Assignment

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Introduction
A company’s financial statements provide various financial information that investors and
creditors use to evaluate a company’s financial performance. Financial statements are also
important to a company’s managers because by publishing financial statements, management can
communicate with interested outside parties about its accomplishment running the company.
Different financial statements focus on different areas of financial performances.
Financial Conditions
A company’s financial conditions are of a major concern to investors and creditors. As capital
providers, investors and creditors rely on a company’s financial conditions for both the safety and
profitability of their investments. More specifically, investors and creditors need to know where
their money went and where it is now. The financial statement of balance sheet addresses such
issues by providing detailed information about a company’s asset investments.
Cash Flows
A company’s profits reported in the income statement are accounting income and most likely
contain certain non-cash elements, providing no direct information on a company’s cash exchange
during the period. Moreover, a company also incurs cash inflows and outflows during a period
from other non-operating activities, namely investing and financing. To investors, cash from all
sources, not just accounting income from operations, is what pays back their investments. The
importance of the cash flow statement is that it shows the exchange of cash between a company
and the outside world during a period, and so investors can know if the company has enough cash
to pay for expenses and asset purchases.
Shareholders’ Equity
The statement of shareholders’ equity is especially important to equity investors because it shows
the changes in various equity components, including retained earnings, during a period. The
amount of shareholders’ equity is a company’s total assets minus its total liabilities, representing
the company’s net worth. A steady growth in a company’s shareholders’ equity by way of
increasing retained earnings, as opposed to expanding shareholder base, means the accumulation
of investment returns for current equity shareholders.

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Operating Results
Financial conditions shown in the balance sheet are snapshots of a company’s assets, liabilities
and equity at the end of a financial reporting period; they don’t reveal what happened during the
period from operations that may have caused changes to financial conditions. Therefore, operating
results during the period also concerns investors. The financial statement of income statement
reports operating results such as sales, expenses and profits or losses. Using the income statement,
investors can both evaluate a company’s past income performance and assess the uncertainty of
future cash flows.
The main users (stakeholders) of financial statements are commonly grouped as follows:
 Investors
 Employees
 Lenders
 Government
 Suppliers
 Customers
 The public
Many things can impact the calculation of ratios and make comparisons difficult. The limitations
include:
 The use of estimates in allocating costs to each period. The ratios will be as accurate as the
estimates.
 The cost principle is used to prepare financial statements. Financial data is not adjusted for
price changes or inflation/deflation.
 Companies have a choice of accounting methods (for example, inventory LIFO vs FIFO
and depreciation methods). These differences impact ratios and make it difficult to compare
companies using different methods.
 Companies may have different fiscal year ends making comparison difficult if the industry
is cyclical.
 Diversified companies are difficult to classify for comparison purposes.

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 Financial statement analysis does not provide answers to all the users' questions. In fact, it
usually generates more questions!

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2.Financial Statements (Ratio Analysis of Apex Adelchi Footwear Limited)
2.1 Liquidity Ratios: A class of financial metrics that is used to determine a company's ability to
pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger
the margin of safety that the company possesses to cover short-term debts.
 2.1.1 Current Ratio: The current ratio is a financial ratio that shows the proportion of
current assets to current liabilities. The current ratio is used as an indicator of a company's
liquidity.
Current Ratio = Current Assets / Current Liabilities
The following table shows the current ratio of Apex Adelchi Footwear Limited:
Table 1: Current Ratio of Apex Adelchi Footwear Limited
Figure 1: Current Ratio of Apex Adelchi Footwear Limited (2010-2014)
Year 2010 2011 2012 2013 2014
Current
Assets
4,258,672,075 5,290,770,436 6057169775 7,420,556,241 9,809,373,339
Current
Liabilities
3,950,977,717 4,651,574,679 5060830061 6,260,776,879 8412539684
Current Ratio 1.08 1.14 1.20 1.19 1.17

