NORTH SOUTH UNIVERSITY
Financial Analysis: A case of Linde Bangladesh LTD
COURSE NAME: Managerial Finance
BUS 635
SECTION: 03
SUBMITTED TO:
Dr. M. Masud Rahman
SCHOOL OF BUSINESS
NORTH SOUTH UNIVERSITY
SUBMITTED BY:
Group: 08
1. Humayra Rahman Raha -1521659660
2. Maksudul Alam Rana -1521685660
3. Nusrat Habib
-1521666660
Date of Submission: 01/12/2015
Financial analysis: A case of Linde Bangladesh Ltd.
Page 1
Letter of Transmittal
December 01, 2015
To
Dr. M. Masud Rahman
School of Business
North South University
Subject: Submission of Project report titled “Financial Analysis: A case of Linde Bangladesh
LTD.”
Dear Sir,
With due honor, we want to mention that we are student of School of Business, North south
University. This is our great pleasure to submit our Project paper titled “Financial Analysis: A
case of Linde Bangladesh LTD”. This report has been prepared to fulfill the requirement of our
“Managerial Finance Course” Course ID-“BUS 635”.
We have put our best effort to make this report a successful one. It has been joyful &
enlightening experience for us to work with real data, basically financial statements of Linde
Bangladesh, interpreting the numeric data and finding the ultimate results or market value of the
company. However this has been obviously a great source of learning for us to conduct similar
types of studies in the future.
We would like to express our sincere gratitude to you for your kind guidance & suggestions in
preparing the report. It would be our immense pleasure if you find this report useful &
informative to have an apparent perspective on the issue. We shall be happy to provide any
further explanation regarding this report if necessary.
Thank You.
Regards,
Group: 08
Humayra Rahman Raha(1521659660)
Maksudul Alam Ran( 1521685660)
Nusrat Habib(1521666660)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 2
ACKNOWLEDGEMENT
This term paper is basically a financial analysis of Linde Bangladesh LTD. The title of the paper
is titled “Financial Analysis: A case of Linde Bangladesh LTD”. In order to doing this term
paper we have experienced a lot of practical knowledge about the market and financial position
of Linde Bangladesh, the basic is their financial statements, to conduct the analysis Furthermore
it will help us a lot in our future career, being Finance major student.
First and foremost, we would like to express our gratefulness my respected course instructor Dr.
M. Masud Rahman, School of Business, North South University for his support in every area of
this paper. He is the person of our inspiration to give best effort in this study. He was always
there as an advisor, monitor and supervisor. Without his cooperation it would not have been
possible to accomplish the paper.
It was a great effort to do this report and hope the effort will work out.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 3
Executive Summary
The report is a Financial Analysis: A case of Linde Bangladesh LTD.
Dr. M. Masud Rahman on September 20, 2015, this report is submitted on December 01, 2015.
The objective of this report is to find out the overall market and financial position of Linde
Bangladesh and observing the year to year difference of financial data of Balance sheet, Income
statement and cash flow statements.
In this report at first we have provided a short overview of Linde Bangladesh. Later we discuss
about our main topic Financial Analysis: A case of Linde Bangladesh LTD.
This paper gives the idea about the market position of Linde Bangladesh, the difference of
market to book value. This study gives an about the, reason behind year to year fluctuation of
balance sheet and income statement items of Linde Bangladesh.
This paper also gives idea about the reason behind year to year fluctuation of cash flow items.
This paper also includes year to year fluctuation of different ratios of Linde Bangladesh and also
compares all the Linde Bangladesh ratios of 2014 with Baximco Pharma ratios of 2014.
The Key findings of Linde Bangladesh financial positions and Limitations are also described in
this paper.
Financial analysis: A case of Linde Bangladesh Ltd.
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Contents
CHAPTER-1 .................................................................................................................................................... 6
INTRODUCTION & METHODOLOGY .......................................................................................................... 6
1.0 Brief History .................................................................................................................................... 6
1.1 Book Value Vs Market Value ........................................................................................................... 7
1.2 Objectives of the study ................................................................................................................... 9
1.3 Methodology ................................................................................................................................... 9
1.4 Limitations..................................................................................................................................... 10
CHAPTER -2 ................................................................................................................................................. 10
ANALYSIS & INTERPRETATION (Balance Sheet Analysis) ........................................................................ 10
2.0 Balance Sheet Analysis .................................................................................................................. 10
Chapter- 3 ................................................................................................................................................... 15
Cash Flow Analysis .................................................................................................................................. 15
3.0 Cash Flow Statement Analysis ...................................................................................................... 15
Chapter- 4 ................................................................................................................................................... 17
Ratio Analysis .......................................................................................................................................... 17
4.0 Liquidity Ratio ............................................................................................................................... 17
4.1 Asset Management Ratio ............................................................................................................. 20
4.2 Debt Management Ratio ............................................................................................................... 25
4.3 Profitability Ratio .......................................................................................................................... 28
4.4 Market Value Ratio ....................................................................................................................... 34
CHAPTER 5 .................................................................................................................................................. 37
FINDINGS AND CONCLUSION .................................................................................................................. 37
Key Findings ........................................................................................................................................ 37
Recommendation................................................................................................................................ 38
Appendix: .................................................................................................................................................... 39
Reference .................................................................................................................................................... 48
Financial analysis: A case of Linde Bangladesh Ltd.
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CHAPTER-1
INTRODUCTION & METHODOLOGY
1.0 Brief History
The Linde Group has a history of over 130 years built on a heritage of innovation with a strong
focus on technology. The company’s founder, Professor Doctor Carl von Linde, invented
refrigeration technology and pioneered a process of air separation. Today, Linde is a global
market leader in gases and engineering solutions. Linde Bangladesh Limited, a member of the
Linde Group, has been contributing towards the development of the nation as a silent partner.
A strong in–built culture with work values reinforced and developed Linde Bangladesh over the
years. The performance of its employees for more than 60 years with continuous expansion in
operations and business are strongly reflecting the strong culture of Linde Group. Linde sells
their products to more than 35000 customers from a wide spectrum of industries running from
chemicals and petrochemicals to steel. Their team of around 400 trained, motivated and
professional members manages 24-hour operations at three major locations across the country
to support our customers. In Linde Bangladesh Limited, they are committed to the quality of
our product & services. Their motto is to ensure optimum conditions in health, safety and the
environment for employees, customers and stakeholders.
