Financial Statment Analysis - Summit Power

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Finacial Statement Analysis Of

Summit Power Limited


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Institute of Business Administration

University of Dhaka

October 10, 2015

Financial Statement Analysis Of

Summit Power Limited

Prepared for:

Dr. Md. Mohiuddin

Professor and Course Instructor

Code: F501

Financial Theory and Practices

Prepared by:

Md Raquibul Islam Russeau

ZR-1403009

EMBA 20thBatch

Md Tamjid Alam Adnan

ZR-1403020

EMBA 20thBatch


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October 10, 2015

Dr. Md. Mohiuddin

Professor and course instructor

Code: F501, Financial Theory and Practices

Executive MBA Program, IBA

University of Dhaka

Subject:Submission of Term Paper.

Dear Sir,

Thank you very much for giving us the opportunity to work on financial statement analysis. Surely, it will

enhance our classroom learning, and facilitate any future undertaking on this issue. We are pleased to

submit our term paper on Financial Statement Analysis of Summit Power Limited as a mandatory

requirement of Financial Theory and Practices course of EMBA program.

This report will be a reflection of our learning in Financial Theory and Practices course under you. Wehave followed your instructions given in various classes, and tried our best to incorporate all major

lessons in this report.

It was a great learning opportunity undergoing Financial Theory and Practices course under you, and

following up the theoretical lessons with a practical comparison with organizations.

Sincerely,

.Md Raquibul Islam Russeau

ZR-1403009

EMBA 20thBatch

For Assignment Team


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Executive SummarySummit Power Limited (SPL), a subsidiary of Summit Group is the first Bangladeshi Independent Power

Producer (IPP) in Bangladesh in private sector providing power to national grid. SPL was incorporated in

Bangladesh on March 30, 1997 as a Private Limited Company. On June 7, 2004, the Company was

converted into Public Limited Company under the Companies Act 1994.

In the first section of the report we have tried to show the changes within the capital statement and also

along the statement. To do that we have used Horizontal and Vertical analysis of the Statement of

Financial Position and Statement of Comprehensive Income. There we have analyzed how the

components of both structures has been changing over time and what are the reason behind this

changes.

Later as we move on the report we have attempted to analysis various aspect of summit power through

ratio analysis. In that segment we have discussed how the company is performing over the yeast and

what are the riskiness present in companys operation. Also we have tried to show how the efficient the

company is from operations point of view as well as we discussed companys other vital signs through

the ratio analysis.


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ContentsExecutive Summary ...................................................................................................................................................................iv

Introduction ............................................................................................................................................................................... 1

Background ............................................................................................................................................................................ 1

Objective: .............................................................................................................................................................................. 1

Methodology: ........................................................................................................................................................................ 1

Financial Statement Analysis ..................................................................................................................................................... 1

Company profile .................................................................................................................................................................... 1

Nature of business ................................................................................................................................................................. 2

Consolidated Financial Statement ............................................................................................................................................. 3

Vertical Analysis - Consolidated Financial Statement ............................................................................................................... 4

Horizontal Analysis - Consolidated Financial Statement ........................................................................................................... 5

Comprehensive Income Statement ........................................................................................................................................... 6

Vertical Analysis - Comprehensive Income Statement.............................................................................................................. 7

Horizontal Analysis - Comprehensive Income Statement ......................................................................................................... 8

Explanation of Vertical and Horizontal Analysis ........................................................................................................................ 9

Statement of Financial Position: Asset Side .......................................................................................................................... 9

Statement of Financial Position: Liabilities Side .................................................................................................................... 9

Statement of Profit or Loss and Other Comprehensive Income ......................................................................................... 10

Ratio Analysis ........................................................................................................................................................................... 11

Liquidity Ratio ...................................................................................................................................................................... 12

Operating Efficiency Ratio ................................................................................................................................................... 12

Profitability Ratio ................................................................................................................................................................. 13

Solvency Ratio ..................................................................................................................................................................... 14

Other Ratios ......................................................................................................................................................................... 15

Conclusive Message................................................................................................................................................................. 15


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Introduction

BackgroundWe have taken Financial Theory and Practices course under Dr. Md. Mohiuddin as part of Executive MBA program at

Institute of Business Administration (IBA), University of Dhaka. The honorable course instructor asked us to relate the

classroom learning with our organization and submit as a Term Paper. We have prepared the Term Paper on Summit Power

Limited. This report is an endeavor to reinforce and retain the classroom knowledge by analyzing the practical

implementation of financial statement analysis in an organization. The report will present financial statement analysis ofSummit Power Limited. Since 1997 this company is providing power to national grid.

