But this report covers only one company that is Confidence Cement Limited. The
financial performances of five years (2011-2015) have been presented in this report.
Information from marketing department and human resource department has been
obtained for non-financial indicators. Company’s record of these years will be used for a
comprehensive analysis through various ratio calculations and further their necessary
assessment to project future performance of Confidence Cement Limited in Bangladesh
market.

Page No: 3
1.4 Methodology of the Study

Methodology comprises of all the activities that is required to conduct the study and
generate it into a report. In order to complete the study, mainly secondary data are used.

Here the following sources of secondary data have been used:

Financial Statements of Confidence Cement Limited

Customer Satisfaction report prepared by Confidence Cement Limited
Relevant journals/Articles from the websites
Information from official websites

From the annual reports of the company for the last five years, various liquidity ratios
will be calculated for the analysis on how it is performing in its market in Bangladesh.
These findings will also help the projection of future performance of the company. On
the other hand the return on investment, asset utilization, will also be found and
analyzed further for a more in depth view of the company’s ability to perform in
Bangladesh.

These findings and various ratio analyses should be used for getting the idea of how the
company is performing and the impact of its decisions on its growth, debt position, asset
utilization, various turnovers, margin, owner’s share and profitability on its actual
performance. These findings will also lead to a future projection of the company in
Bangladesh.

Page No: 4
 Chapter – 2 : Organizational Overview
2.1 Background of the Company
2.2 Vision of Confidence Cement Limited
2.3 Mission of Confidence Cement Limited
2.4 Values of Confidence Cement Limited
2.5 Products Offered by Confidence Cement Limited
2.6 Organogram of Confidence Cement Limited
2.7 Competitive Condition in Business
2.8 Corporate and Contact Information
2.9 Non Financial Performance
2.9.1 Customer Satisfaction
2.9.2 Employees Satisfaction
2.9.3 Production
2.9.4 Sales
2.9.5 Quality Control
2.9.6 Brand

Page No: 5
2.1 Background of the Company

Confidence Cement Limited is one of the main concern of Confidence Group is the
pioneer industry of this sector producing high quality cement established in 1994 with a
capacity of 7,00,000 MT per annum. It was also the country’s first private sector cement
manufacturing company in Bangladesh. It is a leading blue-chip company in the local
stock exchange and there it has been among the top 20 performing companies for the last
five years.

Confidence Cement Limited is the first ISO-9002 certified Cement manufacturer in

Bangladesh. It has a unique management system in quality assurance, Marketing, Sales
and procurements. It manufactures Portland Cement and Portland Composite
Cement. Confidence Cement aims to be the number one cement manufacturing
company in Bangladesh through continuous development and by producing high &
consistent quality cement to meet all customers requirement at all time.

One of Confidence Cement Limited quality policy is to maintain BSTI Standard. In the
year 2003 BSTI adopted European standard EN 197-1:2000 as BDS standard in cement
sector. It is noted that confidence Cement specification is much higher than the
parameters specified by BDS EN 197-1:2000 and meets the ASTM standard (IS-8112).

Confidence Cement Limited is customer friendly company. Basically it expand its

business in Chittagong and Sylhet Division. To attain competitive advantage and fulfill
its goal Confidence Cement Limited has some extraordinary features. Some of them are
discuss below.

Page No: 6
 User can saving up to 15% on cement costs by using confidence cement,
as the strength of confidence cement is much higher than the other
ordinary cement. The higher grade of concrete achieved by using
Confidence Cement enable further saving of up to 5%-10% on steel costs,
depending upon the type of construction.
Confidence Cement has 3.33 MW power plant to ensure uninterrupted
power supply for smooth production and delivery.
The plant is being equipped with an advanced lab backed by sophisticated
computer system and computer facilities to closely monitor the quality
parameters. Every one hour interval this lab collect the cement samples
and take necessary prevention where required.
Cement delivery is done by conveyor belt from cement silo at factory
site, directly. So no old inventory remains in stock.
One stop service for the customers.
More than 100 tripper trucks and bulk carrier deployed for crying to
make sure the availability of cement on time.

Confidence Cement has pioneered a whole range of modern methods for quality
assurance and excelled itself in strategic marketing, consumer research, products
innovation and development. Confidence Cement is a symbol of quality in the arena of
Cement Company whose products are widely recognized to be of international
standards. In Cement Industry in Bangladesh, Confidence Cement is often use as the
synonyms of Durability, Strength, Reliability, and Economical.

Despite having one of the largest capacities in the Cement Industry sector, Confidence
Cement is over loaded with orders, and has little or no finished goods inventory in stock.
In addition, Confidence Cement has waiting lists and back orders for their products. It
may also be mentioned that most of Confidence Cement’s sales are on cash basis.

Page No: 7
Taking these factors into consideration, in addition to the country’s surging demand for
Cement, they decided to expand their business all over the country. Funding for the
company was arranged by banks/financial institutions under a syndication arrangement
while working capital of the company provided by a group of banks against bilateral
agreements.

For over a solid two decade the company6 has been virtually free from any industrial
dispute. Confidence Cement Limited today is proud to be one of the largest contributor
to the national exchequer by way of VAT, Power, Gas, and Income Tax & Customs
duties in the Cement sector. It employs 1200 workers, staffs & officers in the group.

Confidence Cement Limited has a higher long-term strength than an Ordinary Cement.
The long-term strength will continue to increase as time progresses.

There are four distinctive features of Confidence Cement Limited:

 Quality
 Strength
 Durability
 Economical

Page No: 8
2.2 Vision

Let’s Believe in our Brand

Confidence Group has to be among the top 3 (three) most valued and revered
conglomerates in Bangladesh. All of the brands under Confidence Group has to be most
respected in their respective market sphere in Bangladesh.

Let’s Believe in our Business

Confidence Group has to be a conglomerate of BDT 10,000 crore within 2020.

