Bata Shoe Company Introduction:

As a part of the assignment Program of BBA course requirement, we were assigned to do our

assignment in Bata Shoe Company (Bangladesh) Limited.

Company SecretaryMd. Hashim Reza

Legal AdvisersMalik Law Associates

AuditorsRahman Rahman Huq

Chartered Accountants

9, Mohakhali C/A (11th Floor)

Dhaka-1212

BankersEastern Bank Ltd.

Dutch Bangla Bank Ltd.

HSBC Ltd.

Islami Bank (Bangladesh) Ltd.

Factories1. Tongi Industrial Area

Tongi, Gazipur

2. Dhamrai, Dhaka

TanneryDhamrai, Dhaka

Registered OfficeBata Shoe Company (Bangladesh) Limited

Tongi Industrial Area

Tongi, Gazipur

Share Liaison Office6, B. B. Avenue (2nd Floor)

Dhaka

Company Information

Bata Shoe Company Board of Directors:

Fernando Garcia Restrepo

Chairman

Present Position

Group Managing Director, Bata Emerging Market

(WEST)

Previous Positions

President Director, Bata Indonesia

Managing Director, Bata Kenya

Managing Director, Bata India

Vice President, Wholesale & Marketing, Bata Ltd,

Toronto, Canada

Managing Director, Bata Bangladesh

Muhammad Qayyum

Vice Chairman & Managing Director

Previous Positions

Retail Manager, Futura Footwear

Limited, South Africa

Retail Manager, Bata Pakistan Limited

Area Manager, Bata Pakistan Limited

Merchandise Planning & Budget Control

Manager, Bata Pakistan Limited

Mike Middleton

Director

Current Positions

CFO, Bata Emerging Markets Limited,

Bangladesh

Director, Bata Pakistan Limited

Director, Bata Shoe of Thailand Public

Company Limited

Director, Bata Malaysia Limited

Director, Bata Shoe Company of Ceylon Limited

Commissioner, P.T. Sepatu Bata Tbk, Indonesia

Previous Positions

Finance Manager, Shoe Company (Malawi) Limited

Company Secretary, The Zimbabwe Bata Shoe Company Limited

Finance Manager, Bata Shoe Company (Kenya) Limited

Director of Finance, Bata Limited, Toronto, Canada

Rokanuddin Moahud Bar-at-law

Independent Director

Senior Advocate in the Supreme Court in Bangladesh

Rashidul Hasan

Independent Director

Current Positions

Chairman, Uttara Finance & Investments Ltd.

Independent Director, Reckitt Benckiser Bangladesh Ltd

Independent Director, Monno Group of Industries

Trustee, Kumudini Welfare Trust of Bangladesh Ltd

Previous Positions

Founder Chairman of IDLC the first joint venture leasing company of Bangladesh

CEO & Managing Director of IPDC the first joint venture investment company of Bangladesh

Bata Shoe Company Executive Summary

In leather and foot wear sector, Bata Shoe Company (Bangladesh) Ltd. is one of the growing

companies in Bangladesh. In our opinion the financial statement, the prepared in accordance

with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standard

(BFRS), give a true and fair view of the stat of the company’s affairs as at 31 December 2010

and of the result of its operations and its cash flows for the year then ended and comply with the

Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and

regulations. During the year 2010 Bata Shoe Company (Bangladesh) Ltd. recorded a profit

before tax of taka 743 million, an impressive increase of taka 113 million against 2009. In 2010

your company achieved a turnover of taka 5,663 million representing an increase of more than

10% against 2009. The Company currently has nearly 1000 independent dealers throughout the

country.

In this assignment we have tried to highlight the company’s current financial situation and ratio

analysis (cross sectional analysis) of Bata Ltd which is one of the growing companies in

Bangladesh. We have also tried to provide recommendation according to each identified problem

on the basis of each ratio.

Bata Shoe Company Vision:We see Business as a means to the well being of the shareholders and all other stakeholders,

society at large keeping in line with the Nation’s interest.

Mission Statement:Our Mission is to provide world-class products to our valued Customers, Maintaining high

Ethical Standard business.

Objective:Our primary objective is to conduct transparent business operation within legal and social

framework with aims to attain the mission with qualitative & quantitative target in business

operation.

Objective of the Study

General Objective:

The Broad objective of this assignment is to analysis “Financial Performance evaluation of Bata Company Bangladesh Ltd.

Specific objectives:

The following objectives can be listed as the specific objectives of study.

To identify and assess the present financial performance of Bata Company Bangladesh

Ltd.

