Financial Statement Analysis and Perform

Financial Statement Analysis and Performance Evaluation
of Bengal Windsor Thermoplastics Ltd.

(In Partial Fulfillment of the Requirement for the Degree of Evening MBA Program)
Prepared for:
Dr. Jannatul Ferdaous
Assistant Professor (Finance)
Faculty of Business Studies (FBS)
Bangladesh University of Professionals (BUP)
Prepared by:
Mahamud Ahamed
ID-EV1404008
EMBA (Major –Finance)
Departmant of Business Studies
BANGLADESH UNIVERSITY OF PROFESSIONALS

Faculty of Business Studies
Mirpur Cantonment, Dhaka-1216
October 20, 2015
Declaration
I hereby declare that the paper entitled “Financial Statement Analysis and Performance
evaluation of Bengal Windsor Thermoplastics Ltd.” submitted to the Bangladesh University
of Professionals (BUP), is a record of an original work done by me under the guidance of
Dr.Jannatul Ferdaous, Assistant Professor (Finance),Faculty of Business Studies
(FBS),Bangladesh University of Professionals (BUP), and this project work is submitted in
the partial fulfillment of the Requirement for the Degree of Evening MBA Program. The paper
has not been submitted to any other University or Institute for the award of any degree.
Mahamud Ahamed
ID-EV1404008
ii
Certificate of Supervisor
This to certify that the presented Dissertation paper entitled “Financial Statement Analysis and
Performance evaluation of Bengal Windsor Thermoplastics Ltd.” has been carried out by
Mahamud Ahamed, ID No. EV 140400, Evening MBA under my direct supervision at the
Faculty of Business Studies, Bangladesh University of Professionals. I recommend that the
prepared paper may be accepted in fulfillment of the requirements of the degree of Evening
MBA.
Dissertation Supervisor

Faculty of Business Studies (FBS)
iii
Letter of Transmittal
October 20, 2015

Faculty Supervisor
Faculty of Business of Studies (FBS)
Subject : Submission of report on „Impact of Foreign Exchange Rate Fluctuation On

Bengal Windsor Thermoplastics Ltd.‟
Sir
With due respect and humble submission we want to inform you that I am students of EMBA-04
batch. I have already collected data and prepared a report on “Financial Statement Analysis
and Performance evaluation of Bengal Windsor Thermoplastics Ltd.” as directed by you.
You have suggested me to make a report on “Financial Statement Analysis and Performance
evaluation of Bengal Windsor Thermoplastics Ltd.”. As your suggestion we have tried my
best to prepare a report on “Financial Statement Analysis and Performance evaluation of
Bengal Windsor Thermoplastics Ltd.”. I tried my best to make the report informative and
acceptable by presenting a report on analysis of financial statement and evaluation of financial
performance, findings and draw a conclusion and recommendation on Bengal Windsor
Thermoplastics Ltd.
Therefore, I pray and hope your attention and patience that you would consider my report and
accept our report as a correct and informative one.
Yours faithfully
Mahamud Ahamed
ID-EV1404008
iv
Acknowledgement
First we would like to thank the almighty Allah who has given us the required knowledge and
the power to finish this report.
I am fortunate to have Dr. Jannatul Ferdaous as my supervisor and I am very grateful to her
because of his outstanding input that helped us all through making the report. Her continuous
support and re-enforcement has encouraged us to do the work properly.
I am thankful to the empoloyees of Bengal Windsor Thermoplastics Ltd. Although being in

extreme workloads in their working position they tried to provide me necessary information
when asked them.
My sincere thanks goes to all who were involved with me in creating the report and finally my
friends and batch mates for their support, help and patience.
v
EXECUTIVE SUMMARY
This report is based on the financial statement analysis and Performance evaluation of Bengal
Windsor Thermoplastics Limited. These learning experiences are described in detail in the
various chapters of this report. The company is a listed company and its shares are traded in the
capital market. I have collected data by face-to-face conversation with the respective officers of
the firm, the annual reports of last 5 years etc.
Plastic Industries of Bangladesh are mainly engaged in manufacture of different products like
PVC pipe, Garments accessories, Hanger, poly bag, Polythene bag, and leather, plastic
household products, Jute and Textile spares Toys, plastic waste recycling, computer Accessories,
auto lighting, plastic Furniture, Poly Propylene woven, Flexible packaging and many. Investment
Policy of Bangladesh is free and open for foreign investment. Bangladesh gives most attraction
Packages of FDI. Countries export growth is 22% in 2006 for all products whereas the national
GDP growth was 6.71%. The company manufacture hanger contribute total GDP. It is 100%
export oriented company and earn foreign currency.
The total term paper is divided into eleven major chapters. Chapters are again divided into
subchapters according to the content of the chapters. In chapter one, a brief discussion of
objective, methodology, data sources, data analysis process, limitation etc.
In chapter two, a brief discussion about BWTL, products, marketing aspect, market share of the
company are shown. In chapter three the overall industry analysis is presented through different
methods; say, Porter’s five force model, Life cycle, SWAT analysis, product pricing strategy.
In chapter four, ratio analysis on the four different dimensions is presented which gives us the
idea of the performance of the company.
In chapter five, exchange rate fluctuation gain and loss affect on company revenue.
In chapter six, DuPont analysis and sensitivity analysis of ROE will be found by the reader. In
chapter seven, Cash flow and trend analysis in a brief. Analysis of sustainable growth rate, actual
growth rate are in chapter eight. Leverage analysis will be found in chapter nine. Disclosure
practices is presented in chapter ten.
In chapter eleven and twelve are finding and commendation and short conclusion is drawn at the
end of the report.
vi
TABLE OF CONTENTS
CHAPTER CONTENTS PAGE

NUMBERS
1. Introduction 01-03
1.1 Background
1.2 Origin of the Study
1.3 Objective
1.4 Methodology
1.5 Limitation
2. Company profile 04-11
2.1 History of the Company
2.2 Mission
2.3 Market Aspect
3. Industry Analysis 12-24
3.1 Plastics Industry
3.2 Micro Economy Analysis
3.3 Industry Life Cycle
3.4 SWAT Analysis
3.5 Competitive Strategy Analysis
4 Exchange rate fluctuation and affect 25-34
4.1 How Exchange Rate Fluctuation Affect Companies
4.2 Factors that Affect Foreign Exchange Rate
4.3 Types of Risk
4.4 Hedging
4.5 How Exchange Rate Fluctuation Affect Bengal
Windsor Thermoplastics Ltd.
5. Financial performance analysis 35- 48
5.1 Time Series Ratio Analysis
5.1.1 Liquidity Ratio
5.1.1.1Current Ratio
5.1.1.2 Quick Ratio
5.1.1.3 Cash Ratio
5.1.1.4 Inventory to Working
Capital Ratio
5.1.2 Activity Ratio
5.1.2.2 Receivable Turnover
5.1.2.3 Inventory Turnover
5.1.2.4 Assets Turnover
5.1.3 Profitability Ratio
5.1.3.2 Gross Profit Margin on
Sales
5.1.3.3 Net Profit Margin on Sales
5.1.3.4 Return on Assets
5.1.3.5 Return on Equity
5.1.3.6 Earnings Per Share
5.1.4 Leverage Ratio
5.1.4.2 Debt to total Assets Ratio
5.1.4.3 Debt to Equity Ratio
5.1.4.4 Debt to Coverage Ratio
6. DuPont Analysis 49- 59
6.1DoPont Analysis
6.1.1 Operating Profit Margin
6.1.2 Total Assets Turnover
6.1.3 Interest Burden
6.1.4 After Tax Retention Rate
6.1.5 Financial Leverage
6.2 DuPont Analysis
6.2.1 Sensitivity of ROE
6.2.2 Sensitivity of Operating Profit Margin
6.2.3 Sensitivity of Interest Burden
6.2.4 Sensitivity of After Retention Rate
(ATRR)
6.2.5 Sensitivity of Financial Leverage
7. Analysis of cash flow statement 60- 61
5.1 Computation of free Cash Flow
5.2 Analyzing cash flow trends
8. Analysis of sustainable growth 62- 63
9. Operating leverage, financial leverage and Total leverage 64-65
10. Disclosure Practice, Discussion MDA, Choice of Accounting Policy 66-68
10.1 Disclosure Practices
10.2 Management Discussion and Analysis
10.3 Choice of Accounting Policy
10.4 Off Balance Sheet Items
11. Finding and Recommendation 69-71
12. Conclusion 72-73
Bibliography
Appendix
TABLE

NUMBERS
2. Company profile 04-11
Table 2.1.3 : Contribution to GDP
Table 2.3.3 : Market Share of BWTL & Other competitors
Table 2.3.4 :Product Pricing Strategy
Table 2.3.6 : Risks and Mitigation
4 25-34
Exchange rate fluctuation and affect
Table 4.5.1 : Following Table Shows Profit /(Loss) by Exchange of

Foreign currency Transaction
5. Financial performance analysis 35- 48

Table 5.1.1: Liquidity Ratio
Table 5.1.2: Activity Ratio
Table 5.1.3 : Profitability Ratio
Table 5.1.4: Leverage Ratio

DuPont Analysis 49- 59
6.
Table 6.1 : DuPont Analysis
Table 6.2.1 : Sensitivity of Operating Profit Margin
Table 6.2.2 : Sensitivity of Total Asset Turnover
Table 6.2.3 :Sensitivity of Interest Burden

Table 6.2.4 : Sensitivity of After Tax Retention Rate (ATRR)
Table 6.2.5 : Sensitivity of Financial Leverage
Table 6.2.5 : CV Analysis
7. Analysis of cash flow statement 60- 61
Table 7.1: Free Cash Flow Computation
8. Analysis of sustainable growth 62- 63
Table 8.1: Analysis of Sustainable Growth
64-65
9. Operating leverage, financial leverage and Total leverage
Table 9.2 : Calculation of Degree of Leverage

FIGURE

NUMBERS
2. Figure 2.3.3 : % of Market Share 04-11
3. Figure 3.3 : Industry Life Cycle 12-24
Figure 3.4 : SWAT Analysis
Figure 3.5 : Porter's 5 Forces model
5. Financial performance analysis 35-48
Figure 5.1.1: Liquidity Ratio
Figure 5.1.1.1: Current Ratio
Figure 5.1.1.2: Quick Ratio
Figure 5.1.1.3: Cash Ratio
Figure 5.1.1.4: Inventory to Working Capital Ratio
Figure 5.1.2: Activity Ratio
Figure 5.1.2.1: Receivable Turnover
Figure 5.1.2.2: Inventory Turnover
Figure 5.1.2.3: Assets Turnover
Figure 5.1.3 : Profitability Ratio
Figure 5.1.3.1: Gross Profit Margin on Sales
Figure 5.1.3.2: Net Profit Margin on Sales

Figure 5.1.3.3: Return on Asset
Figure 5.1.3.4: Return on Equity
Figure 5.1.3.5: Earnings per Share
Figure 5.1.4: Leverage Ratio
Figure 5.1.4.1: Debt to Total Assets
Figure 5.1.4.2: Debt to Equity Ratio
Figure 5.1.4.3: Debt Coverage Ratio
6. DuPont Analysis 49-59
Figure 6.1.1 : Operating Profit margin
Figure 6.1.2 : Total Assets Turnover
Figure 6.1.4 : After Tax Retention Rate
6.1.3 : Interest Burden
Figure 6.1.5 : Financial Leverage
Figure 6.2 : ROE
Analysis of cash flow statement

7. 60-61
Figure 7.2 : Analyzing cash flow trends
8. Analysis of sustainable growth 62-63
Figure 8.1: Actual and Sustainable Growth
9. Operating leverage, financial leverage and Total leverage 64-65
Figure 9.1: Degree of Leverage

CHAPTER- 1
INTRODUCTION
1.1 Background
Economy of Bangladesh is in the group of world’s most underdeveloped economics.