Let’s Believe in our Business

Confidence Group has to be among the top 3 (three) most socially and environmentally
compliant conglomerates in Bangladesh.

Let’s Believe in our Self

Every member of Confidence Group is chosen because of their uniqueness and

competence. So be proud being part of Confidence. Confidence has to be a preferred
brand of employment.

2.3 Mission

1. Let’s commit to our customers that our products and services shall ensure the
best value for their money.
2. Let’s adopt ‘Can do’ attitude in targeting every Goal.

Page No: 9
2.4 Values:
Let’s Believe in our Values:

 Leadership: be a role model, setting benchmarks through our products,

processes and people; constantly moving ahead of competition by differentiating
our products innovating our processes, increasing our market share and nurturing
talent to develop leaders within the organization.
 Respect: We embrace each individual’s unique talents and honor diverse life and
work styles. We operate in a spirit of cooperation and value human dignity.
 Integrity: We are each personally accountable for the highest standards of
behavior, including honesty and fairness in all aspects of our work. We fulfill our
commitments as responsible citizens and employees. We will consistently treat
customers and company resources with the respect they deserve.

 Cooperation:

 We work as a team to ensure the success of the whole Group

 We cooperate to reach our common goals
 We focus on the important issues for the business
 We choose solutions which are in the best interests of the Group

 Innovation: We acknowledge the weaknesses within our industry and create

ethical, forward thinking solutions to overcome them. We identify, develop and
deploy leading edge technology, employee development programs and process
improvement tools.

2.5 Products Offered by Confidence Cement Limited

 Portland Cement, CEM-I

 Portland Composite Cement, CEM-II/B-M(S-V-L)
 Readymix

Page No: 10
Page No: 11
2.7 Competitive Position in Business

There are almost 30 Cement Company in Bangladesh. They are marketing their products
with their brand name. Besides there are a number of Cement company which are
marketing their products by importing from other countries. But in Bangladesh
Confidence Cement Limited first introduced private sector Cement manufacturing
company. The best Competitive advantage of this company is it’s product quality. To
ensure best quality, Confidence Cement maintain a unique computerized raw material
mixing process to get the finest & high quality Cement with satisfactory level of
compressive strength and sophisticated PLC controlled bagging facility ensures accurate
weight. The whole production process is strictly monitored through a state-of-art
computerized Central Control Room (CCR). Confidence Cement has established a good
brand image in the mind of consumers.

Companies are adopting different promotion mix to retain and capture the market share.
Trade promotional tools are very much used to capture the share the Cement market than
the other promotion tools.

It is noticeable that both the manufacturing and marketing company are immensely
dependent on retailers throughout the distribution channel to sell their products to the
consumers. Retailers play an influential and dominant motivation role on customers in
making their bying decision. But Confidence Cement Limited has made the exception by
giving more importance on using the other promotional tools than the use of trade
promotion to share and create the awareness in the market for its products.

Confidence management has realized the matter that it is better to secure the customer
with the product of less price that ultimately will lead to create a good brand image in
the mind of customer. They want to provide a standard product with possible low price
which will reduce the total budget cost of development and will provide a long term
strategic advantage to Confidence Cement Limited against its competitors. To do so they
have decided to introduce a new product.

Page No: 12
2.8 Corporate and Contact Information

Company Name: Confidence Cement Limited

Year of Incorporation: 1994

Board of Directors:

Engr. Rezaul Karim, Chairman

Mr. Rupam Kishore Barua, Managing Director

Mr. Shah Muhammed Hasan, Director

Mr. Imran Karim, Director

Mrs. Runu Anwar, Director

Engr. A. Z. M Sazzadur Rahman, Independent director

Engr. A. K Rashiduddin Ahmed , Independent Director

Audit Committee:

Engr. A. Z. M sazzadur Rahman, Chairman

Mr. Rupam Kishore Barua, Member

Mr. Shah Muhammed Hasan, Member

Engr. A. K Rashiduddin Ahmed

Page No: 13
Management Committee:

Mr. Newaz Mohammed Iqbal Yousuf, Executive Director & Company Secretary

Mr. Abdullah Al Mahmud, Executive Director (Head of Plant)

Mr. Zahir Uddin Ahmed, Executive Director (Head of Sales & Marketing)

Mr. Mohammed Zahir Uddin helal, Chief Financial Officer (CFO)

Mr. Hassibul Hasan Chowdhury (Rashed), Head of Internal Audit

Page No: 14
2.9 Non Financial Performances

Choosing performance measures is a challenge. Performance measurement systems play

a key role in developing strategy, evaluating the achievement of organizational
objectives and compensating managers. Yet many managers feel traditional financially
oriented systems no longer work adequately. Financial measures such as earning and
accounting returns and little emphasis on drivers of value such as customers and
employee satisfaction, innovation and quality. Inadequacies in financial performance
measures have led to innovations ranging from non-financial indicators “Intangible
Assets” and “Intellectual Capital” to “Balanced Scorecards” of integrated financial and
non-financial measures. (Ittner & Larcker, 2000)

2.9.1 Customer Satisfaction

Confidence Cement Limited is satisfying its customers very well. Customers are
satisfied with the product, product quality, delivery service and overall performance of
the company. Customers found company’s personnel courteous, friendly &
knowledgeable and took steps to address their queries problems promptly to their
satisfaction. Confidence Cement Limited has successfully gained many large companies
as loyal customer. CEPZ is one of the main loyal customer of Confidence Cement
Limited. Number of dealers also increased that also indicates the increased demand of
the product. Recently Confidence Cement Limited faced tremendous problem in
delivery service which results increase number of customer complaint related to
delivery. But Confidence Cement Limited manage to develop their delivery services.

