financial ratio analysis of keya company.docx

1
Department: School of Business
Course no: BBA 223
Course Title: Financial Management
Session: Spring 2018
Assignment on
Financial Ratio Analysis
of
Supervised by: Submitted by:
Ms. Naznin Sultana Chaity
Assistant professor
School of Business
AUST
Nayma Akter Meem
ID: 18.01.02.045
Section: B
AUST
Submission date: 10 sept 2020

2
Letter of Transmittal
10 September, 2020
School of business
Ahsanullah University of Science & Technology.
Subject: Submission of assignment on “Financial Ratio Analysis of Keya Cosmetics Ltd.”
Dear Mam,
It is indeed a great pleasure for me to be able to hand over the report on “Financial Ratio
Analysis of Keya Cosmetics Ltd”. Working on this report has been an interesting &
informative experience for me. I learned many unidentified facts, which will be supportive in
my life& professional career in future. I have enjoyed working on this report. The information
of this report is mainly based on Internet information. Please feel free for any query or
clarification that you would like me to explain. Hope you will appreciate my hard work and
excuse the minor errors. Thank you for your valuable guidance and advice for preparing this
report.
Sincerely Yours,
Nayma Meem
180102045

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Acknowledgement
Today I’m really glad because I managed to complete my fianacial ratio analysis of
Keya Cosmetics Ltd, assignment within the given time by our honorable Mam Ms.
Naznin Sultana Chaity, Assistant professor at Ahsanullah University of Science &
Technology.
I would like to thank our Ms. Naznin Sultana Chaity mam for the guidance and
encouragement in finishing this assignment and also for teaching me this course.
I would also like to expand my gratitude to all those who have directly and
indirectly guided me in writing this assignment. Last but not least I would like to
thank my family and friends for their constant source of inspiration.
About Keya Company Ltd
Incorporated in the year 1996, Keya Cosmetics Ltd is one of the leading
cosmetics manufacturing companies in Bangladesh, and a popular brand name
for superior quality products available at affordable prices.
With an objective to never compromise with quality, Keya Cosmetics Ltd. has
established state-of-the-art facilities, equipped with the latest European
machinery, and also ensures that each stage of production undergoes rigorous
testing and quality assurance.

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Mission
 Adapting modern techniques and resources.
 Providing training/seminars, secure work environment, and growth opportunities to
employees.
 Ensuring cost control and efficient usage of resources.
Vision
Keya Cosmetics Ltd. aspires to become the leading cosmetics and toiletries
manufacturing company in Bangladesh, boasting a diverse product portfolio and
instilling long-term brand loyalty towards its products among the people both at
home and abroad.
Our Commitments
 To provide the best quality products using the finest ingredients.
 To understand and meet the requirements of the consumers.
 To implement innovative and cutting-edge technologies.
 To maintain world-class standards in our products

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Table of Contents
Letter of Transmittal..................................................................................................................... 2
Acknowledgement........................................................................................................................ 3
About Keya Company Ltd.............................................................................................................. 3
Mission........................................................................................................................................4
Vision...........................................................................................................................................4
Our Commitments........................................................................................................................ 4
Table of Contents ......................................................................................................................... 5
INTRODUCTION............................................................................................................................ 6
OBJECTIVES..................................................................................................................................7
SOURCES OF DATA........................................................................................................................ 7
Limitations...................................................................................................................................7
METHODOLOGY ........................................................................................................................... 8
FINDINGS OF THE RATIOANALYSIS................................................................................................ 9
1. Liquidity Ratio....................................................................................................................... 9
1(a) Current ratio .................................................................................................................. 9
1(b) Quick Ratio .................................................................................................................. 10
2. Debt Ratio .......................................................................................................................... 11
2(a) Debt toequity.............................................................................................................. 11
2(b) Time Interest Earned Ratio:........................................................................................... 12
3. Activity Ratio....................................................................................................................... 13
3(a) Inventory Turnover....................................................................................................... 13
3(b) Inventory Turnover in days............................................................................................ 14
.......................................................................................................................................... 14
3(c) Average Collection Period ............................................................................................. 15
3(d) Account Receivables Turnover....................................................................................... 16
3(e) Account Payable Turnover ............................................................................................ 17
3(f) Payable Turnover in Days............................................................................................... 18
3(g) Operating Cycle............................................................................................................ 18
4. Profitability/Performance.................................................................................................... 18
4(a) Gross Profit Margin....................................................................................................... 19
4(b) Operating profit margin................................................................................................ 19
4(c) Net profit margin:......................................................................................................... 20
4(d) Earning per share: ........................................................................................................ 21
4(e) Return on Asset(ROA) .................................................................................................. 22