Manufacturing Companies plays a vital role for a nation’s economic development. Over the last
few years the manufacturing Companies of Bangladesh has been undergoing a lot of changes due
to technological innovations, globalization etc. These changes also made revolutionary changes
of a country’s economy. Present world is changing rapidly to face the challenge of competitive
free market economy. It is well recognized that there is an urgent need for better-qualified
management and better-trained staff in the dynamic global market. Bangladesh is no exception of
this trend. Manufacturing companies sector in Bangladesh is facing challenges from different
angles though its prospect is bright in the future.
1.2 Origin of the Study
This project has been prepared for fulfilling the requirement of the MBA program of Bangladesh
University of Professionals (BUP). The two years MBA program consists of six semesters,
having four months in each semester. As per the requirements of the MBA program we were
placed to different organizations. As a student of MBA I have been deputed to Bengal Windsor
Thermoplastic Limited (BWTL), a sister concern of Bengal Group of Industries, for the matter of
having practical exposure to activities of manufacturing firm (FMCG). Duration of the
dissertation was for 8 weeks, from September to November 2015. This project was approved by
the faculty supervisor Dr. Jannatul Ferdaous, Assistant Professor(Finance), FBS, BUP
1.3 Scope of the Study:
This study provides insight into the manufacturing activities of BWTL. Specifically, this study
examines the organizational structure, culture, values, and background objectives etc. of that
organization. Another scope of that in that study was to evaluate the performance of the firm.
This evaluation process is consists of the financial ratios in order to measure the profitability,
operating efficiency, liquidity and other financial ratios.
1
1.4 Objective of the Report:
1.4.1 Broad Objective:
The general purpose of this study is to gain practical knowledge about the operation of FMCG.
Manufacturing industry is a biggest part, which plays a vital role in the economic development of
a country.
1.4.2 Specific Objectives:
More specifically, this study entails the following aspects:
 To evaluate internal performance.
 To evaluate external performance.
 To analyze the financial ratios of firm.
 To know about the function of administration.
 To know about financial activities of the organization.
1.5 Methodology:
The study is performed based on the information extracted from different sources collected by
using a specific methodology. To fulfill the objectives of this report total methodology has been
divided into two major parts:
1.5.1 Data Collection Procedure:
In order to make the report more meaningful and presentable, two sources of data and
information have been used widely.
1.5.1.1 Primary Sources:
The ‘Primary Sources’ are as follows –
 Face-to-face conversation with the respective officers of the firm.
 Practical work exposures on desks of the firm.
Relevant file study as provided by the officers concerned.
1.5.1.2 Secondary Sources:
The ‘Secondary Sources’ of data and information’s are –
2
 Annual report of BWTL (2009-2014).
 The internet was also used as a theoretical source of information.
1.5.2 Data analysis:
In this report different types of analysis are made.
 Global and domestic market are analyzed for industry analysis
 Different types of ratio under different category are explained for financial performance
evaluation.
 Using five factors DuPont Analysis. The equation for 5 factors DuPont Analysis is:
ROE = (NI / EBT) * (EBT / EBIT) * (EBIT / Rev) * (Rev / Avg. TA) * (Avg. TA / Avg. Sh.
Eq.)
= Tax Burden * Interest Burden * EBIT Margin * Asset Turnover * Leverage.
 Analyzed cash flow statement for categorized the group which BWTL belongs to.
 Analyzed sustainable growth and actual growth rate to measure of how much a firm can grow
without borrowing more money.
1.6 Limitations:
A good report ‘sells’ the results of the study, but it should not oversell. Every project has
limitation. I faced some usual constraints during the course of my Practical Orientation.
 Time was inadequate.
 Inadequate data sources.
 Because of confidentiality it was not possible for us to collect some data required for the study.
 Lack of availability of competitors’ data.
3
CHAPTER- 2
COMPANY PROFILE
2.1 History of the Company:
Bengal Group takes pride in developing Bangladesh economy through establishing diversified
industries. The Group is recognized as one of the leading and fastest growing industries in Bangladesh
having a wide range of activities in the field of plastics, adhesives, metal, paper, real estate, agro, food,
bank, insurance, and energy industry.
Bengal Group a front ranking Industrial group in Bangladesh. The company was founded in 1969 a
year before the emergence of Bangladesh as a new nation. after its establishment the company
encountered a challenging environment of rebuilding the shattered economy of the country. Bengal
Group took the challenge with the courage and confidence to withstand all the tests of time. Today
after more than two decades of its establishments Bengal Group has become a corporate name of
success and prosperity as an industrial group.
Bengal Group is one of the largest industrial Group in Bangladesh having more than 750 professional
& technical support personnel in its permanent payroll. The company owns a fully equipped computer
for data processing facilities.
2.1.1 Bengal Windsor Thermoplastics Limited. :
The Project in a brief: Bengal Group is the country's leading and one of the largest manufacturers
of plastic products. Bengal is successfully doing its business operation into different plastic
product line (Hanger, Furniture, Household, and Industrial). As experts in the sector of plastic
industry Bengal came up with line under the company of Bengal Windsor Thermoplastics
Limited (BWTL). Bengal Windsor Thermoplastics Limited (the "company”) was incorporated on
02 January 2002 vide registration no. C—44727(1255) of 2002 as a private limited company in
Bangladesh under the Companies Act, J 994 with the name of Bengal Build-up Bangladesh Ltd. and
subsequently changed its name to Windsor Plastic (BD) Ltd on J 7 May 2005.
Following by the name change, the status of the Company was converted from private to
public limited company, On J 4 December 2010 the company changed its name to its present
name from Windsor Plastic (BD) Ltd.
4
At present Bengal Windsor Thermoplastics Ltd. (the "Company") is a public limited
company incorporated in Bangladesh and its shares are quoted in the Dhaka and Chittagong Stock
Exchanges from 24 June 20J 0. "he address of the Company's registered office !s Bengal House,
75 Gulshan Avenue, Gulshan — J , Dhaka—J 2J 2, Bangladesh. The ComDany's manufacturing unit is
situated at Dhaka Export Processing Zone (DEPZ) extension area, Plot # J 81—J 82, Savar, Dhaka.
2.1.2 Description of Location:
The ComDany's manufacturing unit is situated at Dhaka Export Processing Zone (DEPZ)
extension area, Plot # J 81—J 82, Savar, Dhaka.
The company manufacturing unit is situated at Dhaka Export Processing Zone (DEPZ) extension
area, Plot # J81-J 82, Savar, Dhaka. Total Area of land is 4 bigha. All infrastructural facilities
like water, power, gas, road, etc. are available in the project site. Building & civil works
comprises single storied factory building having 40,000 sft., Generator & sub-station Room,
Pump house.
2.1.3 Contribution of the Society
Employment Opportunity:
Bengal Plastic Pipes having total number of 450 persons of various categories and contributing
towards society by enabling job placement for the people.
Contribution to GDP:
5
Bengal Plastic Pipes Ltd. has added42.39 crore to the Gross Domestic Product of the country in
Financial Year: 2013-2014 as detailed below:
(Taka in 000)
A: Sales (FY: 2013-2014) 8,96,714
B: Less: Inter-firm transaction: -
Raw materials 4,05,072
Stores and spares 19,848
Water, power and fuel 27,409
Repair and maintenance 732
Rent, tax and insurance 690
Insurance 558
Others 18,475
47,278
Contribution to GDP (A-B): 4,23,903
Table 2.1.3 : Comtribution to GDP
2.2 Mission:
Bengal Group of Industries aims to be a model of dynamism and efficiency in high-

techindustry of Bangladesh while performing macro responsibilities and serving thecommunity
with dedication imbued with partisan and social justice.
6
2.3 Market Aspect:
2.3.1 Product its use and users:
The company manufactures and exports garment accessories (hanger and related accessories) which
facilitates the export of garments to the world's largest retailers Like Wal-Mart, K-Mart, Kohl's, J C
Penny etc. in the USA as well as in Europe.
Bengal Windsor Thermoplastics Ltd. is manufacturing different types size and quality which
are required by customer. The company is capable of producing according to QMS, ISO, MCC,
FC etc. specification as per customer requirement. The company is always determined to triumph
customer satisfaction through a high-tech manufacturing system for quality products which has
been certified by ISO 9001: 2008 certificate. Quality is the main strength of BWTL. To maintain
the quality, BWTPL is using modern technology and machine for production that make them
different from others. The range hanger and other accessories are conforms to various national
and international quality standards and available to customers in varied specifications of length
and diameters.
2.3.2 Global Market:
Bangladesh could secure a billion-

dollar share in the global market of apparel accessories andpackaging materials in less than five
years as, industry people say, global importers havebeen desperately looking for a competitive so
urce to China.
Local accessories manufacturers already have experience in catering to the country’s hugeappare
l export industry, but for getting a foothold in global market they need promotion andsustainable
supply chain where government has a lot to do. Bangladesh is targeting onebillion dollar by direc
t exports of packaging materials and garment accessories before the endof 2015.
BCCMA has targeted that by 2018 its members would command a $12 billion worth sector ofpac
kaging materials and accessories. They aspire to feed a $50 billion-
plus garment industryby that period while two to three billion would come from direct exports of
accessories andpackaging materials.
7
Many of the local garment accessories and packaging materials manufacturers are sendingproduc
ts for manufacturers of garments and other products abroad… a new horizon isopening for Bangl
adesh’s export sector.
Bangladesh is now exporting abroad such accessories like plastic hangers, poly bags, cartons,tag
s, labels and sewing threads.
Quoting data from the Export Promotion Bureau, he added that direct exports of garmentaccessor
ies and packaging materials amounted over $220 million in 2012.Acceptability in market, nomin
ations from retailers, quality proofs and certification onproducts and developing smooth deliverie
s according to foreign market requirements andmany things are crucial for direct exports of acces
sories.
2.3.3 Market Share:
BWTL is the market leader in the plastics industry. It holds 49% market shares and other
competitors hold 51% of market share.
Name of the Company % of marketshare
BWTL 49
Esquire 14
RFL 8
DAF 8
KDS 7
Others 14
Total 100
Table 2.3.3 : Market Share of BWTL & Other competitors
8
% of market share
14%
7%
8% 49%
8%
14%
BWTL Esquire RFL DAF KDS Others
Figure 2.3.3 : % of Market Share
2.3.4.Product Pricing Strategy:
Low Price Medium Price High Price
HighValue Under priced: valueundercut Attractive pricing: idealfor mar Premium pricing: prestige,prominence
by price. "What'swrong with t ket penetration."More for your ."Connoisseur" pricingstrategy.
his picture"pricing strategy." money"pricing strategy.
MediumValue True bargain: may be atempo Price and value are inbalance, e Overpriced: informedbuyers will stay
rary special to raiserevenue o xclusive of otherfactors. "Squar away;sales may be made tounsophistic
r to movediscontinued items." e deal"pricing strategy. ated market."Infomercial" pricingstrat
Inventory sale" strategy. egy.
LowValue Cheap stuff. Often soldwith l Turns sales intocomplaints. "Ca Don't even think about it:the "Fleece '
ots of "bonus" itemsor feature veatemptor" pricing strategy.(" em and run"pricing strategy.
s. "Tourist trap"pricing strate Let the buyer beware.")
gy.
Table 2.3.4 :Product Pricing Strategy
9
2.3.5 Promotional Strategy:
The independent marketing department is responsible for designing and implementing marketing
plans and strategies. The team has routine programs for each and every product and promotional
activities to attract customers
2.3.6 Risks and Mitigation:
Risk Mitigation
Systematic Risk
Market Risk National economic indicators (GDP, Per Capita Income etc.) reflects constant growth of food
market. Client’s solid financial strength, strong distribution channel, excellent product quality,
strong brand image and industry experience would enable the company to face any adverse
market scenario.
Interest/ Profit National economy has been experiencing almost stable rate of interest. Group’s competitive
Rate Risks strength in financial sector makes them capable to enjoy prime rate. Moreover, the borrower is
capable enough to exercise the capital market.
Management Sponsors’ involvement, ready succession and senior management’s skills and capacity would
Risk neutralize the risk.
Technology The technology used is simple, user friendly and customized. Dedicated and technically sound
team deployed to look after the project. Both the factors would ensure acceptable risk.
10
Unsystematic Risk
Raw Material Most of the raw materials consumed are local. Imported materials are readily available. Both raw
Sourcing Risk and packing materials have multiple manufacturers’ worldwide.
The risk that an investor will have to close out a long or short position a foreign currency at a loss
Exchange rate
due to an adverse movement in exchange rates.
risk
Table 2.3.6 : Risks and Mitigation
11
CHAPTER- 3
INDUSTRY ANALYSIS
3.1 Plastics Industry
Plastic Industries of Bangladesh are mainly engaged in manufacture of different products like
PVC pipe, Garments accessories, Hanger, poly bag, Polythene bag, and leather, plastic
household products, Jute and Textile spares Toys, plastic waste recycling, computer Accessories,
auto lighting, plastic Furniture, Poly Propylene woven, Flexible packaging and many. Total resin
import in 2005 was 540,000.00 tons and per capita plastic consumption is 3.4 Kgs. Import of
plastic resin is increasing by 10% per annum. For export government provides duty free import
of raw materials. Plastic goods are mainly exporting to USA, Canada, UK, Japan, Australia,
France etc.
Investment Policy of Bangladesh is free and open for foreign investment. Bangladesh gives most
attraction Packages of FDI. Countries export growth is 22% in 2006 for all products whereas the
national GDP growth was 6.71%.
No matter what race or religion a Bangladeshi belongs to, they have coexisted peacefully for
thousand years. It is the friendliest country for investors, with trainable, enthusiastic, diligent and
inexpensive labors. It is suitable for development of labor-intensive industries. The sea and aerial
transportation is very convenient hence it is an ideal site of international trade. Although the
GDP is still low, but the most important is that there are many middle bourgeoisie who have
certain purchasing power. Following the step of economic development, they have become
stronger and more competitive. Thus it is an important consumptive market which full of
business opportunities.
Bangladesh government is keen on participation of foreign investment for stimulating production

and economic growth. Since 1990, the government has announced a number of incentives such
as tax holidays, unhindered repatriation of profits, and withdrawal of non-tariff barriers in all
aspects and duty-free import of capital machinery by export-oriented industries. Bangladesh has
been experiencing a major paradigm shift towards industrialization. Gradually, it is transforming
towards a more competitive destination for foreign investment.
The readymade garments of Bangladesh came into prominence in the beginning of eighties.
During the last eight years the industry marched onwards from its stage of adolescence into
12
matured adulthood. In this period, the industry established itself as a major exporter of RMG to
USA, Canada and EEC countries. In fact, the present market share of Bangladesh in these
countries has become a major concern for other exporting countries.
The industry came into existence on the basis of marketing opportunities provided by the
importers of USA and their local agents in Hong Kong, Taiwan and Singapore. USA is a vast
and competitive market for RMG and the importers there, are always exploring for cheap and
dependable sources of supply. Moreover quota restrictions in their traditional source countries
also encouraged them to develop new territories as alternative sources.
Bangladesh had all the rights ingredients for developing into such abundance of cheap labour,
reasonably good infrastructure for movement of cargo and above all a non-quota environment.
So, the buyers rushed in and to cope with their demand the industry expanded at an astronomical
pace. Supports were provided by many of the buyers in the form of technical assistance in
quality control and production management. Some buyers even provide machinery needed to
execute their specific orders.
Major Products of Bangladesh RMG industry are Woven shirts, Trousers, Jackets, T-shirts,
Shorts, Briefs, etc. Major buyers of Bangladesh garments are USA, EEC, Canada and other
European countries.
The RMG industry of Bangladesh have been successful in penetrating into the market of USA,
Canada, Scandinavian, EEC and Nordic countries as well as the former Soviet Union though
initially started from the West European markets. Vigorous attempts are also under way to
promote export of RMG to the Japanese, Australian, Middle East & the newly emerged
Commonwealth of Independent State markets. Product categories have also been expanded from
4-5 in 1982-83 to over 60 as of now. Use of local fabrics & accessories are also on the increase
in the manufacture of RMG. Today Bangladesh is significant exporter of RMG in twenty
countries of the world.
Like the Newly Industrialized Countries (NICs) & other developing countries, garments sub-
sector is a highly discussed subject for its importance both in respect of providing employment
13
and earning foreign exchange in a country like Bangladesh. Main factors, among others, behind
the success of the garment industry are as follows:
1. Lower initial capital requirement;
2. Availability of cheap labor;
3. Short gestation period;
4. High turnover ratio to investment and
5. Government's co-operation and incentives in the form of back to back L/C, bonded ware house
facility, duty drawback, 15% cash benefit on FOB value of export for use of local raw materials,
creation of export development fund, export credit guarantee scheme (ECG) etc.
Ready Made Garment (RMG) is the leading sector of Bangladesh in terms of employment,
production and foreign exchange earnings. Readymade garment (RMG) alone earned about 76%
of the yearly foreign exchange earning of the country. About 2.50 million people, 85% of which
are women, employed in the garment-manufacturing sector. The growth rate of RMG export was
over 20% over last two decades.
(Sources: FICA & WTO)
3.2 Macro Economy Analysis
3.2.1 Demographic
BWTL is a 100% export oriented manufacturing organization. BWTL has been manufacturing
and exporting different types of garments hanger and other plastics goodsto USA, Canada and
European markets. Foreign markets are the main market.
3.2.2Age
BWTL produces plastic Apparel hangers for men’s, women’s and children’s in many designs,
sizes, and colors.
14
3.2.3 Income
Prices of BWTL's products and lifestyle are reasonable any one can afford it. Due to changes in
recent life style and current market trend, in the market there are varieties of products similar to
that of BETL's. And if we see than, people still prefer BWTL's product.
3.2.4 Technology & Technical Know-how
At first PP, Filler & color master batch are mixed into the mixer & carried to the feeder. The
injection molding consists of two units, one is injection and another is clamping unit. Mix is
loaded in the hopper of injection unit by auto loader. When screw start to rotate and mix is fed to
barrel, the series of heater in the barrel zone heat it. At this level the mix is transformed into
melted plastic form and gets the kneading effects by hydraulic oil. After proper mixing, the
melted plastic is sent in front of nozzle.
In the meantime, the mold is closed and ready by the clamping unit driven by hydraulic pressure
system. After that the molded material is injected into the mold by hydraulic pump. After
injection molded material flows all over the mold thus gets the product form (i.e. hanger) which
is later cooled down by passing chilled water through the mold. After cooling down, the mold is
opened and the product comes out automatically. This whole cycle takes only 15 ~ 18 seconds to
accomplish. It depends on the product size, weight & machine clamping capacity.
3.2.5 Politics
In every industry there is a trade union. When some demands of the worker are not met they are
going through the grievance procedure which sometime turn to strike and lock out situation
which adversely affect on company’s overall performance and production.
3.3 Industry life cycle
Industry life cycle analysis can vary based on how much detail we want. A five stage model
would include-
1.Pioneering development.
15
2. Rapid accelerating growth.
3.Mature growth.
4. Stabilization and market maturity.
5.Declaration of growth and decline.
INDUS T RY L IFE CYCL E