The Linde Group is a world-leading gases and engineering company with approximately 65,500
employees working in more than 100 countries worldwide. In the 2014 financial year, it
achieved sales of EUR 17.1 bn.
Financial analysis: A case of Linde Bangladesh Ltd.
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1.1 Book Value Vs Market Value
The book value of share indicates the dollar value remaining for common shareholders after
liquidating all assets and all debtors are paid. In other words, the book value of share is the
value of the shareholders’ equity according to the financial statement.
Book value is not necessarily the same as an asset's market value. Market value is based on
supply, demand and perceived value and book value is simply an accounting calculation.
Book value can also refer to the amount that investors would theoretically receive if an entity
liquidated, which could be approximately the shareholders' equity portion of the balance sheet
if the entity liquidated all of its assets and liabilities at the values stated on the balance sheet.
We can compare the market value of the total number of an entity's outstanding shares to its
book value to see theoretical undervaluation (if they sell at less than book value) or
overvaluation (if they sell at more than book value) of the shares.
It is good news for the company if the market value is higher than the book value. It means the
market is having trust on the ability of the company's assets to generate future profits and cash
flow and thus demanding the company’s share. On contrary, when the book value is less than
the market value it means that the investors are not putting enough confidence on the
company thus not demanding its share. In other words, the market doesn't believe that the
company is worth the value on its books. Therefore, it is a bad news for the company.
As per the key operating and financial data (consolidated), the market value and book value is
given below:
Particulars
2014
Book value per 171.31
2013
2012
2011
2010
161.57
144.00
142.29
131.13
631.15
539.00
626.97
688.24
share (restated)
Market
value 896.5
per
Financial analysis: A case of Linde Bangladesh Ltd.
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Book Value and Market Value of share for Linde Bangladesh Limited
If we look at the share’s book value and market value of Linde BD Limited, we find out that the
market value of the share is greater than the book value. This is good news for the company. It
explains that the company’s image in the market is favorable.
Here we observe a distinct difference between the book value and market value of the share.
These two values cannot be correct at a time. Here, either the company is devaluating their
equity value or the market/investors are overvaluing the company. However according to the
thumb rule of finance market price is our preference here. Since Market, value is higher than
that of book value, so we are considering it as “good news” for the company.
The graph shows a comparative presentation of the book value and market value of the share
of Linde BD Limited for the year 2010 to 2014.
Market value per
1000
900
800
700
600
500
400
300
200
100
0
Book value per share (restated)
896,5
688,24
631,15
626,97
539
131,13
142,29
144
161,57
171,31
2010
2011
2012
2013
2014
Graph: Market Value vs. Book Value (Source: Annual Report and Stock Bangladesh)
In the graph, it is clearly seen that the market value is higher than the book value every year,
which is good news for the company, which means the investors are having trust on the
company and demanding the share to invest.
However, from year 2010 to year 2012 market value fall down. In year 2011 there was a huge
crash in stock market in Bangladesh and in year 2010 there was high rise in price that was a
clever indication of the disaster waiting towards in 2011 and afterwards. So, based on the
above data a hypothesis can be made as following-
Financial analysis: A case of Linde Bangladesh Ltd.
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Hypothesis: the company is in a good position, as its market value of share is higher than that of
book value.
However if we do a year-to-year comparison we see that the market price of the share has
decreased year 2010 to year 2012. After 2012, it has started rising again, and in the year 2014 it
has the highest market price, which are 896.5. The second highest market price was 688.24 in
the year of 2010, but afterward it fell steeply because of the share market crisis during that
time. In the year 2012, the market price was 539.00, which are the lowest in comparison to
these five years. However, after the year the price started rising, which is good news for the
firm and 2014 has the highest price in compare to any other year, so the company has started
gaining trust in its investors again.
1.2 Objectives of the study
The objectives of this assignment areTo analyze the financial status of the company, with the help of the latest available annual
reports (In our case, we are conducting the analysis based on annual report published in 2014).
To study the book value and market value of share
To analyze the balance sheet and income statement of 2014
To analyze the cash flow statement of 2014
To analyze different ratios 2014
1.3 Methodology
Data source: source of data for this report is the annual reports of the company which is a
secondary source.
Statistical Techniques: For our analysis, we will use the different kind of graphs (line chart)
Period under consideration: our point of discussion will be based on 2010-2014 which is the
latest available year for annual report. For the convenience of our analysis we took five years
data.
Nature of Analysis: we will conduct both time series and cross section analysis.
Standard of Comparison: here we are going to conduct a cross section analysis with another
firm of Pharmaceuticals industry named “Baximco Pharma”.
Financial analysis: A case of Linde Bangladesh Ltd.
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1.4 Limitations
As Linde Bangladesh run a kind of monopoly business. Moreover the little competitors of this
company are not enlisted in DSE so instead of comparing with any rivalry or industry average
and had to compare its ratios with Beximco Pharma, a similar type industry. We couldn’t collect
any primary data from the market as well as the company. Time limitation was another barrier
to make the study perfect. Moreover, we could not study the whole industry of automobiles
and make a comparative analysis based on that, we mentioned earlier rivals are not enlisted in
DSE and it was not possible to visit the rivals due to time constrain.
CHAPTER -2
ANALYSIS & INTERPRETATION (Balance Sheet Analysis)
The analysis and interpretation will be done by the means of time series study and cross section
study.
Time Series Analysis
2.0 Balance Sheet Analysis
We have analysed income statement and Balance sheet by doing a common size statement.
We have also calculated the growth rate for major income statement and Balance sheet items.
Table -1
Linde Bangladesh
COMMON SIZE STATEMENT-INCOME STATEMENT
Particulars
2014
2013
2012
2011
2010
Revenue
100
100
100
100
100
Cost of sales
60.26
62.87
66.19
61.12
58.06
Gross profit
39.74
37.13
33.81
38.88
41.94
Financial analysis: A case of Linde Bangladesh Ltd.
