Financial Statement and Ratio Analysis of Berger paints Bangladesh limited PDF

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Course Title: Financial Accounting Course Code: MBA 301 Assignment 1 Topic: Financial Statement Analysis of Berger Paints Bangladesh Limited

Submitted To: Mr. Sajedul Alam Senior Lecturer School of Business University of Liberal Arts Bangladesh

Submitted By: Hira Mohammad Abdullah ID No. 172051017 Section: 01 MBA 301-Financial Accounting

University of Liberal Arts Bangladesh August 25, 2017

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Letter of Transmittal Date: August25, 2017 Mr. Sajedul Alam Senior Lecturer School of Business University of Liberal Arts Bangladesh Subject: Submission of financial report analysis on Berger Paints Bangladesh Limited. Dear Sir, With high reverence I want to state that i have finished my report on Berger Paints Bangladesh Limited about their Financial Statement Analysis of the past Five years. The report helped me to gain knowledge on how BPBL is doing financially in Bangladeshi market and highlight some vital points about their growth. I got the opportunity to do research on many available sources on BPBL’s financial policies and on their annual reports. This report is valuable and a necessity to complete my course MBA301-Financial Accounting. In this report, I contributed with the best that I could do. I faced some challenges in working these topics but according to your help I overcame them and tried to produce this report for you. It was a great opportunity given to me to experience the vibe of the financial world, and I will like to take this platform to thank you. To end, I would like you to kindly accept my report and to acknowledge our devotion and efforts. Yours Sincerely, Hira Mohammad Abdullah

ID no. 172051017

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Acknowledgement I have taken efforts in this Report. However, it would not have been possible without the kind support and help of many individuals and organizations. I would like to extend my sincere thanks to all of them. I am highly indebted to my respective Course Teacher, Mr. Shajedul Alam, Senior Lecturer in School of Business, University of Liberal Arts Bangladesh for his guidance, valuable & thoughtful comments, and suggestion. I am very grateful to him for giving me inspiration and encouragement throughout my study. His indefatigable patience & attention to detail enable me to complete this Report & get it into its present form. However, all its limitations are considered. I would like to convey my thanks to people providing me with valuable information that was very much needed for the completion of this report. Finally, my sincere gratitude goes to my friends & classmates who helped me whenever I needed. Despite my sincere efforts, there may appear some shortfalls in the report. I apologize for any such unintentional errors.

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Executive Summary Berger Paints Bangladesh limited is one of the leading paints company in our country. At the time of foundation the company name was Jenson & Nicholson. Their corporate head-office is situated in Uttara, Dhaka. BPBL is taking strides in fulfilling their vision to be the most preferred brand in the industry ensuring consumer delight. Their mission is to increase the turnover by 100 percent in every five years which seems very much challenging and encouraging. Being a responsible corporate citizen, BPBL has been contributing to several social causes to bring positive changes in the society. Berger in Bangladesh has successfully been able to position themselves at the minds of their targeted customers. They accelerated in bringing innovation in products for the users to enable them a service of great quality and showing that they are very cautious about customer’s demand and always tries to fulfill their requirements. I had the opportunity to work with the Financial Statement of Berger Paints Bangladesh Limited and prepare a Financial Statement Analysis report. The report has been started with the basic overview of BPBL then the discussion has moved to the main topic of “Financial Statement

Analysis of Berger Paints Bangladesh Limited.” The first section under this report contains Company Profile of BPBL. After that second section contains five years Financial Statement Analysis. Finally the Profitability Ratios, Liquidity Ratios and Efficiency Ratio are analyzed from year 2012 to 2016. Findings are the outcomes of the analysis which includes both positive and negative factors. Later on, recommendations have been provided to improve the areas where it is needed.

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Table of Contents List of Contents

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Letter of Transmittal…………………………………………….. Acknowledgement……………………………………................. Executive Summary……………………………………………... Introduction……………………………………………………. Company Profile……………………………………………….. Vision………………………………………………………………………... Mission………………………………………………………………………. Spirit…………………………………………………………………………. Corporate Objective…………………………………………………………. Strategy……………………………………………………………………… Products……………………………………………………………………... Board of Directors…………………………………………………………... Branches of Business………………………………………………………...