To calculate the financial ratios and identify the areas of concern.

To understand the implications in analyzing and interpreting the financial ratios.

To identify the findings and raise possible recommendations for Bata Ltd.

Bata Shoe Company

Sources of data:

Sources of secondary data of this report are:

Annual Report of Bata Ltd.

Different text book and journals.

Various reports and articles related to study.

Some of my course elements as related to this assignment.

Web base support from the internet.

Marketing Operations:

RetailIn 2010 our Retail channel sold 8.6 million pairs of shoes with a turnover of taka 3.5 billion which is 109% growth against last year. To achieve this outstanding growth in spite of global recession, company took different initiatives like product innovation, aggressive marketing programmers, market expansion, human resource development, operational efficiency, team work etc.

Non RetailNon Retail business played a vital role in the company’s total turnover in 2010. This business channel includes 5 different divisions namely Dealers Support Program (DSP), Wholesalers, Rural Sales, Department Stores and Industrial & Institutions. The Company discontinued business with low volume dealers and focused on the high contribution dealers to minimize business risks and operating expenses. In addition, emphasis was given to open new dealers. Around 71 new dealers were opened during the year which contributed around Tk. 88 million inturnover. Currently, the company has 562 DSPs and 393 wholesalers running under a sound meaningful business policy focused on development of good relationship.

Bata IndustrialsThe company has established a new business channel under the brand “Bata Industrials” to serve the industrial growth. After launching Bata Industrials shoes and we received very encouraging feedback from different industrial groups who focus on quality and safety such as petrochemicals, food Industries, machineries, automobile parts, electrical equipments etc.

Bata Shoe Company ManufacturingThe company operates two manufacturing facilities – one in Tongi and the other in Dhamrai. With a production capacity of 110,000 pairs of shoes daily, the company also has a modern tannery facility with an output of 3.4 million square feet of leather annually. In 2010 company produced over 24.9 million pairs. Currently company continues producing quality & fashionable shoes to respond to customers’ demand.

Human ResourcesBata Shoe Company (Bangladesh) Ltd. organized a day long Workshop on COSTEF (Costing & Efficiency) on June 01, 2010 at the Human Resources Training Center, Tongi. A total of 30 participants from Merchandising, Product Development and Distribution department participated in the workshop. The main topics were Concept of BSO Costing/Standard Cost, Material Calculation, Practical Session - One Pair Area Drawing & Paper Skin Tracing, Labour Cost & Concept of SPM, Production Expenses, Capacity Utilization, Prodeffcost, Negotiation with Supplier and Pricing & Gross Margin Establishment.

Data Collection Procedure: Conducting this report secondary data are used. Data regarding the Performance Evaluation of The Bata Company Bangladesh Ltd. were collected from secondary sources like: Annual Reports, journals, official website. I also collect some information by using internet.

Instruments Used for Analysis:

Ratio analysis

Time series (Trend) analysis:

Time-series analysis evaluates performance over time. Comparison of current to past performance, using ratios, allows the firm to determine whether it is progressing as planned. Additionally, time-series analysis is often helpful in checking the reasonableness of a firm’s projected financial statements.

Cross- sectional analysis:

Cross-Sectional analysis evaluates performance of different firms` financial ratios at the same point in time.

Ratio Analysis:

Involves methods of calculating and interpreting financial ratios of average and monitor the firms

performance.

Liquidity Ratio:

Bata Shoe Company Liquidity means ability to satisfy its short-term obligations as they come due. Liquidity refers to

the solvency of the firm’s overall financial position the ease with which it can pay its bills. The

two basic measures of liquidity are the current ratio and the quick ratio.

Current ratio:A measure of liquidity which is calculated by dividing the firm’s current assets by its current liabilities

Current Ratio = Current Asset/Current Liabilities

Year 2006 2007 2008 2009 2010

Current Ratio 1.54 1.42 1.45 1.44 1.45

Graphically show:

Comments:

Quick (Acid-Test) Ratio:A measure of liquidity calculated by dividing the firm’s current assets minus inventory by its

current liabilities

Quick Ratio=Cash + Government Securities + Receivable / Total Current Liabilities.

Bata Shoe Company Year 2006 2007 2008 2009 2010

Quick Ratio 0.62 .40 .41 .47 .38

Graphically show:

Comments:

Debt Ratio:

The debt ratio measures the proportion of total assets provided by the firm’s creditors.