Objective:

Broad objective- The broad objective of this report is to describe and evaluate Financial statement analysis of summit Power

Limited. Specific objectives- In persuasion of the above mentioned broad objective, this report will endeavor to meet

following specific objectives:

To provide Horizontal Analysis (trend/index) for last four years.

To provide Vertical Analysis (common size) for last four years.

To provide Ratio Analysis for last three years and comment on different aspect of the company e.g. profitability,

liquidity, efficiency and solvency

Methodology:This is a descriptive report covering financial statement analysis of Summit Power Limited. We have formulated this report

based on the following:

Classroom lessons imparted at IBA by Dr. Md. Mohiuddin

Studying and analyzing the Annual Report of Summit Power Limited.

Several theories and notes from the book.

Financial Statement Analysis

Company profileSummit Power Limited (hereinafter referred to as the Company/the parent company) is a Public Limited Company

incorporated in Bangladesh on 7 June 2004 under the Companies Act (# 18) 1994 under registration no: C 32630 (1751)/97

dated 30 March 1997 with its registered office at Summit Centre, 18 Kawran Bazar, Dhaka 1215. The Company registered

as a Private Limited on 30 March 1997 and subsequently converted into a Public Limited. During October-November 2005,

the Company listed its shares with both Dhaka and Chittagong Stock Exchanges. The consolidated financial statements of

the Company as at and for the year ended 31 December 2014 comprise the Company and its subsidiaries. Profiles of

subsidiaries are as under:

Summit Purbanchol Power Company Limited was incorporated in Bangladesh on 15 August 2007 as a Private Limited

Company under Companies Act (#18) 1994 under registration no: C 68123 (674)/07 dated 15 August 2007 with its registered

office at Summit Centre, 18 Kawran Bazar, Dhaka 1215, Bangladesh.

Summit Uttaranchol Power Company Limited was incorporated in Bangladesh on 15 August 2007 as a Private Limited

Company under Companies Act (#18) 1994 under registration no: C 68122(673)/07 dated 15 August 2007 with its registered

office at Summit Centre, 18 Kawran Bazar, Dhaka 1215, Bangladesh.

Summit Narayanganj Power Limited was incorporated in Bangladesh on 4 May 2010 as a Private Limited Company under

Companies Act (#18) 1994 under registration no: C 84422/10 dated 4 May 2010 with its registered office at Summit Centre,

18 Kawran Bazar, Dhaka 1215, Bangladesh.


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Nature of businessThe principal activity of the Company/group is to generate and supply of electricity. Operational details of the Company

including its subsidiaries are as under.

Name of plant Location Plant capacity MW Operation starting date

Ashulia Power Plant (Unit-1) Savar, Dhaka 11.00 8 Feb 2001

Ashulia Power Plant (Unit-2) Savar, Dhaka 33.75 4 Dec 2007

Madhabdi Power Plant (Unit-1) Narsingdi 11.00 1 Apr 2001

Madhabdi Power Plant (Unit-2) Narsingdi 24.30 16 Dec 2006

Chandina Power Plant (Unit-1) Comilla 11.00 2 Jun 2001

Chandina Power Plant (Unit-2) Comilla 13.50 15 Nov 2006

Rupganj Power Plant Narayanganj 33.00 9 Jun 2009

Jangalia Power Plant Comilla 33.00 25 Jun 2009

Maona Power Plant Gazipur 33.00 12 May 2009

Ullapara Power Plant Sirajganj 11.00 3 Mar 2009

Madanganj Power Plant Narayanganj 102.00 1 Apr 2011


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Consolidated Financial Statement

Taka Taka Taka Taka

ASSETSNon-current assets:

Property, plant and equipment, net 13,657,541,971.00 13,462,427,251.00 13,261,427,574.00 13,016,326,309.00

Intangible assts, net 9,956,300.00 9,276,170.00 8,596,040.00 8,033,343.00

Goodwill arsing on consolidation - - 518,284,044.00 519,284,044.00

Investment in subsidiaries - - - -

Investment in associates 10,000,000.00 10,000,000.00 100,000,000.00 4,136,772,452.00

Available for sale financial assets 3,414,102,838.00 2,703,890,148.00 2,995,100,662.00 3,647,104,361.00

17,091,601,109.00 16,185,593,569.00 16,883,408,320.00 21,327,520,509.00

Current assets:

Inventories 651,338,649.00 902,905,660.00 1,334,837,627.00 1,193,964,986.00

Trade Receivables 979,568,165.00 1,412,763,265.00 2,008,611,219.00 2,839,050,063.00

Sundry receivables 104,285,043.00 101,755,052.00 79,676,089.00 87,466,579.00

Inter company receivables - - - 94,000.00

Due from associates 2,746,795.00 2,746,795.00 2,127,684.00 31,615,443.00

Advances, depos its and prepayments 120,714,543.00 225,685,809.00 169,541,404.00 179,529,312.00