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Analysis: As we know that the higher the current ratio, the more capable the company is of paying
its obligations. A ratio under one suggests that the company would be unable to pay off its
obligations. The graph represents that Current same over the period and it was below the Ratio
was the highest (1.20 times) in 2012 & lowest (1.08 times) in 2010. Current Ratio was also standard
(2:1). Therefore, in terms of the standard of Current Ratio, liquidity position of (Apex Adelchi
Footwear) was not satisfactory. The company should try to improve its liquidity position by
increasing its current assets and decreasing current liabilities.
 2.1.2 Quick Ratio:
The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a
company’s ability to meet its short-term obligations with its most liquid assets. For this reason, the
ratio excludes inventories from current assets, and is calculated as follows:
Quick ratio = (current assets – inventories) / current liabilities
Table 2: Quick ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Current
Assets-
Inventories
2,019,472,096 2,462,437,209 2695454735 3,010,099,407 3,538,151,806
Current
Liabilities
3,950,977,717 4,651,574,679 5060830061 6,260,776,879 8412539684
Quick Ratio
0.51 0.53 0.53 0.48 0.42

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Figure 2: Quick ratio of Apex Adelchi Footwear Limited (2010-2014)
Analysis: As we know that the higher the Quick ratio, the more capable the company is of paying
its obligations. A ratio under one suggests that the company would be unable to pay off its
obligations. The graph represents that Quick Ratio was increase from 2010 to 2011 but same
(0.53times) in 2011 ,2012& lowest (0.42times) in 2014 & Quick Ratio was below the standard
(1:1). Therefore, in terms of the standard of Quick Ratio, liquidity position of (Apex Adelchi
Footwear) was not satisfactory. The company should try to improve its liquidity position by
increasing its current assets and decreasing current liabilities & Inventories.
2.2. Asset Management Ratios
Asset management (turnover) ratios compare the assets of a company to its sales revenue.
Asset management ratios indicate how successfully a company is utilizing its assets to generate
revenues. Analysis of asset management ratios tells how efficiently and effectively a company is
using its assets in the generation of revenues. They indicate the ability of a company to translate
its assets into the sales. Asset management ratios are also known as asset turnover ratios and asset
efficiency ratios.

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 2.2.1. Inventory Turnover Ratio:
Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced
over a period. The days in the period can then be divided by the inventory turnover formula to
calculate the days it takes to sell the inventory on hand or "inventory turnover days. “Generally it
is calculated as:
Inventory Turnover = Sales / Inventory
Table 3: Inventory Turnover Ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
sales 6,961,115,608 9,499,256,667 9748378905 10,940,035,731 11,463,903,330
Inventories 2,239,199,979 2,828,333,227 3361715040 4,410,456,834 6,271,221,533
Inventory
Turnover
Ratio
3.11 3.36 2.90 2.48 1.83
Figure 3: Inventory Turnover Ratio of Apex Adelchi Footwear Limited (2010-2014)
Analysis: Hear the graph represents that Inventory turnover ratio was the lowest (1.83 times) in
2014 & highest (3.11 times) in 2010. Inventory turnover ratio was almost same over the period.

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So overall the inventory turnover position of (Apex Adelchi Footwear) was not good. The
company should try to improve its Inventory turnover position by increasing its sales & decreasing
its unused inventory.
2.2.2. Days Sales Outstanding(DSO):
A measure of the average number of days that a company takes to collect revenue after a sale has
been made. DSO is often determined on a monthly, quarterly or annual basis and can be calculated
by dividing the amount of accounts receivable during a given period by the total value
of credit sales during the same period, and multiplying the result by the number of days in the
period measured. The formula for calculating day’s sales outstanding can be represented with the
following formula:
Table 4: Days Sales Outstanding of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Receivables 881,553,360 953,496,096 792733240 963,826,558 1,295,107,098
Sales ÷ 360 days 19,336,432 26,386,824 27078830.3 30,388,988 31844175.92
Days Sales
Outstanding(DSO)
45.59 36.14 29.28 31.72 40.67

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Figure 4: Days Sales Outstanding of Apex Adelchi Footwear Limited (2010-2014)
Analysis: Hear the graph represents DOS was the highest (45.59 days) in 2010 & lowest (29.28
days) in 2012. DOS Ratio was almost same over the period. So overall the DOS position of (Apex
Adelchi Footwear) is not good. So the company should try to collects its account receivable in
time & also try to develop a better credit policy.
2.2.3. Fixed Assets Turnover Ratio
Fixed assets turnover ratio is an activity ratio that measures how successfully a company is
utilizing its fixed assets in generating revenue. It calculates the dollars of revenue earned per one
dollar of investment in fixed assets.
Fixed Assets Turnover Ratio= Sales ÷ Net Fixed Assets
Table 5: Fixed Assets Turnover Ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Sales
6,961,115
,608
9,499,256,
667
9748378905 10,940,035,731
11,463,903,
330
Net Fixed Assets or Net
Non-Current Assets
418,371,7
10
1,889,270,
537
2111103023 2,153,982,977
2,411,991,5
20
Fixed Assets Turnover
Ratio
16.64 5.03 4.62 5.08 4.75