14
12
10
NET SALES
0
STAGE- 1: STAGE -2 : R APID STAGE-3:
PIONE E R ING AC C E LE R ATIN G MATURE
DEVELOPM ENT GROWTH GROWTH
Figure 3.3 : Industry Life Cycle
The figure shows the growth path of sales during each stage. To estimate industry’s sales they
much predict the length of time for each stage. This requires answer to such question as -
a) How long will an industry grow at an accelerating rate?
b) How long will it be in the mature growth phase before it sales, growth, stabilizes and then
declines?
16
So to determine the sales estimate we briefly describe these stages:
3.3.1 Pioneering development
During this start up stage the industry experiences modest sales growth and very small on
negative profit margin and profits. Here time period is small and firms incur major development
cost.
3.3.2 Rapid accelerating growth
During this stage a market develops for the product or service and demand become substantial.
The profit margins are very high, sales, growth rate are moving at an increasing rate to meet
excess demand. During this phase profit can grow at over 100% a year.
3.3.3 Mature growth
In this stage, future sales growth may be above normal but it no longer accelerate. Here the rapid
growth of sales and a high profit margin attract competitors to the industry which causes an
increasing in supply and lower prices which mean the profit margin begin to decline to normal
levels.
3.3.4 Stabilization and market maturity
During this stage investor can estimate growth easily because sales correlate highly with an
economic series. Here competition produces tight profit margins and the rates of return on capital
eventually become equal to or slightly below the competitive level.
3.3.5 Declaration of growth and decline
In this stage the industry sales growth decline because of shifts in demand or growth of
substitutes. Profit margin continues to be squeezed and some firms experience low profits or
even.
17
BWTL and its position in the industry life cycle
Analyzing their market situation, sales estimate and future plan this industry are currently stayed
in the mature growth stage. In this stage future sales growth may be above normal but it no
longer accelerate. Besides, the rapid growth of sales and the high profit margins attracts
competitors to the industry which causes an increase in supply and lower prices which means
that the profit margins began to decline to normal stage.
3.4 SWAT Analysis
Strength
Threats SWAT Weakness
Oppornities
Figure 3.4 : SWAT Analysis
3.4.1 Strength
3.4.1.1 Established Brand Name
Bengal has a predominant retail market presence for more than a decade. The brand name Bengal
is recognized and trademarked. With its wide brand awareness, it is recognized in terms of
18
quality. It is informally ranked in the top ten FMCG and Plastics Exports. Bengal is one of the
largest garments accessories exporters in Bangladesh.
3.4.1.2 Trend of Loan Repayment
The Company is highly regarded by commercial banks, financial institutions and other lenders
for its efficient credit management and its excellent repayment track record. To date, Bengal has
developed successful and long-term business relationship with a number of domestic and
multinational banks. Bengal’s cost of borrowing is one of the lowest in the industry.
3.4.1.3 Industry Expertise
Bengal has developed skilled workforce and gathered knowledge on the industry over the past
many years. Long-term experience in the industry helps Bengal to operate more efficiently and
fix prices more competitively. Besides, over the years, Bengal has developed secured raw
material sources and strong distribution network. On the other hand this is the expansion of the
existing products. Bengal is one of the largest PP oven bag manufacturers in Bangladesh.
3.4.1.4 Superior Quality Control Measures
BWTL maintains and controls the superior quality of the product. It is the policy of plastics
marketing company limited to market products of consistent quality foreign market as per would
standards produced by in accordance with good manufacturing practices.
3.4.1.5 Integrity
BWTL believes success depends upon the quality and value of their products by providing a
safe, wholesome economically efficient and a healthy environment for their customers and by
providing a fair return to their investors while maintaining the highest standards of integrity.
3.4.1.6 Product Range
There are Wide product range & attractive design to instigate the impulse buying behavior.
BWTL lunge various products every month to consider the buyer choice.
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3.4.1.7 Management Quality
The company has top quality management comprised of a group of skilled and experienced
individuals from diversified fields such as finance, management, engineering, production,
distribution, HR etc.
3.4.1.8 Market share
Because of producing large quantity of products, BWTL leads in the share market and increasing
the market share every year. BWTL holds almost 49% market share of the industry.
3.4.2 Weaknesses
3.4.2.1 Forecasting Complexity
The plastic industry is fastest growing sectors of the country. As the business grows faster,
forecasted figures are often surpassed by actual demand. This may cause empty stock to meet the
sales during the peak period.
3.4.2.1 Imported Material
90% of the total raw material used by Bengal is imported. As quality necessitated improvement,
import had to take place. In a competitive market, Bengal focuses on expanding its sales volume
as much as possible. Increase in revenue due to better quality coupled with promotional
campaign brings considerable positive effect to the bottom line eliminating any cost resulting
from currency fluctuation. Moreover, Bengal can actually mitigate the currency risk because
export provides substantial cushion to absorb any fluctuation.
3.4.3 Opportunities
3.4.3.1 Tremendous Growth Opportunity
The hanger market has an obvious growth opportunity in developing countries like Bangladesh.
Most of the countries like EU countries; America and Canada import the garments accessories
20
products from Bangladesh. Bangladesh takes this opportunity to export accessories products and
earn a lost foreign currency.
3.4.3.2 Export Potential
Bengal puts special emphasis on export and actively participates in both local and foreign trade
fairs. At this time Bengal Group is exporting garments accessories and plastic products in the
many countries in the world. On the other hand Bengal Group started to export plastic pipes in
India. India is huge market to there.
3.4.4 Threats
3.4.4.1 Price War
There are competitors, both importers and local producers, who put every effort to penetrate the
market. The personnel in the sales and distribution network maintain close tie with the retail
sellers to make sure that the products are competitive both in terms of quality and price.
Reduction in price to subsistence level may deteriorate margins, although no such effect is
foreseeable in the medium term.
3.4.4.2 Prices of Raw Materials
Prices of plastics raw materials are increasing day by day which is main threat of plastics
products. Because of increasing raw materials price profit margin will thin day by day.
3.5 Competitive strategy analysis
Porter's 5 Forces model
To grab the empty market or keep the current market place the company can take several
strategies. The project analysis may informally talk to customer, competitors, middleman or
others of the industry or he may look at the competitors of the company to learn about the
performance and their purchasing power of the customer action and strategy. Or they may simply
go along with the porters five factor model:
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Threats of
potential
entrants
Bargainin
Bargainin
g power
g power Industry
of
of Rivalry
Customer
Suppliers
s
Threats of
Substitute
s
Figure 3.5 : Porter's 5 Forces model
3.5.1Threat of new / potential entrants
A new entrant in an industry represents a competitive threat to the stabilized firm. So managers
of the stabilized firms usually go for barriers to entry. So the company may apply the policy
include: -
a) Economics of scale.
b) Getting first mover advantage
c) Product diversification.
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d) Switching cost.
e) Relationship
e) Access to distribution channel.
f) Some legal barriers
3.5.2 Bargaining power of suppliers
In many industries the cost of purchased supplies accounts 60-80% at total production cost.
Suppliers have an important effect on industries project potentials.
Considering unfavorable conditions of the supplier company must watch out the factors that
make the suppliers group powerful:-
a) Greater concentration among suppliers than buyers.
b) Dominance by a few suppliers and lack of substitute product.
c) High differentiation among suppliers.
d) High differentiation by suppliers and high switching cost for the buyer.
3.5.3 Bargaining power of the customer
Buyers are the consequential part of the organization. Buyers can exert bargaining over a
supplier industry by forcing its prices down by reducing the amount of goods they purchased
from the industry or by demanding better quality for the same price. The manager of the
organization must watch out the following factors that lead to greater buyer power:
a) Credible threat of backward integration by buyers.
b) Price sensitivity of the buyers.
c) Relatively large volume purchase.
d) Greater concentration in the buyers industry than in suppliers industry.
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3.5.4 Threat of substitute product
When the availability of substitute product is upper and prices are above the following industry’s
product prices, customer tends to switch to substitute. As there are no substitute products, the
company does not face any threat of substitutes. But consequently manager must closely monitor
substitute product that are showing improvement in performance or/and decline in prices.
3.5.5 Rivalry of the existing firms
In the current free market economy, Company has to face high level of competition. That is
usually characterized by in terms of price competition, product differentiation and product
innovation. But in the market, BWTL holds almost 49% of market shares, it does not face rivalry
among existing firm.
3.6 Conclusion
The forces in this model all are not in the same direction. Some creates competition, affects
profitability and some are not. But by overall dimension we can conclude that profitability
condition is higher with little competition.
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CHAPTER-4
EXCHANGE RATE FLUCTUATION AFFECT

4.1 How Exchange Rate Fluctuation Affect Company
Most investors will be familiar with the concept of currency exposure, with constantly changing
exchange rate affecting the cost of investing in international stocks. These issues also affect
companies that operate internationally. So what effect does currency fluctuation have on
company profits, and what are they doing to insulate themselves? In this extract from the Modern
wealth management blog, I take this issue.
4.1.1 Export Oriented Company and foreign Currency
Companies with overseas branches, or those that trade internationally, are at the mercy of global
currency fluctuations. As is the case with private investments, changes in conversion rates can
wipe out profits or increase gains.
Companies with overseas branches, or those that trade internationally, are at the mercy of global
currency fluctuations. As is the case with private investments, changes in conversion rates can
wipe out profits or increase gains.
When a firm has shareholders to report to, and the figures can run into millions, then it can have
a serious impact on profits and losses. The rapidly changing currency landscape can have the
potential to make businesses reluctant to set firm figures in contracts months before a deal takes
place. If a export based firm earn dollars by selling its own products, this earning can be changed
if the dollar exchange rate changes. Such as a company earn Tk. 7,800/-(100 unitsX $1X Tk.78)
for last month. During the its earning can be reduced tk.7,700/- (100 unitsX $1X Tk.78)because
dollars rate Tk.77 instead of 78. Whereas salling units are same, they can end up with much
more or less than they thought depending on the movement of the USD/Taka exchange rate.
These issues also exist when discussing contracts with international clients. Although something
may seem like a good deal when it is first written down, it can turn bad a few months later when
the contract is fulfilled.
A study by SunGard Data Systems polled 275 US businesses of various sizes. It found that 59
per cent of those surveyed had seen a loss or gain of more than five per cent as a result of
currency fluctuations in the previous year.
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"The majority of corporations are in the business of doing business, producing and
manufacturing, not hedging currencies," said Paul Bramwell, a senior vice president of Treasury
solutions at the AvantGard unit of SunGard. "A lot of companies were caught unawares by
volatility’’.
He explained that looking at where the exposure lies instead of waiting for quarterly results to
discover the impact of fluctuations was a better approach, although he conceded that this is a
stance more and more firms are taking.
4.1.2 The Impact on Real Business
Therefore, organisations have to evaluate the risks of doing business on an international level.
But it doesn't always work in their favour. For instance, McDonald's saw sales in Europe
increase in 2011, but the yearly profits were actually down as a result of a weakening euro.
Indeed, some experts think investors should be cautious this year too given that the US dollar has
strengthened so much recently and is expected to continue doing so. As McDonald's generate
nearly three quarters of its profits overseas, this could be an issue if they have not hedged.
Another recent example of this happened at eBay, with CFO Bob Swan admitting that currency
fluctuations will hit the bottom line by around three points in 2012. Ralph Lauren reported that
although currency changes have gone in its favour so far in 2012, it expects a turnaround in
fortunes in 2013.
"Foreign currency effects are estimated to negatively impact net revenue growth by
approximately 200-300 basis points in the first quarter," the company stated.
4.2.1 Factors that Affect Foreign Exchange Rate
4.2.1.1. Terms of Trade
Related to current accounts and balance of payments, the terms of trade is the ratio of export
prices to import prices. A country's terms of trade improves if its exports prices rise at a greater
rate than its imports prices. This results in higher revenue, which causes a higher demand for the
country's currency and an increase in its currency's value. This results in an appreciation of
exchange rate.
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4.2.1.2 Economic Growth
The basic formula for an economy’s GDP is C + I + G + (X – M) where:
C = Consumption or consumer spending, the biggest component of an economy
I = Capital investment by businesses and households
G = Government spending
(X – M) = Exports minus imports, or net exports.
From this equation, it is clear that the higher the value of net exports, the higher a nation’s GDP.
As discussed earlier, net exports have an inverse correlation with the strength of the domestic
currency.
4.2.1.3 Capital Flows
Foreign capital will tend to flow into countries that have strong governments, dynamic
economies and stable currencies. A nation needs to have a relatively stable currency to attract
investment capital from foreign investors. Otherwise, the prospect of exchange losses inflicted
by currency depreciation may deter overseas investors.
Capital flows can be classified into two main types – foreign direct investment (FDI), FDI is a
critical source of funding.
4.2.1.4 Inflation
A devalued currency can result in “imported” inflation for countries that are substantial
importers. A sudden decline of 20% in the domestic currency may result in imported products
costing 25% more since a 20% decline means a 25% increase to get back to the original starting
point.
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4.2.1.5 Interest Rates
Changes in interest rate affect currency value and dollar exchange rate. Forex rates, interest rates,
and inflation are all correlated. Increases in interest rates cause a country's currency to appreciate
because higher interest rates provide higher rates to lenders, thereby attracting more foreign
capital, which causes a rise in exchange rates
4.2.1.6 Country’s Current Account/Balance of payments
A country’s current account reflects balance of trade and earnings on foreign investment. It
consists of total number of transactions including its exports, imports, debt, etc. A deficit in
current account due to spending more of its currency on importing products than it is earning
through sale of exports causes depreciation. Balance of payments fluctuates exchange rate of its
domestic currency.
4.2.1.7. Government Debt

