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
NAEEM SAJJAD
PIRZADA ARSLAN
ARSLAN GUJJAR M .IFTIKHAR
9243 9212 9234 9229 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 Common Size Size Financ Financial ial Statem Statement ent discloses the inte in tern rnal al st stru ruct ctur ure e of the the firm firm.. It in indi dica cate tes s the the exis existi ting ng rela relati tion onsh ship ip betw betwee een n sale sales s and and each each income statement account. It shows the mix of assets that produce income and the mix of the sour source ces s of capi capita tal, l, wheth whether er by curr curren entt or long 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) In Intr trod oduc ucti tion on…… ………… ………… ………… ………… ………… ………… ………… ………… ………… ……..
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Introductio Introduction n of Bata shoes …………………… ………………………………… ………………. …. 8 Intr Introd oduc ucti tion on of Serve Servess shoes… shoes……… ………… ………… ………… ………… ………. …... ..
Projec Projectt
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procee proceedin dings… gs…………… …………………… ………………… ………………… ………………. …….
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1. Ratio Ratio Analys Analysis… is………… ……………… ……………… ……………… ……………… ………….… ….………… ………..
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a) Liquid Ratio……………………………… Ratio…………………………………………………... …………………... 15 b) Leverage Ratio…………………………………………………
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c) Pro Proffitability Ra Ratio………………………………………………
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d) Activity Activity Ratio…………………… Ratio………………………………… …………….….…… .….………….. …….. 32 e) Market Ratios…………………………………………………. Ratios………………………………………………….33 33 f) St Statement of of Ca Cash Fl Flow……………………………………….
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Company’s introduction: Introduc Int roduction tion of Serves Serve s shoes company compa ny :
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”
Bata Introduction of Bata
S hoes hoes C ompany ompany
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, goals, and evaluat evaluating ing the performa performance nce of manager managers. s. Externa Externall analyst analystss use ratios 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 Current Ratio (b) Quick Ratio Ratio (c) Avg. Inventory Inventory Turnover Turnover Period Period (d) Accounts Receivable Receivable Collection Period 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
Year
2007
2008
Current
1398003
1652271
Current
808720
734907
Current
1.73
2.25
SERVIS SHOES
Year
2007
2008
Current
159136
242708
Current
189657
189657
Current
0.840
1.280
Interpretation BATA SHOES
The current ratio for the year, 2007 & 2008 is 1.73 & 2.25 respectively respectively this1.73 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
The debt to equity ratio is the most popular leverage ratio ratio and it provides detail detail around the amount of leverage (liabilities assumed) that a company has in relation to the monies provided by shareholders
BATA SHOES
Year
2007
Current
62
Current
808720
Quick
0.78
2008 377982 734907 0.51
SERVIS SHOES
Year
2007
2008
Current
892505
2308826
Current
1896571
1896571
0.471
1.218
Quick
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
Year
2007
Inventory Cost of Avg
2008
76
1274289
232
2942432
120.78
158.08
SERVIS SHOES
Year
2007
2008
Inventory
69855
118256
Cost of
38096
535517
66.92
80.60
Avg
Interpretation BATA SHOES We can see from the above calculations 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 increased to 1.85 .
(d)Accounts Receivable Collection Period: Avg account receivable period=trade receivable/sales*365 The capitalization capitalization ratio measures the debt component of a company's company's capital structure , shareholders' equity ) to or capitalization (i.e., the sum of long-term debt liabilities and shareholders'
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
Trade
3482 3964187
Sales Avg account
0.321
SERVIS SHOES
2008 893 51065 0.064
Year
2007
2008
Trade
1904
2844
45211
639323
0.15
1.62
Sales Avg account
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:
Profit Ability Ratio’s
(a) Gross Profit Margin (b) Net Profit Margin (c) Assets Turnover Turnover Ratio 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
Year
2007
2008
Gross
1637053
Sales
3964187
5106578
Gross
41.29
42.37
216
SERVICE SHOES
Year
2007
2008
Gross
711514
103
Sales Gross
4521147
6393323
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 PBIT/sales*100
Posit Positive ive workin working g capita capitall means means that that the company company is able able to pay off its short-t short-term erm 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
Year PBIT sales Net profit
2007
2008
503999
663822
3964
5106578
12.71
12.99
SERVICE SHOES
Year PBIT sales Net profit
2007
2008
236180
878203
4521147
6393323
5.23
13.74
Interpretation: BATA SHOES It is very clear from the above above calcul calculati ations ons that that the working working capital 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
sales
39641
510657
Cap
20633
191251
Assets
2008
19.21
26.70
SERVICE SHOES Year
2007
2008
sales
4521147
6393323
Cap
576630
5239
Assets
7.85
12.21
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 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.
(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
Year
2007
2008
PBIT
503999
663822
Capital
191251
2063
Return cap
2.64
3.22
SERVIS SHOES
Year
2007
2008
236
478203
Capital
576630
523901
Return
0.41
0.913
PBIT
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 .
Earning Per Share- EPS: Earning Per Share
=
Profit after Taxation Number of Shares
The portion portion of a company company's 's profit profit alloca allocated ted to each each outsta outstandi nding ng share share of common common stock. Earnings per share serve as an indicator of a company's profitability. Earnings per per share share are are gene general rally ly consi conside dered red to be the the sing single le most most impo import rtan antt varia variabl blee in determining a share's price. It is also a major component used to calculate the price-toearnings valuation ratio. BATA SHOES
Year
2007
2008
Profit
10084
156140
Number of
69000
759000
Earning
14.61
20.57
SERVIS SHOES
Year Profit Number of
Earning
2007
2008
3130229
1301301
650000
799500
4.815
1.627
Price / Earning Ratio: Price / Earning Ratio =
Stock Price Per Share 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
Year
2007
2008
10
10
EPS
14.61
20.57
Price /
0.68
0.49
Stock
SERVIS SHOES
Year
2007
2008
10
10
EPS
4.815
1.627
Price /
2.07
6.14
Stock
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.
Dividend cover: Dividend Payout Ratio = Earning per share Dividends per shrare
The percentage of earnings paid to shareholders in dividends.
BATA SHOES
Year
2007
2008
DPS
2.0014
3.597
EPS
14.61
20.57
Dividend
0. 0.137
0.175
SERVIS SHOES
Year
2007
2008
DPS
00
1.21
EPS
4.815
1.627
00
0.74
Dividend
.
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 performance of the firm. This report mainly deals with two companies. It is required by law that all private and public public limited limited companies must prepare the financial statements statements like like,, inco income me stat statem emen ent, t, bala balanc ncee shee sheett and and cash cash flow flow stat statem ement ent of the the part partic icul ular ar 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