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Figure 5: Fixed Assets Turnover Ratio of Apex Adelchi Footwear Limited (2010-2014)
Analysis: Hear the graph represents that Fixed Assets Turnover Ratio was the highest (16.64times)
in 2010 & lowest (4.62 times) in 2012.we can also see that the gaping of the period is so high.
Therefore, in terms of Fixed assets turnover ratio position of (Apex Adelchi Footwear) was not
satisfactory. The company should try to improve its total assets turnover position by increasing it
is sales & utilize it is fixed assets properly.
 2.2.4. Total Assets Turnover Ratio
The asset turnover ratio is a measure of a company’s ability to use its assets to generate sales or
revenue, and is a calculation of the amount of sales or revenue generated per dollar of assets. The
formula for the ratio is as follows:
Sales or Revenues ÷ Total Assets

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Table 6: Total Assets Turnover Ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Sales 6,961,115,608 9,499,256,667 9748378905 10,940,035,731 11,463,903,330
Total
Assets
4,677,043,785 7,180,040,973 3107442737 9,574,539,218 12,221,364,859
Total
Assets
Turnover
Ratio
1.48 1.32 1.19 1.14 0.94
.
Figure 6:Total Assets Turnover Ratio of Apex Adelchi Footwear Limited (2010-2014)
Analyses: Hear the graph represents that Total Assets Turnover Ratio was the highest (1.48times)
in 2010 & lowest (0.94 times) in 2014.we can also see that it was almost same over the period.
Therefore, in terms of total assets turnover ratio position of (Apex Adelchi Footwear) was not
satisfactory. The company should try to improve its total assets turnover position by increasing it
is sales & utilize it is total assets properly.

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 2.3. Debt Management Ratios
Standard financial ratios are used to evaluate one's financial condition. Debt management ratios,
in particular, are used by banks and other lenders to evaluate a prospective borrower's suitability
for a home mortgage or other loan.
A variety of different debt-to-income ratios are key indicators of an individual's financial health.
In general, the debt-to-income ratio is calculated by dividing monthly minimum debt payments by
monthly gross income.
2.3.1 Debt Ratio:
A financial ratio that measures the extent of a company’s or consumer’s leverage. The debt ratio
is defined as the ratio of total – long-term and short-term – debt to total assets, expressed as a
decimal or percentage. It can be interpreted as the proportion of a company’s assets that are
financed by debt.
Table 7: Debt Ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Total
Debt
3950977717 5152165002 5689405219 1226178410 9352845065
Total
Asset 4,677,043,785 7,180,040,973 8168272798 9,574,539,218 12,221,364,859
Debt
Ratio
84% 72% 70% 13% 77%

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Figure 7: Debt Ratio of Apex Adelchi Footwear Limited (2010-2014)
Analysis: Hear the graph represents that debt ratio increase from 2010 to 2012 & also increase in
2014 but in 2013 it was decrease. As we know that if debt ratio increases than the interest expenses
also increase & it also increase the probability of default. Hear we can see that the debt ratio will
be increase in maximum period & also in the ended period. So we can say that the debt position
of this corporation is not good & for improving the position the corporation should try to increases
it is assets and decreases it is liabilities.
2.3.2 Equity Multiplier:
The ratio of a company’s total assets to its stockholder’s equity. The equity multiplier is a
measurement of a company’s financial leverage. Companies finance the purchase of assets either
through equity or debt, so a high equity multiplier indicates that a larger portion of asset
financing is being done through debt. The multiplier is a variation of the debt.