Debt Ratio = Total Liabilities / Total Assets

Year 2006 2007 2008 2009 2010

Debt Ratio 2.21 66.33 61.10 58.85 56.74

Graphically show:

Bata Shoe Company

Comments:

Time Interest Earned Ratio:This ratio measures the ability to meet contractual interest payment that means how much the company

able to pay interest from their income.

Time Interest Earned Ratio=EBIT/ Interest

Year 2007 2008 2009 2010

Time Interest

Earned Ratio

99.12 89.11 63.11 52.98

Graphically show:

Comments:

Total Asset Turnover:The total asset turnover indicates the efficiency with which the firm is able to use all its assets to generate

sales.

Total Asset Turnover = Sales/ Total Asset

Year 2006 2007 2008 2009 2010

Total Asset

Turnover

4.73 1.77 1.85 1.89 1.85

Bata Shoe Company Graphically show:

Comments:

Inventory turnover:A ratio showing how many times a company's inventory is sold and replaced over a period.

Inventory Turnover= Cost of goods sold/ Average Inventory

Year 2006 2007 2008 2009 2010

Inventory

Turnover

2.36 2.02 2.08 2.26 2.13

Graphically show:

Bata Shoe Company Comments:

Average Collection Period:The average amount of time needed to collect accounts receivable.

Average Collection Period=Accounts receivable/ (Credit sales/365)

Year 2006 2007 2008 2009 2010

Average

Collection Period

11 4 6 7 9

Graphically show:

Comments:

Average Payment Period:

Average payment period ratio gives the average credit period enjoyed from the creditors that means it

represents the number of days by the firm to pay its creditors. A high creditor’s turnover ratio or a lower

credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit

worthiness of the company. However a very favorable ratio to this effect also shows that the business is

not taking the full advantage of credit facilities allowed by the creditors. It can be calculated using the

following formula:

Average Payment Period=Accounts payable/ Average purchase per day

Bata Shoe Company

Year 2006 2007 2008 2009 2010

Average Payment

Period

138 155 153 118 113

Graphically show:

Comments:

Operating Profit Margin:Measures the percentage of each sales dollar remaining after all costs and expenses other then interest, taxes and preferred stock dividends are deducted “pure profits” earned on each sales dollar. The operating profit margin is calculated as follows:

Operating Profit Margin = Operating Profit / Sales

Year 2006 2007 2008 2009 2010

Operating Profit

Margin

10.54% 12.77% 14.02% 12.77% 13.62%

Graphically show:

Bata Shoe Company

Comments:

Gross profit margin:The gross profit margin measures the percentage of each sales dollar remaining after the firm has

paid for its goods. The gross profit margin is calculated as follows

Gross profit margin = Gross Profit / Sales

Year 2006 2007 2008 2009 2010

Gross profit

margin

39.82 33.27 34.45 37.02 36.12

Graphically show:

Bata Shoe Company Comments:

Net profit Margin:The net profit margin measures the percentage of each sales dollar remaining after all expenses, including

taxes, have deducted. The higher the net profit margin is better. The net profit margin is calculated as

follows:

Net profit Margin = Net profit after Taxes / Sales

Year 2006 2007 2008 2009 2010

Net profit Margin 11.04% 8.17% 9.72% 8.74% 9.61%

Graphically show:

Comments:

Return on Asset (ROA):Return on asset (ROA), which is often called the firms return on total assets, measures the overall

effectiveness of management in generating profits with its available assets. The higher ratio is better.

Return on Asset (ROA) = Net profit after Taxes / Total Assets

Bata Shoe Company Year 2006 2007 2008 2009 2010

Return on Asset 0.52% 14.43% 17.98% 16.50% 17.79%

Graphically show:

Comments:

Return on Equity (ROE):The Return on Equity (ROE) measures the return earned on the owners investment. Generally, the higher

this return, the better off the owners.

Return on Equity (ROE) = Net profit after Taxes / Stockholders Equity

Year 2006 2007 2008 2009 2010

Return on Equity 52.2% 46.23% 39.49% 40.11% 41.13%

Graphically show:

Bata Shoe Company

Comments:

Price/ Earnings ratio (PE ratio):

The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share

relative to the income or profit earned by the firm per share.

P/E ratio - Price per share / earnings per share

Earnings per share (EPS):

EPS represents the dollar amount earned behalf of each outstanding share of common stock.

EPS= Net income/no. of common share outstanding

Year 2006 2007 2008 2009 2010

EPS 20.25 23.75 32.85 32.85 39.76

Graphically show:

Comments:

Bata Shoe Company