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Operating expenses
19.07
15.46
17.38
15.62
16.26
Profit from operations
20.67
21.67
16.43
23.26
25.68
Other income
-0.01
2.33
0.01
0.05
0.55
Interest income, net
0.69
0.70
0.87
1.89
2.00
Profit before taxation
21.36
24.69
17.30
25.21
28.23
Taxation
5.80
6.48
4.66
6.93
7.35
18.22
12.64
16.63
20.46
Total comprehensive income 15.56
for the year
Table -2
Financial analysis: A case of Linde Bangladesh Ltd.
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Table -3
Particulars
2014
2013
2012
2011
Revenue
-1.77%
6.27%
2.34%
16.58%
Total Assets
8.51%
9.67%
6.61%
7.08%
Property, Plant and Equipment
1.73%
2.32%
19.05%
18.71%
Trade debtors
22.85%
41.80%
43.94%
-6.75%
Inventories
8.95%
-17.09% 22.58%
81.84%
Cash
14.89%
71.94%
-47.14%
-27.47%
Long Term Debt
22.10%
14.60%
2.92%
2.00%
Expense creditors and accruals
6.30%
14.99%
33.77%
1.62%
Short Term Loans
9.22%
-1.66%
33.56%
4.65%
COGS
-5.85%
0.92%
10.83%
22.73%
Operating Expense
21.17%
-5.45%
13.90%
11.97%
Net Income
-16.07%
53.14%
-22.19%
-5.27%
Interest Charges
-56.62%
-65.60% 36.54%
353.77%
Based on the Income statements and Balance sheet in terms of growth rate and common size
statements, some of the major findings that we identified are as below-
 The company had negative growth rate revenue in the year 2014; the reason might be
their operating expense growth rate has increased in 2014.
Financial analysis: A case of Linde Bangladesh Ltd.
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Revenue Growth Rate
Revenue Growth Rate
20,00%
16,58%
15,00%
10,00%
6,27%
2,34%
5,00%
-1,77%
0,00%
2011
2012
2013
2014
-5,00%
From the above graph in 2011, the revenue growth rate was highest but after that time it
started to decrease, the reason might be low sales promotion increased expense. From the
table we can see that expenses had not increased too drastically so the reason of fall may be
poor sales promotion.
We can also see that after 2011 the company had also changed their sales policy, from a
negative growth of Trade debtors they have reached to 22.85% growth rate trade debtors, the
graph is given below. This is showing they have brought their focus to their clients.
Trade debtors Growth Rate
Trade debtors Growth Rate
60,00%
43,94%
41,80%
40,00%
22,85%
20,00%
0,00%
-6,75%
2011
2012
2013
2014
-20,00%
 Assets had a growth rate with difficulty over the years.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 13
 Cash availability has decreased over the years, and had a negative growth rate in 2011 &
2012. The reason can be the increase in credit sales as we can see in the chart of growth
rate of trade debtors.
Another reason of the company’s less access to funds may be the reduction of creditors and
accruals over the years.
 In 2014, the inventory growth rate has increased too much in compare to 2013, but
from the growth rate table we can see that both the sales revenue & Accounts
receivable have not increased over these years so the company is piling up inventories
for sure.
Total non-current liabilities
Total current liabilities
25
20,17
20
18,2
15
12,31
11,73
11,32
11,83
2010
2011
2012
2013
18,08
16,1
10
5
0
 The company concentrated more on short-term liabilities than long term as we can see
from the above graph, the reason for low interest expense of the company. Thus, they
are not being able to experience the advantage of tax shield in terms of profitability.
 In accordance with the sales, COGS also went down with a negative growth for last
years. But they had a high growth rate in COGS in 2012 though the sales decreased in
that year compare to the preceding year, resulting a high INVENTORY in 2012
 In terms of profitability result, 2010 & 2013 was the best year for the company as Net
income was almost 20 & 18 percent of total sales. In all the other years, this result was
around 12-15 percent of sales, which is lower than compared to 2010 and 2011.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 14
In 2012, we can see that the COGS at that year was almost 66% of the total sales, this might be
the one of the prime reason, for which the company had the lowest income over total sales in
2012.
Chapter- 3
Cash Flow Analysis
3.0 Cash Flow Statement Analysis
In financial accounting, a cash flow statement (also known as statement of cash flows or funds
flow statement) is a financial statement that shows how changes in balance sheet accounts and
income affect cash and cash equivalents. The cash flow statement, as the name suggests,
provides a picture of how much cash is flowing in and out of the business during the fiscal year.
The cash flow is widely believed to be the most important of the three financial statements
because it is useful in determining whether a company will be able to pay its bills and make the
necessary investments. A company may look great based on the balance sheet and income
statement, but if it does not have enough cash to pay its suppliers, creditors, and employees, it
will go out of business. A positive cash flow means that more cash is coming into the company
than going out, and a negative cash flow means the opposite.
The statement of cash flows is designed to show how the firms operations have affected its
cash position by examining the investment and financing decisions of the firm. Often the
information contained in the statement of cash flows answer questions like, Is the firm
generative the cash needed to purchase additional fixed assets for growth? Does it have excess
cash flows to repay debt or to invest in new products? Information contained in the Cash Flow
Statement is useful for both financial managers and investors.
The graph followed shows the net cash in hand of Linde Bangladesh Limited for the year 2012 –
2014:
Financial analysis: A case of Linde Bangladesh Ltd.
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Cash Balance
1000000
800000
600000
400000
200000
0
2011
2012
2013
2014
From the graph, it is clear that net cash in hand is higher in 2011 compare to other years. In
2012 and 2014 cash, balance has gone down. Now here our point of analysis would why the
cash balance has gone down in the year 2012 and 2014. For that first, we will have a look into
the Investment activities & financing activities situation of the company.
Cash flow from operating and Investment Activities
A major reason of decreasing cash balance can be company’s huge investment in the gross fixed
assets and inventories in 2012 and in 2014 accounts receivable also increased. Managing
director of the company in the last AGM had announced the expansion of business and this
huge investment in the gross fixed asset and inventories might be reflection of that.
Cash flow from financing Activities:
Linde has decreased the amount of dividends paid in 2012 than that of 2011. A payment of
dividend has taken away some portion of cash balance from the company. A scenario of
dividend payment from 2011 to 2014 is showing below-
Dividend
520 000
500 000
480 000
460 000
440 000
420 000
2011
2012
Financial analysis: A case of Linde Bangladesh Ltd.
