Welcome to Presentation session

Presentation on Capital structure and profitability analysis

Presented by NameID:IntakeSection

Company profile

History Earlier in November 1980, Bangladesh Bank, the country’s Central Bank, sent a representative to study the working of several Islamic banks abroad. In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to participate in establishing a joint venture Islamic Bank in the private sector. They found a lot of work had already been done and Islamic banking was in a ready form for immediate introduction. Two professional bodies - Islamic Economics Research Bureau (IERB) and Bangladesh Islamic Bankers’ Association (BIBA) made significant contributions towards introduction of Islamic banking in the country.

Mission To establish Islami banking through the introduction of a welfare oriented banking system and also ensure equity and justice in the field of all economic activities, achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less developed areas of the country. Vision Vision of the organization is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance.

Distinguishing features of Islamic Banking:  Abolition of interest (Riba):  Adherence to public interest:  Multi-purpose bank:  More careful evaluation of investment demand:  More careful evaluation of investment demand:  Work as catalyst of development:

Capital structure and profitability comparison Between Dhaka Bank and BRAC Bank

Capital structure Debt ratio The debt ratio measures what portion of capital in firm’s total assets financed its debt holders. The higher this ratio, the greater the amount of other people’s money being used to generate profits. The ratio is calculated as. Debt ratio = The debt ratio of Dhaka Bank is 93.61% The debt ratio of BRAC Bank is 90.67% Comments This ratio of both company represent higher risk. But it is obvious that in Bank industry this figure is not represent greater risk because it is calculated from total liability where also include the deposit of the people But in consideration of tow companies the Dhaka Bank is in greater risk than that of BRAC Bank. BRAC Bank Total Assets financed by 90.67% 9.33% Debt capital Equity capital

Capital structure Capital Structure (Debt/Equity ratio): Capital structure ratio provides insight into the extent to which non-equity capital is used to finance the assets of the firm. The higher the ratio, the higher proportion of assets financed by non- shareholders parties. The capital structure is calculated as Debt/Equity ratio= For Dhaka Bank 14.66:1 For BRAC Bank 10.26:1 Comments this ratio shows the both company that they have huge amount liability against Tk. 1 equity capital. But for the bank industry it is not an abnormal result because in total liability include the deposit of the people.

Profitability Operating profit margin: The operating profit margin measures the percentage of each sales dollar remaining after all costs and expenses other than interest, taxes and preferred stock dividends are deducted. Operating profit margin= For Dhaka Bank 66.36% For BRAC Bank 51.33% Comments The operating profit margin of Dhaka Bank is 66.36% and BRAC Bank is 51.33%. This result indicates that the Dhaka Bank can generate more operating profit than BRAC Bank Because of there management efficiency in operating cost control system.

Profitability Net profit margin: The net profit margin measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends have been deducted. Net profit margin= For Dhaka Bank 22.65% For BRAC Bank 17.28% Comments The net profit margin of Dhaka Bank is 22.65% and BRAC Bank is 17.28%. The result shows that the Dhaka Bank is able to produce more net profit that is available for common stockholders Because of lower debt in capital structure of BRAC Bank their net profit margin did not decline as much than the Dhaka bank.

Profitability Earnings per share (EPS): EPS represents the number of dollars earned during the period on behalf of each outstanding share of common stock. Earnings per share is calculated as follows: EPS= For Dhaka Bank Tk For BRAC Bank Tk Comments The earnings per share of Dhaka bank is Tk and BRAC Bank is Tk The result shows that the BRAC Bank has higher EPS than the Dhaka Bank because of both lower number of shareholder and higher Earnings Available for Common Stockholders (EACS) than that of Dhaka Bank.

Profitability Return on equity: The return on common equity (ROE) measures the return earned on the common stockholders’ investment in the firm. Generally, the higher this return, the better off are the owners. Return on common equity= For Dhaka Bank 19.32% For BRAC Bank 15.02% Comments The return on equity (ROE) of Dhaka Bank is 19.32% and BRAC Bank 15.02%. The result shows that the equity capital of Dhaka Bank has earned higher profit than the BRAC Bank because of higher amount of debt use in capital structure than the BRAC Bank. As because of higher risk to the equity it is obvious that the equity holders desire higher profit.