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4(f) Return on Equity (ROE).................................................................................................. 23
5. Market Ratio....................................................................................................................... 24
5(a) Price-to-Earnings Ratio (P/E Ratio)................................................................................ 25
5(b) The market to book ratio .............................................................................................. 25
Recommendation....................................................................................................................... 27
Reference:................................................................................................................................. 28
Thank you.................................................................................................................................. 29
INTRODUCTION
A sustainable business and mission requires effective planning and financial
management. Ratio analysis is a useful management tool that will improve your
understanding of financial results and trends over time, and provide key indicators of
organizational performance. Managers will use ratio analysis to pinpoint strengths and
weaknesses from which strategies and initiatives can be formed. Funders may use
ratio analysis to measure your results against other organizations or make
judgments concerning management effectiveness and mission impact.
For ratios to be useful and meaningful, they must be:
 Calculated using reliable, accurate financial information
 Calculated consistently from period to period.
 Used in comparison to internal benchmarks and goals o Used in
comparison to other companies in your industry.
 Viewed both at a single point in time and as an indication of broad
trends and issues over time.
 Carefully interpreted in the proper context, considering there are many
other important factors and indicators involved in assessing performance.

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OBJECTIVES
The objective of Keya Cosmetics Ltd is to ensure the following:
To understand and meet the requirements of the consumers.
To implement innovative and cutting-edge technologies.
To maintain world-class standards in our products.
To provide the best quality products using the finest ingredients
SOURCES OF DATA
The main data source is the published annual reports of Keya Cosmetics Ltd.
Trading code: KEYACOSMET
Keyagroupbd.com for the year ended 2017 & 2018
Limitations
Primary limitation of the report is that it is based on facts, accumulated from word of mouth,
while consulting secondary data. Some information presented in the report may be biased,
as people tend to avoid their own limitation regarding their job and tend to hold other
departments responsible for drawbacks of their own. As the report is not a comprehensive
one, rather based on a single facility of Unilever Bangladesh Limited and also based on a
limited number of department employees so any ultimate decision may not be drawn about
the whole organizations training facility.

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METHODOLOGY
The Financial Ratios:
1. LiquidityRatio
I. Current Ratio
II. Quick Ratio
2. Debt Ratio
I. Debt-to-equity
II. Debt-to-Total Asset
3. Activity Ratio
I. Account Receivables Turnover
II. Average Collection Period
III. Inventory Turnover
IV. Inventory Turnover in days
V. Payable Turnover
VI. Payable Turnover in Days
VII. Operating Cycle
4. Profitability/Performance
I. Gross Profit Margin
II. Net Profit Margin
III. EPS
IV. Return on Asset (ROA)
V. Return on Equity (ROE)
5. Market Performance
I. PE Ratio
II. market/Book ratio

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FINDINGS OF THE RATIO ANALYSIS
1. Liquidity Ratio
In a nutshell, a company's liquidity is its ability to meet its near-term obligations, and
it is a major measure of financial health. Liquidity can be measured through several
ratios.
1(a) Current ratio
The current ratio is the most basic liquidity test. It signifies a company's ability to
meet its short-term liabilities with its short-term assets. A current ratio greater than or
equal to one indicates that current assets should be able to satisfy near-term
obligations. A current ratio of less than one may mean the firm has liquidity issues.
Current Ratio = (Current Assets / Current Liabilities)
Year 2018 2017
Current Asset 26,734,676,230 24,747,735,695
Current Liability 9,142,107,520 7,018,627,141
Current Ratio 2.9243 3.5260
In between these two years 2017 was is more liquid then 2018. Generally between 1.5 and 3
for healthy businesses. So it’s in good position.
2.9243
3.526
0
0.5
1
1.5
2
2.5
3
3.5
4
2018 2017
Current Ratio