2013
2014
Page 16
Chapter- 4
Ratio Analysis
4.0 Liquidity Ratio
Liquidity ratio determines the firm’s ability to meet its debts, ability to pay its debt when they
become due. These ratios establish relation between cash and other current asset and current
liabilities. Commonly used ratios are
 Current Ratio
 Quick Ratio
a) Current Ratio
Year
Current Ratio
2010
3.79
2011
3.63
2012
2.60
2013
3.64
2014
3.8
Year
Current Ratio
2014
3.22
Baximco
Pharma
1.74
(2014)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 17
Current Ratio
Current Ratio
4
3,79
3,63
2,58
3
Current ratio
3,22
3,08
4
3
2
1
0
2
1
0
3,22
1,77
2014
2010
2011
2012
2013
2014
Baxcimco
Pharma
The current ratio measures the company’s ability to pay off its current liability. Here we can see
that current ratio was highest in 2014 and 2010 when compared to other years. Actually, it is
decreasing every year from 2010-2012 and again increase in 2013-2014. It is considered,
standard of current ratio to be 2:1. A current ratio 2 means that current assets are sufficient to
cover for twice the amount of a company’s short-term liabilities and then it is considered to
have good short-term financial strength. We can see that the ratios are better than the
benchmark of 2, so it denotes that the liquidity of the company is doing well. However, high
current ratio means that the companies do generate cash or maybe it is utilizing its assets
properly, so it might be a good sign for the Linde Bangladesh Ltd. On the other hand compared
to most recent year current ratio of Baximco pharma this ratio is also better than that.
Therefore, in a concluding note we would like to say company has enough current assets to
make the payments of short-term liabilities.
Financial analysis: A case of Linde Bangladesh Ltd.
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b) Quick Ratio
Year
Quick Ratio
2010
3.02
2011
2.28
2012
1.35
2013
2.03
2014
2.17
Year
Quick Ratio
2014
2.17
Baximco
Pharma
1.25
(2014)
Quick Ratio
Quick Ratio
4
Quick Ratio
3,01
2,37
3
2,03
2,16
1,35
2
Quick Ratio
2,16
2
1
0
3
1,24
1
2010
2011
2012
2013
2014
3,01
2,37
1,35
2,03
2,16
0
2014
Baximco Pharma
Quick ratio is one of the important ratio in finance and the most conservative ratio in
calculating liquidity position. A company with a quick ratio of less than one will find it very
difficult to pay back its current liabilities; it is a bad sign for investors. Here we can see that it is
gradually decreasing from 2010 to 2012 and again increased in 2013- 2014. In 2012 significantly
change because in 2012 more inventories purchased compare to other years. However, that
Financial analysis: A case of Linde Bangladesh Ltd.
Page 19
decrease does not have that much negative impact as because the quick ratio was better than
the benchmark of one, which is good. Therefore, the company’s liquidity position is satisfactory
according to the benchmark analysis. On the other hand compared to quick ratio of Baximco
Pharma (1.25), Linde’s quick ratio (2.17) was better than that of.
Overall Comments on Liquidity Ratio
The company’s current ratio and quick ratio suggest that its liquidity condition is good. With its
current assets, the company is capable enough to meet the current liabilities.
4.1 Asset Management Ratio
Activity ratios are used to evaluate the competence or efficiency, which the company manages
and utilizes on its asset. This ratio also calls the turnover ratios because they indicate the speed
with which the assets are transformed or turnover into sales. A proper balance between assets
and sales generally reflects on that the assets.
The asset management ratios are as following Inventory Turnover Ratio
 Days Sales Outstanding (DSO)
 Fixed Asset Turnover
a) Inventory Turnover ratio
Year
Inv. Turnover Ratio
2010
5.14
2011
3.46
2012
3.14
2013
3.81
2014
3.29
Year
Inv. Turnover Ratio
Financial analysis: A case of Linde Bangladesh Ltd.
Page 20
2014
3.30
Baximco
Pharma
2.45
(2014)
Inventory Turnover
Inventory Turnover
6
5
4
3
2
1
0
5,1
Inventory turnover
3,46
3,13
3,81
3,29
4
3,29
2,44
3
2
1
0
2010
2011
2012
2013
2014
2014
Baximco Pharma
Inventory turnover ratio measures how fast the inventory become cash or accounts receivable.
If the turnover number is more than the company’s position is good. In 2010 it is 5.14 times, in
2011 it is 3.46 times, and in 2012 it is 3.14, in those consecutive three years the inventory
turnover rate has decreased gradually. But in 2011 the rate of inventory has decreased
drastically from 5.14 to 3.46, the reason for such a decrease is Linde piled up too many
inventories in 2011, they had 361,478 in 2010 and in 2011 they had 657,315 inventories in hand
which is too high but the sales was not too high in compare to this. In 2013 3.81, the rate
increased compare to last 2 years but even that year the rate wasn’t even near to the rate of
2010. Again in 2014 the rate fall and decreased to 3.29. Here we see the turnover is decreasing
over the time except in 2013. On the other hand we can see that this ratio was higher than the
compared firm (Baximco Pharma). It might be holding excessive stock of inventory in recent
year but the rate is higher than the compared firm, which indicates that their inventory
management is good.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 21
b) Days sales Outstanding (DSO) Ratio
Year
Days’
Outstanding (DSO)
2010
22.52
2011
18.01
2012
25.33
2013
33.80
2014
42.27
Year
2014
Sales
Days’
Sales
Outstanding (DSO)
42.27
Baximco
Pharma
44.89
(2014)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 22
DSO
42,27
45
40
33,79
35
30
25
25,32
22,51
DSO
18,08
20
45
15
44
10
43
5
42
0
41
2010
2011
2012
2013
2014
44
42,27
2014
Baximco Pharma
Days Sales Outstanding is the measure of number of times per year, which the average amount
of sales is collected and transfers the cash amount. Here we see that in 2015, the company took
42.27 days to collect its sales receivables. In 2013 it took 33.79 days to collect the sales. In this
case the collection performance of recent year is getting worse than that of previous year; the
reason might be they are increasing their credit sales in last two years. So, the company
management is not performing efficiently to collect the sales regularly. Again compared to
Baximco Pharma (44.89 days) it’s (LInde’s- 42.27) is not poor. So, we conclude that the firm
should to be more serious in collection of receivables, but it the DSO is good compare to
Baximco. So for this increased DSO, the reason might be that the company is focusing more in
their sales/ client,and increasing their DSO but it’s not high in compare to other company.
c) Fixed Asset Turnover Ratio
Year
Fixed Asset Turnover
Ratio
2010
3.05
2011
3.00
2012
2.51
2013
2.61
2014
2.52
Financial analysis: A case of Linde Bangladesh Ltd.
