Empirical Study of Financial Ratio :British American Tobacco of

Bangladesh
Md. Parvez Aalm
Department of Finance
University OF Chittagong
Email.parvezcu53alam@gamil.com
October 6, 2017

Abstract
For our study purpose, I have chosen British American tobacco from food and allied industry from the
manufacturing sector. Here I have performed my study by using the most recent financial statement of
the respective company. i have also categorized financial ratio into 5 segments. These are Liquidity ratio,
Profitability Ratio, Leverage ratio, Management Efficiency ratio, and Market Measurement and growth ratio.
By covering 5 segments we have calculated total 27 financial ratios. Moreover,I have also put a comment at
the end of the each of segment.

1 Introduction
The food industry is one of the major growing sectors of our country. The industry is growing at double-digit
growth rate form the last decade in order to meet the growing demand of millions of people. Moreover, an
investor is becoming more interested to invest in this industry. But without having the proper and available
information its really hard for them to find out most attractive firm to invest their hard earned money. To
evaluate any specific firm, ratio analysis is one of the effective technique to understand the current financial
situation of the specific firm. By keeping in mind the importance of analytic information, we are heading
toward to our analysis.

2 Profitability Ratio

Table 1: Profitability Ratio

2012 2013 2014 2015 2016
Gross Profit margin 0.42 0.44 0.46 0.47 0.45
ROS 0.14 0.16 0.18 0.15 0.17
ROA 0.26 0.27 0.23 0.20 0.21
ROE 0.56 0.55 0.55 0.40 0.40

2.1 Comment
If we look at the profit margin ratio and return on sales ratio it indicates that they are doing very well and
profitability ratio are increasing at a constant rate. The graph shows an upward trend in both ratios. On
the other hand, the rest of the two ratios, ROA, and ROE reflects the opposite directions. Indicating that
their return is decreasing day by day. The basic reason behind this declining trend is that the management
is not able to control their operating cost and administrative expenses. As a result, there are not able to
keep consistency between these two groups ratios.

3 Efficiency Ratio
3.1 Comment
In the case of the measuring efficiency of a firm, the higher the turnover ratio of its asset both short term
and long term the higher efficient the firm is. The graph shows that British American tobacco is much more
efficient in maintaining account receivable than the inventory turnover or total asset turnover. If we look at

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 Gross Profit margin Ratio RETURN ON SALE
0.48 0.47 0.20
0.46 0.45
0.46
Margn Ratio

0.44 0.15
0.44
0.42

Ratio
0.42 0.10

0.40 0.05
0.38
2012 2013 2014 2015 2016 0.00
2012 2013 2014 2015 2016
Year
Year

ROA ROE
0.30 0.26 0.27 ROE Linear (ROE)
0.23 0.21
0.20
0.20 0.80
RATIO

0.60

Ratio
0.10 0.40
0.20
0.00 0.00
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
YEAR Year

Figure 1: Profitability Chart

Table 2: Efficiency Ratio

2012 2013 2014 2015 2016
Rec. Turn 29.29 40.50 20.17 42.41 41.18
Inv. Turn. 3.22 2.64 2.12 2.48 1.71
APP 73.27 76.15 127.94 133.10 123.84
ACP 12.29 8.89 17.85 8.49 8.74
AAI 111.91 136.31 169.42 145.16 210.65
Operting cycle 124.20 145.20 187.27 153.65 219.39
CCC 50.92 69.05 59.33 20.55 95.55
Total Assets Turnover 1.83 1.69 1.32 1.35 1.24

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 CCC Efficiency Ratio
120.00
95.55
100.00
50.00
80.00 69.05
40.00
Axis Title

59.33
Receivable Turnover

Axis Title
60.00 50.92 30.00
40.00 20.00
20.55 Inventory Turnover
10.00
20.00
0.00 Total Assets
0.00
Turnover
2011 2012 2013 2014 2015 2016 2017
Axis Title Axis Title

Operating Cycle
ACP AAI APP

250.00

200.00
Axis Title

150.00

100.00

50.00

0.00
2011.5 2012 2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5
Axis Title

Figure 2: Management Efficiency Position

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the operating cycle and cash conversion cycle in recent times the firm is taking more time to manage their
current asset than the recent past. It implies that at recent times the firm is become more inefficient to
manage their current assets.

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4 Liquidity Position

Table 3: Add caption

Year 2012 2013 2014 2015 2016
Current ratio 1.30 1.20 1.07 1.28 1.46
Quick Ratio 0.60 0.40 0.42 0.59 0.44
Cash ratio 0.32 0.23 0.12 0.19 0.11
WC 2143089000 1635862000 953608000 3475530000 6298745000

4.1 Comment
The average current ratio position of the firm is somewhat stable and also indicates that sufficient funds
are available to meet the short-term obligation. Trend analysis indicates that current ratio position has
increased in recent times. The position of a quick ratio is slightly decreased in recent times. A paradigm
shift has been noted in cash ratio. It implies that firm tends to have less cash asset at hand. Her are two
reasons to explain the condition, first lee, the firm is investing their money in money market instrument to
maximize their return or they are inefficient to manage their cash asset. The working capital position is
increasing year by year. It implies that the authority may tend to expand their operation in near future.