Government debt is public debt or national debt owned by the central government. A country
with government debt is less likely to acquire foreign capital, leading to inflation. Foreign
investors will sell their bonds in the open market if the market predicts government debt within a
certain country. As a result, a decrease in the value of its exchange rate will follow.
4.2.1.8 The Global Inflation of Currencies
The global forex market is by far the largest financial market with its daily trading volume of
over $5 trillion - far exceeding that of other markets including equities, bonds and commodities.
Despite such enormous trading volumes, currencies stay off the front pages most of the time.
However, there are times when currencies move in dramatic fashion; during such times, the
reverberations of these moves can be literally felt around the world.
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4.2.1 Types of Exchange Rate Systems
Moreover, exchange rate system can be classified into four categories: Fixed, Freely floating,
managed float, and Pegged.
4.2.1.1 Fixed Exchange Rate System
In this system either the exchange rate is constant or can fluctuate in very narrow limits. A fixed
exchange rate would be beneficial for firms so they could engage in direct foreign investments,
without concern about exchange rate movements of that currency. Fixed exchange rate would
help them to convert their foreign earnings into their home currency without worry that their
earnings might weaken over time. Thus, the management of multinational corporations would be
much easier. In this exchange rate system corporations are encouraged to invest in foreign
countries. (Madura, & Fox, 2002).
4.2.1.2 Freely Floating Exchange Rate System
In free exchange rate system, exchange rate values are determined by market forces without the
interference of governments. In fixed exchange system there is no flexibility for exchange rate
movements, unlike free exchange rate system there is complete flexibility. A free exchange rate
changes in a continuous way in response to demand and supply conditions of the currency.
Within this system of exchange rate it is hard for the multinational companies to control its
earnings in the future (Madura, & Fox, 2002).
4.2.1.3 Managed Float Exchange Rate System
In some countries the exchange rate system is between fixed and free exchange rate system. This
system is similar to the free exchange rate system in that exchange rates are allowed to vary from
one day to another. It is similar to the fixed rate system in that government is able to interfere to
prevent its currency from moving too far in a certain direction. This type of system is known as a
managed float. In this system of exchange rate corporations are encouraged to invest in foreign
countries (Madura, & Fox, 2002).
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4.2.1.4 Pegged Exchange Rate System
In this system the currency of a certain country would be pegged into other stable foreign
currency such as dollar. So this currency moves in line with that currency against other
currencies. In pegged exchange system the companies are more likely to invest in foreign
countries especially in the country that their currency is pegged to (Madura, & Fox,
2002).Thisexample of a student's work
4.3.1 Types of Risk
The fluctuation of exchange rate will affect the corporation’s cash flow through the transaction
risk, translation risks, and economic exposure risk. These three different types of currency
fluctuation risks are being discussed in the study (Ramasamy, 2004).
4.3.1.1 Transaction Risk
The second risk is the transaction risk, which is the cash flow risk that is generated from region
currencies. Transaction exposure exists when the anticipated future cash transactions of a firm
are affected by exchange rate fluctuations. Transaction risk is easier than translation risk to
measure and reduce it since multinational companies always hedge policies against transaction
risk but they rarely do for balance sheet account and translation risk. There are two reasons for
the multinational corporations not to hedge against translation; the first is that the deflation and
reduction in one country will affect its branches in other countries. Second reason is that in long
term the net worth of the company will not be affected by exchange rate fluctuation because
exchange rate is affected by the productivity of the corporation’s (Moguillansky, 2002).
4.3.1.2 Translation Risk
Translation risk is the risk that results from the changes done to the financial statements of the
multinational corporations. The financial statement is normally measured in its local currency, to
be consolidated each financial statement should be translated into the currency of the
multinational companies’ parent. Since exchange rate fluctuation by time, this translation into
different currency is affected by the exchange rate changes. This translation risks with the
fluctuation of currency exchange rate my lead to the loss or gain in translation of multinational
companies annual accounts. For this reason many companies seek to have a balanced balance
30
sheet. The main source of risk for most of the corporations is the translation risk; translation
profit or loss has a huge impact on the profitability of the company which has more harmful
effects than those caused by operational activities like sales and profit margins (Dhanani, 2003).
Foreign currency translation from an accounting respective: assets and liabilities are translated at
exchange rate at the balance sheet date, whereas the profit or loss is translated at an average rate
for the whole financial year or at the closing year rate of exchange; nevertheless the share capital
is translated at the historical rate of exchange which is the rate when it was first issued. These
results are mentioned in the income statement to show the changes in assets and liabilities
(Dhanani, 2003).
4.4.1 Hedging
4.4.1.1 The Use of Financial and Operational Hedging Strategies
These risks, that companies are facing, result from the fluctuation of exchange rate. To reduce
the effect of these risks that may affect the company’s cash flow, assets, profit, and financial
structure the company should use hedging activities to reduce exchange rate fluctuation risk
(Ramasamy, 2004).
There are 3 types of financial and operational hedging: (i) the number of countries the company
operates in, (ii) the number of large area which the company is located, (iii) the geographic
distribution of its subordinate. To know whether the corporation exchange risk is affected by
hedging or not the corporation should consider two factors which are the company’s stock rate of
return and the exchange rate index (Allayannis, Ihrig, & Weston, 2001).
4.4.1.2 Hedging Exposure to Fixed Assets
In this point the focus is on the result of economic exposure on cash flows. The effects of
economic exposure may exceed cash flows. When multinational has fixed assets in a foreign
country, the cash flows received from sales of these assets is subject to exchange rate risk. Some
multinational companies do not worry about their fixed assets because they expect normally to
save the fixed assets for several years, given the regular reorganization of global operations.
However multinational corporations must think about hedging against the possible sales of these
assets in the future. The sales of these assets can be hedged by forming a liability that matches
31
the expected value of the assets in the future if sold. The sale of the fixed assets provides a
foreign currency cash inflow that can be used to pay the liabilities that is denominated in the
same currency (Madura, & Fox, 2002).
The limitations of selling the fixed assets are that the multinational corporations do not have the
ability to know (1) the date that the company will sell the assets, (2) the price in local currency at
which it will sell them. Moreover, the company is unable to create a liability that matches the
amount of the sale of the fixed assets. Nevertheless, these limitations must not prevent a firm
from hedging. Long-term future contracts are also a possible way for hedging far-away fixed
assets in foreign countries, but they may not be available for many rising market currencies
(Madura, & Fox, 2002).
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4.5 How Exchange Rate Fluctuation Affact Bengal Windsor Thermoplastics Ltd.
4.5.1 Following Table Shows Profit /(Loss) by Exchange of Foreign currency Transaction
L/C Loss & Gain 2013-14
DATE
SL# NAME OF THE PARTY L/C NO L/C ISSUE L/C AMT IN LAST EXPIRY P/I NO L/C OPENING INVOICE DATE OF BANK
SHIPMENT REALISED REALISED Priviour Received
DATE US$ DATE DATE BANK NO INVOICE SUBMISSION EXP NO. BANK RAF. NO MATURITY DATE DATE AMOUNTS rate rate Loss
001 Masco Industries Ltd 194513120444A 03/09/2013 $ 11,620.50 20/10/2013 30/10/2013 61309155, 9160, 9161, 9154, 9164 EXIM Bank Ltd 61305705 07/09/2013 06/11/2013 14819 421150259495-L 15/12/2013 15/12/2013 $ 11,620.00 77.00 76.00 (11,620.00)
Mercantile Bank
002 Bando Fashion Ltd 174113120647 10/09/2013 $ 36,067.63 10/10/2013 20/10/2013 61309052 ,61309115 , 61309152 , 61309087 Ltd. 61305721 14/09/2013 10/11/2013 15326 421150260205-L 23/02/2014 27/02/2014 $ 35,977.63 77.00 76.00 (35,977.63)
003 Rishal garments Ltd 000713120029 16/09/2013 $ 24,832.30 25/10/2013 10/11/2013 61309206 , 61309207 Agrani Bank Ltd 61305735 18/09/2013 22/12/2013 15634 421150266281-L 10/04/2014 23/04/2014 $ 24,706.31 77.00 76.00 (24,706.31)
004 R.T. Classics Ltd. ILC0802131216110 16/09/2013 $ 13,206.93 31/10/2013 15/11/2013 61309132 , 71 , 87 , 89 , 91 , 92 , 94 , 96 , 61309212 IFIC Bank Ltd. 61305729 17/09/2013 04/11/2013 15676 421150259351-L 17/12/2013 12/12/2013 $ 13,151.23 77.00 76.00 (13,151.23)
005 Apparels Gallery Ltd 044913120053 17/09/2013 $ 12,286.36 01/11/2013 15/11/2013 61309162 , 59 , 63 Uttara Bank Ltd. 61305732 17/09/2013 02/12/2013 15675 421150263015-L 21/12/2013 29/12/2013 $ 12,261.36 77.00 76.00 (12,261.36)
Social Islami
006 Legend Textiles Ltd 120313120069 17/09/2013 $ 15,155.24 30/09/2013 15/10/2013 61308491 Bank Ltd. 61305742 19/09/2013 26/11/2013 15674 421150262588-L 31/01/2014 06/03/2014 $ 15,115.00 77.00 76.00 (15,115.00)
Jamuna Bank
007 Cresent Fashion Ltd. 009313120232 18/09/2013 $ 5,336.84 01/11/2013 15/11/2013 61309252 Ltd 61305745 23/09/2013 10/11/2013 16048 421150260189-L 19/03/2014 19/03/2014 $ 5,303.00 77.00 76.00 (5,303.00)
008 ATS Apparels Ltd 147213120259 17/09/2013 $ 13,248.10 30/10/2013 15/11/2013 61308968 Eastern Bank Ltd 61305733 18/09/2013 04/11/2013 15637 421150259306-L 05/01/2014 13/01/2014 $ 13,223.10 77.00 76.00 (13,223.10)
Shahjalal Islami
009 The Rose Dresses Ltd. 296513120201 14/11/2013 $ 2,636.53 15/12/2013 30/12/2013 61309434 , 61308180 Bank Ltd. 61305880 16/11/2013 15/12/2013 19281 42150265488-L 26/03/2014 01/04/2014 $ 2,550.72 77.00 76.00 (2,550.72)
010 Best Shirt Ltd 093013120525 18/11/2013 $ 14,370.00 20/12/2013 04/01/2014 61309512 NBL 61305897 23/11/2013 08/12/2013 19282 421150264381-L 17/03/2014 01/04/2014 $ 14,270.00 77.00 76.00 (14,270.00)
011 Apparels Gallery Ltd 019513120386 19/11/2013 $ 3,439.25 25/12/2013 09/01/2014 61309520 , 614309489 , 61309517 Pubali Bank Ltd 61305895 20/11/2013 08/12/2013 19283 421150264390-L 10/03/2014 13/03/2014 $ 3,389.00 77.00 76.00 (3,389.00)
012 Apparels Gallery Ltd 019513120381 13/11/2013 $ 9,669.34 10/12/2013 25/12/2013 61309448 Pubali Bank Ltd 61305884 17/11/2013 05/12/2013 19285 421150263890-L 08/03/2014 13/03/2014 $ 9,619.00 77.00 76.00 (9,619.00)
33 013 Refat Garments Ltd BBCDAK311342 22/10/2013 $ 24,798.00 15/12/2013 30/12/2013 61309538 HSBC 61305902 26/11/2013 22/12/2013 19569 421150266272-L 24/03/2014 31/03/2014 $ 24,561.00 77.00 76.00 (24,561.00)
014 Beximco Fashion Ltd. 033013120099 09/12/2013 $ 2,113.34 25/12/2013 14/01/2014 61309545 Sonali Bank Ltd 61305940 11/12/2013 28/01/2014 20467 421150273102-L 15/05/2014 15/05/2014 $ 2,033.34 77.00 76.00 (2,033.34)
015 Arefin textile Mills Ltd 034313120031 10/12/2013 $ 3,003.33 30/12/2013 14/01/2014 61309594 Sonali Bank Ltd 61305937 11/12/2013 01/01/2014 421150268047-L 10/04/2014 25/05/2014 $ 2,908.33 77.00 76.00 (2,908.33)
016 Refat Garments Ltd 5633343502 09/12/2013 $ 15,313.50 20/01/2014 04/02/2014 61309603, 9610, 9611, 9602 City Bank N A 61305939 11/12/2013 26/01/2014 20727 421150272657-L 18/03/2014 24/03/2014 $ 15,283.50 77.00 76.00 (15,283.50)
017 Refat Garments Ltd 249013120440 08/12/2013 $ 10,248.38 30/01/2014 15/02/2014 61309643 SCB 61305950 19/12/2013 16/01/2014 20933 421150271140-L 20/04/2014 21/04/2014 $ 10,233.38 77.00 76.00 (10,233.38)
Social Islami
018 Friends Style Wear Ltd. 12113120076 15/12/2013 $ 29,115.00 10/01/2014 20/01/2014 61309627 Bank Ltd. 61305948 17/12/2013 22/01/2014 20864 421150271952-L 05/05/2014 01/06/2014 $ 29,065.00 77.00 76.00 (29,065.00)
Mercantile Bank
019 Bando Fashion Ltd 174113120825 28/11/2013 $ 444.63 31/12/2013 10/01/2014 61309601 Ltd. 61305949 19/12/2013 06/01/2014 20934 421150268911-L 20/03/2014 23/03/2014 $ 422.40 77.00 76.00 (422.40)
Total (245,693)
Table 4.5.1 : Following Table Shows Profit /(Loss) by Exchange of Foreign currency Transaction
Transactions in foreign currencies are translated to the functional currencies at an exchange rate
applicable on the date of transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are retranslated t o the functional currency at the exchange rate
prevailing at that date. Foreign exchange d iffere nc e s a r i s i n g on translation are recognized i n
statement of comprehensive income. None—monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate at the date of transactions,
We see above case the company losses when they convert dollars to taka. Because when the
company agreed to sales their products to their buyer that time the buyer want to buy that
product on dollars. That time dollars rate was tk.77/-.After L/C maturities time was over they
payment agreed price to the buyer on dollars. The company’s was received same dollars but
company received less amount taka. Because that time the dollar’s value was lesser than selling
time.
Another cause ask/ bid price of bank exchange rate .when the company sales its product the
company buy dollars and the bank sales it. As a result dollars rate was high. One other hand
when the company received sales price the bank buy the dollars and the company sales
comparatively low prices. Result the company was losses.
Some time the company sales its L/C at discount rate for daily operation. In this stage dollars rate
fluctuation and ask/ bid price factor may effect and the company would suffer losses.
34
CHAPTER- 5
FINANCIAL PERFORMANCE ANALYSIS

