final project of accounting
TRANSCRIPT
Final Project
FINANCIAL STATEMENT ANALYSIS
OF
BATA SHOES AND SERVIS SHOES
AND
A REPORT
SUBMITTED TO THE DEPARTMENT OF MANAGEMENT
SCIENCES,
SUPERIOR UNIVERSITY OF PAKISTAN
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE DEGREE OF Bachelor IN BUSINESS ADMINISTRATION
Submitted By:
Submitted to:
Sir Luqman
Dedication
we would like to dedicate this project to
our parents who have always encourage
us throughout in our academic career and
make possible for us to stand where we
today.
GROUP MEMBERS :
KASHIF ALI 9215
NAVEED-UL-HASSAN 9243
NAEEM SAJJAD 9212
PIRZADA ARSLAN 9234
ARSLAN GUJJAR 9229
M .IFTIKHAR 9218
We become able to complete this project by blessing of our God and the help of our teacher which give us guiding in every aspect of our project. And sure us that he is available when we need assistance. We would also like to thanks our family as specially our parents for being a patent and encouraging and motivating us. We dedicate this project to our respected teacher Sir Luqman
Common Size Financial Statement discloses the internal
structure of the firm. It indicates the existing relationship
between sales and each income statement account. It shows
the mix of assets that produce income and the mix of the
sources of capital, whether by current or long-term debt or by
equity funding.
The primary objective of financial analysis is to forecast or
determine the actual financial status and performance of a
project
TABLE OF CONTENT
Section I
a) Introduction……………………………………………………. 6
Introduction of Bata shoes ……………………………………. 8
Introduction of Serves shoes………………………………... 9
Project proceedings………………………………………………. 14
1. Ratio Analysis…………………………………………….…………. 14
a) Liquid Ratio…………………………………………………... 15
b) Leverage Ratio………………………………………………… 18
c) Profitability Ratio……………………………………………… 24
d) Activity Ratio………………………………….….………….. 32
e) Market Ratios…………………………………………………. 33
f) Statement of Cash Flow………………………………………. 38
Company’s introduction:
Introduction of Serves shoes company :
Serves e are in leather trade since last 25 years having a tannery. Now they started
manufacturing of shoes of various kinds for men, women, sports, softy shoes, boots and
much other kind of shoes under the choice of buyers
Vision:
“Enabling people to advance with confidence and success”
Mission:
“To make our customer prosper, our staff excels and creates value for shareholders”
Introduction of Bata Shoes Company
Bata Ltd. is a privately owned global shoe manufacturer and retailer headquartered in
Ontario, Canada. The company is led by a third generation of the Bata family. With
operations in 68 countries, Bata is organized into four business units. Bata Canada,
based in Toronto, serves the Canadian market with 250 stores. Based in Paris, Bata
Europe serves the European market with 500 stores. With supervision located in
Singapore, Bata International boasts 3,000 stores to serve markets in Africa, the Pacific,
and Asia, Finally, Bata Latin America, operating out of Mexico City, sells footwear
throughout Latin America. All told, Bata owns more than 4,700 retail stores and 46
production facilities. Total employment for the company exceeds 50,000
VISION
To be the premier organization operating locally and internationally that provided the complete range of financial services to all segment under one roof
MISSION
To develop and deliver the most innovative products manage customer experience deliver quality services that contribute to brand strength establish a competitive advantage and enhance profitability , thus providing value to stake holder of the bank.
Data Processing and Analysis:
We can use several tools to evaluate a company, but we will use one of the most valuable
tool that is “financial ratios Ratios are useful both to internal and external analysts of
the firm. For internal purposes: ratios can be useful in planning for the future, setting
goals, and evaluating the performance of managers. External analysts use ratios to
decide whether to grant credit, to monitor financial performance, to forecast financial
performance, and to decide whether to invest in the company we will use Microsoft Word
and Microsoft Excel work sheets to compute the different ratios and analysis.
Project proceedings:
RATIO ANALYSIS:
(1) PROFITABILITY RATIO’S
(2) Debt & Leverage Ratio’s
(3) Liquidity & Working Capital Ratio’s
(4) shareholder ratio’s
(1)Liquidity & Working Capital Ratio’s
(a)Current Ratio
(b)Quick Ratio
(c) Avg. Inventory Turnover Period
(d)Accounts Receivable Collection Period
(e) Accounts Payable Payment Period
(a) Current Ratio
Current Ratio = Current Assets / Current Liabilities
Current assets normally include cash, marketable securities, accounts receivables, and
inventories. Current liabilities consist of accounts payable, short-term notes payable,
current maturities of long-term debt, accrued taxes, and other accrued expenses
BATA SHOES
SERVIS SHOES
Year 2007 2008
Current Assets 1398003 1652271
Current Liabilities 808720 734907
Current ratio 1.73 2.25
Bata Servis0
0.2
0.4
0.6
0.8
1
1.2
1.4
Quick Ratio 20x7Quick Ratio 20x8
Interpretation
BATA SHOES
The current ratio for the year, 2007 & 2008 is 1.73 & 2.25 respectively this1.73 ratio is
lower which shows low short term.