Financial Statement of BPBL…………………………………. BPBL Last Five Years Income Statement…….…………………………….. Comparison of Income Statement from Previous years…………………….. BPBL Last Five Years Owners Equity Statement………..…………………. Comparison of Owners Equity Statement from Previous years…………….. BPBL Last Five Years Financial Position….……………………………….. Comparison of Financial Position from Previous years…………………….. BPBL Some Notes to the Financial Statement…..…………………………..

Financial Ratio Analysis……………………………………….. Profitability Ratios……………………………………………….. Mark Up Percentage………………………………………………………… Gross Profit Margin…………………………………………………………. Net Profit Percentage………………………………………………………... Return on Capital Employed………………………………………………… Return on Capital Invested…………………………………………………..

Liquidity Ratios…………………………………………………. Current Ratio………………………………………………………………… Quick Test Ratio……………………………………………………………..

Efficiency Ratio…………………………………………………. Stock Turnover……………………………………………………………….

Findings..………………………………………………………… Recommendations………………………………………………. Conclusion………………………………………………………. References………………………………………………………..

iii iv v 1 2-5 3 3 3 3 3 4 4 5 6-16 6 8 8 10 11 12 13 17-30 17 18 19 20 22 23 25 25 27 29 29 31 32 33 34

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Introduction Business has never been as competitive as it stands today, there are witnessed the fall of many industry giants within the last decade than ever before. Industry experts and scholars put this down to many reasons, not forecasting or adapting to possible changers. Not been proactive enough but reactive are few to name. A major area which attracted the lime light was the ‘Accounting sector’ mainly many critics pointed out that the reason for ‘Financial Giant’ to collapse was due to lack of correct (Legal) and ethical accounting practices, reflecting their true financial picture/status to the public. Financial reports at a glance provide the ‘profit and loss’ stance of a company, but to get the maximum leverage or insight knowledge one should be able to ‘read between the lines’ in accounting terms in an annual report. This is the point where they can use the ‘ratio analysis’ as a vital tool. Not only to analyze the profit/ loss but many other important factors. Understanding the cost effectiveness, capital and liability structure in long term and short term perceptive, effectiveness of assets management, income turnover of assets, etc. To focus on our study on the ‘Financial Performance Analysis’ where I select Berger Paints Bangladesh limited as a manufacturing company and the years 2012 to 2016 as the years to conduct the study, based on their annual reports. There was a reason behind this manufacturing company selection. Though I would like to work with a successful manufacturing company, in 2014 Berger Paints Bangladesh limited won the “Best Corporate Award-2014” from The Institute of Cost and Management

Accountants of Bangladesh (ICMAB) in the multinational category. That indicates Berger Paints Bangladesh limited is one of the most successful and financial strong manufacturing company in Bangladesh. I hope that this comprehensive and descriptive ‘Financial Performance Analysis’ will be able to give an in-depth insight to the industry and much other functionality in a more coherent and an accountable manner.