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 Current Ratio Quick Ratio
2 0.80
0.60 0.59
1.5 0.60 0.42 0.44
0.40

Ratio
Ratioi

1 0.40
0.20
0.5
0.00
2012 2013 2014 2015 2016
0
2012 2013 2014 2015 2016 Quick Ratio 0.60 0.40 0.42 0.59 0.44
Year Year

Cash Ratio Working Capital

0.35 0.32 7000000000.00
0.30 0.23 6000000000.00
0.25 0.19 5000000000.00
RATIO

Axis Title

0.20
0.15 0.12 0.11 4000000000.00
0.10 3000000000.00
0.05 2000000000.00
0.00
2012.0 2013.0 2014.0 2015.0 2016.0 1000000000.00
0 0 0 0 0 0.00
Cash ratio 0.32 0.23 0.12 0.19 0.11 2011 2012 2013 2014 2015 2016 2017
YEAR YEar

Figure 3: Firm Liquidity Position

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5 Solvency Ratio

Table 4: Add caption

Year 2012 2013 2014 2015 2016 Average
Debt Ratio 0.06 0.07 0.06 0.09 0.08 0.07
Equity Ratio 0.47 0.48 0.42 0.49 0.53 0.48
Debt -Equity Ratio 1.14 1.07 1.36 1.03 0.87 1.09
Times In. Ea. ratio 55.23 812.74 70.06 102.44 362.15 280.52

5.1 Comment
If we are goanna look at total four solvency ratio, they will indicate a positive outlook regarding the firm.
Very first place, debt ratio (total liabilities to the total asset) indicates that on an average firm are using
BDT 53 as the source of debt to finance their total asset BDT 100. Secondly, equity ratio (total shareholder
equity to a total asset) implies that the firm uses on an average BDT 48 from equity financing to support
their total asset BDT 100 . Its not a major concern for a growing firm. The debt to total asset indicates
that firm is using on an average equity and debt as of 50

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 Average capital Debt To Equity
1.60
structure fo the firm 1.36
1.40
1.14
1.20 1.07 1.03
1.00 0.87

Axis Title
0.80
Equity, Debt , 0.52,
0.48, 48% 0.60
52%
0.40
0.20
0.00
2011 2012 2013 2014 2015 2016 2017
Debt Equity Year

TIMES INTEREST EARNED RATIO

900.00
800.00
700.00
600.00
500.00
400.00
300.00
200.00
100.00
0.00
2011.5 2012 2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016 2016.5

Figure 4: Solvency Ratio

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6 Valuation and Growth Ratio

Table 5: Add caption

Valuation and Growth Ratio
year 2012 2013 2014 2015 2016
EPS 65.69 82.07 104.7 97.9 126.37
NAV PS 175.82 171.18 254.74 265.63 314.71
Market price per sh. 840.61 1607.00 2650.00 2950.00 2473.00
P/E Ratio 12.78 19.59 25.31 30.14 19.65
Dividend Pay-out Ratio 0.91 0.73 0.57 0.61 0.47
Dividend Yield Ratio 0.07 0.04 0.02 0.02 0.02
Market Cap 33580m 83564m 117000m 162250m 149340m

6.1 Comment
Market performance of the firm shows an upward trend from the last five years. Earnings per share, market
price per share, and net asset value per share are increasing year to year. The average dividend payout ratio
is BDT .66 meaning that they are paying out .66cent from every BDT 1 earnings. Dividend yield of the last
five years was on an average 3.5 percent.

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 Market Capitalization Dividend Payment
180000000000.00
160000000000.00
140000000000.00
120000000000.00
34% Dividend Pay-out
100000000000.00
Ratio
80000000000.00
Retention Rate
60000000000.00 66%
40000000000.00
20000000000.00
0.00
2011 2012 2013 2014 2015 2016 2017

Market performence
350 3500.00

300 3000.00

250 2500.00

200 2000.00

150 1500.00

100 1000.00

50 500.00

0 0.00
2012 2013 2014 2015 2016 average

Earnings Per Share - Basic Net Asset value per share

Market price per share

Figure 5: Market performance

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7 Conclusion
In the conclusion phase we can conclude that British American tobacco as a multinational firm they are
doing well in terms of other counter part in the market. They are the market leader in food and allied
industry of Bangladesh. they are holding market share 21.2 percent of the total market.By analyzing all the
financial ratio we can conclude that the firm a growing at sustainable way and it could be one of the safest
destination for potential investors.
your regard
Md.Parvez Alam
latex Users

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