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1(b) Quick Ratio
The quick ratio is a tougher test of liquidity than the current ratio. It eliminates
certain current assets such as inventory and prepaid expenses that may be more
difficult to convert to cash. Like the current ratio, having a quick ratio above one means
a company should have little problem with liquidity. The higher the ratio, the more
liquid it is, and the better able the company will be to ride out any downturn in its
business.
QUICK RATIO = [ ( CURRENT ASSET - INVENTORY ) / (CURRENT LIABILITIES) ]
Year 2018 2017
Current asset 26734676230 24747735695
Inventory 11418671952 9959332466
Current liability 9142107520 7018627141
Quick ratio 1.675 2.107
Ideal Quick ratio should be 1:1 or higher. The higher the ratio, the greater the company's
liquidity. In between these two years 2017 was is more liquid then 2018.
1.675
2.107
0
0.5
1
1.5
2
2.5
2018 2017
Quick ratio

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2. Debt Ratio
The debt ratio compares a company's total debt to its total assets, which is used to gain
a general idea as to the amount of leverage being used by a company. A low percentage
means that the company is less dependent on leverage, i.e., money borrowed from
and/or owed to others. The lower the percentage, the less leverage a company is using
and the stronger its equity position. In general, the higher the ratio, the more risk that
company is considered to have taken on.
2(a) Debt to equity
Debt to Equity ratio= (Total liabilities/ total asset)
Year 2018 2017
Total Asset 31949984097 28638650875
Total Liability 9142107520 7018627141
Debt to equity Ratio 0.286 0.245
0.286
0.245
0.22
0.23
0.24
0.25
0.26
0.27
0.28
0.29
2018 2017
Debt to Equity ratio

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2(b) Time Interest Earned Ratio:
The times interest earned (TIE) ratio is a measure of a company's ability to meet its debt
obligations based on its current income. A higher times interest earned ratio is favorable
because it means that the company presents less of a risk to investors and creditors in terms
of solvency.
The times interest earned ratio = (EBIT/ interest expense)
Year 2018 2017
EBIT 1483346944 1910860270
Interest expense 74167347 91707067
Time interest earned ratio 0.286 0.245
Keya Cosmetics Ltd has times interest earned ratio less than 2.5 is considered an acceptable
risk.
0.286
0.245
0.22
0.23
0.24
0.25
0.26
0.27
0.28
0.29
2018 2017
time interest earned ratio

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3. Activity Ratio
Activity ratios measure company sales per another asset account—the most
common asset accounts used are accounts receivable, inventory, and total assets.
Activity ratios measure the efficiency of the company in using its resources. Since
most companies invest heavily in accounts receivable or inventory, these accounts
are used in the denominator of the most popular activity ratios.
3(a) Inventory Turnover
For a company to be profitable, it must be able to manage its inventory,
because it is money invested that does not earn a return. The best measure of
inventory utilization is the inventory turnover ratio (aka inventory utilization
ratio), which is the total annual sales or the cost of goods sold divided by the
cost of inventory.
Inventory Turnover = (Total Annual Sales or Cost of Goods Sold / inventories)
Year 2017-18 2016-17
CostofGoodsSold 18,269,875,123 17,828,217,100
Inventory 11418671952 9959332466
InventoryTurnover 1.6 1.2
0.662
0.745
0.62
0.64
0.66
0.68
0.7
0.72
0.74
0.76
2018 2017
Inventory Turnover
Series 1

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3(b) Inventory Turnover in days
Inventory turnover period (2016-17)
Inventory turnover period (2016-17) = (365/1.2) = 326 days
Thus a turnover rate of 1.2 becomes 326 days.
Keya company sales through its stock roughly every ten and a half month
Inventory turnover period (2017-18)
Inventory turnover period (2017-18) = (365/1.6) = 228 days
Thus a turnover rate of 1.6 becomes 228 days.
Keya company sales through its stock roughly every seven and a half month.
2016-17,326,
59%
2017-18,228,
41%
TURNOVER IN DAYS

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3(c) Average Collection Period
The average collection period is the average number of days between
1) the dates that credit sales were made,
2) the dates that the money was received/collected from the customers.
The average collection period is also referred to as the days' sales in accounts receivable.
Average Collection Period = [Account receivable / Average sales per year]
Year 2017-18 2016-17
Account receivable 26734676230 24747735695
Average sales per year 9383191659 8024827316
Average Collection Period 2.849 3.084
2.7
2.75
2.8
2.85
2.9
2.95
3
3.05
3.1
3.15
2018 2017
Average Collection Period