SERVIS SHOES
The ratios for the last 2 years are 0.840, & 1.280,
(b)Quick Ratio:
Quick ratio=current assets-stock/current liabilities
Year 2007 2008
Current Assets 1591361 2427082
Current Liabilities 1896571 1896571
Current ratio 0.840 1.280
The debt to equity ratio is the most popular leverage ratio and it provides detail around
the amount of leverage (liabilities assumed) that a company has in relation to the monies
provided by shareholders
BATA SHOES
SERVIS SHOES
Bata Servis0
20
40
60
80
100
120
140
160
180
Avg. Inventory Turnover Period 20x7Avg. Inventory Turnover Period 20x8
Year 2007 2008
Current assets-stock 628007 377982
Current liabilities 808720 734907
Quick ratio 0.78 0.51
Year 2007 2008
Current assets-stock 892505 2308826
Current liabilities 1896571 1896571
Quick ratio 0.471 1.218
Interpretation
BATA SHOES
We can see from the above calculations that this ratios continuously decreasing in the
last two years.
SERVIS SHOES
Calculating this debt ratio we can see that it was 0.471 & 1.218 the year, 2007 & 2008
respectively. This shows increasing the ratio of the company
(c)Avg. Inventory Turnover Period:
Avg inventory period = inventory / cost of sales*365
BATA SHOES
SERVIS SHOES
Year 2007 2008
Inventory 769996 1274289
Cost of sales 2327134 2942432
Avg inventory period 120.78 158.08
Year 2007 2008
Inventory 698556 1182566
Cost of sales 3809633 5355170
Avg inventory period 66.92 80.60
Bata Servis0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Accounts Receivable Collec-tion Period 20x7Avg. Inventory Turnover Period 20x8
Interpretation
BATA SHOES
We can see from the above calculations that this ratios continuously decreasing in the last two years. In
2007 it was 1.66 and in 2008 it was 1.33.
SERVIS SHOES
Analysis shows that this ratio was as high as 1.2 among two years. However, it declined to 1.15 in the year
2008. In 2007 the ratio somewhat increased to 1.85.
(d)Accounts Receivable Collection Period:
Avg account receivable period=trade receivable/sales*365
The capitalization ratio measures the debt component of a company's capital structure, or
capitalization (i.e., the sum of long-term debt liabilities and shareholders' equity) to support a
company's operations and growth. Long-term debt is divided by the sum of long-term
debt and shareholders' equity. This ratio is considered to be one of the more meaningful
of the "debt" ratios - it delivers the key insight into a company's use of leverage.
BATA SHOES
Year 2007 2008
Trade receivable 3482 893
Sales 3964187 5106578
Avg account receivable 0.321 0.064
SERVIS SHOES
Bata Servis0
5
10
15
20
25
30
35
40
45
Gross Profit Margin 20x7Accounts Receivable Collec-tion Period 20x8
Interpretation
BATA SHOES
It is obvious from the above calculations that there is a gradual fall in this ratio over the years.
SERVIS SHOES
The ratios for the last 2 years are, 0.65 and 0.52. Shows below standard of 2:1
(e)Accounts Payable Payment Period:
Year 2007 2008
Trade receivable 1904 2844
Sales 4521147 639323
Avg account receivable 0.15 1.62
Profit Ability Ratio’s
(a)Gross Profit Margin
(b)Net Profit Margin
(c) Assets Turnover Ratio
(d) ROCE
(a)Gross Profit Margin:
Gross profit = gross profit/sales*100
Sales to working capital give an indication of the turnover in working capital per year. A
low working capital indicates an unprofitable use of working capital.
BATA SHOES
SERVICE SHOES
Bata Servis0
2
4
6
8
10
12
14
16
Net Profit Margin 20x7Gross Profit Margin 20x8
Year 2007 2008
Gross profit 1637053 2164116
Sales 3964187 5106578
Gross profit margin 41.29 42.37
Year 2007 2008
Gross profit 711514 1038153
Sales 4521147 6393323
Gross profit margin 15.73 16.24
Interpretation:
BATA SHOES
This liquidity ratio for the years, 2007 & 2008 is, 41.29& 42.37 compared to standard
ratio this ratio is lower which shows low short term liquidity efficiency at the same time
holding less than sufficient current assets mean inefficient use of resources
SERVIS SHOES
The ratios for the last 2 years are, 15.73 &16.24 shows the ratio
(b)Net profit margin:
Net profit margin= PBIT/sales*100
Positive working capital means that the company is able to pay off its short-term
liabilities. Negative working capital means that a company currently is unable to meet its
short-term liabilities with its current assets (cash, accounts receivable and inventory).