2.9.2 Employees Satisfaction

Employees are also satisfied with the company. It is clearly seen that their retention rate
is much higher than turnover rate. It indicates that employees are staying in the

Page No: 15
company. Company also arranges many training and workshop for skill development of
the employees to improve their performance.

Employee Turnover and Retention: Employee turnover indicates the rate of employee
leaving the company. It indicates the number of leavers as percentage to average number
of employees. In can be calculated by

Confidence Cement Limited has very attractive compensation package to its employee.
The other fringe benefits offered by Confidence Cement Limited are very effective to
motivate the employees as per international standard such as contributory provident
fund, gratuity, bonus, subsidized lunch facility, sufficient medical allowance for self and
family, leave fare assistance, health insurance for self, group insurance etc. Confidence
Cement Limited has a fair promotional structure for the administrative and technical
Employees.

2.9.3 Production

During the period under review the Company was able to produce at cement plant
873,457 MT as against 707,258 MT in previous period and at ready mix plant 1,264,492
CFT as against 1,076,621 CFT in previous period which is summarized in the following
table:

Particular January 2015 to June 2016 July 2013 to Dec 2014

Cement Plant Production MT 873,457 707,258
Capacity Utilization (in %) 78 63
Ready-Mix Production CFT 1,264,492 1,076,621
Plant Capacity Utilization (in %) 35 30

Page No: 16
2.9.4 Sales

The overall sales performance for the period ended 30 June 2016 showed a steady
upward trend. During the period under review sales increased at Cement Plant by 15% in
quantity and 11% in value. On the other side sales also increased at Ready-Mix Plant by
13% in quantity and 23% in value. To boost sales the management of the company
declared sales scheme for dealers. Emphasis was given to improve the relationship with
the valued customers to ensure future market growth. We hope that the Company will be
able to maintain decent growth rate in the coming days too.

Sales performance in Cement and Ready-Mix plant of the company are shown in the
following Table:

Particular Unit Jan 2015 to June 2016 July 2013 to Dec 2014 Growth (%)
Qty. Tk Qty. Tk Qty. Tk
Cement Plant MT 808,512 5,380,208,431 704,706 4,829,037,588 15 11
Ready Mix Plant CFT 1,264,456 376,317,324 1,120,637 306,113,478 13 23

2.9.5 Quality Control

To ensure best quality, Confidence Cement maintain a unique computerized raw

material mixing process to get the finest & high quality Cement with satisfactory level
of compressive strength and sophisticated PLC controlled bagging facility ensures
accurate weight. The whole production process is strictly monitored through a state-of-
art computerized Central Control Room (CCR).

To create customer satisfaction and to grow more confidence, Confidence Cement

adopted ISO 9001-2000 standards, which ensures half yearly audit of Management
System, Quality assurance, Marketing, Sales, Procurements and Manufacturing process
of Portland Cement and Portland Composite Cement. ISO 9001-2000 regulations have
been brought into practice in the confidence Cement Management. Staffs at all level
have been trained in the highly demanding quality control system.

Page No: 17
ISO 9001-2000 certification demonstrates the determination of Confidence Cement’s
management and staffs to maintain a quality system that efficiently meet all customers
requirement.

2.9.6 Brand

Brand image of Confidence Cement Limited is very strong. Confidence Cement Limited
has maintained long term reputation in the market for its good quality. Once people hear
the name of Cement the name first comes to mind is Confidence Cement Limited. It also
aware of developing its brand. It is investing very sufficient amount to develop its brand
and taking proper action to develop its brand. Nowadays “Shah Cement” “Royel
Cement” & “HeidelbergCement” are the main threat for the brand image of Confidence
Cement Limited. To avoid this risk Confidence Cement Limited should expand its
business all over the country as well as it’s turnover.

Page No: 18
 Chapter – 3 : Financial Performance Evaluation
3.1Financial Performance
3.2 Financial Performance Indicators
3.3 Financial Performance Evaluation
3.4 Liquidity Ratios
3.4.1 Current Ratio
3.4.2 Quick Ratio
3.4.3 Cash Ratio
3.5Activity Dimension
3.5.1 Accounts Receivable Turnover
3.5.2 Accounts Payable Turnover
3.5.3 Inventory Turnover Ratio
3.5.4 Inventory Conversion Period
3.5.5 Total Asset Turnover
3.6 Profitability Dimension
3.6.1 Gross Profit Margin
3.6.2 Net Profit Margin
3.6.3 Return on Total Asset (ROA)
3.6.4 Return on Equity (ROE)
3.7 Debt Utilization Ratio
3.7.1 Debt-Asset Ratio
3.7.2 Debt to Equity Ratio
3.8 Problems
3.9 SWOT Analysis

Page No: 19
3.1 Financial Performance

Financial analysis is the process of identifying the financial strengths and weakness of
the firm by properly establishing relationship between the items of the balance sheet and
the profit and loss account.

3.2 Financial Performance Indicators

Financial indicators have always, and still are widely used for monitoring performance,
Developing strategies and for benchmarking purposes. Various devices are used in the
analysis of financial statement data to bring out the comparative and relative
significance of the financial information presented.

3.3 Financial Performance Evaluation

In this report only one device is used to evaluate the financial performance of
Confidence Cement Limited. That is Ratio Analysis, because it is the starting point in
developing the information desired by the analyst. Ratio analysis provides only a single
snapshot, the analysis being for one give point or period in time. Financial ratio analysis
involves the calculation and comparison of ratios, which are derives from the
information given in the company’s financial statements.