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3(d) Account Receivables Turnover
Accounts receivable is the total amount of money due to a company for products or
services sold on an open credit account. The accounts receivable turnover shows
how quickly a company collects what is owed to it.
Accounts Receivable Turnover= (Total Credit Sales/ Account Receivable)
The higher the receivable turnover indicates quicker chance of receivable collection.
Year 2018 2017
Account receivable 453,284,248 587,836,673
Total credit sales 9383191659 8024827316
Account receivable turnover 20.7 13.6
20.7
13.65
Account receivable turnover
2018
2017

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3(e) Account Payable Turnover
A short-term liquidity measure used to quantify the rate at which a company
pays off its suppliers. Accounts payable turnover ratio is calculated by taking the total
purchases made from suppliers and dividing it by the average accounts payable
amount during the same period.
Year 2018 2017
Total supplier purchase 453,482,248 587,638,673
Average accounts payable 93831998 80248654
Account payable turnover 4.83 7.32
40%
60%
Account payable turnover
2018
2017

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3(f) Payable Turnover in Days
The higher payable turnover days allow the firm to get the maximum advantage of credit
purchase.
3(g) Operating Cycle
The time between the purchases of an asset and its sale, or the sale of a product made
from the asset. Most companies desire short operating cycles because it creates cash
flow to cover the company's liabilities.
Operating cycle = Days inventories outstanding + Days sales outstanding
4. Profitability/Performance
Year 2018 2017
Payable turnoverin days 13.00 10.78
55%
45%
Payable turnover in days
2018
2017

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Every firm is most concerned with its profitability. One of the most frequently used
tools of financial ratio analysis is profitability ratios which are used to determine the
company's bottom line. Profitability measures are important to company managers
and owners alike. If a small business has outside investors who have put their own
money into the company, the primary owner certainly has to show profitability to those
equity investors.
4(a) Gross Profit Margin
The gross profitmargin looks at cost of goods sold as a percentage of sales. This ratio looks
at how well a company controls the cost of its inventory and the manufacturing of
its products and subsequently passes on the costs to its customers. The larger the gross
profit margin, the better for the company.
Gross Profit margin= (gross profit / sales)
Year 2018 2017
Gross profit 3015994495 2984993634
Sales 9383191659 8024827316
Gross profit margin 0.321 0.372
4(b) Operating profit margin
0.28
0.3
0.32
0.34
0.36
0.38
gross profit margine
Gross Profit Margin
2018 2017

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It measures what percentage of total revenues is made by operating income. In other word
it demonstrates how much revenue are left over after all the variable or operating cost have
been paid.
Operating profit margin= operating profit/sales
Year 2018 2017
Operating profit 2675804821 2636481308
sales 9383191659 8024827316
Operating profit margin 0.285 0.328
This ratio shows how much profit is earned for each dollar of sales. Now operating profit
margin is below 1% means that each dollar earned in revenue brings less then 1%.
4(c) Net profit margin:
operating
profit
margin
2018 0.285
2017 0.328
Column1
0.285
0.328 OPERATING PROFIT MARGIN
2018 2017 Column1

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When doing a simple profitability ratio analysis, net profit margin is the most often margin
ratio used. The net profit margin shows how much of each sales dollar shows up as net
income after all expenses are paid.
Net profit margin=Earnings Available for common stock holders/sales
Year 2018 2017
EACS 1211882731 1675039066
Sales 938319165 802482731
Net profit margin 12.7% 20.5%
Gross sales are operating at under 10% margins when 15%-20% is likely ideal. ... Simply
bringing in more cash doesn't mean you're making a bigger profit.
4(d) Earning per share:
12.7
20.5
0
0.05
0.1
0.15
0.2
0.25
net profit
net profit margin
2018 2017

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Earnings per share (EPS) is calculated as a company's profit divided by the
outstanding shares of its common stock. It is common for a company to report EPS that is
adjusted for extraordinary items and potential share dilution. The higher a company's EPS,
the more profitable it is considered.
EPS= Earnings Available for common stock holders / No. of common stockholders
year 2018 2017
EACS 1211882731 1675039066
No of common stockholders 1466378 3,366,828
EPS 69.8 82.7
4(e) Return on Asset (ROA)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
EACS
no of common stockholders
EPS
1211882731
1466378
69.8%
1675039066
3,366,828
82.7%
Earning per share
2018 2017