Cash and cash equivalents 1,081,038,437.00 2,399,159,338.00 1,556,977,673.00 1,903,769,977.002,939,691,632.00 5,045,015,919.00 5,151,771,696.00 6,235,490,360.00

Total Assets 20,031,292,741.00 21,230,609,488.00 22,035,180,016.00 27,563,010,869.00

Equity and Liabilities

Shareholders' equity:

Share capital 3,943,601,640.00 4,929,502,050.00 5,915,402,460.00 7,870,626,430.00

Share premium 2,900,697,657.00 2,900,697,657.00 3,501,083,574.00 6,234,626,639.00

Revaluation reserve 794,231,503.00 794,231,503.00 688,025,459.00 671,772,007.00

Fair value reserve (233,211,507.00) (951,906,236.00) (660,695,722.00) (8,692,023.00)

Retained Earnings 2,830,009,738.00 3,717,583,396.00 4,431,439,702.00 6,037,007,280.00

10,235,329,031.00 11,390,108,370.00 13,875,255,473.00 20,805,340,333.00

Non-controlling interest 1,572,337,219.00 3,474,225,049.00 3,243,977,518.00 3,474,225,049.00

11,807,666,250.00 14,864,333,419.00 17,119,232,991.00 24,279,565,382.00

Non-current liabilities:

Project loan-non current portion 3,011,197,392.00 2,013,738,524.00 1,071,465,349.00 223,217,253.00

Redeemable Pref. shares- non current portion 1,703,568,179.00 1,241,998,725.00 778,368,580.00 312,254,100.00Payable to SIMCL-non current portion 1,255,526,342.00 849,062,168.00 954,799,154.00 -

Finance lease- non current portion 5,626,392.00 1,472,558.00 216,673.00 -

Deferred liabilities 12,689,278.00 22,620,528.00 82,421,960.00 106,366,954.00

5,988,607,583.00 4,128,892,503.00 2,887,271,716.00 641,838,307.00

Current liabilities:

Dividend payable on ordinary shares - 6,047,388.00 6,047,388.00 9,829,630.00

Trade creditors 122,904,061.00 135,865,829.00 90,118,542.00 179,090,399.00

Sundry creditors and accruals 170,429,674.00 237,990,960.00 94,591,599.00 102,753,332.00

Short-term loan - - - 1,012,846,312.00

Project loan- current portion 752,886,418.00 973,693,938.00 868,500,000.00 868,500,000.00

Redeemable Pref. shares - current portion 468,368,900.00 468,368,900.00 468,368,900.00 468,368,900.00

Payable to SIMCL- current portion 650,000,000.00 500,000,000.00 500,000,000.00 -

Finance lease- current portion 6,488,168.00 4,125,225.00 1,048,880.00 218,607.00

Unclaimed Dividend 6,179,728.00 - - -

Liabities for project development 57,761,959.00 - - -

2,235,018,908.00 2,326,092,240.00 2,028,675,309.00 2,641,607,180.00Total Liabilities 8,223,626,491.00 6,454,984,743.00 4,915,947,025.00 3,283,445,487.00

Total Equity and Liabilities 20,031,292,741.00 21,319,318,162.00 22,035,180,016.00 27,563,010,869.00

Particulars

As at December 2011 As at December 2012 As at December 2013 As at December 2014

Statement of Financial Position


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Vertical Analysis - Consolidated Financial Statement

% of Total Asset % of Total Asset % of Total Asset % of Total Asset

ASSETSNon-current assets:

Property, plant and equipment, net 0.68 0.63 0.60 0.47

Intangible assts, net 0.00 0.00 0.00 0.00

Goodwill arsing on consolidation - - 0.02 0.02


Investment in associates 0.00 0.00 0.00 0.15

Available for sale financia l ass ets 0.17 0.13 0.14 0.13

0.85 0.76 0.77 0.77

Current assets:

Inventories 0.03 0.04 0.06 0.04

Trade Receivables 0.05 0.07 0.09 0.10

Sundry receivables 0.01 0.00 0.00 0.00

Inter company receivables - - - 0.00

Due from associates 0.00 0.00 0.00 0.00

Advances , deposi ts and prepayments 0.01 0.01 0.01 0.01

Cash and cash equivalents 0.05 0.11 0.07 0.070.15 0.24 0.23 0.23

Total Assets 1.00 1.00 1.00 1.00



Share capital 0.20 0.23 0.27 0.29

Share premium 0.14 0.14 0.16 0.23

Revaluation reserve 0.04 0.04 0.03 0.02

Fair value reserve (0.01) (0.04) (0.03) (0.00)