5.1 Time Series Ratio Analysis
Ratio analysis is the starting point in developing the information desired by the analyst. Ratio
analysis provides only a single snapshot, the analysis being for one given point or period in time.
In the ratio analysis it is possible to define the company ratio with a standard one. Ratio analysis
can be classified as follows:
a) Liquidity ratio
b) Activity ratio
c) Profitability ratio
d) Leverage ratio.
5.1.1 Liquidity ratio
Liquidity ratio measures the ability of the firm to meet its obligations. These ratios establish
relation between cash and other current asset and current liabilities. Creditors to evaluate the
creditworthiness of the firm use these ratios. These ratios also provide revels management's
policy in managing liquidity position of the firm. The liquidity ratio we can satisfy those are:
1. Current ratio
2. Quick ratio or acid test
3. Current ratio.
4.Inventory to Working Capital Ratio
35
Name of the Ratio 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
a) Liquidity Ratio
1. Current Ratio 2.99 5.27 7.41 3.63 6.18 8.16
2. Quick Ratio 2.34 4.41 6.15 3.04 4.82 5.87
3. Cash Ratio 0.03 0.07 0.13 0.15 0.07 0.75
4. Net Working Capital 1.99 4.27 6.41 2.63 5.18 7.16
Ratio
5. Inventory to 0.33 0.21 0.17 0.17 0.21 0.25
Working Capital Ratio
Table 5.1.1: Liquidity Ratio
9.00
8.00
Current Ratio
7.00
6.00 Quick Ratio
5.00
Cash Ratio
4.00
Net Working
3.00 Capital Ratio
2.00 Inventory to
Working Capital
1.00 Ratio
0.00
2007- 2008- 2009- 2010- 2011- 2012-
2008 2009 2010 2011 2012 2013
Figure 5.1.1: Liquidity Ratio
36
5.1.1.1Current Ratio
The current ratio is a financial ratio that measures whether or not a firm has enough resources to
pay its debts over the next 12 months. In the following graph, it is clearly seen that BWTL’s
current ratio is higher except 2010-2011. That mean BWTL maintain higher liquidity to pay
debt. We can also observe it through the following graph
Current Ratio
10.00 Current
Ratio
8.00
6.00
4.00
2.00
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.1.1: Current Ratio
5.1.1.2 Quick Ratio
The current ratio is a financial ratio that measures whether or not a firm has enough resources to
pay its debts over the next 12 months. In the following graph, it is clearly seen that BWTL’s
quick ratio is always higher except 2010-2011. That mean BWTL maintain higher cash and cash
equivalent assets to pay current debt.
QUICK RATIO
7.00
6.00
5.00
Quick
4.00 Ratio
3.00
2.00
1.00
0.00
2007- 2008- 2009- 2010- 2011- 2012-
2008 2009 2010 2011 2012 2013
Figure 5.1.1.2: Quick Ratio

37
5.1.1.3 Cash Ratio
A strong cash ratio is useful to creditors when deciding how much debt, if any, they would be
willing to extend to the asking party. BWTL gradually increases cash ratio every year to pay
current debt. But in 2012-2013, cash ratio jumped from 0.07 to 0.75 than previous year because
of listed in BSEC.
CASH RATIO
0.80
Cash Ratio
0.60
0.40
0.20
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.1.3: Cash Ratio
5.1.1.4 Inventory to Working Capital Ratio
The Inventory to Working Capital ratio measures how well a company is able to generate cash
using Working Capital at its current inventory level. Following graph show that after being
stable in 2009-2010 and 2010-2011, ratio increased. That indicates BWTL generates more cash
using WC.
Inventory to Working Capital Ratio

0.35
0.30
0.25 Inventory to Working
Capital Ratio
0.20
0.15
0.10
0.05
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.1.4: Inventory to Working Capital Ratio
38
5.1.2 Activity Ratio
Activity ratios are used to evaluate the competence, 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 Activity ratio we can satisfy on the three ratios, those
are:
1. Receivable turnover.
2. Inventory turnover.
3. Assets turnover.
4. Fixed asset turnover
5. Net Assets Turnover
6. Fixed Asset Turnover
7. Current Assets Turnover
Name of the Ratio 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Activity Ratio
Receivable Turnover 3.28 3.44 3.21 2.41 2.34 2.18

Inventory Turnover 6.72 7.00 7.42 4.75 3.35 2.12
Total Assets 1.16 0.99 0.95 0.47 0.47 0.38
Turnover
Net Assets Turnover 1.59 1.18 1.08 0.61 0.64 0.47
Fixed Asset 5.81 6.33 8.67 2.25 2.42 1.97
Turnover
Current Assets 1.46 1.18 1.07 0.60 0.58 0.47
Turnover
Table 5.1.2: Activity Ratio
39
10.00
Receivable Turnover
9.00
Inventory Turnover
8.00
Total Assets Turnover
7.00
Net Assets Turnover
6.00
Fixed Asset Turnover
5.00
4.00 Current Assets Turnover
3.00
2.00
1.00
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.2: Activity Ratio
5.1.2.1Receivable Turnover
Receivable turnover is a measure of how quickly a company is collecting its sales that were
made on credit (i.e., sales for which cash payment was delayed until after the sale date). A high
rate of turnover occurs when the proportion of receivables to sales is low. This turnover
decreased gradually, that means BWTL’s management actively collect their payments actively.
Receivable Turnover
4.00
3.50
3.00
2.50 Receivable Turnover
2.00
1.50
1.00
0.50
0.00
2007- 2008- 2009- 2010- 2011- 2012-
2008 2009 2010 2011 2012 2013
Figure 5.1.2.1: Receivable Turnover
40
5.1.2.2: Inventory Turnover
Inventory turnover ratio tells us how many times our inventory turned over on a particular period
of time. The more it turned over, the more sales will be generated through it. BWTL’s inventory
turnover ratio is decreasing trend. So BWTL is losing sales.
Inventory Turnover
8.00 Inventory Turnover
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.2.2: Inventory Turnover
5.1.2.3 Assets Turnover
Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in
generating sales revenue or sales income to the company. Companies with low profit margins
tend to have high asset turnover, while those with high profit margins have low asset turnover.
BWTL’s high profit margin leads to low assets turnover.
10.00
8.00
Total Assets
6.00 Turnover
Net Assets Turnover
4.00
2.00
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.2.3: Assets Turnover
41
5.1.3 Profitability Ratio
There are many measures of profitability, which relate the returns of the firm to its sales, assets,
or equity. As a group, these measures allow the analyst to evaluate the firm's earnings with
respect to a given level of sales, a certain level of assets, or the owners' investment. 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.
Name of the Ratio 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Profitability Ratio
Gross Profit Margin on 0.32 0.32 0.33 0.34 0.35 0.37

Sales
Net Profit Margin on Sales 0.24 0.23 0.26 0.27 0.24 0.27
Return on Asset 0.28 0.23 0.25 0.13 0.11 0.10
Return on Equity 0.39 0.27 0.28 0.16 0.16 0.13
Earnings Per Share - - 3.40 3.62 3.38 4.16
COGS to Net Sales 0.68 0.68 0.67 0.66 0.65 0.63
Operating Exp. to 0.05 0.06 0.05 0.05 0.06 0.04
Net Sales
Financial Exp. to Net Sales 0.03 0.03 0.02 0.02 0.07 0.08
Operating Profit to Net Sa 0.27 0.26 0.27 0.28 0.30 0.32
les
Table 5.1.3 : Profitability Ratio
42
0.80
Gross Profit Margin on
0.70 Sales
Net Profit Margin on
0.60 Sales
Return on Asset
0.50
Return on Equity
0.40
COGS to Net Sales
0.30
Operatinn Exp. to
0.20 Net Sales
Financial Exp. to Net
0.10 Sales
Operat. Profit to Net Sa
les
0.00
2 0 0 7 - 2 0 0 82 0 0 8 - 2 0 0 92 0 0 9 - 2 0 1 02 0 1 0 - 2 0 1 12 0 1 1 - 2 0 1 22 0 1 2 - 2 0 1 3
Figure 5.1.3 : Profitability Ratio
5.1.3.1 Gross Profit Margin On Sales
A financial metric used to assess a firm's financial health by revealing the proportion of money
left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as
the source for paying additional expenses and future savings. Gross profit margin for BWTL is
increasing every year. That means BWTL can increase sales and at the same time can reduce
COGS.
Gross Profit Margin On Sales

0.38
0.37
0.36 Gross Profit Margin
0.35 on Sales
0.34
0.33
0.32
0.31
0.30
0.29
2007- 2008- 2009- 2010- 2011- 2012-
2008 2009 2010 2011 2012 2013
Figure 5.1.3.1: Gross Profit Margin on Sales
43
5.1.3.2 Net Profit Margin on Sales
A higher profit margin indicates a more profitable company that has better control over its costs
compared to its competitors. BWTL’s net profit margin fluctuate but has an increasing trend. So
BWTL has better control over its competitors.
Net Profit Margin on Sales

0.28
0.27
0.26 Net Profit Margin on Sales
0.25
0.24
0.23
0.22
0.21
0.20
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.3.2: Net Profit Margin on Sales
5.1.3.3Return on Asset:
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings. Company’s management
fails to increase ROA that is not good for the company. Though company is in a better position,
company’s management needs to take necessary steps for increasing ROA.
Return On Asset
0.30
0.25 Return on Asset

0.20
0.15
0.10
0.05
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.3.3: Return on Asset

44
5.1.3.4 Return on Equity:
Return on equity (ROE) measures the rate of return on the ownership interest (shareholders'
equity) of the common stock owners. It measures a firm's efficiency at generating profits from
every unit of shareholders' equity. ROE shows how well a company uses investment funds to
generate earnings growth. In the following graph, every year firms ROE decreased. That means
company cannot use investment funds to generate earnings growth.
0.50 Return on Equity

Return on Equity
0.40
0.30
0.20
0.10
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.3.4: Return on Equity
5.1.3.5 Earnings per Share
EPS stand for earnings per share. That indicates our profit or earnings in the every share. It’s a
tool to measure the company’s position in the market and its attractiveness in the market as well.
It has increasing trends that increases firms value.
5.00
Earnings Per Share
Earning Per Share
4.00
3.00
2.00
1.00
0.00
2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.3.5: Earnings per Share
45
5.1.4 Leverage Ratio:
Leverage ratios are calculated to judgment the long-term financial position of the company. This
ratio indicate, mix of funds provided by owners and lenders, the manner in which the assets are
finance, the extent of earning that is magnified or leveraged by use of debt and finally the extent
of limited stakeholders control over the company.
Name of the Ratio 2007- 2008- 2009- 2010-2011 2011-2012 2012-2013

2008 2009 2010
Leverage Ratio
Debt to Total Assets 0.27 0.16 0.12 0.22 0.27 0.21
Debt to Equity Ratio 0.37 0.19 0.14 0.28 0.38 0.26
Debt Coverage Ratio 0.11 0.11 0.06 0.09 0.22 0.25
Table 5.1.4: Leverage Ratio
0.40
0.35
Debt to Total Assets
0.30
Debt to Equity
0.25
Ratio
0.20
Debt Coverage
Ratio
0.15
0.10
0.05
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.4: Leverage Ratio
5.1.4.1 Debt to Total Assets Ratio:
Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are
provided via debt. In the graph, we can see that this ratio fluctuates. When firm increases
financing assets by lending ratio increase. Higher ratio is not good for the firm. It increases the
financial cost and default risk.
46
Debt To Total Assets
0.30 Debt to Total Assets
0.25
0.20
0.15
0.10
0.05
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.4.1: Debt to Total Assets
5.1.4.2 Debt to Equity Ratio
The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets. Total debt to Equity ratio
measures how much debt we owed from the outsiders against our owned capital. The more the
ratio is, the more vulnerable the company will be. But from the profitability side, the more debt
we use, the more profit will be generated. But this will lead us to a situation when our
bankruptcy cost and risk factors will hamper profitability. The management board tries to
minimize the ratio so that it cannot hamper the profitability. In the graph we see, this ratio
fluctuates.
Debt to Equity Ratio

0.40
0.35
0.30 Debt to Equity Ratio
0.25
0.20
0.15
0.10
0.05
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 5.1.4.2: Debt to Equity Ratio
47
5.1.4.3 Debt Coverage Ratio
Debt coverage ratio," (DCR) is the ratio of cash available for debt servicing to interest, principal
and lease payments. It is a popular benchmark used in the measurement of an entity's (person or
corporation) ability to produce enough cash to cover its debt (including lease) payments. The
higher this ratio is, the easier it is to obtain a loan. As BWTL has higher DCR they can also get
loan easily.
Debt Coverage Ratio

0.30 Debt Coverage Ratio
0.20
0.10
0.00
2 0 0 7 - 2 0 0 82 0 0 8 - 2 0 0 92 0 0 9 - 2 0 1 02 0 1 0 - 2 0 1 12 0 1 1 - 2 0 1 22 0 1 2 - 2 0 1 3
Figure 5.1.4.3: Debt Coverage Ratio
48
CHAPTER 6
DUPONT AND SENSITIVITY ANALYSIS OF ROE