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Company Profile Berger Paints is one of the oldest names in the paint industry, yet, it is one of the most technologically advanced companies in the country. It is constantly striving for innovating superior quality products and services. With more than 250 years of rich heritage, Berger manufactures world class paints for all kinds of substrates and also provides unparallel services. Berger’s inception was laid out in 1760 by a German national named Louis Berger, who started dye and pigment making business in England. Louis involved his family into the business and eventually changed the status of the company to Louis Berger & Sons Limited. The company grew and expanded rapidly with a strong reputation for excellence in innovation and entrepreneurship. In the initial years, Louis successfully refined the process of manufacturing Prussian blue, a deep blue dye. This dye was widely used for the uniforms of many European armies of that time. Production of dyes and pigments evolved into production of paints and coatings, which till today, remains the core business of Berger. The company grew rapidly, by establishing branches all over the world and through mergers and acquisitions with other leading paint and coating manufacturing companies. Berger Paints started ‘painting’ Bangladesh since independence. Over the past few decades, Berger has evolved and transformed itself in becoming the leading paint solution provider in the country with a diversified product range that caters to all your painting needs. Berger has heavily invested in technology and Research & Development (R&D) compared to any other manufacturer in this market. Investment in technology and plant capacity is even more evident from the establishment of Powder Coating and Emulsion plants at the Dhaka factory. The state-of-the-art Dhaka factory is an addition to Berger's capacity, making it the paint giant in Bangladesh. It sources raw materials from some of the best known names in the world. The superior quality of Berger's products has been possible because of its advanced plants and strict quality controls that match international standards. With its strong distribution network, Berger has reached almost every corner of Bangladesh. Nationwide Dealer Network, supported by 8 Sales Depots strategically located at Dhaka, Chittagong, Rajshahi, Khulna, Bogra, Sylhet ,Comilla and Mymensingh has an unmatched capability to answer to paint needs at almost anywhere in Bangladesh. Berger's one of the prime objectives is to provide best customer support-connecting consumers to technology through specialized services like free technical advice on surface preparation, color consultancy, special color schemes etc. To bolster customer satisfaction, Berger offers Home Decor Service from where one can get an array of services pertaining to painting. The product range includes specialized outdoor paints to protect against adverse weather conditions, ColorBank, Superior Marine Paints, Textured Coatings, Heat Resistant Paints, Roofing Compounds, Epoxies and Powder Coatings. In each of these product categories, Berger has been the pioneer. Besides, Berger offers illusions-the first designer paint solution in

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Bangladesh. The company also launched Power Bond adhesive, lnnova Wood Coating in collaboration with Sherwin-Williams, Vehicle Refinish in collaboration with world renowned PPG-USA, Texbond binder to cater to the growing needs of the customers. Apart from business, Berger Paints has added another dimension to its social responsibilities by contributing to the well being of the autistic children in Bangladesh from 2009. Berger Paints Bangladesh Limited has been promoting the young and creative talents of the country through Berger Young Painters’ Art Competition (BYPAC), Berger Award for Excellence in Architecture (BAEA), Berger Award Programme for the Students of Architecture of BUET (BASAB), Scholarship Programme for the students of Architecture Discipline, Khulna University.

Vision “To be the most preferred brand in the industry ensuring consumer delight.”

Mission “We shall increase our turnover by 100 percent in every five years. We shall remain socially committed ethical company.”

Spirit “Our customers are our partners. Our people are our strength. Our shareholders are our foundations. We proudly bring inspiration, strength and color to communities through affiliation with our customers.”

Corporate Objective “Our aim is to add value to life, to outperform the peers in terms of longevity, customer service, revenue growth, earnings and cash generation. We will be the employer of choice for all existing and future employees.”

Strategy “Our strategy is to build long-term partnerships with the customers/consumers. With their support, we aim to maximize the potential of our business- through a combination of enhanced quality of product, service, creative marketing, competitive pricing and cost efficiency.”

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Products Berger is committed to offer quality products that satisfy consumers ‘ultimate desires from paints with the help of state-of-art technology. Berger always believes in one step ahead in offering new product to create more value for customers’ money. Berger outsmarts other competitors of the market through its one step ahead policy and innovative market offers. Berger is trying to fill up all holes of the market through offering a wide range of products to meet the needs (Premium to Economy Paints) of different types of users and to solve the different types of functional requirements (Decorative paint, Industrial paint, Marine paint). Berger Bangladesh offers approximately 600 stock keeping unit SKU including variations within basic product groups. Due to shift in market growth trends Berger is trying to establish itself in the economy segment of the paint market. Decorative paint: ➢ ➢ ➢ ➢ ➢

The objective is to beautify the surfaces with protection from corrosion and erosion. This business category mainly targets household segment. Products are being offered to the consumers through a dealer network. Products fulfill the aesthetic value of the consumer. Major revenue earning business area of BPBL.

Industrial paint: ➢ Tailor made products to cater to the specific needs of customers. ➢ Products give protection to the surfaces in extreme situations like severe. ➢ Hazardous environment, high temperature, movement of heavy materials and machinery etc. Direct marketing approach is being used to promote the Industrial Coatings. ➢ Main customer groups: Garments Factories, Chemical Plants, Fertilizer Manufacturing Plants, Consumer Durable Manufacturing Plants etc. Marine paint: ➢ Products are being offered mainly through direct marketing approach. ➢ Dock Yards, Bangladesh Navy, Passenger Ships are the main user groups. ➢ Market is mostly concentrated in Dhaka and Chittagong.