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Table 8: Equity multiplier Ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Total assets 4,677,043,785 7,180,040,973 8168272798 9,574,539,218 12,221,364,859
Stockholder
equity 726,066,068 2,027,875,971 2286730921 2,496,114,103 2,637,333,839
Equity
multiplier 6.44 3.54 3.58 3.83 4.63
Figure 8: Equity multiplier Ratio of Apex Adelchi Footwear Limited (2010-2014)

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Analysis: Analysis: Hear the graph represents that the equity multiplier ratio decrease from 2010 to 2013
but in 2014 it was increase. As we know that if the equity multiplier ratio increases than the interest expenses
also increase & it also increase the probability of default. Hear we can see that the equity multiplier ratio
will be increase in the ended period. So we can say that the equity multiplier position of this corporation is
not good & for improving the position the corporation should try to increases it is equity and decreases it is
liabilities.
 2.4. Profitability Ratios
A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time. For
most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a
previous period is indicative that the company is doing well. Some examples of profitability ratios
are profit margin, return on assets and return on equity. It is important to note that a little bit of
background knowledge is necessary in order to make relevant comparisons when analyzing these
ratios.
 2.4.1. Net Profit Margin:
Profit margin is part of a category of profitability ratios calculated as net income divided
by revenue, or net profits divided by sales. Net income or net profit may be determined by
subtracting all of a company’s expenses, including operating costs, material costs (including raw
materials) and tax costs, from its total revenue. Profit margins are expressed as a percentage and,
in effect, measure how much out of every dollar of sales a company actually keeps in earnings. A
20% profit margin, then, means the company has a net income of $0.20 for each dollar of total
revenue earned.
Profit Margin = Net Income / Net Sales (revenue)
Table 9: Net Profit Margin of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Net
Profit 228,226,667 261,011,193 258854949 265,633,182 203,094,736
Sales 6,931,516,622 9,499,256,667 9748378905 10,940,035,731 11,463,903,330

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Net
Profit
Margin 3.29% 2.75% 2.65% 2.43% 1.77%
Analysis: Hear the graph represents that the net profit margin ratio almost same (3.29%, 2.75%,
2.65%, 2.43%) in 2010 to 2013 but in 2014 (1.77%) it will have decreased. So over all the position
of net profit margin ratio of this corporation is not satisfactory. For improving the corporation
should try to increase it is sales &decrease it is expenses.

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 2.4.2 Return on Total Asset:
Table 10: Return on total asset Ratio of Apex Adelchi Footwear Limited
YEAR 2010 2011 2012 2013 2014
NET
INCOME
228,226,667 261,011,193 258854949 265,633,182 203,094,736
TOTAL
ASSETS
4,677,043,785 7,180,040,973 8168272798 9,574,539,218 12,221,364,859
RETURN
ON
TOTAL
ASSET
4.88% 3.64% 3.17% 2.77% 1.66%

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Analysis: Hear the graph represents that the return on total asset decreased from 2010 to 2014 (in
364%, 3.17%, 2.77%, 1.66%). So the overall return on total asset position of this corporation is
not good. The corporation should try to increase it is sale & utilize it is assets properly.
 2.4.3 Return on Common Equity:
Table 11: Return on common equity Ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Net
Income 228,226,667 261,011,193 258854949 265,633,182 203,094,736
common
equity 726,066,068 2,027,875,971 2286730921 2,496,114,103 2,637,333,839
Return on
common
equity 31.43% 12.87% 11.32% 10.64% 7.70%

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Analysis: Hear the graph represents that the return on common equity decreased from 2010 to
2014 (in 12.87%, 11.32%, 10.64%, 7.70%). So over all position of return on common equity of
this corporation is not good. The corporation should try to increase it is sales & utilize it is equity
properly.
2.4.4 Earnings Per Share:
Table 12: Earning per share of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
Net
Profit 228,226,667 261,011,193 258854949 265,633,182 203,094,736
Number
of
shares 1124989.73 11250482.46 11249671.84 11250875.98 11251785.93
earnings
per
share 202.87 23 23.01 24 18

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Analysis: Hear the graph represent that EPS of this corporation decreased from 2010 to 2014. Which is not
good sign for this corporation? For improve the position, the management of this corporation need to take
steep to improved corporation share price in the capital market.
 2.5.1: Price / Earnings (PE) Ratio:
Table 13: PE ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
PE Ratio 20.27 12.74 10.04 17.45 24.57
Analysis: As we know that the higher PE ratio, create batter position for the corporation & hear
the graph represents that PE ratio was the lowest (10.04 times) in 2012 & highest (24.57 times) in
2014. Over the period in 2011, 2012 the PE ratio was decrease & in 2013, 2014 the PE ratio was
increase. which is a good sign for the corporation.