The absolute accounting figures reported in the financial statements do not provide a
meaningful understanding performance and financial position of a firm. An accounting
figure conveys meaning, when it is related to some other related information. The
relationship between two accounting figures, expressed mathematically, is known as a
financial ratio. Ratio analysis can be classified ad follows:

1. Liquidity ratio
2. Activity ratio
3. Profitability ratio

Page No: 20
 4. Debt-coverage ratio
5. Owner’s ratio

3.4 Liquidity Ratios

Liquidity ratios are the ratios that measure the ability of a company to meet its short
term debt obligations. These ratios measure the ability of a company to pay off its short-
term liabilities when they fall due. The liquidity ratios are a result of dividing cash and
other liquid assets by the short term borrowings and current liabilities. They show the
number of times the short-term debt obligations are covered by the cash and liquid
assets. If the value is greater than1, it means the short term obligations are fully covered.
Generally, the higher the liquidity ratios are, the higher the margin of safety that the
company possesses to meet its current liabilities. Liquidity ratios greater than 1 indicate
that the company is in good financial health and it is less likely fall into financial
difficulties. Most common examples of liquidity ratios include current ratio, acid test
ratio (also known as quick ratio), cash ratio and working capital ratio. Different assets
are considered to be relevant by different analysts. Some analysts consider only the cash
and cash equivalents as relevant assets because they are most likely to be used to meet
short term liabilities in an emergency. Some analysts consider the debtors and trade
receivables as relevant assets in addition to cash and cash equivalents. The value of
inventory is also considered relevant asset for calculations of liquidity ratios by some
analysts. The concept of cash cycle is also important for better understanding of liquidity
ratios. The cash continuously cycles through the operations of a company. A company’s
cash is usually tied up in the finished goods, the raw materials, and trade debtors. It is
not until the inventory is sold, sales invoices raised, and the debtors’ make payments that
the company receives cash. The cash tied up in the cash cycle is known as working
capital, and liquidity ratios try to measure the balance between current assets and current
liabilities. A company must possess the ability to release cash from cash cycle to meet
its financial obligations when the creditors seek payment. In other words, a company

Page No: 21
should possess the ability to translate its short term assets into cash. The liquidity ratios
attempt to measure this ability of a company.

There are some ratios that are commonly used to measure liquidity directly, they are:

1. Current Ratio
2. Quick Ratio or Acid Test
3. Cash Ratio

3.4.1 Current Ratio

Current ratio is an efficient tool to measure that the organization is capable in meeting
up its short term debts or not. Current ratio basically assesses a firm’s liquidity because,
if a firm is enough liquid and it has enough resources then it can pay back the all debts
that need to cover during 12 months.

Higher current ratio definitely indicates that the firm is highly liquid and able enough to
meet the demands of the creditors. Satisfactory current ratio actually varies from
industry to industry but in general, if the current ratio lies between 1.5 and 3 then it
indicates that the business is healthy. If the current ratio is below then it means that the
current liabilities are higher than the current asset, so the firm can face many difficulties
while paying back short term debts. On the other hand if the current ratio is too high
then it indicates that the firm is not efficient to utilize its short term financing facilities.
It may also indicate that the firm has problem in working capital management. Low
current ratios normally indicate that the firm is in trouble to meet current obligation but
not necessarily always a low current ratio indicates a huge problem. Firms which have
not much currents assets but have a strong long term plans and prospects, they definitely
can sort out ways to tackle this problem. There are many firms who have a current ratio
under 1 but they are surviving quite well. So, low current ratio does not always mean

Page No: 22
that the firm is at an alarming stage or very near to be bankrupt but of course it is better
to maintain a standard current ratio in order to ensure fewer risks. From the perspective
of short term creditors, a high current ratio is appreciable because it means that the
company is eager to pay back current debts within 12 months. A high current ratio also
indicates that the firm is much efficient to convert its goods into cash quickly. In short,
current ratio should be compared within the same industry as the benchmark ratio varies
from industry to industry.

Current Ratio = Current Assets/Current Liabilities

Year Calculation Ratio

2011 1,131,359,647/915,339,475 1.24
2012 1,544,843,374/1,191,946,366 1.30
2013 1,760,886,450/1,247,623,029 1.41
2014 2,443,434,324/1,758,186,496 1.39
2015 2,599,717,607/2,182,705,265 1.91

2.5

1.5

Current Ratio
1

0.5

0
2011 2012 2013 2014 2015

Page No: 23
From the above chart we can see that the current ratio is slightly increasing year by year.
But after 2014 it is dramatically going high. That means company have adequate
liquidity to repay its debt. More than 1.5 current ratio is satisfactory, but a huge increase
of current ratio express that the company can’t use its liquidity in a proper way.

3.4.2 Quick Ratio

This ratio assesses the capacity of an organization to recover its current liabilities by
using the organization’s quick assets. The asset which can be turned into cash rapidly at
an amount that is very close to its book value is known as quick asset. This ratio assesses
the capacity of an organization to recover its current liabilities by using the
organization’s quick assets.

Quick Ratio = Quick Assets/Quick Liabilities

Here,

Quick Assets = Current Assets-Inventory &

Quick Liabilities = Current Liabilities-Bank Overdraft

From the formula, we can see that inventory is not included in the quick ratio, where as
it is included in the current ratio. Always a high quick ratio is not considered as good, if
it happens that the firm has huge account receivables but those will be collected after a
long time and the current liabilities are lesser but needs to be paid instantly then the
quick ratio will be higher but still the firm is in a great risk as there is liquidity crisis. On
the other hand, opposite thing can be happen when the firm has lesser current assets
which will be mature soon and more current liabilities which need to be paid in much
later. In this case, the quick ratio will be lower but despite of that the firm is risk free as
there is no hurry of payments. Higher the quick ratio, the company is more liquid but yes
the benchmark figure is different in different industries.