Page 23
Fixed Asset Turnover
Year
Ratio
2014
2.52
Baximco
Pharma
0.54
(2014)
Fixed Asset Turnover
3,5
3,03
3
3
2,61
2,5
2,52
2,5
Fixed Asset Turnover
2
1,5
3
1
2
0,5
1
0
2,52
0,54
0
2010
2011
2012
2013
2014
2014
Baximco Pharma
A higher fixed-asset turnover ratio shows that the company has been more effective in using
the investment in fixed assets to generate revenues. Here the company is not in a good position
because the Fixed Asset turnover ratios were decreasing, in the 2013, it is slightly better than
previous year but not like as 2010, but again in 2014 it decreased. It shows more or less ups and
downs through the 5 years which indicates that the business has invested in the fixed assets but
sales did not generate as much as the fixed assets. However, when we compared with Baimco
Pharma (0.54) in that case it’s (2.52) better than that of. Therefore, the reason might be the
present value of growth opportunity.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 24
Overall Comments on Asset Management Ratio
The company is focusing on growth thus they are not doing well in terms of managing its fixed
asset and inventory due to poor sales promotion. However, to improve the DSO within a short
period, the firm should be more punctual in its collection of credit sales. Cash discount can be
increased. The results of this ratio are showing the present value of growth opportunity.
4.2 Debt Management Ratio
Debt management ratios show the leverage scenario of the company.
The debt management ratio we can justify on the two ratios, those are as follows
 Debt Ratio
 Time Interest Earned (TIE) Ratio
a)Debt Ratio
Year
Debt Ratio
2010
28.78%
2011
27.83%
2012
31.49%
2013
29.91%
2014
32%
Year
Debt Ratio
2014
32%
Baximco
Pharma
27.86%
(2014)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 25
Debt Ratio
Debt Ratio
34%
32%
30%
28%
26%
24%
32%
30%
Debt ratio
31%
29%
28%
34
32
30
28
26
24
32
27,86
2014
2010
2011
2012
2013
2014
Baximco
Pharma
It is seen that the company has started using debt in its capital structure from the year 2010
and it has both increased and decreased the portion of debt. In a sense the company has taken
debt as per their need. The more the company take debt the lower will be the taxable income
and get tax exemption. However since it is changing its capital structure by putting more debt
in it so it is a matter of risk for the investors, though an optimum level of debt portion is
expected to get the tax advantage and the EPS will be higher in 2013 years compared to
previous year. Again compared to Baximco Pharma (27.86%) the ratio is higher than that of.
That means Linde Bangladesh Ltd. is a highly leveraged one than Baximco Pharma.
b) Time Interest Earned (TIE) Ratio
Year
Times-Interest Earned
Ratio
2010
589.88
2011
137.25
2012
72.65
2013
296.06
2014
639.35
Year
Times-Interest Earned
Financial analysis: A case of Linde Bangladesh Ltd.
Page 26
Ratio
2014
639.35
Baximco
Pharma
3.34
(2014)
Times Interest Earned
Times Interest Earned
800
639,35
589,8
600
800
600
400
200
0
296,06
400
137,24
200
Times interest earned
72,65
0
639
3,34
2014
2010
2011
2012
2013
2014
Baximco
pharma
The graph of TIE ratios shows the consequence of adding debt to the capital structure. As the
company has started using not much debt the ratio has started getting better. So this is very
good news for the investors because if the company have enough EBIT, then they pay the
interest charges. But in 2012 is significantly lower than other years because of lower EBIT and
higher interest expense compare to other years. On the other hand, compared to Baximco
Pharma (3.34 times) the ratio (639.35 times) is also better than that of.
Overall comments on Debt ratio
The company has started increase use of not much debt in its capital structure as a result its TIE
is getting better. So it is not much risky for the investors. On the other hand it is lucrative for
the investors as the EPS has increased in 2013 than that of previous year.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 27
4.3 Profitability Ratio
Profitability ratio represents the organization’s ability to translate sales takes at different stages
of measurement. The ratio measures profitability after consideration of all revenues and
expenses, including interest taxes and non-operating items. This ratio specify the capacity of
the company to survive difficult circumstances, which might occur from a number of basis, such
as declining price, increasing cost and declining sale.
The profitability ratio we can justify on the five ratios, those are as follows
 Profit Margin on Sales
 Total Asset Turnover
 Return on Investment/ Asset (ROA) Ratio
 Finacial leverage
 Return on Equity (ROE) Ratio
Here we show four ratios out of five
a) Profit Margin on Sales
Year
Net Profit Margin
2010
20.46%
2011
16.63%
2012
12.64%
2013
18.21%
2014
16%
Year
Net Profit Margin
2014
16%
Baximco
Pharma
13.63%
(2014)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 28
Profit Margin on Sales
Profit Margin on Sales
25%
20%
20%
Profit margin
18%
17%
16%
13%
15%
10%
5%
17
16
15
14
13
12
0%
16
13,6
2014
2010
2011
2012
2013
2014
Baximco
Pharma
Profit margin on sales is the percentage of selling price that turned into profit, where as "Profit
Percentage" or "Markup" is the percentage of cost price that one gets as profit on top of cost
price. While selling something one should know what percentage of profit will he get on a
particular investment so companies calculate profit percentage to check what is ratio of profit
based on cost. A higher profit margin percentage is a favorable profit indicator and vice-versa.
This ratio helps organization to fix their product price. If the ratios minimum percentage then
indicates the product market price lower or product, production cost high. Here we see that
profit margin ratio was gradually decreasing in 2010-2012 but it has gone up in 2013 and 2014
that can give well for the company. In 2012, it was lower than other years because on this year
net income was lower compare to other years. On the other hand when we compared this ratio
with Baximco Pharma this shows better than that of.
b)Total Asset Turnover
Year
Total Asset Turnover
Ratio
2010
1.14
2011
1.24
2012
1.19
2013
1.15
2014
1.05
Financial analysis: A case of Linde Bangladesh Ltd.