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 2.5.2: Market / Book value Ratio:
Table 14: Market / Book ratio of Apex Adelchi Footwear Limited
Year 2010 2011 2012 2013 2014
MVPS 0.0999162 295.568 231.0204 411.9945 443.4885
BVPS 645.397952 180 203.2709001 222 234
Market/Book
value
0.00016 1.63979 1.13651 1.85700 1.89208
Analysis: Hear the graph represent that the market / book value ratio increase from 2010 to 2014
which is good sign for the corporation & for more batter the management of this corporation need
to take steep to improved corporation share price in the capital market.

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CONCLUSION
This project of Ratio analysis in the production concern is not merely a work of the project. But a
brief knowledge and experience of that how to analyze the financial performance of the firm. The
study undertaken has brought in to the light of the following conclusions. According to this project
we came to know that from the analysis of financial statements it is clear that Apex Adelchi
Footwear Ltd. Have been incurring loss during the period of study. So the firm should focus on
getting of profits in the coming years by taking care internal as well as external factors.
The company’s overall position is not at a very good position. The company achieves not sufficient
profit in past 5 years. The long term solvency position of the company is very good. The company
maintains low liquidity to achieve the high profitability. The company distributes dividends every
year to its shareholders. The profit of the company decreased in the last year due to maintaining
the comparatively high liquidity. The networking capital of the company is maximum in the last
year shows the maximum liquidity. Without P/E ratio and M/B ratio all others ratios indicate
dissatisfaction.
Financial analysis is helpful in assessing the financial position and profitability of a concern. This
is done through comparison by ratios for the same concern over a period of years; or for one
concern against another; or for one concern against the industry as a whole; or for one concern
against the predetermined standards; or for one department of a concern against other departments
of the same concern. Accounting ratios calculated for a number of years show the trend of the
change of position. The trend is upward or downward or static. The ascertainment of trend helps
us in making estimates for the future. Thus we can say that there is lots of application of financial
analysis in the modern days of business. To assess any business condition financial analysis gives
a clear financial picture of any business organization. This helps to evaluate the trend and condition
of organization. From small to big business organization financial analysis helps a great deal in
decision-making process. As it helps to give idea about the financial condition, thus it helps in
future financial projection and decision making process of any business house. Eventually one can
assess how important is financial analysis in the modern days of business. It gives the exact picture
of the financial condition and helps future projection of any organization. Apex Footwear Ltd is
leading edge footwear company in Bangladesh. It is gradually expanding its asset base and able to
proper utilize assets. No business stays at the top if it doesn’t maintain its performance. Thus it is
very important to fulfill the demand of the consumers through competitive advantage.

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References & Bibliography
 Reference Book –
Essential of Managerial Finance – Besley & Brigham
 Annual Report of Apex Adelchi Footwear Ltd, 2010 – 2014
 All Mathematical Calculation is done by MS Excel 2016
 For Line chart presentation we use MS Excel 2016 , Office 365 &
http://www.onlinecharttool.com/
 Share’s information collected from : http://www.dsebd.org/
 We also Collected information form: http://www.apexfootwearltd.com/apex_footwear/
 Other’s Information - http://www.myaccountingcourse.com/financial-ratios/

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Appendix
1.We have computed DAYS SALES OUTSTANDING by dividing accounts receivable by
average sales per day. To computed average sales per day we have to divide annual sales by 360
days.
2. We have computed DEBT RATIO dividing total liabilities by total assets. In 2010 there are only
current liabilities that’s why we take these as total liabilities. In 2011 total liabilities has given
directly. But in 2012,2013 and 2014 we take total liabilities by adding current liabilities and long
term debt/loan/borrowings.
3.Price/Earnings (P/E) ratio are directly given in Dhaka Stock Exchange.
4.We have computed MARKET/BOOK (M/V) VALUE by dividing market price per
share(MPPS) by book value per share(BVPS). Here MPPS and BVPS are not given directly that’s
why we have to find out it. To find out It we divide market price per share(mpps) by book value
per share(bvps).