Page No: 24
 Year Calculation Ratio
2011 806,547,210/915,339,475 0.88
2012 1,184,587,564/1,191,946,366 0.99
2013 1,527,474,179/1,247,623,029 1.22
2014 2,047,130,610/1,758,186,496 1.16
2015 2,267,487,922/2,182,705,265 1.04

1.4

1.2

0.8
Quick Ratio
0.6

0.4

0.2

0
2011 2012 2013 2014 2015

Quick asset ratio follows a standard which is 1.1. It means it is enough for firm to have
quick assets just equal to its current liabilities. In 2011 & 2015 the quick ratio decreased
because the amount of inventories has increased than other components of current assets.
The ratio is higher in 2013 because the components of current asset except inventory
have increased at higher rate than that of current liability.

3.4.3 Cash Ratio

Cash ratio is a ratio of a firm’s cash and cash equivalents to its current liabilities. This
ratio is a great measurement of liquidity, if the ratio is high then it indicates that the firm
has enough cash to meet up immediate payment demand. Cash ratio is very conservative

Page No: 25
at its appearance as it does not include any non-cash current assets, only cash on hand
and cash equivalents are used to calculate this and for this reason the result is relatively
low. A cash ratio higher than 0.5 is preferable.

Cash Ratio = Cash/Current liabilities

Year Calculation Ratio

2011 59,512,296/915,339,475 0.07
2012 43,105,373/1,191,946,366 0.04
2013 108,087,011/1,247,623,029 0.09
2014 68,115,966/1,758,186,496 0.04
2015 181,636,433/2,182,705,265 0.08

0.1
0.09
0.08
0.07
0.06
0.05 Cash Ratio
0.04
0.03
0.02
0.01
0
2011 2012 2013 2014 2015

Like other ratio cash ratio is also an unparallel ratio of Confidence Cement Limited.
Sometimes it is increasing and some time it is decreasing. The cash ratio of Confidence
Cement Limited was alarming in 2012 & 2014 as it was only 0.04. But it rises from that
adverse situation to 0.9 in 2013 & 0.8 in 2015. In 2013 it has increased because the cash
amount is greater relatively other falling years. The cash flow has decreased in 2012
because of low investment due to volatility and unrest in political and economical sector.

Page No: 26
3.5 Activity Dimension

Activity ratios reflect the firm’s efficiently in utilizing its assets. The funds of creditors
and owners are invested in various kinds of assets to generate sales and profits. These
ratios are called Turnover Ratios because they indicate the speed with which assets are
being converted or turned over into sales. There are some ratios under these criteria.
They are as follows:

1. Accounts Receivable Turnover

2. Accounts Payable Turnover
3. Inventory Turnover Ratio
4. Inventory conversion Period
5. Total Assets Turnover

3.5.1 Accounts Receivable Turnover

Accounts receivable turnover measures the ability of a company to efficiently issue

credit to its customers and collect funds from them in a timely manner. Receivable
turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. A high
turnover ratio indicates a combination of a conservative credit policy and an aggressive
collections department, as well as a number of high-quality customers. A low turnover
ratio represents an opportunity to collect excessively old accounts receivable that are
unnecessarily tying up working capital. Low receivable turnover may be caused by a
loose or nonexistent credit policy, an inadequate collections function, and/or a large
proportion of customers having financial difficulties. It is also quite likely that a low
turnover level indicates a excessive amount of bad debt. It is calculated as:

Accounts Receivable Turnover = Sales/Accounts Receivable

Page No: 27
 Year Calculation Turnover
2011 2,240,791,456/231,615,420 9.67 times
2012 3,271,923,378/445,863,355 7.34 times
2013 3,481,284,388/583,170,584 5.97 times
2014 3,634,989,180/739,051,832 4.92 times
2015 3,637,270,887/762,506,403 4.77 times

12

10

6 Accounts Receivable Trunover

0
2011 2012 2013 2014 2015

From this analysis we get that the ratio is continuously decreasing from 2011 to 2015 it
has decreased from 9.67 to 4.77 times. It means that accounts receivable is decreasing
day by day which is very good for the company because accounts receivable tied up a lot
of cash money, which can be invested by the company in other sector.

3.5.2 Accounts Payable Turnover

The accounts payable turnover indicates ratio of accounts payable compare with sales of
a firm. The ratio indicates the rapidity of accounts payable to be turned into cash. The
accounts payable turnover ratio is a activity ratio that shows a company’s ability to pay
off its accounts payable by comparing net credit purchases to the average accounts

Page No: 28
payable during a period. In other words, the accounts payable turnover ratio is how
many times a company can pay off its average accounts payable balance during the
course of a year.

This ratio helps creditors analyze the liquidity of a company by gauging how easily a
company can pay off its current suppliers and vendors. Companies that can pay off
supplies frequently throughout the year indicate to creditor that they will be able to make
regular interest and principle payments as well.

Accounts Payable Turnover =Sales/Accounts Payable

Year Calculation Turnover

2011 2,240,791,456/211,868,145 10.58 times
2012 3,271,923,378/174,798,129 18.72 times
2013 3,481,284,388/192,856,352 18.05 times
2014 3,634,989,180/167,770,934 21.67 times
2015 3,637,270,887/213,756,386 17.02 times

25

20

15

Accounts Payable Trunover

10

0
2011 2012 2013 2014 2015

Page No: 29
Analysis shows that there is no consistency in growing of accounts payable turnover. In
2013 & 2015 the ratio is going down but ultimate ratio line is growing up. Growing high
Accounts payable Turnover express that the firm maintained a low accounts payable. A
high ratio of firm indicates that the firm is prompt in terms of paying its creditors. This
makes the creditors satisfied and they get encouraged to remain with the firm.

3.5.3 Inventory Turnover Ratio

In the business, the sufficient volume of inventory is must and we can judge that enough
inventory is being produced or not through the inventory turnover ratio. This ratio
basically shows that over a period, how many times the inventories are sold and
renovated in a business. When the inventory level is very high then the ratio will be low
which means the inventories are kept idle in the warehouse so definitely it is bad for
future growth. Huge amount of inventories also symbolize that the rate of return on the
inventory investment is near to zero. The turnover ratios of the unpreserved goods are
normally very high as these are sold out quickly. Although high inventory turnover ratio
is always desired but sometimes high ratio may also indicate ineffective buying as lower
inventory purchasing will cause the ratio to be high.