6.1 DuPont Analysis
The DuPont ratio is a good place to begin a financial statement analysis because it measures the
return on equity (ROE). A tor-profit business exists to create wealth for its owner(s). ROE is,
therefore, arguably the most important of the key ratios, since it indicates the rate at which owner
wealth is increasing. While the DuPont analysis is not an adequate replacement for detailed
financial analysis, it provides an excellent snapshot and starting point.
We use five factors DuPont Analysis. The equation for 5 factors DuPont Analysis is:
ROE = (NI / EBT) * (EBT / EBIT) * (EBIT / Rev) * (Rev / Avg. TA) *(Avg. TA / Avg. Sh.
Eq.)
= Tax Burden * Interest Burden * EBIT Margin * Asset Turnover * Leverage
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Operating Profit Margin 0.27 0.26 0.27 0.28 0.30 0.32
Total Assets Turnover 1.16 0.99 0.95 0.47 0.47 0.38
Interest Burden 0.89 0.89 0.94 0.96 0.86 0.88
After Tax Retention Rate 1.00 1.00 1.00 1.00 0.94 0.95
Financial Leverage 1.37 1.19 1.14 1.28 1.39 1.27
ROE(Return on Equity) 0.39 0.27 0.28 0.16 0.16 0.13
Table 6.1 : DuPont Analysis
49
6.1.1 Operating Profit Margin
BWTL has strong operating profit margin. It ranges from 26% to 32% yearly. This can probably
be attributed to one major reason. BWTL is the biggest brand in the RMG industry in BD.
Because they are such a strong brand, they can charge a premium for their product. This
premium leads to stronger profit margins. The profit margin has slipped 2008-2009.But after
that profit was gradually increasing year by year. So, here the graph is presented to show that
Operating Profit Margin

0.40
0.30
0.20
0.10
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 6.1.1 : Operating Profit margin
6.1.2 Total Assets Turnover
Asset turnover for BWTL ranges from 1.16 to 0.38. It indicates lowerturnover ratio over the
time. Lower asset turnover is not a good sign for the company. It increases its profitability.
Because proper management BWTL can manage their total assets turnover decreasing. It is
shown year wise in the graph presented below:
Total Assets Turnover

1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 6.1.2 : Total Assets Turnover
50
6.1.3 Interest Burden
It indicates how much burden we are bearing for the payment of the interest from EBIT or
Operating profit. Higher the interest burden lower will be the profitability and lower the interest
burden higher will be the profitability. For BWTL interest burden is fluctuating every year. In
2007-2008 and 2008-2009 it was constant after that it was increasing in2009-2010 and 2010-
2011, then it was decreasing but again it increased in 2012-2013. It indicates that their
management always trying to reducing the burden.
Interest Burden
1.00
0.95
0.90
0.85
0.80
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 6.1.3 : Interest Burden
6.1.4 After Tax Retention Rate
It indicates how much amount we are going to retain after deducting all kinds of expenses as
well as taxes. Higher the rate is, higher the wealth of the shareholders’ will be maximized. For
BWTL from 2007-2008 to 2010-2011 there is no tax deduction for 100% export oriented firm
there is no tax payment for revenue. But when they listed in BSEC and go in private placement,
BWTL needs to pay tax. Graphical presentation is illustrated below:
After Tax Retention Rate

1.02
1.00
0.98
0.96
0.94
0.92
0.90
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 6.1.4 : After Tax Retention Rate
51
6.1.5 Financial Leverage
BWTL’s leverage ratio varies from 1.14 to 1.39. In 2009-2010, it uses lowest amount of debt so
its leverage is lowest but in 2011-2012 it uses highest amount of debt so its leverage is highest in
this year. Then it reduced taking debt and collected money from share market. So, it indicates a
good sign that company is decreasing using the amount of debt. This would make them a more
stable company if there was ever a big shock to the plastics industry or the market as a whole.
Their low leverage and high ROE means that a good portion of returns are coming from sales or
effective management, not artificial leveraging.
Financial Leverage
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 6.1.5 : Financial Leverage
6.2 ROE
The amount of net income returned as a percentage of shareholders equity. Return on equity
measures a corporation's profitability by revealing how much profit a company generates with
the money shareholders have invested. ROE for BWTL is 39% in 2007-2008, 27% in 2008-
2009, 28%, 16%, 16% and 13% in the year 2009-2010, 2010-2011 and 2011-2012, 2011-2012
consequently. That will indicate lower return on equity. In the graph we can easily see that ROE
is gradually lower.
52
ROE(Return on Equity)
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 6.2 : ROE
6.2 Sensitivity of ROE
Sensitivityof ROE is an important aspect to be calculated to find out the most sensitive part of
the determinants of ROE. Because it helps to manage ROE of the company effectively as it has
mentionable effect on the share price of the company.
In case of BWTL, the sensitivity of different components of ROE is Shown below:
6.2.1 Sensitivity of Operating Profit Margin
Sensitivity of Operatin Profit Margin is shown in the table below:
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Operating Profit 0.27 0.26 0.27 0.28 0.30 0.32

Margin
53
Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
After Tax Retention 1.00 1.00 1.00 1.00 1.00 1.00

Rate
ROE(Return on 0.39 0.36 0.39 0.40 0.42 0.46

Equity)
% Change of ROE - (0.06) 0.07 0.03 0.06 0.08
Average of the Change 0.04
Standard Deviation of 0.05

Change
C. V. of Change 1.46
Table 6.2.1 : Sensitivity of Operating Profit Margin
So from the table we can see that CV of Operating Profit Margin is 1.46. And this CV measures
the sensitivity of Operating Profit Margin in determining ROE.
54
6.2.2 Sensitivity of Total Asset Turnover
Sensitivity of TAT is shown in the table below:
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Operating Profit 0.27 0.27 0.27 0.27 0.27 0.27

Margin
Total Assets 1.16 0.99 0.95 0.47 0.47 0.38

Turnover
Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
After Tax Retention 1.00 1.00 1.00 1.00 1.00 1.00

Rate
ROE(Return on 0.39 0.33 0.32 0.16 0.16 0.13

Equity)
Change of ROE (0.15) (0.04) (0.50) (0.01) (0.19)
Average of the 0.18

Change
Standard Deviation 0.17

of Change
Table 6.2.2 : Sensitivity of Total Asset Turnover

55
So from the table we can see that CV of TOT is 0.97. And this CV measures the sensitivity of
TAT in determining ROE.
6.2.3 Sensitivity of Interest Burden
Sensitivity of Interest Burden is shown in the table below
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interest Burden 0.89 0.89 0.94 0.96 0.86 0.88
Change of ROE (0.00) 0.06 0.01 (0.10) 0.02
Standard Deviation of Change 0.05
Table 6.2.3 :Sensitivity of Interest Burden
56
So from the table we can see that CV of Interest Burden is 88.01. And this CV measures the
sensitivity of interest burden in determining ROE.
6.2.4 Sensitivity of After Tax Retention Rate (ATRR)
Sensitivity of ATRR is shown in the table below
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
Change of ROE 0.00 0.00 0.00 (0.06) 0.01
Table 6.2.4 : Sensitivity of After Tax Retention Rate (ATRR)
57
So from the table we can see that CV of ATRR is 2.61. And this CV measures the sensitivity of
ATRR in determining ROE.
6.2.5 Sensitivity of Financial Leverage
Sensitivity of Financial Leverage is shown in the table below
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
Change of ROE (0.13) (0.05) 0.13 0.09 (0.09)
Table 6.2.5 : Sensitivity of Financial Leverage
58
So from the table we can see that CV of financial leverage is 10.90. And this CV measures the
sensitivity of financial leverage in determining ROE.
As, CV measures the sensitivity of Operating Profit Margin in determining ROE. We can
comment on which factor is more sensitive for ROE after observing all the CVs. So, the
summary of the analysis of calculation of CVs are presented below in a tabular format.
Net Operating Total Asset Interest After Tax Financial

Profit turnover Burden retention Rate Leverage
CV 1.46 0.91 88.01 2.61 10.90
Table 6.2.5 : CV Analysis
So, it can be drawn a conclusionary remark from the above table after ovserving the CVs of
different factors, ROE of BWTL is more sensitive for Interest Burden then for Financial
Leverage, then for After tax retention rate and the lowest sensitivity of ROE withtotal asset
turnover.
59
CHAPTER 7
ANALYSIS OF CASH FLOW STATEMENT

7.1 Computation of Free Cash Flow
In financial accounting, operating cash flow (OCF), cash flow provided by operations or cash
flow from operating activities (CFO), refers to the amount of cash a company generates from the
revenues it brings in, excluding costs associated with long-term investment on capital items or
investment in securities. For BWTL, the OCF from the year 2007-2008 to 2012-2013 is shown
below.
Year 2007- 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Average

2008
Net Cash (50,769,1 35,602,296 (6,956,754) 241,037,911 48,446,438 34,548,782 50,318,259

Flow from 18)
Operating
Activities
Net Cash (3,735,24 (985,619) (629,567) (663,164,439 (153,315,5 (209,660,2

Flow from 2) ) 14) 98)
Investing
Activities
Free Cash (47,033,8 36,587,915 (6,327,187 904,202,350 201,761,95 244,209,08 222,233,37

Flow 76) ) 2 0 2
Exp,anation Expansio Growth and Expansion Cash Cow Cash Cow Cash Cow Cash Cow
n Investment (Matured) (Matured) (Matured) (Matured)
Table 7.1: Free Cash Flow Computation
From that OCF we can calculate free cash flow (FCF). And then by analyzing FCF and OCF we
can classify our firm as cash cow, growing firm or other category. From the following table it
can easily observable that BWTL’s both FCF and OCF is positive over the year and its average
OCF and FCF also positive in nature. So, we can classify it as Cash cow and also we can say that
it’s a matured firm and investment is lower than OCF generated by assets. That means BWTL
has the long term establishment. So, it should provide more cash dividend
60
7.2 Analyzing cash flow trends
Operating cash flow of the firm over the year was fluctuating. That means BWTL is generating
more and more cash from its operational activities and uses them for investment and expansion.
That is also an indication for the firms growing nature. And BWTL will be established in the
long term and it should provide more cash dividend to retain its customers
Net Cash Flow from Operating Activities
300,000,000.00
250,000,000.00
Net Cash Flow from
Operating Activities
200,000,000.00
150,000,000.00
100,000,000.00
50,000,000.00
0.00
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
(50,000,000.00)
(100,000,000.00)
Figure 7.2 : Analyzing cash flow trends
61
CHAPTER 8
ANALYSIS OF SUSTAINABLE GROWTH

8.1 Analysis of Sustainable Growth
Almost every business owner intuitively knows that their business can grow too fast even if the
company is well managed during the growth period. Also, advisors to smaller firms have
learned by experience that many firms that fail do so in the year of their highest sales. What is
needed is the ability to calculate the rate of sales growth that a particular business can afford so
that realistic growth objectives can be established.
The sustainable growth rate is a measure of how much a firm can grow without borrowing more
money.
Real or actual growth rate is the measure of how much the firm actually grows over the time.
When the firm’s actual growth rate has passed this rate, it must borrow funds from another
source to facilitate growth.
2008- 2009- 2010- 2011- 2012- Average

2009 2010 2011 2012 2013
Actual Growth 1.81% 26.71% 5.41% 24.44% 10.67% 13.81%
Rate(Sales Growth)
Sustainable Growth 36.95% 38.61% 12.62% 17.89% 13.72% 30.52%
Rate
Table 8.1; Analysis of Sustainable Growth
As we can see from the above mentioned table that the sustainable growth rate for BWTL is
36.95%, 38.61%, 12.62%, 17.89% and 13.72% consequently. But on the other hand, its actual
growth rate is 1.81%, 26.71%, 5.41%, 24.44% and 10.67% consequently from the year 2007-
2008 to 2012-2013. In here, we can see that, every year BWTL’s growth rate fluctuate, but it is
clearly visible that the actual growth is much lower than sustainable growth. As the BWTL’s
actual growth rate not passed this rate, it needs borrow funds from another source to facilitate
growth.
62
45.00%
40.00%
35.00%
Actual Growth
30.00%
Rate(Sales Growth)
25.00%
20.00% Sustainable Growth

Rate
15.00%
10.00%
5.00%
0.00%
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Figure 8.1: Actual and Sustainable Growth
63
CHAPTER- 9
OPERATING LEVERAGE AND FINANCIAL

LEVERAGE
9.1 Degree of Operation Leverage
The degree of Operating Leverage (DOL) is the leverage ratio that sums up the effect of an
amount of operating leverage on the company’s earnings before interests and taxes (EBIT).
Operating Leverage takes into account the proportion of fixed costs to variable costs in the
operations of a business.
2.50
2.00 Degree of Operating

Leverage
1.50
Degree of Financial
1.00 Leverage
0.50
Degree of Total
Leverage
0.00
2010-2011 2011-2012 2012-2013
(0.50)
Figure 9.1 : Degree of Leverage
9.2 Degree of Financial Leverage
The degree of financial leverage (DFL) is the leverage ratio that sums up the effect of an
amount of financial leverage on the earning per share of a company. The degree of financial
leverage or DFL makes use of fixed cost to provide finance to the firm and also includes the
expenses before interest and taxes.
Year 2010-2011 2011-2012 2012-2013

Degree of Operating 1.61 1.31 1.86
Leverage
Degree of Financial 0.74 (0.21) 1.16
Leverage
Degree of Total Leverage 1.20 (0.27) 2.16
Table 9.2 : Calculation of Degree of Leverage
64
In the table we summarize the DOL and DFL of BWTL. Also in the chart illustrated above we
can observe that DOL marked by blue line is increasing over the time but only decreased in the
year 2011-2012. That clearly indicates that the amount of fixed cost of BWTL’s isincreasing day
by day and it means that the earnings before interest and taxes would be unpredictable of BWTL,
even if all the other factors remain the same because DOL tells us about how much the effect on
EBIT when sales increases by one dollar or taka.
On the other hand DFL measure how much the effect on EPS when we change EBIT by one
taka. In BWTL the DFL is also decreasing over the time but only decreased in the year 2011-
2012 that means the use of leverage is increasing and EPS is unpredictable. As we know that if
the Degree of Financial Leverage is high, the Earnings per Share or EPS would be more
unpredictable while all other factors would remain the same. In here, it is seen That EPS is
unpredictable and the use of the proportion of leverage was increased.
65
CHAPTER -10
DISCLOSURE PRACTICES, CHOICE OF ACCOUNTING