Retained Earnings 0.14 0.18 0.20 0.22

0.51 0.54 0.63 0.75

Non-controlling interest 0.08 0.16 0.15 0.13

0.59 0.70 0.78 0.88


Project loan-non current portion 0.15 0.09 0.05 0.01

Redeemable Pref. shares- non current portion 0.09 0.06 0.04 0.01Payable to SIMCL-non current portion 0.06 0.04 0.04 -

Finance lease- non current portion 0.00 0.00 0.00 -

Deferred liabilities 0.00 0.00 0.00 0.00

0.30 0.19 0.13 0.02


Dividend payable on ordinary shares - 0.00 0.00 0.00

Trade creditors 0.01 0.01 0.00 0.01

Sundry creditors and accruals 0.01 0.01 0.00 0.00

Short-term loan - - - 0.04

Project loan- current portion 0.04 0.05 0.04 0.03

Redeemable Pref. shares- current portion 0.02 0.02 0.02 0.02

Payable to SIMCL- current portion 0.03 0.02 0.02 -

Finance lease- current portion 0.00 0.00 0.00 0.00

Unclaimed Dividend 0.00 - - -

Liabities for project development 0.00 - - -

0.11 0.11 0.09 0.10

Total Liabilities 0.41 0.30 0.22 0.12

Total Equity and Liabilities 1.00 1.00 1.00 1.00

Particulars

As at December 2011 As at December 2012 As at December 2013 As at December 2014



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Horizontal Analysis - Consolidated Financial Statement

% of 2011 % of 2011 % of 2011 % of 2011

ASSETS

Non-current assets:

Property, plant and equipment, net 1.00 0.99 0.97 0.95Intangible assts, net 1.00 0.93 0.86 0.81

Goodwill arsing on consolidation - - - -


Investment in associates 1.00 1.00 10.00 413.68

Available for sale financia l ass ets 1.00 0.79 0.88 1.07

1.00 0.95 0.99 1.25

Current assets:

Inventories 1.00 1.39 2.05 1.83

Trade Receivables 1.00 1.44 2.05 2.90

Sundry receivables 1.00 0.98 0.76 0.84

Inter company receivables - - - -

Due from associates 1.00 1.00 0.77 11.51

Advances , deposi ts and prepayments 1.00 1.87 1.40 1.49

Cash and cash equivalents 1.00 2.22 1.44 1.76

1.00 1.72 1.75 2.12

Total Assets 1.00 1.06 1.10 1.38



Share capital 1.00 1.25 1.50 2.00

Share premium 1.00 1.00 1.21 2.15

Revaluation reserve - - - -

Fair value reserve 1.00 (1.70) (1.18) (0.02)

Retained Earnings 1.00 1.31 1.57 2.13

1.00 1.11 1.36 2.03

Non-controlling interest 1.00 2.21 2.06 2.21

1.00 1.26 1.45 2.06


Project loan-non current portion 1.00 0.67 0.36 0.07

Redeemable Pref. shares- non current portion 1.00 0.73 0.46 0.18

Payable to SIMCL-non current portion 1.00 0.68 0.76 -

Finance lease- non current portion 1.00 0.26 0.04 -Deferred liabilities 1.00 1.78 6.50 8.38

1.00 0.69 0.48 0.11


Dividend payable on ordinary shares - - - -

Trade creditors 1.00 1.11 0.73 1.46

Sundry creditors and accruals 1.00 1.40 0.56 0.60

Short-term loan - - - -

Project loan- current portion 1.00 1.29 1.15 1.15

Redeemable Pref. shares- current portion 1.00 1.00 1.00 1.00

Payable to SIMCL- current portion 1.00 0.77 0.77 -

Finance lease- current portion 1.00 0.64 0.16 0.03

Unclaimed Dividend 1.00 - - -

1.00 1.07 0.93 1.21

Total Liabilities 1.00 0.79 0.60 0.40

Total Equity and Liabilities 1.00 1.07 1.10 1.38

As at December 2012 As at December 2013 As at December 2014


ParticularsAs at December 2011


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Comprehensive Income Statement

Consolidated Consolidated Consolidated Consolidated

Revenue 4,757,208,529.00 5,892,627,264.00 6,191,915,486.00 6,109,044,517.00

Cost of sales (1,929,597,030.00) (2,268,685,312.00) (2,373,939,738.00) (2,552,585,532.00)

Gross profit 2,827,611,499.00 3,623,941,952.00 3,817,975,748.00 3,556,458,985.00

Other income, net 833,937,552.00 11,577,936.00 86,514,242.00 166,536,718.00

Operating expenses

General and Admin. Expenses (366,461,900.00) (506,813,150.00) (592,564,624.00) (565,768,894.00)