Inventory Turnover = Cost of Goods Sold/Inventory of Stock or Average Inventory

Year Calculation Turnover

2011 1,926,360,961/369,653,560 5.21 times
2012 2,710,292,215/342,534,124 7.91 times
2013 2,765,198,852/296,834,041 9.32 times
2014 3,028,576,709/314,857,993 9.62 times
2015 3,067,034,586/364,266,700 8.42 times

Page No: 30
 12

10

6 Inventory Trunover

0
2011 2012 2013 2014 2015

Generally a high inventory turnover is indicative of good inventory management. A low

inventory turnover ratio implies slow moving of obsolete inventory. Analysis shows a
gradual inflation of inventory turnover ratio over the five years. In 2011, the ratio was
5.21 times, and in 2015 the ratio is 8.42 times. From 2014 to 2015 the ratio line is
slightly decreasing and declining inventory turnover commonly indicated that the
company is not being able to flush its inventory very well as it was ding the previous
years. It means company is holding excessive amount of inventory. High inventory
levels are unhealthy because they represent an investment with a zero rate of return in
addition to the increased cost associated with maintaining those inventories.

3.5.4 Inventory Conversion Period

The inventory conversion period is the period during which the inventories are used to
produce new goods and then preparing them for selling to the end users. Lower the
conversion period, higher the firm’s ability to convert the raw materials into finished
goods.

Inventory Conversion Period = 360/ Inventory Turnover Ratio

Page No: 31
 Year Calculation Period
2011 360/5.21 69 days
2012 360/7.91 46 days
2013 360/9.32 39 days
2014 360/9.62 37 days
2015 360/8.42 43 days

80

70

60

50

40 Inventory Conversion Period

30

20

10

0
2011 2012 2013 2014 2015

In case of inventory conversion period, lower figure is more acceptable. From the table
we can see that the trend line is decreasing year by year from 2011 to 2015. This is a
good sign for the company. It means that inventory are quickly cleared from warehouse
and increase production.

3.5.5 Total Asset Turnover

Total Assets Turnover indicates how well a company has used its fixed and current
assets to generate sales. The total asset turnover ratio measures the ability of a company

Page No: 32
to use its assets to efficiently generate sales. This ratio considers all assets, current and
fixed.

Those assets include fixed assets, like plant and equipment, as well as inventory, account
receivable, as well as any other current assets. Such ratio is probably most useful as an
indication of trends over of years.

Total Asset Turnover = Sales/Total Assets

Year Calculation Turnover

2011 2,240,791,456/3,734,534,286 60 times
2012 3,271,923,378/4,083,976,310 80 times
2013 3,481,284,388/4,587,102,041 76 times
2014 3,634,989,180/5,061,452,990 72 times
2015 3,637,270,887/5,568,009,703 65 times

90

80

70

60

50
Total Asset Turnover
40

30

20

10

0
2011 2012 2013 2014 2015

Here the ratio increased in 2011 to 2012 and started to fall down gradually to 2015.
From 2011 to 2012, the increase has happened because the sales have increased at a
higher rate than the rate of increase in total asset on that particular year. But from than
the trend is not quite satisfactory.

Page No: 33
3.6 Profitability Dimension

There are many measures of profitability, which relate the returns of the firm to its sales,
assets, or equity. As a group, these measures allow the analyst to evaluate the firm’s
earnings with respect to a given level of sales, a certain level of assets, or the owners’
investment. Without profits, a firm could not attract outside capital. Moreover, present
owners and creditors would become concerned about the company’s future and attempt
to recover their funds. Owners, Creditors, and management pay close attention to
boosting profits due to the great importance place on earnings in the marketplace.

The profitability ratios are:

1. Gross Profit margin

2. Net Profit Margin
3. Return on Total Assets (ROA)
4. Return on Equity (ROE)

3.6.1 Gross Profit Margin

Profitability depends on a large number of policies and managerial decisions of a firm.

All the effects of liquidity, asset and debt management on the income is judged through
the profitability ratios. Gross Profit Margin, Net Profit Margin, Return on Assets and
Return on Equity are the mostly used profitability ratios. The relationship of sales and
cost of goods sold is assessed through gross profit margin. High margin indicates a
secure position for the company. Low profit margin signals towards less safe position
because it means that sales are diminishing, therefore generating low revenues. It is also
a great tool of identifying pricing strategy and cost control. It helps to cut cost by
presenting that cost is relatively low or high than the revenues. So, from the low profit
margin we actually get the idea that which way we need to control our costs.

Gross Profit Margin =Gross Profit/ Sales

Page No: 34
 Year Calculation Margin
2011 314,430,495/2,240,791,456 14%
2012 561,631,163/3,271,923,378 16%
2013 716,085,536/3,481,284,388 21%
2014 606,412,471/3,634,989,180 17%
2015 570,236,301/3,637,270,887 16%

25

20

15

Gross Profit Margin

10

0
2011 2012 2013 2014 2015

Here the ratio increased from 2011 to 2013 and gradually decrease to 2015. There are
many reason for increasing and decreasing of gross profit. If the revenue increased and
cost of goods sold decreased, gross profit are increase. On the other hand, declining of
revenue and increase of cost of goods sold occurs low gross profit in the organization.