Page 29
Total Asset Turnover
Year
Ratio
2014
1.05
Baximco
Pharma
.38
2014
Total asset turnover
Total asset turnover
1,24
1,3
1,19
1,2
1,14
total Asset turnover
1,15
1,5
1,04
1,1
1,05
1
0,38
0,5
1
0
0,9
2010
2011
2012
2013
2014
2014
Baximco
Pharma
The Asset Turnover ratio is an indicator of the efficiency with which a company is deploying its
assets. The higher the ratio, the better it is, since it implies the company is generating more
revenues per taka of assets. But since this ratio varies widely from one industry to the next,
comparisons are only meaningful when they are made for different companies in the same
sector. The ratio rose in 2011, and then gradually falls in 2012-2014 respectively. On the other
hand compare to Baximco Pharma it’s much better than that of.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 30
c) Return on asset
Year
Return On Assets
2010
23%
2011
21%
2012
15%
2013
21.06%
2014
16%
Year
Return On Assets
2014
16%
Baximco
Pharma
5%
Return on asset
Return on asset
25%
23%
20%
Return on asset
21%
21%
16%
15%
20
15%
15
10%
10
5%
5
0%
16
5
0
2010
2011
2012
2013
2014
2014
Baximco Pharma
Return on total assets indicates how profitable a company is relative to its total assets. It also
indicates the management efficiency to utilize total assets to make profit. In 2010 it has been
Financial analysis: A case of Linde Bangladesh Ltd.
Page 31
highest compared to the previous year. Then the percentage dropped to 15% in 2012, again
rose to 21% in 2013, and again dropped to 16% in 2014. In 2012 ROA is lowest compare to
other years because on this year net income is lowest than other years. In 2014 it also lower
because total asset of 2014 increase comare to 2013 but net income is decrease compare to
2013. So it can be said that company’s generated return on the assets is not up to the mark
compare to previous year but compare to Baximco Pharam it’s represent better value than that
of.
d) Return on Equity
Year
Return On Equity
2010
33%
2011
29%
2012
22%
2013
30%
2014
24%
Year
Return On Equity
2014
24%
Baximco
Pharma
7%
(2014)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 32
Return On Equity
Return On Equity
35,00%
32,80%
30,05%
28,64%
30,00%
24%
22,02%
25,00%
Return on equity
20,00%
30
24
20
15,00%
10,00%
7
10
5,00%
0,00%
0
2010
2011
2012
2013
2014
2014
Baximco Pharma
Return on equity is the measurement of shareholders wealth maximization. It indicates how
much shareholders earned from their investment. The higher the ratio indicates higher the
shareholders wealth maximization. Return on equity is highest in 2010 return shows 33%. But
this is gradually decreasing in 2010-2012 but in 2013 it has gone up and again dropped to 24%
in 2014. In terms of comparison with Baximco Pharam it’s much better than that of. So it is
good for the company.
Overall comment on profitability
Linde Bangladesh Ltd. has been a profitable company almost since its establishment and
during the past few years, the Profit Margin ratio has improved a lot. However, in last couple of years (20112012), profitability has gone down to changing economy and huge stock market crash. Here we
see that all the profitability ratios are better than other firms (Baximco Pharma). ROA is better
than the other firms. In addition, when we calculate the profitability ratios we find out that
Linde Bangladesh Ltd. was low leveraged one. This confirms the observation of excess of fixed
assets, inventories and debt. The firm should devote to inventory and asset management. The
apparent of low leverage in terms of lower tax exemption is evidential in profit promotion. Thus
operating activities of the firm affected from better asset management and low average debt.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 33
4.4 Market Value Ratio
Market value ratios show the market demand or market scenario of the company. It can be
measured by the help of following two ratios PE Ratio
 Market/Book Value Ratio
a) PE Ratio
Year
Price-to-Earnings Ratio
2010
16.00
2011
14.00
2012
17.00
2013
13.00
2014
22.00
Year
Price-to-Earnings Ratio
2014
22.00
Baximco
Pharma
14.14
(2014)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 34
PE Ratio
PE Ratio
25
20
22
16,99
16
14
15
13
10
5
0
2010
2011
2012
2013
2014
PE ratio
25
20
15
10
5
0
22
14,14
2014
baximco
Pharma
The graph shows an Increasing PE ratio over the years from 2010-2012 but in 2011 and 2013
the ratio decreased but it increased in 2014 again. In the case of 2014 it means the firm is
growing and the market price has increased than the previous years. It is good news for the
investors that indicate that the firm gained more trust from investors. The compare company
had also low PE ratio (14.14) than Linde (22.00) in 2014. This high PE ratio is truly describing the
growth of the firm and describing the reason for the low asset management ratio.
b) Market/Book Value Ratio
Year
Market-to-Book Value
2010
5.25
2011
4.41
2012
3.74
2013
3.91
2014
5.23
Financial analysis: A case of Linde Bangladesh Ltd.
Page 35
Year
Market-to-Book Value
2014
5.23
Baximco
Phrama
1.03
(2014)
Market/Book Value Ratio
Market/Book Value Ratio
6
5
4
3
2
1
0
5,24
Market/book value ratio
5,23
4,4
3,74
6
3,91
5,23
4
1,03
2
0
2010
2011
2012
2013
2014
2014
Baximco Pharma
The market to book value ratio has decreased over the time from 2011 to 2013, but it increased
again in 2014 but could not even match with the rate of 2010, which is not a good sign. It seems
that the market lost trust from the company from the period of 2011-2013 and thus the
company changed its policy which we can see in its other ratio and in 2014 it again started to
increase trust in it’s investors. However, still market value of Linde (5.23) is too higher than that
of market value of the compared company (1.03), which is good news for the company. Again
the market value of the share is higher than its book value, which is good news for the firm.
Overall comment on Market Value Ratio
One of the most important ratios to evalute the performances of the firm is the price-erning
ratio. Looking at the two ratios of market value it can be concluded that in 2010 the market
situation was good. But after the share market crisis in 2011 the ratios got poor. Although good
news is that market value of the share is higher than its book value and P/E has increased than
Financial analysis: A case of Linde Bangladesh Ltd.