Operating profit 3,295,087,151.00 3,128,706,738.00 3,311,925,366.00 3,157,226,809.00

Finance income/(expenses)-net (189,948,918.00) (642,053,514.00) (482,097,680.00) (317,387,810.00)

Profit before income tax 3,105,138,233.00 2,486,653,224.00 2,829,827,686.00 2,839,838,999.00

Income tax expenses (33,201,636.00)

Profit after income tax 3,071,936,597.00 2,486,653,224.00 2,829,827,686.00 2,839,838,999.00

Other comprehensive income

Net change in fair value of available for sale financial assets (259,954,148.00) (718,694,729.00) 291,210,514.00 652,003,699.00

Total comprehensive income for the year 2,811,982,449.00 1,767,958,495.00 3,121,038,200.00 3,491,842,698.00

Profit attributable to:

Owners of the company 2,511,150,489.00 1,873,474,068.00 2,184,858,468.00 2,219,988,013.00

Non controlling interest 560,786,108.00 613,179,156.00 644,969,218.00 619,850,986.00

Profit for the year 3,071,936,597.00 2,486,653,224.00 2,829,827,686.00 2,839,838,999.00

Total comprehensive income attributable to:

Owners of the company 2,251,196,341.00 1,154,779,339.00 2,476,068,982.00 2,871,991,712.00

Non controlling interest 560,786,108.00 613,179,156.00 644,969,218.00 619,850,986.00

Total comprehensive income for the year 2,811,982,449.00 1,767,958,495.00 3,121,038,200.00 3,491,842,698.00

Earnings per share 6.37 3.80 3.69 3.26

Re-stated earnings per share - 3.17 3.21 -

Statement of Profit or Loss and Other Comprehensive Income

2011 2012 2013 2014Particulars


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Vertical Analysis - Comprehensive Income Statement

% of Comprehensive Income % of Comprehensive Income % of Comprehensive Income % of Comprehensive Income

Revenue 1.00 1.00 1.00 1.00

Cost of sales (0.41) (0.39) (0.38) (0.42)

Gross profit 0.59 0.61 0.62 0.58

Other income, net 0.18 0.00 0.01 0.03

Operating expenses

General and Admin. Expenses (0.08) (0.09) (0.10) (0.09)

Operating profit 0.69 0.53 0.53 0.52

Finance income/(expenses)-net (0.04) (0.11) (0.08) (0.05)

Profit before income tax 0.65 0.42 0.46 0.46

Income tax expenses (0.01) - - -

Profit after income tax 0.65 0.42 0.46 0.46


Net change in fair value of available for sale financial assets (0.05) (0.12) 0.05 0.11

Total comprehensive income for the year 0.59 0.30 0.50 0.57

Profit attributable to:

Owners of the company - - - -

Non controlling interest - - - -

Profit for the year - - - -

Total comprehensive income attributable to:Owners of the company - - - -

Non controlling interest -

Total comprehensive income for the year - - - -



Statement of Profit or Loss and Other Com rehensive Income

Particulars2011 2012 2013 2014


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Horizontal Analysis - Comprehensive Income Statement

% of 2011 % of 2011 % of 2011 % of 2011

Revenue 1.00 1.24 1.30 1.28

Cost of sales 1.00 1.18 1.23 1.32

Gross profit 1.00 1.28 1.35 1.26

Other income, net 1.00 0.01 0.10 0.20

Operating expenses

General and Admin. Expenses 1.00 1.38 1.62 1.54

Operating profit 1.00 0.95 1.01 0.96

Finance income/(expenses)-net 1.00 3.38 2.54 1.67

Profit before income tax 1.00 0.80 0.91 0.91

Income tax expenses 1.00 - - -

Profit after income tax 1.00 0.81 0.92 0.92


Net change in fair value of available for sale financial assets 1.00 2.76 (1.12) (2.51)

Total comprehensive income for the year 1.00 0.63 1.11 1.24

Profit attributable to:Owners of the company - - 0.87 -

Non controlling interest - - 1.15 -

Profit for the year - - 0.92 -

Total comprehensive income attributable to:

Owners of the company - - - -

Non controlling interest -

Total comprehensive income for the year - - - -



20142011 2012 2013

Statement of Profit or Loss and Other Comprehensive Income

Particulars


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Explanation of Vertical and Horizontal Analysis

Statement of Financial Position: Asset SideIn the analysis we see a noticeable changes Long Term Assets in the Investment in Associates and Financial Assets

Available for Sale which is the holding in the con-controlling interest. In the current asset side there is no major changes

other than inflation in the Inventories and Trade Receivables.