Profitability Return on Assets: The return on total assets (ROA), often called the return on investment (ROI), measured the overall effectiveness of management in generating profits with its available assets. The higher the firm’s return on total assets, the better. Return total assets = For Dhaka Bank 1.23% For BRAC Bank 1.32% Comments The return on total assets (ROA) of BRAC Bank is 1.32% and Dhaka Bank is 1.23%. The result shows that the BRAC Bank is able to generate net profit (Earnings available for common stockholders) than the Dhaka Bank U sing more debt in capital structure of Dhaka Bank that decline their net profit a large portion in compare to operating profit as we earlier said in Net profit margin ratio.

Profitability Return on Assets: The return on total assets (ROA), often called the return on investment (ROI), measured the overall effectiveness of management in generating profits with its available assets. The higher the firm’s return on total assets, the better. Return total assets = For Dhaka Bank 1.23% For BRAC Bank 1.32% Comments The return on total assets (ROA) of BRAC Bank is 1.32% and Dhaka Bank is 1.23%. The result shows that the BRAC Bank is able to generate net profit (Earnings available for common stockholders) than the Dhaka Bank U sing more debt in capital structure of Dhaka Bank that decline their net profit a large portion in compare to operating profit as we earlier said in Net profit margin ratio.

Comparison on Textile industry Metro Spinning And Saiham textile

Company Profile Metro Spinning And Saiham textile

Company Profile Metro spinning Vision: We see Business as a means to the well being of the shareholders and all other stakeholders, society at large keeping in line with the Nation’s interest. Mission Statement: Our Mission is to provide world-class products to our valued Customers, Maintaining high Ethical Standard business. Objective Our primary objective is to conduct transparent business operation within legal and social framework with aims to attain the mission with qualitative quantitative target in business operation.

Capital structure and profitability comparison between Metro Spinning and Saiham textile

Capital structure Debt ratio: The debt ratio measures what portion of capital in firm’s total assets financed its debt holders. The higher this ratio, the greater the amount of other people’s money being used to generate profits. The ratio is calculated as. Debt ratio = For Metro Spinning 65.03% For Saiham textile 38.26% Comments The debt ratio of the Metro spinning Ltd is 65.03%. It means that the company’s 65.03% of total assets are collected from the creditors. So it is more levered firm. The greater the financial leverage the greater its risk. Whereas the debt ratio of Saiham textile is 38.26%. So it can say that the Saiham textile is in the better position than that of Metro spinning Ltd.

Capital structure Capital Structure (Debt to Equity) ratio: Capital structure ratio provides insight into the extent to which non-equity capital is used to finance the assets of the firm. The higher the ratio, the higher proportion of assets financed by non- shareholders parties. Debt/Equity ratio = For Metro Spinning 1.86 : 1 For Saiham textile 0.62 : 1 Comments The debt to equity ratio of Metro Spinning is 1.86:1 whereas the same ratio of Saiham textile is 0.62:1. This ratio shows that the Metro Spinning is using debt capital of Tk.1.86 against Tk.1 equity capital in capital structure and Saiham Textile is using debt capital of tk.0.62 against tk.1 of equity capital in capital structure. In comparison this two companies the Metro Spinning uses huge debt capital so this company is in the greater risk and has greater chance of financial distress cost than that of Saiham Textile.

Profitability Gross profit margin The gross profit margin measures the percentage of each sales dollar remaining after the firm has paid for its goods. The gross profit margin is calculated as follows Gross profit margin = For Metro Spinning 33.08% For Saiham textile 18.67% Comments The gross profit margin of Metro Spinning Ltd is 33.08%. It indicates that the company can generate Tk from each Tk100 of sales, so the cost of goods sold is 66.92%. Whereas the gross profit margin of Saihma textile Ltd is 18.67%. So we can say that the Metro spinning Ltd is in the better position than that of Saiham textile Ltd.

Profitability Operating profit margin The operating profit margin measures the percentage of each sales dollar remaining after all costs and expenses other than interest, taxes and preferred stock dividend are deducted. Operating profit margin = For Metro Spinning 28.31% For Saiham textile 14.48% Comments The operating profit margin of Metro Spinning Ltd is 28.31%. It indicates that the company is generated Tk of operating profit from each Tk. 100 of sales. Whereas the Saiham textile Ltd is 14.48%. So we can say that the Metro Spinning is more capable to produce more operating profit than the Sahiham textile Ltd. because of higher capital.

Profitability Net profit margin The net profit margin measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes and preferred stock dividend have been deducted. Net profit margin = For Metro Spinning 5.10% For Saiham textile 4.80 % Comments The net profit margin of the Metro Spinning Ltd is 5.10%. It indicates that the company is capable to generate net profit of Tk from each sales of Tk The greater the net profit margins the better for the company. Whereas the net profit margin of the Saiham textile Ltd is 4.80%. So in this regard we can say that Metro Spinning is in the better position than that of Saiham textile Ltd.