Page 36
that of last year, which is actually reflecting the growth of the firm. The improvement may
indicate that the firm is gaining some trust of investors.
CHAPTER 5
FINDINGS AND CONCLUSION
Key Findings
After analyzing the company, some key findings that we have found areIn terms of sales, Linde increased their sales gradually from 2010-2013 but in 2014 they could
not continue their increasing. In 2013 their sales was highest compare to other years.
In COGS also went down with a negative growth for 2014 years. However, they had a high
growth rate in COGS in 2012 though the sales decreased in that year compare to the preceding
year, resulting a high INVENTORY in 2012.
In terms of profitability result, 2010 & 2013 was the best year for the company as Net income
was almost 20 & 18 percent of total sales. In all the other years, this result was around 12-15
percent of sales, which is lower than compared to 2010 and 2011.
Increasing PE ratio over the years from 2010-2012 but in 2011 and 2013 the ratio decreased but
it increased in 2014 again. In the case of 2014 it means the firm is growing and the market price
has increased than the previous years. It is good news for the investors.
The market to book value ratio has decreased over the time from 2011 to 2013, but it increased
again in 2014 but could not even match with the rate of 2010, which is not a good sign. It seems
that the market lost trust from the company from the period of 2011-2013 and thus the
company changed its policy, which we can see in its other ratio, and in 2014 it again started to
increase trust in its investors.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 37
Recommendation
In 2014, their sale has gone down. Therefore, they should take care about it. They need more
sales promotion to increase their sales.
In 2014 their operating expense also very much compare to other years, so they should proper
management action to control operating expense.
Their trade debtors also increasing gradually, so the company needs to increase the cash
discount to encourage the cash sales and discourage the credit sales.
From the above analysis, we can say that the company does not have major problems. Last five
years they were performing very much well except 2012. Because of stock market crush, Linde
Bangladesh Ltd faced some difficulties like other companies but they have already recovered
those difficulties and now they are operating their business very well. Moreover, all this
reflected in the market as the higher price shows that the investors are gaining their trust on
the company.
Financial analysis: A case of Linde Bangladesh Ltd.
Page 38
Appendix:
Linde Bangladesh
COMMON SIZE STATEMENT-BALANCE SHEET
Particulars
2014
2013
2012
2011
2010
21.38
20.19
12.88
25.97
38.34
5.64
5.91
4.48
4.20
Assets
Current assets:
Cash and cash equivalents
Advances,
deposits
and 5.74
prepayments
Inventories
19.12
19.05
25.19
21.91
12.90
Trade debtors
12.29
10.86
8.40
6.22
7.14
Total current assets
58.53
55.73
52.38
58.59
62.59
and 40.33
43.02
46.11
41.29
37.24
Non-current assets:
Property,
plant
equipment
Intangible assets
1.14
1.25
1.51
0.12
0.17
Investment in subsidiaries
0.0011
0.0011
0.0013
0.0013
0.0007
Total non-current assets
41.47
44.27
47.62
41.41
37.41
Total assets
100
100
100
100
100
Share capital
4.00
4.34
4.76
5.07
5.43
Revaluation reserve
0.53
0.58
0.63
0.67
0.72
General reserve
63.96
65.17
63.12
66.43
65.07
Total equity
68.49
70.09
68.51
72.17
71.22
4.83
2.87
2.75
2.85
4.08
Equity and Liabilities
Shareholders’ equity:
Non-current liabilities:
Employee benefits
Financial analysis: A case of Linde Bangladesh Ltd.
Page 39
Deferred tax liabilities
3.04
3.64
2.83
3.10
2.32
non-current 5.44
5.32
5.75
5.78
5.91
13.31
11.83
11.32
11.73
12.31
2.83
2.01
2.76
2.29
2.12
and 9.03
9.22
8.79
7.00
7.38
3.61
3.94
5.99
3.84
1.97
Provision for taxation (net 2.74
2.92
2.63
2.96
5.00
Other
liabilities
Total non-current liabilities
Current liabilities:
Trade creditors
Expense
creditors
accruals
Sundry creditors
of advance tax payment)
Total current liabilities
18.20
18.08
20.17
16.10
16.47
Total liabilities
31.51
29.91
31.49
27.83
28.78
Total equity and liabilities
100.00
100.00
100.00
100.00
100.00
Financial analysis: A case of Linde Bangladesh Ltd.
Page 40
Linde Bangladesh
COMMON SIZE STATEMENT-INCOME STATEMENT
Particulars
2014
2013
2012
2011
2010
Revenue
100
100
100
100
100
Cost of sales
60.26
62.87
66.19
61.12
58.06
Gross profit
39.74
37.13
33.81
38.88
41.94
Operating expenses
19.07
15.46
17.38
15.62
16.26
Profit from operations
20.67
21.67
16.43
23.26
25.68
Other income
-0.01
2.33
0.01
0.05
0.55
Interest income, net
0.69
0.70
0.87
1.89
2.00
Profit before taxation
21.36
24.69
17.30
25.21
28.23
Taxation
5.80
6.48
4.66
6.93
7.35
Net profit for the year
15.56
18.22
Gain on sale of lease land
20.88
Actuarial loss on defined
benefit plan
Other
comprehensive
1037.59
76.50
income/(loss) for the year
Total comprehensive income 15.56
18.22
12.64
16.63
20.46
0.02
0.02
0.02
0.02
for the year
Earnings per share:
Basic earnings per share (par 0.02
value Tk10)
Financial analysis: A case of Linde Bangladesh Ltd.
Page 41
Linde Bangladesh
Cash Flow Statement
2014
2013
2012
2011
620,132
738,895
482,511
681,515
51,352
45,719
71,089
Change in Trade -87,015
-
-81,981
13,510
debtors
112,256
-148,451
-
Cash flow from
operation
activities:
Net income
Add
back 54,644
depreciation
Change
in
current asset and
current
liabilities:
Change
in -59,826
137,668
Inventories
295,837
Change
in -20,373
-8,704
-54,671
-16,845
-17,682
19,494
9,430
42,147
70,973
3,356
-53,494
76,428
59,874
Advances,
deposits
and
prepayments
Change
Trade 36,934
creditors
Change Expense 20,373
creditors
and
accruals
Change
Sundry -760
creditors
Financial analysis: A case of Linde Bangladesh Ltd.