Inflation in the inventories are well explained by the expansion in their three unit name Dhaka Palli Bidyut Samity - 1

(Expansion), Narsingdi Palli Bidyut Samity - 1 (Expansion) and Comilla Palli Bidyut Samity - 1 (Expansion).

In the year 2012 we have seen increase of 31% in the Trade Receivables due to the increase in BST price, this doesnt

reflect any incapability or inefficiency of recovering receivables from trade partners but it reflects capability of

Negotiating this increase and recovering in due times.

In the recent year there has been increase in the investment in associates, major changes in the associates were due

to investment in the share capital of Summit Barisal Power Limited, Summit Narayanganj Power Unit II Limited,

SummitMeghnaghat Power Company Limited. Also increase in the Non-Controlling interest has been increased not

due to the purchase of new shares in Khulna Power Company Limitedor any other non-controlling interests but dueto the issuance of Bonus Share.

In the current asset side there has been no major change after 2012, in the year we have seen increase in the trade

receivables due to the increase in Bulk Supply Tariff which is yet to be approved by REB.

Statement of Financial Position: Liabilities SideThere has been changes in the equity as well as the liabilities side of the Statement of Financial Position, these changes

are explained as there has been new issuance of the share as bonus shares in all four years and also as ordinary shares

has been issued to SIMCL in exchange of shares in the associates in the year 2014. Also the increase in share premium

in the year is resulted for this nature of investment is associates.

Also there has increase in the value of assets of SPL in the year 2011 2014 which has also increased the shareholders

equity in respect Total Liabilities and Equity and Base year 2011 in the mentioned years.

In case of fair value reserve almost all the years share investments in the Khulna Power, Peoples Leasing and Popular

Life has been depreciated except year 2013 where there was increase in the share price of Kulna Power.

In the long term liabilities side Project loan and Redeemable Preferred Share has been continually decreasing due to

its nature of annuity payment also we can notice in the faster decrease in the Project Loan due to Gain of Exchange

rate. Also due to the arrangement of loan from SIMCL it has to be paid in 6 installment starting from 2010 that has

resulted in the gradual reduction in the loan and also due to one off payment in year 2014 has been made to pay the

full loan with interest. Finance lease has been continuously decreasing also due to its annuity nature.

In the deferred liabilities in increasing nature is due to the continuous increment in the size of Gratuity and Earned

Leave fund. Also in the year 2014 it has increased sharply as there was a new Provision made for Liability for assets

retirement obligation.

Current Asset composition has been quite stable over the year, however there has been increase in the Sundry

Creditors in the year 2012 due to the expansion happened in the year 2011. Also increase in the Project Loan is due to

new loan required for expansion. In the following year also due to the increased annuity the current portion has

increased. Increase in the Short Term Loan in 2014 is because Company took short term loan for Summit Power Limited

(SPL) amounting Taka for a term of 6 months from Bank Asia Limited and for Summit Narayangonj Power Limited for

a period of 3 months to meet the working capital finance.


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Statement of Profit or Loss and Other Comprehensive IncomeCOS (Cost of Sales) has been almost maintained stable proportion to Sales/Revenue. But the positive trend we are

seeing in the cost can be attributed to the increase demand of raw material due to the expansion of its three units in

year 2011. Also the sales are complementing well with this explanation. The year by year increase since after can be

attributed to the regular increase in cost price of Raw Materials.

Other Income was shown a constant trend in the year 2011 and 2012 but increased in 2013 due to the gain from sale

of vehicle and in 2014 it has been due to the Increase in Dividend Income from Subsidiaries.

General Admin and Expense observe a constant % relative to sales and it has a positive trend over the last 4 year which

is due to nature of increasing costs due to inflation and life cost adjustment. But it has decreased in 2014 due to the

decrease in some costs like gratuity fund, education and training, AGM and Office expenses. It seems that they are

leaning the regular office processes however decline in education and training is not a good sign for the human

development.

Finance cost has increased due to the loan taken from SIMCL and Bank to support the investment in KPCL and three

expansionary units.

Other than the variation in the Net Profit after Tax is due to the presence of TAX in the 2011 only but not in 2012

2014.