3.6.2 Net Profit Margin

A ratio of profitability calculated as net income divided by revenues, or net profits

divided by sales. It measures how much out of all money of sales a company actually
keeps in earnings. Profit margin is very useful when comparing companies in similar
industries. A higher profit margin indicates a more profitable company that has better

Page No: 35
control over its costs compared to its competitors. The net profit margin measures the
percentage of each sales remaining after all costs and expenses including interest and
taxes deducted. The net profit margin is calculated as follows:

Net Profit Margin = Net Profit after Tax/Sales

Year Calculation Margin

2011 198,228,234/2,240,791,456 9%
2012 280,401,214/3,271,923,378 9%
2013 364,000,408/3,481,284,388 10%
2014 239,276,307/3,634,989,180 7%
2015 326,140,075/3,637,270,887 9%

12

10

6 Net Profit Margin

0
2011 2012 2013 2014 2015

We can see ups and downs in the ratio. The net profit margin of Confidence Cement
Limited was in an increasing manner in 2011 to 2013. In 2014 the ratio decreased very
sharply and again increased in 2015. It indicates that Confidence Cement Limited is
managing its sales and cost of goods sold very well.

Page No: 36
3.6.3 Return on Total Asset (ROA)

Calculating the return on total assets is another variation on measuring how well the
assets of the business are used to generate profit. Return on total assets also called return
on investment. It measures the overall effectiveness of management to generate profit
with its assets. It could be measures as follows:

Return on Total Assets = Net Profits after Taxes/Total Assets

Year Calculation Return

2011 198,228,234/3,734,534,286 5%
2012 280,401,214/4,083,976,310 7%
2013 364,000,408/4,587,102,041 8%
2014 239,276,307/5,061,452,990 5%
2015 326,140,075/5,568,009,703 6%

5
Return on Total Assets
4

0
2011 2012 2013 2014 2015

We can see a sharp increase of ratio from 2011 to 2013. It decreased in 2014 and again
increasing. It express that the company can’t use its assets properly in 2014, that’s why
the return is going down.

Page No: 37
3.6.4 Return on Equity (ROE)

Return on Equity or ROE is the ratio of net income to total shareholder’s equity. It
measures that the firm how much earns from the shareholders’ equity. It also shows the
firm’s efficiency at generating profits from all money of equity capital. Increasing ROE
indicates improved performance. In accounting sense, ROE is the true bottom line of
performance measurement.

Return on Equity (ROE) = Net Income/Common Stock Equity

Year Calculation Return

2011 198,228,234/2,514,942,667 8%
2012 280,401,214/2,553,146,941 11%
2013 364,000,408/2,929,474,547 12%
2014 239,276,307/2,898,245,046 8%
2015 326,140,075/3,102,568,270 11%

14

12

10

8
Return on Equity
6

0
2011 2012 2013 2014 2015

We can see that the trend of return on equity is almost similar to the trend of return on
assets. The ratio is fluctuating year by year. Though in 2014 the return is low, company
can cover it and let the trend upwarding in 2015.

Page No: 38
3.7 Debt Utilization Ratio

The debt utilization ratios measure the proportion of debt and how efficiently
management used the debt capital. The higher the ratio, the greater the amount other
peoples money being used in an attempt to generate profits. There are some ratios under
these criteria.

They are as follows:

1. Debt-Asset Ratio
2. Debt-Equity Ratio

3.7.1 Debt-Asset Ratio

Total liabilities divided by total assets. The debt-asset ratio shows the proportion of a
company’s assets which are financed through debt. If the ratio is less than one, most of
the company’s assets are financed through equity. If the ratio is greater than one, most of
the company’s assets are financed through debt. Companies with high debt/asset ratios
are said to be “highly leveraged”, and could be in danger if creditors start to demand
repayment of debt. The debt-asset ratio measures the proportion of total assets financed
by the time’s creditor. The higher the ratio, the greater the amount other peoples money
being used in an attempt to generate profits. The ratio is calculated as follows:

Debt-Asset Ratio = Total Liabilities/Total Assets

Year Calculation Ratio

2011 1,219,591,619/3,734,534,286 32.66%
2012 1,530,829,369/4,083,976,310 37.48%
2013 1,657,627,494/4,587,102,041 36.14%
2014 2,163,207,944/5,061,452,990 42.74%
2015 2,465,441,433/5,568,009,703 44.28%

Page No: 39
 50
45
40
35
30
25 Debt Asset Ratio
20
15
10
5
0
2011 2012 2013 2014 2015

Calculating the debt ratio, we came to see that this company is highly leveraged one.
From 2011 to 2015 the trend is going up. That means company used more debts to
continue their business instead of total assets. A high amount of debt is not good for the
company. It increases the risk of bankruptcy.

3.7.2 Debt to Equity Ratio

The debt to equity ratio is the best way to measure the financial leverage of any firm; it
is one of the most important ratios of any firm. Higher the ratio, higher the debt amount
of the firm, therefore higher financial leverage. If the ratio is lower, the leverage of the
firm is also lower. It presents the percentage of a company’s asset that is financed by
debt versus equity. It is a widespread quantity of the long term capability of a firm’s
business and along with current ratio, a measure of its liquidity, or its ability to cover its
expenses. So, it often takes only long term debts instead of total liabilities. Sometimes, it
happens that higher debt leads the firm to gain higher debt as cost of debt is lower than
the cost of equity but it is not good for the firm to always apply this technique because if
the firm fails to meet up the obligations of debts then the firm can reach even in the
stage of the bankruptcy. So, the firms should be much analytical and attentive when to

Page No: 40
take higher debts. Higher debt can lead to both higher gain and risk, so firms should be
very careful while taking financial leverage.

Debt-Equity Ratio = Total Debt/Shareholder’s Equity

Year Calculation Return

2011 605,181,445/2,514,942,667 24.06%
2012 877,235,530/2,553,146,941 34.36%
2013 896,929,482/2,929,474,547 30.62%
2014 1,331,362,125/2,898,245,046 45.94%
2015 1,697,798,246/3,102,568,270 54.72%

60

50

40

30 Debt Equity Ratio

20

10

0
2011 2012 2013 2014 2015

From the chart we can see that the trend is going upward sharply in 2014 & 2015. In
these two years company used a huge amount of loan to continue its business. If the
company can’t have enough resources to pay its debt, company may be faced some crisis
in doing their business.