POLICY AND OFF BALANCE ITEMS
10.1 Disclosure practices
The disclosure practice of BWTLC is fairly good enough as compared to other publically traded
company in Bangladesh. It duly represents all the necessary things which are required by law.
10.1.1 Mandatory Disclosure
Asmandatory disclosure BWTL disclose:
i)Employee position (as per requirement of Schedule XI, Part II, Note 5 of Para 3)
ii) Production capacity utilization
iii) Raw material consumption of total purchase
iv) Related party transactions
v) The remuneration of the directors
vi) The key operating and financial data
vii) The shareholding pattern of the company etc.
10.1.1 Voluntary Disclosure
It also provides some voluntary disclosures regarding the segmented sales data, cost structure
related data and others. Apart from that it also explains the matters regarding the change of any
facts which can affect its earnings and growth.
10.2 Management Discussion and Analysis
Management Discussion and Analysis (MD&A) is an integrated part of a company's annual

financial statements. The purpose of the MD&A is to provide a narrative explanation, through
the eyes of management, of how an entity has performed in the past, its financial condition, and
its future prospects. In so doing, the MD&A attempt to provide investors with complete, fair, and
balanced information to help them decide whether to invest or continue to invest in an entity.
66
MD&A for BWTL
 The principal activities of the Company continued to be the business of manufacturing

and export of garments accessories (hanger) which facilitate the export of garments to the
world’s largest retailers like WalMart, K-Mart, Khol’s, J C Penny etc. in the USA as well
as in Europe.
 Achieved their sales and profit targets, made progress as planned in key operational areas
and expanded business in export markets.
 Company has been sustaining profitability during this financial year 2012-13.
 In spite of facing different hindrances, your Company has been able to uphold an
impressive level of sales and production over the years.
 The gross turnover of Tk. 79.50 crore in 2011-12 increased to Tk. 87.98 crore showing a
growth of 9.67 %. Net Profit has increased by 23.39 % from Tk. 19.35 crore in 2011-12
to Tk. 23.88 crore in 2012-13.
 With expansion into new markets underway and significant international accreditations
achieved, BWTL is well positioned to continue to build the Company’s presence in both
domestic and international markets.
 Besides strong financial position enabled BWTL to take further actions in the year to
increase profitability based upon current expectations.
 Risks and concerns of the industries solely depends on the exchange rate fluctuation,
change of raw materials cost and upcoming changes of global and national policies,
which may have negative impact on the cost structure and profitability of the company.
10.3 Choice of accounting policy
The financial statements have been prepared in accordance with the BAS, BFRS, company act,
BSEC rule and other applicable regulations. Revenue from sale of goods is recognized when the
significant risk and rewards of ownership have been transferred to the buyer, recovery of the
consideration is probable, the associated costs and possible return of goods can be estimated
67
reliably, there is no continuing management involvement with the goods, and amount of revenue
can be measured reliably. Items of property, plant and equipment are measured at cost less
accumulated depreciation and accumulated impairment losses. A provision is recognized if, as a
result of a past event, the company has a present legal or constructive obligation that can reliably
be estimated and, it is probable that an outflow of economic benefits will be required to settle the
obligation.
10.4 Off Balance Sheet Items
For all the assets (except land) the depreciation is charged based on straight line method, the
inventory is calculated based on average cost method. Lease is considered as financial lease and
as an on balance sheet item. There is no off balance sheet items in the financial statement of
BWTL form the year 2007-2008 to 2012-2013.
68
CHAPTER -11
FINDING AND RECOMMANDATION

When I was preparing the report, I was discussed different level of employee of the company.
They were not concern regarding internal resources and its proper utilization and not careful
Global Economy. The company was not feel different financial index which may be help to the
company to take proper divisions. So I can draw finding which was observing data collecting
period and also mention recommendations.
Finding
1. The company doesn’t analysis internal resources and external threats and strategic
implementation properly.
2. BWTL doesn’t careful regarding global economy and external shock of the global and micro
economy.
3. The company’s finance department was not monitoring properly exchange rate fluctuation and
they did not take any corrective action.
4. The company did not lock an exchanges rate for a fixed period of time by setting up forward
contract
5. The company did not hedge against this exposure.
6. The company paid large number dividend every years. As a result the company will suffer
working capital crises.
7. The company doesn’t focus on product development and diversification .As result revenue
might be reducing for future competition.
8. Eventually the company doesn’t bother regarding exchange rate fluctuation gain or loss.
9. Company always focuses on shareholders satisfaction but it should focus on wealth

maximization.
69
Recommendation
1. VRINE model is an analytical framework that suggests that a firm with resources and
capabilities which are valuable, rare, inimitable, No substitutable and exploitable will gain a
competitive advantage. The V in the VRINE model stands for valuable and there are a few
important aspects that are extremely valuable to the success BWTL. The most valuable aspect is
its BRAND VALUE. Another valuable aspect of BWTL is their employees who are their key
strength to grow. After deciding what is valuable to BWTL, we need to decide what aspects are
rare. The rare aspects are what make up the R in the VRINE model. But in my analysis they
don’t possess any rare aspects of BWTL. According to the I (Inimitable) and N (Non-
substitutable) of the VRINE model, C’s business is something that can be easily imitated and
substituted for. What BWTL is doing is something any company can do because it is only the
capability of cultivating and producing the cigarettes. As for being substitutable, that is easy as
well.
Finally, the E in the VRINE model stands for exploitable. This asks us if this product can be used
for a purpose, aka make money and that answer is yes. One reason is because there are not a lot
of other companies in this business so not only do they have the competitive advantage, but also
the company with the most recognizable name. BWTL is making a lot of money off what they
are doing right now by cultivating and selling cigarettes and it is something that will continue to
profit them in the future as long as they keep up their good name.
So, after analyzing the VRINE model for BWTL, we can say that BWTL have to gain cost
leadership as they are presently focusing on product differentiation.
2. As BWTL is the market leader and their share price and EPS is higher than the any of the
companies of its industry so to remain in the same position and increase its share value more
than now they should be more careful about the global economy and external shock of the global
and micro economy.
3. As with private investors, business essentially has four options to counteract their currency
exposure.
70
The first approach is just to monitor the changes and this can be the best option if companies do
not think that they are at a particularly high risk from exchange rate fluctuations.
Second option is to lock into an exchange rate for a period of time by setting up a forward
contract. If the exposure estimates are correct, this can be a beneficial approach. Some business
will also purchase currency in advance if they know that they will be making big purchases and
are concerned about volatility.
A third option is to hedge against this exposure via derivates. Although this may be the most
complicated option, it can be effective in limiting exposure to volatility. It can also give a clearer
picture of how a company’s overseas operation is really performing.
Finally, firm can choose to manage their currency exposure through business practices.
4. They have declared a large number of dividends and have created a leap in the flow. We have
seen the growth rate to fall and the retention rate as well. So, they should provide low number of
dividend in the coming years so sustain in the market.
5. As BWTL has already existed in the mature market as stated earlier, they should give more
focus on product development and product diversification rather market making and market
development.
6. From the trend analysis it is seen that the value ratios are better in case of BWTL. BWTL
gives good dividend and earnings per share are also good. The company always keeps its
shareholders happy but the company should remember that their main job is to increase
shareholder’s wealth not only offering high dividend.
71
CHAPTER -12
CONCLUSION
This report is based on the financial statement analysis and Performance evaluation of Bengal
Windsor Thermoplastics Limited. The company is a listed company and its shares are traded in
the capital market.
The company manufacture hanger contribute total GDP. It is 100% export oriented company and
earn foreign currency.
A brief discussion of objective, methodology, data sources, data analysis process, limitation etc,
discussed in chapter one and next chapter a brief discussion about BWTL, products, marketing
aspect, market share and risk of the company. The company mitigates the systematic and
unsystematic risk.
In chapter three the overall industry analysis is presented through different methods; say’s
Porter’s five force model, Life cycle, SWAT analysis, product pricing and find huge opportunity
in hanger market by the growth of export and the company is profitability condition is higher
with little competition.
Ratio analysis on the four different dimensions is presented which gives us the idea of the
performance of the company. The company faces problem current ratio and quick ratio but it is
strong at cash ration net working capital ratio and working capital to inventory ratio.
In chapter five, exchange rate fluctuation gain and loss affect on company revenue and it suffer
losses.
DuPont analysis and sensitivity analysis of ROE will be found by the reader. it can be drawn a
conclusionary remark after ovserving the CVs of different factors, ROE of BWTL is more
sensitive for Interest Burden then for Financial Leverage, then for After tax retention rate and the
lowest sensitivity of ROE withtotal asset turnover.
In chapter seven, Cash flow and trend analysis in a brief. Operating cash flow of the firm over
the year was fluctuating. That means BWTL is generating more and more cash from its
operational activities and uses them for investment and expansion. That is also an indication for
the firms growing nature.
Analysis of sustainable growth rate, actual growth rate are in chapter eight. The company growth
rate was fluctuating but it is sustainable.
Leverage analysis will be found in chapter nine. The company DFL was increased from last year
it means that it’s fixed and financial cost is increased as a result was effect on EBIT.
72
The company is listed company to Dhaka Stock Exchange (DSE) and Chittagong Stock
exchange (CSE). So the company disclosed all relevant data which directed by Security
Exchange Commission (CSE), company law and other in rules of practices of IFRS, BAS is
presented in chapter ten.
In chapter eleven and twelve are finding and commendation and short conclusion is drawn at the
end of the report.
In the end it is only fair to mention that Bengal Windsor Thermoplastics Limited is one of the
leading hanger manufacturers with strong brand value. In this study we have showed that the
condition of the entire industry of security market in Bangladesh. In compare to that the total
security market and industry in particular. The security condition for BWTL is also holds
promising return compared to the security market. It is highly noticeable that the stock of BWTL
has higher return with lower risk. So, it would be wise to add this stock in the portfolio.
73
BIBLIOGRAPHY
1. Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan.(2012) Fundamentals of
Corporate Finance. 8th Edition
2. Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe. (2008) Corporate Finance.9th
Edition
3. Reilly, Brown. (2006) Investment Analysis and Portfolio Management (8th Edition)
4. I. M. Pandey (2009). Financial Management .8th Edition
5. John A Bob, Richard B. Robinson, Anita Mittal(2010) . Strategic management
6. Jeff Madura (2012). International Financial Management.9th Edition
7. Bengal Windsor thermoplastic Ltd.Annual Report (2007-2008,2008-2009,2009-

2010,2010-2011,2011-2012,2012-2013)
8. Dr. Yaw-Yih Wang (2011). Fluctuation of exchange rate on the Valuation of Multination
corporate as Raiwan’s Samples.p. 1-10
9. Euro investor.(2010)
10. uniassignment (2011). Exchange rate fluctuation impact multinational companies profits
(http://www.uniassignment.com/)
11. Jhon Sing(2009) effect of the exchange rate on business.

http://www.economichelp.org/blog/9228/business/effect -exchange-rate-business
APPENDIX
Statement of Financial Position
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

a) NON-CURRENT ASSETS 80,909,534 75,602,173 69,888,543 284,162,817 328,155,801 445,620,350
Property, Plant and Equipment 80,909,534 75,602,173 69,888,543 212,162,817 328,155,801 436,870,350
Leasehold Assets - - - - - 8,750,000
Investment in Subsidiary - - - 72,000,000 - -
b) CURRENT ASSETS: 322,697,750 406,216,132 567,743,344 1,063,866,289 1,373,624,172 1,891,474,153

Inventories 69,908,103 66,832,031 96,458,671 172,814,457 301,313,787 530,071,128
Accounts Receivable 143,303,070 134,746,958 242,839,281 287,530,089 391,110,165 416,503,519
Advances, Deposits & Prepayments 106,131,958 199,114,513 218,804,086 241,205,388 395,702,226 501,089,871
Inter Company Receivable - - - 108,092,956 - -
Investment in FDR - - - 209,250,000 269,950,000 269,950,000
Cash and Cash Equivalent 3,354,619 5,522,629 9,641,306 44,973,398 15,547,994 173,859,636
c) CURRENT LIABILITIES: 108,034,634 77,036,380 76,580,128 292,964,904 222,395,287 231,927,474

Accounts Payable 24,112,349 30,291,795 5,609,019 70,754,569 165,749,598 143,160,382
Accrued Expenses - - 15,190,626 18,225,879 30,502,942 35,208,037
Short term Loan 76,524,154 44,075,486 55,780,483 203,984,456 25,011,111 43,224,498
Bank Overdraft 4,732,073 - - - - -
Payable to IPO applicant - - - - - 9,430,284
Lease Liabilities -Current - - - 1,978,485 1,131,636 904,273
d) NET CURRENT ASSETS (B-C) 214,663,116 329,179,752 491,163,216 770,901,385 1,151,228,885 1,659,546,680
e) NON-CURRENT LIABILITIES - - - - 240,645,490 252,001,173
Lease Liabilities - - - - 846,849 9,942,576
Long Term Loan - - - - 239,798,641 242,058,597
f) NET ASSETS (A+B-C-E) 295,572,650 404,781,925 561,051,759 1,053,085,717 1,238,739,196 1,853,165,856

g) SHARE HOLDERS EQUITY 295,572,650 404,781,925 561,051,759 1,053,085,717 1,222,141,689 1,836,541,136
Share Capital-Paid Up 1,000,000 1,000,000 1,000,000 540,000,000 540,000,000 700,000,000
Premium on ordinary share - - - 240,000,000 232,800,000 465,600,000
Retained Earnings 294,527,650 403,781,925 560,051,759 273,085,717 449,341,689 670,941,136
Non Controlling Interest - - - - 16,597,507 16,624,720

h) TOTAL EQUITIES & LIABILITIES 295,572,650 404,781,925 561,051,759 1,053,085,717 1,238,739,196 1,853,165,856
Net Assets Value Per Share (NAVPS) 12.20 19.50 22.94 26.24
Statement of Profit or Loss and Comprehensive Income
Particrlars 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Revenue 469,806,989 478,330,010 606,091,768 638,887,995 795,011,479 879,833,038