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Ratio Analysis

Liquidity Ratio 2011 2012 2013 2014

Current Ratio (CR) 1.32 2.17 2.54 2.36

Quick Ratio (QR) 1.02 1.78 1.88 1.91

Working Capital Ratio (WCR) 0.04 0.13 0.14 0.13

Cash Ratio 0.48 1.03 0.77 0.72

Solvency Ratio 2011 2012 2013 2014

Debt - Equity Ratio (DE) 69.65% 43.43% 28.72% 13.52%

Debt - Total Asset (DT) 41.05% 30.40% 22.31% 11.91%

Long Term Debt - Equity Ratio 50.72% 27.78% 16.87% 2.64%

Profitability Ratio 2011 2012 2013 2014

Gross Profit (Margin) 59.44% 61.50% 61.66% 58.22%

Profit Margin / Net Profit 64.57% 42.20% 45.70% 46.49%

Return on Assets (ROA) 17.67% 12.05% 13.08% 11.45%

Return on Equity (ROE) 32.82% 23.00% 22.40% 16.38%

Activity/Efficiency Ratio 2011 2012 2013 2014

Total Asset Turn Over (TATO) 27.36% 28.56% 28.62% 24.63%

Fixed Asset Turn Over 42.57% 43.46% 46.34% 46.50%

Inventory Turnover Ratio (ITO) 4.14 2.92 2.12 2.02

Days Holding Inventory 86.89 123.32 169.67 178.32

Average Receivable Turnover Ratio (ARTO) 6.64 4.93 3.62 2.52

Days Outstanding Account Receivables 54.22 73.08 99.46 142.83

Other Ratio 2011 2012 2013 2014

Time Interest Earned Ratio 8.77 4.81 6.76 8.18Earnings Per Share (EPS) 6.37 3.80 3.69 3.26

Price Earnings Ratio P/E (Times) 14.62 16.81 11.96 14.24

Dividend Payut Ratio 0% 0% 0% 30.66%


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Liquidity Ratio

The trend of current ratio shows that the firm gradually turned to conservative approach to aggressive approach of

working capital management.

The comparison of trend and level of current and quick ratio give us insight that the inventory captures a constant

amount of total current asset. So the Quick Ratio also follows the same trend as Current Ratio in last 4 years.

Same has been reflected in the Working Capital Ratio as we can see the same increasing pattern which do emphasis

that the expect the sharp increase in the Trade Receivable due to expansion of 3 units.

The inclining but slow trend of cash ratio and its comparison with quick ratio discloses the facts that account

receivable is increasing but cash is not increasing in the same rate. The increase in the receivables is due the

expansion also the increase in due for hike in BST which is not paid yet. Otherwise credit policy has remained almost

same throughout this period of analysis.

Operating Efficiency Ratio

27.36% 28.56% 28.62% 24.63%

4.14

2.92

2.12 2.02

6.64

4.93

3.62

2.52

42.57% 43.46% 46.34% 46.50%

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

700.00%

2011 2012 2013 2014

Total Asset Turn Over (TATO) Inventory Turnover Ratio (ITO) Average Receivable Turnover Ratio (ARTO) Fixed Asset Turn Over

1.32

2.17

2.542.36

-

0.50

1.00

1.50

2.00

2.50

3.00

2011 2012 2013 2014

Current Ratio (CR)

1.02

1.781.88 1.91

-

0.50

1.00

1.50

2.00

2.50

2011 2012 2013 2014

Quick Ratio (QR)

0.04

0.130.14

0.13

-

0.02

0.04

0.060.08

0.10

0.12

0.14

0.16

2011 2012 2013 2014

Working Capital Ratio (WCR)

0.48

1.03

0.770.72

-

0.20

0.40

0.60

0.80

1.00

1.20

2011 2012 2013 2014

Cash Ratio


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The declining trend of inventory turnover suggests the nature of inventory is which is required to the operation but

also it is locking a good amount of investment is which generates substantial opportunity cost and overall adverse

impact on shareholders wealth but inadequate or low inventory can interrupt business operation which result in

more loss have a larger impact on Shareholders wealth.

Increasing trend in average collection period or DOAR also support the statement mentioned earlier that the

liquidity of accounts receivable is deteriorating it increases possibility of bad debts.

The trend of Total asset turnover and fixed asset turnover remains more or less stable. The proportion of fixed asset

in total asset is between 50 70% of total asset on average. Which implies that the contribution of fixed asset on

generating sales is much higher than current asset.

Increasing Days Outstanding Account Receivables steep increasing trend again restate that the Debt Collection is

question it I due the ongoing negotiation with REBs regarding extra payment recovery regarding increased BST in

2011/2012.

Also Days Holding Inventory steep incline is related to the nature of business as the spare parts for their plants are

off high value and critical to business operation so holding those makes the inventory larger than a normal

manufacturing firm. And its increased days holding inventory actually a good sign as it implicates that the plan

machinery requires less parts replacement or they have a good amount of parts in their inventory to ensure

uninterrupted business operation.