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The Return on Assets ratio is an important profitability ratio because it measures the
efficiency with which the company is managing its investment in assets and using them to
generate profit. It measures the amount of profit earned relative to the firm's level of
investment in total assets. The return on assets ratio is related to the asset
management category of financial ratios.
ROA = EACS/ Asset
Year 2018 2017
EACS 121188273136 167503906678
Asset 3194998409 2863865087
ROA 4.7% 3.6%
ROAs over 5% are generally considered good. The higher the percentage, the better
the firm’s asset utilization to earn, because that means the company is doing a good
job using its assets to generate sales.
4(f) Return on Equity (ROE)
3.6
4.7
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
ROA
Return on total asset

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The Return on Equity ratio is perhaps the most important of all the financial ratios to
investors in the company. It measures the return on the money the investors have put into
the company. This is the ratio potential investors look at when deciding whether or not to
invest in the company.
ROE= Net income / shareholders’ equity
Year 2018 2017
Net income 12118827317 16750390667
Shareholder equity 146637812 3,366,8285
ROE 19.8% 17.4%
ROE is a measure of management's ability to generate income from the equity available to
it. ROEs of 15-20% are generally considered good
5. Market Ratio
19.8%
17.4%
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
ROE
Return on Equity (ROE)
2018 2017

25
Market value ratios are used to evaluate the current share price of a publicly-held
company's stock. These ratios are employed by current and potential investors to determine
whether a company's shares are over-priced or underpriced.
5(a) Price-to-Earnings Ratio (P/E Ratio)
Analystsandinvestorsreview acompany'sP/Eratiowhentheydetermine if the share price
accuratelyrepresentsthe projectedearningspershare.
P/E Ratio= Market value per share / Earnings per share
year 2018 2017
Market per share 25.41 32.16
Earnings per share 1.21 2.01
P/E Ratio 21 16
A higher P/E ratio shows that investors are willing to pay a higher share price today because
of growth expectations in the future. Here we can see P/E ratio increased 16 to 21 in 2018
financial year.
5(b) The market to book ratio
0
5
10
15
20
25
P/E ratio
2018 21
2017 16
21
16
Price-to-Earnings Ratio
2018 2017

26
The market to book ratio is a valuation metric used to compare the price of a stock to its
book value. It is also called the price to book (P/B) ratio
Market to Book Ratio = Market Capitalization / net book Value
Net Book Value= total assets- total liabilities
Net book value= 22,807,876,577 (2017-18)
Net book value= 21,620,023,734 (2016-17)
Year 2017-18 2016-2017
Market capitalization 31949984096 28638650875
Net book value 22807876577 21620023734
Market to book ratio 1.4 1.3
A high market to book ratio indicates that a stock is expensive, while a low ratio indicates
that it is cheap.
0 0.5 1 1.5 2 2.5
MARKET TO BOOK RATIO
Market to book ratio
2017 2018

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Recommendation
Keya Cosmetics Ltd. is one of the largest companies in Bangladesh. Quality comes
first- keeping this principle in mind; the company aim at producing guarantied international
quality cosmetics and toiletries for quality conscious people of home and abroad.
Few suggestions and recommendations have been provided here so that it can survive better
in future.
 Diversification of product should be conducted as soon as possible so that people can
get their necessary products from this company.
 Distributors are not as much as obedient to follow the instruction of the company. So,
it should be consider carefully.
 Delivery Officers have poor knowledge about market. So, they should be trained
properly.
 Promotion facility of the employees should be increase so that they can more
motivate to their job.
 It will more benefit if the company appoints the Delivery Officer.
 In case of Shopping Mall, delivery of products should be provided directly by the
Company.
 Some retailers are not much aware about Keya’s product. They should provide
awareness about it.
 Create more awareness to the people about the products of Keya Cosmetics Ltd.

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Reference:
 https://www.amarstock.com/stock/KEYACOSMET
 http://www.keyagroupbd.com/wp-content/uploads/Audited-Financial-
Statements-for-the-year-ended-30th-June-2018-of-Keya-Cosmetics-
Ltd.pdf
 https://www.google.com/search?q=keya+cosmetics+ltd+annual+report+
pdf&oq=keya&aqs=chrome.3.69i60j69i59j69i57j69i59j69i60l2j69i65j69i6
0.7242j0j7&sourceid=chrome&ie=UTF-8
 http://www.keyagroupbd.com/keya-cosmetics-ltd-annual-report-2016-
17/
 https://www.emis.com/php/company-
profile/BD/Keya_Cosmetics_Ltd_en_4049376.html
 Principles of Financial Management Finance by LawewnceJ. Gitman

29
Thank you
ID: 180102045
Name: Nayma Akter Meem


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