Board of Directors The list of Board of Directors of BPBL is given below: Chairman Managing Director

Mr. Gerald K. Adams Ms. Rupali Chowdhury

Directors

MR. Abdul khalek Mr. K.R. Das Mr. Anil Bhalia Mr. Jean-Claude Loutreuiil Ms. Rishma Kaur Mr. Anis A. Khan Mr. Kanwardip Singh Dhingra Mr. Masud Khan

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Branches of Business Registered Office: 43/3, Chatteswari Road Chittagong–4000, Bangladesh. Email: [email protected] Web: http//www.bergerbd.com Corporate Headquarter: Berger House Plot – 8, Road No.-2 Uttara Sector –3, Uttara Model Town, Dhaka Email: [email protected] Web: http//www.bergerbd.com Factory: Dhaka Factory - Nabinagar, Chittagong Factory –27 D, FIDC Road Kalurghat, Chittagong. Plant: Powder coating plant –Nabinagar, Savar Emulsion plant - Nabinagar, Savar Home decor: Bonani, Dhaka E–mail: dé[email protected] Sales office: Dhaka–3/3-D Bijoynagar Kakrail Chittagong - 43/3, Chatteswari road Sylhet– H # 32, Block –A, Shahjalal Upashahar Khulna–2 KDA Approach Road, Sonadanga. Bogra–31, Piari Sanker, Katnar Para Comilla–576, Laksham road Rajshahi-1458, Ramchandrapur Ghoramara, Boalia.

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Financial Statement of Berger Paints Bangladesh Limited Financial statements (or financial reports) are formal records of the financial activities of a business, person, or other entity. Financial statements provide an overview of a business or person's financial condition in both short and long term. All the relevant financial information of a business enterprise, presented in a structured manner and in a form easy to understand is called the financial statements. The analysis of financial statement is a process of evaluating the relationship between component parts of financial statement to obtain a better understanding of firm financial position. A complete set of financial statement comprises: 1) 2) 3) 4) 5)

A statement of comprehensive income for the period; A statement of changes in equity for the period: A statement of financial position as at the end of the period: A statement of cash flow for the period. Notes of Account comprising a summary of significant accounting policies and other explanatory information.

Berger Paints Bangladesh Limited financial statements have been prepared and the disclosures of information are made in accordance with the Bangladesh Financial Reporting Standards (BFRS), the Companies Act (#18) 1994 and the Bangladesh Securities Exchange Rules 1987 as much as practicable. The statement of financial position and statement of profit or loss and other comprehensive income have been prepared according to Bangladesh Accounting Standards (BAS) 1 Presentation of Financial Statements on accrual basis of accounting following going concern assumption under generally accepted accounting principles and practices in Bangladesh. Here we will analyze BPBL’s three Basic Financial Statements:

Last Five years Income Statement Analysis of BPBL Income statement, also called profit and loss statement (P&L) and Statement of Operations is financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or year. Berger Paints Bangladesh Limited prepares their Income Statement yearly basis. BPBL income statement shows a presentation of the sales, the main expenses and the resulting net income over the period. Net income is based on accounting principles which gives guidance/rules on when to recognize revenues and expenses. These records provide information that shows the ability of BPBL to generate profit by increasing revenue and reducing costs. The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.

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Berger Paints Bangladesh Limited’s last five (5) years Income Statements are given below:

Berger Paints Bangladesh Limited Income Statement For the year ended December 31, 2016

Taka in ‘000

Particulars

Notes

2016 Taka %

2015 Taka %

2014 Taka %

2013 Taka %

2012 Taka %

Revenue-net

5

14,128,113

100%

12,267,996

100%

10,881,046

100%

8,796,778

100%

7,611,213

100%

Cost of sales

6

(7,231,444)

51.18%

(7,012,664)

57.16%

(6,585,744)

60.52%

(5,479,651)

62.29%

(5,086,852)

66.83%

6,896,669

48.82%

5,255,332

42.84%

4,295,302
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