Page No: 41
3.8 Problems

In every program or activities, has to face numerous problems. It is observed that there
are some problems in financial position of Confidence Cement Limited.

Ratios of Confidence Cement Limited are not consistent.

It is seen that the company has tendency keeping cash and stock. In this case we
can say that management has filed to use cash and it’s a big loss for the
company.
It is also identified that the company is taking a very long time to make payments
to its creditors. A long payment period at first improves the company’s liquidity,
but may also be and indicator for liquidity problems.
Late payment of business debt is a serious problem for suppliers of goods and
services. It can also happen because of keeping low cash. Late payment can
make it necessary for a company to increase borrowing and to extend overdraft
facilities.
Increasing interest cost in one of the major problems. Confidence Cement
Limited using more debt financing which resulted in more interest cost and
brought the net income down.

Page No: 42
3.9 SWOT Analysis

A scan of the internal and external environment is an important part of the strategic
planning progress. Environmental factors internal to the firm usually can be classified as
strengths(S) or Weaknesses(W) and those external to the firm can be classified as
opportunities(O) or Threats(T). Such an analysis of the strategic environment is referred
to as a SWOT analysis. The SWOT analysis provides information that is helpful in
matching the firm’s resources and capabilities to the competitive environment in which
it operates. As such, it is instrumental in strategy formulation and selection. The
following diagram shows how a SWOT analysis fits into an environmental scan:

Strengths Weaknesses
What we are good at, and What we are not good at,
are doing well. and is not doing well.

Opportunities Threats
The events and trends The events and trends
favorable to the group Unfavorable to the group

Page No: 43
STRENGTH

Market Leader.
Great competitive skills.
Reliability strong employee bonding and belongingness.
Strong marketing lineup.
Strong products distribution lineup.
Modern Equipment & Technology.
Backward-linkage industry.

WEAKNESS

High interest rates decline profit.

New rivalry.
Can’t occupy the whole country market.

OPPORTUNITIES

Market dominance.
International scope.
Increased demand for the products.
Organizational Goal.

THREATS

Economic crisis.
Growing Competition.
Labor Unions.
Power Crisis.

Page No: 44
Chapter – 4 : Recommendation and Conclusion

4.1 Recommendation

4.2 Policy to improve overall performance of

Confidence Cement Limited
4.3 Conclusion

Page No: 45
4.1 Recommendation

Although Confidence Cement Limited is maintaining a fair current ratio, but it is seen
that the liquidity of the company may be needed some concerns.

In cash ratio, it is seen that the company has tendency to keeping cash and stock. They
must find some way to invest that cash instead of keeping it on hand.

Confidence Cement Limited is maintaining a good position in activity ratios. It is clearly

seen that company is managing its accounts receivable very efficiently.

Inventory turnover, Inventory Conversion Period, Total Asset Turnover all had been
relatively stable throughout the four years.

Analysis of profitability ratios shows that, apart from Gross Profit Ratio, Net Profit
Margin, Return on Total Assets and Return on Equity all have been actually decreased in
2012 comparatively other previous years. It could be so alarming situation of confidence
Cement Limited in 2012. But in 2013 the situation is slightly good position.

Debt utilization ratios of Confidence Cement Limited presents that, high proportion of
total assets of the company is financed by owner’s capital. Company’s assets are
financed more through equity rather than debt, which is a good sign for the company.
But still, company has more burdens of debts on its financial structure.

From the total analysis, it is most of the ratios are not consistent. Most of the ratios are
unparallel. In this situation it becomes difficult to predict how the company will perform
in next year. Confidence Cement Limited should focus on improvement of its liquidity
position and profitability.

Page No: 46
4.2 Policy to improve overall performance of Confidence Cement Limited

In every program or activities, it is faced numerous problems. Some policy must be

develop to increase in case of getting good performance.

Confidence Cement Limited must concentrate on proper cash utilization issue and by
used in proper utilization of cash the company faces low risk.

Confidence Cement Limited should proper concentrate on controlling the debts.

Time and resources can be taken up on maintaining and collecting late payments instead
of being devoted to other areas of business.

Confidence Cement Limited should focus on improvement of its liquidity position and
profitability. And it is possible when it has been decreasing the burdens of debts on its
financial structure.

Confidence Cement Limited should improve their sale volume and productivity and
decreasing liabilities. As a result high profitability.

Page No: 47
4.3 Conclusion

After conducting the research it can be said that Confidence Cement Limited is
performing better in aspects of non financial performance than financial performance.
The company is facing problem in its liquidity and profitability segment. They should
pay more attention to improve these sectors. Or else in long run these may prove
harmful for the business. In spite of high demand of Confidence Cement Limited
product sales and production has increased in last two years. The company adopted new
production system and increase their production to cover the whole country market. But
it has to adjust it production with the new system or else the production will continue to
decrease. Sales have decreased due to high price of product. The company can not
decrease their selling price as because of their high technology investment. There is
huge demand for cement in Bangladesh and confidence Cement Limited playing
important role by supplying according to demand. The steel industry has become very
competitive where reputed and giant domestic and foreign companies are joking for the
market share. In such a scenario if Confidence Cement Limited wants to keep and grab
the growing market it should have to be dynamic to provide new product which will
reduce investment cost.

Page No: 48
 Reference

Books:

Subramanyam, Financial Statement Analysis, 11th edition

Besley, S, & Brigham, E. F. (2005), Essentials of Managerial Finance,
Thompson, South-Western.

Website:

www.confidencecement.com/
www.en.wikipedia.org/wiki/financial_ratio
www.investopedia.com/university/ratios
www.scribd.com

Others:

Annual Reports of Confidence Cement Limited

Page No: 49