Profitability Ratio

86.89

123.32

169.67 178.32

54.2273.08

99.46

142.83

-

50.00

100.00

150.00

200.00

2011 2012 2013 2014

Days Holding Inventory Days Outstanding Account Receivables

64.57%

42.20%45.70% 46.49%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2011 2012 2013 2014

Profit Margin / Net Profit

17.67%

12.05%13.08%

11.45%

0.00%

5.00%

10.00%

15.00%

20.00%

2011 2012 2013 2014

Return on Assets (ROA)32.82%

23.00% 22.40%

16.38%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

2011 2012 2013 2014

Return on Equity (ROE)

59.44%

61.50% 61.66%

58.22%

56.00%

57.00%

58.00%

59.00%

60.00%

61.00%

62.00%

2011 2012 2013 2014

Gross Profit (Margin)


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Gross profit margin has stabilized after the increase in year 2012 which implicates the relationship between prices

and overall cost structure remains same since then. However the steep increase in the year 2012 was due to the

revenue generated from the expansion units of three units.

More or less stable trend of net profit margin over time. High Net Profit Margin in FY 2011 is because of the Lowinterest Expense on that year, as on that year few expansion and investment in non-controlling assets has increased

which has been sourced from Loan or other concerns raises the interest expense after year.

ROE also shows a declining trend. And by DuPont analysis is it found that the total asset and financial leverage

turnover has declined. By analyzing capital structure we found that issuance of bonus share every year and constant

level of long term liability contributes to the reduction of riskiness of firm. Also the more or less constant Net Profit

Margin after 2011 and increase in the Equity as Bonus share contributed to the downward trend of ROE.

Return on Asset hasnt deviated more than 1% since 2012 in 2012 It was the expansion of plan which has increased

the accounts receivables and inventory which resulted in higher asset base and in other way the finance used in

those projects has increased interest rates which has lower the Net Profit and resulted in declining ROA.

Solvency Ratio

Debt to Equity ratio indicates that the financial leverage or riskiness is negligible. As the debt was never more

than the equity and in recent time with issuance of new and bonus shares equity has increased which has

actually make it more favorable. As 2014 Liabilities is only 13.52% of the equity which do not impose any risk

to the business

The existence of huge shareholders equity in comparison to long term debt indicates less riskiness of the firmand its declining trend strengthen it more.

Also from the asset point of view this company is not risky, it declining debt and almost consisting asset make

its look declining. And company is able to pay its debt even from selling off its 12% assets.

2011 2012 2013 2014

Debt - Equity Ratio (DE) 69.65% 43.43% 28.72% 13.52%

Debt - Total Asset (DT) 41.05% 30.40% 22.31% 11.91%

Long Term Debt - Equity Ratio 50.72% 27.78% 16.87% 2.64%

0.00%10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

SOLVENCY RATIO / FINANCIAL RISK

Debt - Equity Ratio (DE) Debt - Total Asset (DT) Long Term Debt - Equity Ratio


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Other Ratios

The little decline in EPS trend that firm expansionary policy as firm is spending more on the investment and new

projects the loan is resulting in good amount of interest expense which has actually make EPS trend a little negative.

Exact trend for price earning multiple shows that market price of the firms stock is relatively higher than its earning

generating capability. But its not necessarily signals badly because by the expansionary policies of firm is able to

generate good stream of future cash flow and with the emphasis of power sector and high demand of power makes

it lucrative enough to the investor which result in the higher market price.

Increasing trend of Times Interest Earned ratio discloses the facts that management have exceled to increase

accounting earnings with direct proportions of fixed financial charges. It reflects management capability and

utilization of the loans/advances it has drawn and ultimately it resulted in producing good amount of earning which

not only able to meet the financial expenses but also very useful for future investments and growth.

Conclusive MessageAs mentioned earlier our above analysis is based on only one Summit Power and All its Subsidiaries, from where we can get

a good picture how this company is doing overall. As we went with the analysis of Summit we find this has a very strong

financial backbone and management are not only efficient in guiding it to attain day to day success but also it has visioninstilled in its operation which is driving the growth. This is evident in their investment in the similar company and also

expanding their line of output day by day. Though the management would like to focus on making its receivable collection

better.

2011 2012 2013 2014

Time Interest Earned Ratio 8.77 4.81 6.76 8.18

Earning Per Share (EPS) 6.37 3.80 3.69 3.26

Price Earning Ratio P/E (Times) 14.62 16.81 11.96 14.24

Dividend Payut Ratio 0% 0% 0% 30.66%

0%

5%

10%

15%

20%

25%

30%

35%

-2.004.006.008.00

10.0012.0014.0016.0018.00

Chart Title

Time Interest Earned Rat io Earning Per Share (EPS) Price Earning Ratio P/E (Times) Dividend Payut Rat io

Financial Statment Analysis - Summit Power

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