Also known as "net working capital", or the "working capital ratio".
BATA SHOES
SERVICE SHOES
Year 2007 2008
PBIT 503999 663822
sales 3964187 5106578
Net profit margin 12.71 12.99
Year 2007 2008
PBIT 236180 878203
sales 4521147 6393323
Net profit margin 5.23 13.74
Bata Servis0
5
10
15
20
25
30
Assets Turnover Ratio 20x7Net Profit Margin 20x8
Interpretation:
BATA SHOES
It is very clear from the above calculations that the working capital of the Bata is
gradually increasing over the years, which shows good short term liquidity efficiency.
SERVIS SHOES
This ratio increased to a great extent in 2007, almost double of the year 2008
(e) Assets turnover ratio:
Assets turnover ratio=sales/cap employment
The interest coverage ratio tells us how easily a company is able to pay interest expenses
associated to the debt they currently have.
BATA SHOES
Year 2007 2008
sales 3964187 5106578
Cap employed 206334 191251
Assets turnover ratio 19.21 26.70
SERVICE SHOES
Bata Servis0
5
10
15
20
25
30
Assets Turnover Ratio 20x7Assets Turnover Ratio 20x8
Interpretation
BATA SHOES
We can see from this ratio analysis that, this company has covered their interest expenses
19.21 times in 2007 and 26.70 times in 2008. It means they have performed pretty much
same in 2007 and 2008.
SERVIS SHOES
We can see that, this company has covered their interest expenses 7.85 times in 2007 and
12.21 times in 2008.
Year 2007 2008
sales 4521147 6393323
Cap employed 576630 523901
Assets turnover ratio 7.85 12.21
(d)Return on capital employed:
Return on capital employed=PBIT/capital employed*100
The ratio of total debt to total assets, generally called the debt ratio, measures the
percentage of funds provided by the creditors. The proportion of a firm's total assets that
are being financed with borrowed funds.
BATA SHOES
SERVIS SHOES
Interpretation:
BATA SHOES
Calculating the debt ratio, we came to see that this company is highly leveraged one
SERVIS SHOES
Calculating the debt ratio, we came to see that this company is highly leveraged one.
Year 2007 2008
PBIT 503999 663822
Capital employed 191251 206334
Return cap employed 2.64 3.22
Year 2007 2008
PBIT 236180 478203
Capital employed 576630 523901
Return cap employed 0.41 0.913
Earning Per Share- EPS:
Earning Per Share = Profit after Taxation
Number of Shares
The portion of a company's profit allocated to each outstanding share of common
stock. Earnings per share serve as an indicator of a company's profitability. Earnings per
share are generally considered to be the single most important variable in determining a
share's price. It is also a major component used to calculate the price-to-earnings
valuation ratio.
BATA SHOES
SERVIS SHOES
Price / Earning Ratio:
Price / Earning Ratio = Stock Price Per Share
Year 2007 2008
Profit after Taxation 10084037 15614020
Number of Shares 690000 759000
Earning Per Share 14.61 20.57
Year 2007 2008
Profit after Taxation 3130229 1301301
Number of Shares 650000 799500
Earning Per Share 4.815 1.627
Earning Per Shares
The Price-Earnings Ratio is calculated by dividing the current market price per share of
the stock by earnings per share (EPS). (Earnings per share are calculated by dividing net
income by the number of shares outstanding.)
BATA SHOES
SERVIS SHOES
Interpretation
BATA SHOES
The P/E ratio was 0.54 times in 2006 and increased further to as high as 0.68 times in the
following year. However, in 2008 it declined to 0.49 times which is an alarming signal
for the potential investors.
SERVIS SHOES
The P/E ratio was 2.83 times in 2006 and decreased a little bit in 2007. However, in 2008
it increased as much higher than before to 6.14 times.
Year 2007 2008
Stock price per share 10 10
EPS 14.61 20.57
Price / Earning Ratio 0.68 0.49
Year 2007 2008
Stock price per share 10 10
EPS 4.815 1.627
Price / Earning Ratio 2.07 6.14
Dividend cover:
Dividend Payout Ratio = Earning per share
Dividends per shrare
The percentage of earnings paid to shareholders in dividends.
BATA SHOES
SERVIS SHOES
Year 2007 2008
DPS 2.0014 3.597
EPS 14.61 20.57
Dividend Payout Ratio 0.137 0.175
Year 2007 2008
DPS 00 1.21
EPS 4.815 1.627
Dividend Payout Ratio 00 0.74
.
Conclusion
Financial Statement Analysis is a method used by interested parties such as investors,
creditors, and management to evaluate the past, current, and projected conditions and
performance of the firm. This report mainly deals with two companies. It is required by
law that all private and public limited companies must prepare the financial statements
like, income statement, balance sheet and cash flow statement of the particular
accounting period. The management and financial analyst of the company analyze the
financial statements for making any further financial and administrative decisions for the
betterment of the company