Less: Cost of Goods Sold (318,501,572) (325,486,986) (409,027,205) (423,687,774) (513,509,487) (557,365,059)
Gross Profit/(Loss) 151,305,417 152,843,024 197,064,563 215,200,221 281,501,992 322,467,978
Less : Operating Expenses (22,773,187) (30,187,475) (31,422,626) (35,112,598) (43,779,031) (37,454,948)
Administrative Expenses 6,524,643 14,275,524 16,869,977 19,257,737 27,443,162 21,561,789
Selling & Distribution Expenses 16,248,544 15,911,951 14,552,649 15,854,861 16,335,869 15,893,159
Operating Profit 128,532,230 122,655,549 165,641,937 180,087,624 237,722,960 285,013,030
Less : Financial Expenses (13,934,215) (13,446,274) (9,372,102) (15,413,679) (52,148,459) (71,582,549)
Add : Non-Operating Income - - - 10,500,482 31,265,966 51,870,702
Net Profit before Provision & Tax 114,598,014 109,209,274 156,269,834 175,174,427 216,840,467 265,301,182
Provision for Gratuity - - - 3,140,468 (810,610) (421,207)
Provision forWPPF(5%) - - - - (10,801,493) (13,279,316)
Net Profit beforeTax 114,598,014 109,209,274 156,269,834 172,033,958 205,228,364 251,600,659
Provision forTax (24.75% on NOI) - - - - (11,724,737) (12,837,999)
Net Profit afterTax 114,598,014 109,209,274 156,269,834 172,033,958 193,503,627 238,762,660
Other Comprehensive Income - - - -
Total Comprehensive Income 156,269,834 172,033,958 193,503,627 238,762,660
Consolidated profit for the year - - - -
Bengal WindsorThermoplastics 156,269,834 172,033,958 194,322,466 238,735,447
Noncontrolling Interest - - (818,839) 27,213
Net Income/Profit 114,598,014 109,209,274 156,269,834 172,033,958 193,503,627 238,762,660
Earnings Per Share 3.40 3.62 3.38 4.16
Ratio Analysis
Name of the Ratio 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

a) Liquidity Ratio
Current Ratio 2.99 5.27 7.41 3.63 6.18 8.16
Quick Ratio 2.34 4.41 6.15 3.04 4.82 5.87
Cash Ratio 0.03 0.07 0.13 0.15 0.07 0.75
Net Working Capital Ratio 1.99 4.27 6.41 2.63 5.18 7.16
Inventory to Working Capital Ratio 0.33 0.21 0.17 0.17 0.21 0.25
b) Activity Ratio
Receivable Turnover 3.28 3.44 3.21 2.41 2.34 2.18
Inventory Turnover 6.72 7.00 7.42 4.75 3.35 2.12
Net Assets Turnover 1.59 1.18 1.08 0.61 0.64 0.47
Fixed Asset Turnover 5.81 6.33 8.67 2.25 2.42 1.97
Current Assets Turnover 1.46 1.18 1.07 0.60 0.58 0.47
c) Profitability Ratio
Gross Profit Margin on Sales 0.32 0.32 0.33 0.34 0.35 0.37
Net Profit Margin on Sales 0.24 0.23 0.26 0.27 0.24 0.27
Return on Asset 0.28 0.23 0.25 0.13 0.11 0.10
Return on Equity 0.39 0.27 0.28 0.16 0.16 0.13
Earning Per Share - - 3.40 3.62 3.38 4.16
COGS to Net Sales 0.68 0.68 0.67 0.66 0.65 0.63
Operating Exp. to Net Sales 0.05 0.06 0.05 0.05 0.06 0.04
Financial Exp. to Net Sales 0.03 0.03 0.02 0.02 0.07 0.08
Operat. Profit to Net Sales 0.27 0.26 0.27 0.28 0.30 0.32
d) Leverage Ratio
Debt to Total Assets 0.27 0.16 0.12 0.22 0.27 0.21
Debt to Equity Ratio 0.37 0.19 0.14 0.28 0.38 0.26
Debt Coverage Ratio 0.11 0.11 0.06 0.09 0.22 0.25
Necessary Information for Ratio
1. Current Assets 322,697,750 406,216,132 567,743,344 1,063,866,289 1,373,624,172 1,891,474,153

2. Non Current Assets 80,909,534 75,602,173 69,888,543 284,162,817 328,155,801 445,620,350
3. Current Liabilities 108,034,634 77,036,380 76,580,128 292,964,904 222,395,287 231,927,474
4. Non Current Liabilities 0 0 0 0 240,645,490 252,001,173
5. Quick Assets 252,789,647 339,384,101 471,284,673 891,051,832 1,072,310,385 1,361,403,025
6. Cash and Cash Equivalents 3,354,619 5,522,629 9,641,306 44,973,398 15,547,994 173,859,636
7. Sales 469,806,989 478,330,010 606,091,768 638,887,995 795,011,479 879,833,038
8. Accounts Receivables(Beginning) - 143,303,070 134,746,958 242,839,281 287,530,089 391,110,165
9. Accounts Receivables(Ending) 143,303,070 134,746,958 242,839,281 287,530,089 391,110,165 416,503,519
10. Average Accounts Receivables 143,303,070 139,025,014 188,793,120 265,184,685 339,320,127 403,806,842
11. Cost of Goods Sold 318,501,572 325,486,986 409,027,205 423,687,774 513,509,487 557,365,059
12. Beginning Inventory - 69,908,103 66,832,031 96,458,671 172,814,457 301,313,787
13. Ending Inventory 69,908,103 66,832,031 96,458,671 172,814,457 301,313,787 530,071,128
14. Average Inventory 69,908,103 68,370,067 81,645,351 134,636,564 237,064,122 415,692,458
15. Total Assets 403,607,284 481,818,305 637,631,887 1,348,029,106 1,701,779,973 2,337,094,503
16. Gross Profit 151,305,417 152,843,024 197,064,563 215,200,221 281,501,992 322,467,978
17. Net Income 114,598,014 109,209,274 156,269,834 172,033,958 193,503,627 238,762,660
18. Stockholders' Equity 295,572,650 404,781,925 561,051,759 1,053,085,717 1,222,141,689 1,836,541,136
19.Net Profit before Tax 114,598,014 109,209,274 156,269,834 172,033,958 205,228,364 251,600,659
20. Total Debt 108,034,634 77,036,380 76,580,128 292,964,904 463,040,777 483,928,647
21. Earnings before Interest and Tax 128,532,230 122,655,549 165,641,937 180,087,624 237,722,960 285,013,030
22. Interest Charged 13,934,215 13,446,274 9,372,102 15,413,679 52,148,459 71,582,549
23. Net Working Capital 214,663,116 329,179,752 491,163,216 770,901,385 1,151,228,885 1,659,546,679
24. Net Assets 295,572,650 404,781,925 561,051,759 1,053,085,717 1,238,739,196 1,853,165,856
25. Income Tax Expense 0 0 0 0 11,724,737 12,837,999
26. Operating Expenses 22,773,187 30,187,475 31,422,626 35,112,598 43,779,031 37,454,948
27. Financial Expenses 13,934,215 13,446,274 9,372,102 15,413,679 52,148,459 71,582,549
28. Operating Profit 128,532,230 122,655,549 165,641,937 180,087,624 237,722,960 285,013,030
DoPont Analysis
Particulars
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Interest Burden 0.89 0.89 0.94 0.96 0.86 0.88
Key Information
1. Earnings before Interest and Tax(EBIT) 128,532,230 122,655,549 165,641,937 180,087,624 237,722,960 285,013,030
2. Sales 469,806,989 478,330,010 606,091,768 638,887,995 795,011,479 879,833,038
3. Tatal Assets 403,607,284 481,818,305 637,631,887 1,348,029,106 1,701,779,973 2,337,094,503
4. Earnings before Tax(EBT) 114,598,014 109,209,274 156,269,834 172,033,958 205,228,364 251,600,659
5. Net Income 114,598,014 109,209,274 156,269,834 172,033,958 193,503,627 238,762,660
6. Stockholders' Equity 295,572,650 404,781,925 561,051,759 1,053,085,717 1,222,141,689 1,836,541,136
1. Calculation of ROE Sensitivity with Respect to Operating Profit Margin

Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
% Change of ROE (0.06) 0.07 0.03 0.06 0.08

2. Calculation of ROE Sensitivity with Respect to Total Assets Turnover

Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
Change of ROE (0.15) (0.04) (0.50) (0.01) (0.19)
3. Calculation of ROE Sensitivity with Respect to Interest Burden

Interest Burden 0.89 0.89 0.94 0.96 0.86 0.88
Change of ROE (0.00) 0.06 0.01 (0.10) 0.02

4. Calculation of ROE Sensitivity with Respect to After Tax Retention Rate

Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
Change of ROE 0.00 0.00 0.00 (0.06) 0.01
5. Calculation of ROE Sensitivity with Respect to Financial Leverage

Interest Burden 0.89 0.89 0.89 0.89 0.89 0.89
Change of ROE (0.13) (0.05) 0.13 0.09 (0.09)

Cash Flow Analysis
Year 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 Average

Net Cash Flow from Operating Activities (50,769,118) 35,602,296 (6,956,754) 241,037,911 48,446,438 34,548,782 50,318,259
Net Cash Flow from Investing Activities (3,735,242) (985,619) (629,567) (663,164,439) (153,315,514) (209,660,298)
Cash
Cow
Free Cash Flow (47,033,876) 36,587,915 (6,327,187) 904,202,350 201,761,952 244,209,080 222,233,372
Growth and Cash Cow Cash Cow Cash Cow

Expantion Expantion
Investment (Matured) (Matured) (Matured)
Net Cash Flow from Operating Activities

300,000,000 Net Cash Flow from Operating Activities
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
(50,000,000)
(100,000,000)
Actual and Sustanable Growth
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Actual Growth Rate(Sales Growth) 1.81% 26.71% 5.41% 24.44% 10.67%
Sustainable Growth Rate 63.32% 36.95% 38.61% 12.62% 17.89% 13.72%
Necessary Information
Sales Revenue 469,806,989 478,330,010 606,091,768 638,887,995 795,011,479 879,833,038
Dividend 0.00 0.00 0.00 54,000,000 8,000,000 17,136,000
Net Income 114,598,014 109,209,274 156,269,834 172,033,958 193,503,627 238,762,660
Return on Equity(ROE) 0.39 0.27 0.28 0.16 0.16 0.13
Dividend Payout Ratio(DPR) 0.00 0.00 0.00 0.31 0.04 0.07
Retention Rate (b) 1.00 1.00 1.00 0.69 0.96 0.93
ROE*b 0.39 0.27 0.28 0.11 0.15 0.12
1-(ROE*b) 0.61 0.73 0.72 0.89 0.85 0.88

Dgree of Operation Leverage, Dgree of Financial Leverage and Dgree of Tota Leverage
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
Sales 469,806,989 478,330,010 606,091,768 638,887,995 795,011,479 879,833,038

Percentage Change in Sales 0.02 0.27 0.05 0.24 0.11
EBIT 128,532,230 122,655,549 165,641,937 180,087,624 237,722,960 285,013,030
Percentage Change in EBIT (0.05) 0.35 0.09 0.32 0.20
EPS - 3.40 3.62 3.38 4.16
Percentage Change in EPS - - 0.06 (0.07) 0.23
Degree of Operating Leverage (2.52) 1.31 1.61 1.31 1.86

Degree of Financial Leverage - - 0.74 (0.21) 1.16
Year 2010-2011 2011-2012 2012-2013

Degree of Operating Leverage 1.61 1.31 1.86
Degree of Financial Leverage 0.74 (0.21) 1.16

Financial Statement Analysis and Perform

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Financial Statement Analysis and Perform

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Financial Statement Analysis and Performance Evaluation

of Bengal Windsor Thermoplastics Ltd.

BANGLADESH UNIVERSITY OF PROFESSIONALS

Dr. Jannatul Ferdaous

October 20, 2015

Subject : Submission of report on „Impact of Foreign Exchange Rate Fluctuation On

I am thankful to the empoloyees of Bengal Windsor Thermoplastics Ltd. Although being in

CHAPTER CONTENTS PAGE

CHAPTER CONTENTS PAGE

2. Company profile 04-11

Table 2.1.3 : Contribution to GDP

Table 2.3.3 : Market Share of BWTL & Other competitors

Table 2.3.4 :Product Pricing Strategy

Table 2.3.6 : Risks and Mitigation

Table 4.5.1 : Following Table Shows Profit /(Loss) by Exchange of

5. Financial performance analysis 35- 48

Table 5.1.2: Activity Ratio

Table 5.1.3 : Profitability Ratio

Table 5.1.4: Leverage Ratio

Table 6.2.1 : Sensitivity of Operating Profit Margin

Table 6.2.2 : Sensitivity of Total Asset Turnover

Table 6.2.3 :Sensitivity of Interest Burden

Table 6.2.5 : Sensitivity of Financial Leverage

Table 6.2.5 : CV Analysis

7. Analysis of cash flow statement 60- 61

Table 7.1: Free Cash Flow Computation

8. Analysis of sustainable growth 62- 63

Table 8.1: Analysis of Sustainable Growth

Table 9.2 : Calculation of Degree of Leverage

CHAPTER CONTENTS PAGE

2. Figure 2.3.3 : % of Market Share 04-11

3. Figure 3.3 : Industry Life Cycle 12-24

Figure 3.4 : SWAT Analysis

Figure 3.5 : Porter's 5 Forces model

5. Financial performance analysis 35-48

Figure 5.1.1: Liquidity Ratio

Figure 5.1.1.1: Current Ratio

Figure 5.1.1.2: Quick Ratio

Figure 5.1.1.3: Cash Ratio

Figure 5.1.1.4: Inventory to Working Capital Ratio

Figure 5.1.2: Activity Ratio

Figure 5.1.2.1: Receivable Turnover

Figure 5.1.2.2: Inventory Turnover

Figure 5.1.2.3: Assets Turnover

Figure 5.1.3 : Profitability Ratio

Figure 5.1.3.1: Gross Profit Margin on Sales

Figure 5.1.3.2: Net Profit Margin on Sales

Figure 5.1.3.4: Return on Equity

Figure 5.1.3.5: Earnings per Share

Figure 5.1.4: Leverage Ratio

Figure 5.1.4.1: Debt to Total Assets

Figure 5.1.4.2: Debt to Equity Ratio

Figure 5.1.4.3: Debt Coverage Ratio

6. DuPont Analysis 49-59

Figure 6.1.1 : Operating Profit margin

Figure 6.1.2 : Total Assets Turnover

Figure 6.1.4 : After Tax Retention Rate

6.1.3 : Interest Burden

Figure 6.1.5 : Financial Leverage

Figure 6.2 : ROE