Profitability Earnings Per Share (EPS) EPS represent the dollar amount earned on behalf of each outstanding share of common stock- not the amount of earnings actually distributed to shareholders. EPS is generally of interest to present or prospective stockholders and management. EPS = For Metro Spinning Tk For Saiham textile Tk Comments The EPS of the Metro Spinning Ltd is Tk Which indicates the company is able to earn Tk against each share of common stock outstanding. The higher the EPS the higher the corporate success. Whereas the EPS of Saiham textile Ltd is Tk So it can say that the Saiham textile Ltd is in the better position than that of Metro Spinning Ltd. because of lower number of common stock share.

Profitability Return on Assets (ROA) The Return on Total Assets Measures the overall effectiveness of management in generating profits with its available assets also called return on investment (ROI). ROI is calculated as follows Return on Assets = For Metro Spinning 1.65% For Saiham textile 3.16% Comments The ROA of the Metro Spinning Ltd is 1.65%. Which indicates that the company is able to generate net profit of Tk by utilizing each total assets of Tk The higher the ROA the more efficient of the management. Whereas the ROA of the Saiham textile Ltd is So we can say that Saiham textile is more efficient than that of Metro spinning Ltd. because of their total assets is lower in compare to EACS than that of Metro Spinning.

Profitability Return on Equity (ROE) The return of Equity measures the return earned on the common stockholders’ investment. It is calculated as follows Return on Equity = For Metro Spinning 4.74% For Saiham textile 5.12% Comments The ROE of the Metro Spinning Ltd is 4.74%. Which indicate that the company earns Tk against of each Tk. 100 of Common stock equity. The higher this return the better for the owners. Whereas the ROE of Saiham Textile Ltd is 5,12%. So we can say that the Saiham textile Ltd is in the better position.

Profitability Overall comments Using huge debt amount in capital structure of Metro Spinning their net profit margin is adversely affected. So their profitability ratio shows their worse performance than that of Saiham textile. So we can say that the capital structure of Saiham textile is better.

Findings & Recommendation Bank industry

Major Findings Bank industry  Dhaka Bank has used a huge amount debt capital (93.61%) in capital structure. So the company is in greater risk than BRAC Bank.  As because of higher interest provide to the debt holders the net profit margin of Dhaka Bank hugely decline in compare to operating profit margin.  BRAC Bank did not use huge amount of debt that result their net profit margin slightly decline.  From huge deposited amount and profitable investment BRAC Bank is able to produce higher EPS than Dhaka Bank.  As because of huge amount of debt in Dhaka Bank’s capital structure, the equity capital earn more profit because equity posses higher risk than that of BRAC Bank.  Huge debt in capital structure of Dhaka Bank that result their net profit sharply decline that impact on return on total assets.

Recommendation Bank industry  Dhaka bank should restructure their capital structure. They should reduce their debt amount in order to reduce financial distress cost.  Efficient cost management system should be implemented for the both company.  Net profit margin decline sharply because of huge amount of interest payment in both company but more in Dhaka bank so debt capital should be reduced.

Findings & Recommendation Textile Industry

Major Findings Textile Industry  The equity capital of Metro Spinning is less than 50% (38.26%) the problem is that the firm can be acquired by any other company.  The debt capital of metro spinning is higher that posses higher risk.  Net profit margin of Metro Spinning is sharply decline because of higher interest on higher debt capital used in capital structure.  Earnings per share of Metro spinning (3.77) is less than the Saiham Textile (11.52) because their net profit hugely decline from operating profit because of higher interest payment.  The higher interest payment also affect the return on total assets of Metro Spinning.  The equity of Metro Spinning posses higher risk that result we find that in return on equity of this company is (4.74) which is less than Saiham Textile (5.12).  Both the companies have effective cost management system that result operating income is slightly decline to operating profit margin

Recommendation Textile Industry  The Metro Spinning should increase their equity capital slightly more than 50% in order to reduce the chance of hostile takeover from another company.  The debt capital of Metro Spinning should slightly decline to reduce the financial distress cost.  The debt capital of Saiham Textile can be increased to 40%- 50%.  The debt capital should decline to reduce the interest payment that adversely affect in profitability ratio of Metro Spinning Ltd.  The existing Management body should be continued for both the company.

Thank you to all For being attended patiently