Page 42
Net
cash
flow
564,109
777,926
410,022
526,092
from operations
Cash flow from
long
term
investing:
Payment
for -
acquisition
Property,
-
200,513
-388,255
-
201,846
319,895
plant
and equipment
Payment
for -6,872
acquisition
-2,936
-70
-521
119,836
1,473
4,456
of
intangible assets
Proceeds
from 784
sale of property,
plant
and
equipment
Net
cash
flow
from investing
-
-84,946
-
206,601
-315,960
386,852
Cash flow from
financing
activities:
Paid
to
-20
-43
subsidiary
Dividend
-
-
-464,094
-
-
-505,240
payment
462,442
454,420
464,114 505,197
Net increase Or
-
238,560
-
decrease in cash
104,934
-295,108
440,924
during the year
Financial analysis: A case of Linde Bangladesh Ltd.
Page 43
Add
Opening
576,942
338,382
779,306
1,074,414
338,382
779,306
cash and cash
equivalents
Closing cash and
cash equivalents
472,008
576,942
1. LIQUIDITY RATIO
a. Current ratio
2010
Current Asset
= Current Liability
2011
2012
2013
2014
1,753,636/461,499 1,757,700/482,947 1,675,427/645,026 1955061/634342 2228036/69281
=3.80
=3.64
=2.60
=3.08
3
=3.22
b. Quick ratio or acid test ratio
=
Current Asset−Inventories
Current Liability
2010
2011
2012
2013
2014
1,753,636-
1,757,700-
1,675,427-
(1955061-
(2228036-
361,478
657,315
805,766
668098)/634342
727924)/692813=
/461,499=3.02
/482,947=2.28
/645,026=1.35
=2.03
2.16
2. ASSET MANAGEMENT RATIO
a. Inventory turnover =
2010
Cost of goods sold
2011
Inventory
2012
2013
2014
1,857,531/361,478 2,279,806/657,315 2,526,730/805,766 2550089/668098 2400925/72792
=5.14
=3.48
=3.14
=3.82x
4
=3.29x
Financial analysis: A case of Linde Bangladesh Ltd.
Page 44
b. Total asset turnover
2010
Sales
= Total asset
2011
2012
2013
2014
3,199,375/2,801,9 3,729,754/3,0
3,817,127/3,198, 4056278/3507 3984482/3806428=
74
00,230
541
873=
=1.14
=1.2
=1.19
1.17x
c. Fixed asset turnover
2010
1.05x
Sales
= Fixed Asset
2011
2012
2013
3,199,375/1,048,3 3,729,754/1,2
3,817,127/1,5
4056278/15528 3984482/1578392=
38
42,530
23,114
12=
=3.05
=3.00
=2.51
2.61x
d. Average collection period =
2010
2011
2014
2.52x
Accounts Receivable
sales
360
2012
2013
2014
200103/3199375 186593/3729754 268574/3,817,127 380830/(4056278 467845/(3984482/
/360
/360
/360
/360
360)
=22.52days
=18.01days
=25.33days
)=33.79 days
=42.27 days
Financial analysis: A case of Linde Bangladesh Ltd.
Page 45
3. DEBT MANAGEMENT RATIO
Total Debt
a. Debt ratio = Total Asset * 100
2010
2011
2012
2013
2014
806,476/2,801,974 834,825/3,000,2
1,007,174/3,198,541 1049378/35078
1199568/38064
=31.49%
=27.78%
73
28
=29.91%
=32%
30
=27.83%
EBIT
b. Times Interest Earned
= Interest Expense
2010
2011
2012
2013
2014
821,703/1393
867,533/6321
627,039/8631
879007/2969=
823491/1288=
=589.88
=72.65
=137.25
296.06x
639.35x
4. Profitability ratio
a. Net profit margin =
2010
Net Profit
Sales
* 100
2011
2012
2013
2014
654,602/3,199,375 620,132/3,729,754 482,511/3,817,127 738815/4056278 620012/3984482
=20.46%
b. Return on asset
=16.63%
=12.64%
=18.21%
=16%
Net Income
= Total Asset * 100
Financial analysis: A case of Linde Bangladesh Ltd.
Page 46
2010
2011
2013
2014
654,602/2,801,974 620,132/3,000,230 482,511/3,198,5
738815/350785
620012/3806
=23%
41
3=
408=
=15%
21.06%
16%
=21%
Net Income
c. Return on equity
2010
2012
= Total Equity * 100
2011
2012
2013
2014
654,602/1,995,498 620,132/2,165,4
482,511/2,191,36
738815/245881
3806408/2607
=33%
05
7
1=
056=
=29%
=22%
30.05%
24%
5. Market value ratio:
a. Price to Earnings Ratio
Market Price Per Share
= Earning price per Share
2010
2011
2012
2013
2014
688.24/43.01
626.9/44.78
539.01/31.71
631.15/48.54=
896.5/40.74=
=16x
=14x
=17x
13.00x
22.00x
b. Market to Book Value Ratio
=
Market Price per Share
Book Value Per Share
2010
2011
2012
2013
2014
688.24/131.13
626.9/141.2
539.01/144
631.15/161.57
896.5/171.31
=5.25
=4.41
=3.74
=3.91x
=5.23x
Financial analysis: A case of Linde Bangladesh Ltd.
Page 47
Reference
Linde Bangladesh, (2014), 2013-2014 annual report, Linde Bangladesh,
retrieved from
http://www.linde.com.bd/internet.global.corp.bgd/en/images/Linde%20AR%202014_Final%20
391_165157.pdf
Linde Bangladesh, (2012), 2011-2012 annual report, Linde Bangladesh, retrieved from
http://www.linde.com.bd/internet.global.corp.bgd/en/images/Linde%20AR%202012_Final%20
391_165157.pdf
Linde Bangladesh, (2011), 2010-2011 annual report, Linde Bangladesh,
retrieved from
http://www.linde.com.bd/internet.global.corp.bgd/en/images/Linde%20AR%202011_Final%20
391_165157.pdf
Financial analysis: A case of Linde Bangladesh Ltd.
Page 48