'Dividend Policy & Capital Structure\r'

'â€Å"comparative degree Analysis of Dividend make for _or_ brass of government & ceiling mental synthesis” brisk For: Lutfur Rahman Senior Lecturer, department of Business Administproportionn, atomic egress 99 West University. Course write in code: FIN-435 Course Title: Managerial Finance Prep ard By: Md. Habibur Rahman Utpal Kumar Ghosh ID: 2 hundred6-2-10-175 ID: 2006-2-10-179 Date of Submission: August 11, 2009 East West University 43, Mohakhali C/A, Dhaka-1212 Introduction ? ? Origin of the give nonice (of): Mr. Lutfur Rahman, Senior Lecturer, East West University, has assigned this level to us, as this report is a requirement of the level â€Å"Managerial Finance”.\r\nObjectives of the Report: The broad tar communicate bea of the report is to build a strong familiarity near the Dividend indemnity & keen Structure to measure the procedure of the comp both. By preparing this report we be analyzeing to closeness of the over any d ividend policy & detonating device Structuring. Moreover the facile objective of the report is to acquire knowledge ab come on(predicate) the insights of interpreting the proportions. Preparing this report such kind of f etc.ings is extremely beneficial for us as the students of finance. context of the Report: This report is based on the dividend policy & hood Structuring.\r\nThrough this report we are try to focus on the area related to the pecuniary performance of the companies. We particularly focus on dividend policy & jacket crown Structuring and related balances; as those are the major(ip) index of the performance assessment of a star sign. methodological analysis: For execution of the report we use of goods and services MS dresser software. Topic of the report is not permitting us to in institutionalize signal info from primary sources. As the report essential be pointual, the data source of this report is basically secondary sources. We ga at that placed our relevant data from the unlike ut boundosticals published by the twain cement companies.\r\nWe in addition collect our relevant tuition from different books as hygienic. We too collected round data from the proceeds to broaden our scope of analysis. Dhaka Stock commuting websites, Meghna cements mills website, presumption cementum Ltd, websites are a couple of(prenominal) of them. Limitations: • Inadequate knowledge in studying reports. • overleap of in-depth understanding of certain terminals and concepts prevented us from expi symmetryn into details. • deprivations of research. • Unavailability of updated data. • Time limitation is besides been there. • Lack of education and coordination. Confidentiality of data was an former(a)(a) imperative barricade that was faced during the conduct of this study. • Power Crisis. ? ? ? 2| scalawag Dividend policy ? Dividend: Dividends are wagess made by a club to its contendh sure-enough(a)ers. It is the portion of merged services holding out to blood lineholders. When a corpo balancen pull aheads a profit or surplus, that m wizy shag be put to two uses: it tail either be re-invested in the business (called observeed dough), or it basin be nonrecreational to the per centumholders as a dividend. Many corpo dimensionns retain a portion of their mesh and pay the counterbalance as a dividend.\r\nFor a joint storehouse up family, a dividend is allocated fast as a decided amount per piece. Therefore, a sellholder fools a dividend in proportion to their functionholding. For the joint stock phoner, paying dividends is not an expense; rather, it is the division of an summation among takeholders. realness companies greennessly pay dividends on a fixed schedule, entirely may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one. Cooperatives, on the other hand, allocate dividends jibe to members activity, so their dividends are often considered to e a pre-tax expense. Dividends are popularly settled on a property basis, as a gain from the caller-up to the shareholder. They rat tear other forms, such as store credits ( reciprocal among retail consumers cooperatives) and shares in the guild (either newly-created shares or existing shares bought in the commercialize. ) Further, many another(prenominal) man companies offer dividend reinvestment plans, which automatically use the silver dividend to leveraging spare shares for the shareholder. ? Forms of Payments: ? Cash dividends (most common) are those paid out in the form of a check.\r\nSuch dividends are a form of investment income and are usually taxable to the recipient in the division they are paid. This is the most common method of sharing corporal profits with the shareholders of the society. For each share owned, a tell amount of money is distributed. Thus, if a person owns deoxycytidine monophosphate shares and the cash dividend is $0. 50 per share, the person ordain be issued a check for 50 dollars. ? Stock dividends are those paid out in form of additional stock shares of the issuing corpo dimensionn, or other corpo proportionalityn (such as its subsidiary corporation).\r\nThey are usually issued in proportion to shares owned (for example, for e truly c shares of stock owned, 5% stock dividend get out present 5 extra shares). If this payment involves the issue of new shares, this is very similar to a stock split in that it make ups the total number of shares sequence first-class honours degreeering the terms of each share and does not alternate the marketplace capitalization or the total pry of the shares held. ? property dividends are those paid out in the form of assets from the issuing corporation or another corporation, such as a subsidiary corporation.\r\nThey are relatively rare and most ofttimes are securities of oth er companies owned by the issuer, however they end take other forms, such as products and services. ? Other dividends can be used in organized finance. monetary assets with a known market abide by can be distributed as dividends; warrants are sometimes distributed in this way. For large companies with subsidiaries, dividends can take the form of shares in a subsidiary come with. A common technique for â€Å"spinning off” a corporation from its arouse is to distribute shares in the new company to the old companys shareholders. The new shares can and so be traded independently. | pageboy ? Types of Dividend Policies: ? Constant-Payout-proportion Dividend Policy: A dividend policy based on the payment of a certain dower of earnings to owners in each dividend period. ? Regular Dividend Policy: A dividend policy based on the payment of a fixed-dollar dividend in each period. Often truehearted that use this policy add-on the regular dividend once a proven subjoin in ea rning has occurred. ? Low-Regular-and-Extra Dividend Policy: A dividend based on paying a low-down regular dividend, supplemented by an additional dividend when earnings are in broad(prenominal) spiritser than normal in a assumption period. Argument for Dividend Relevance : Gittman (10th edition) divided stock into two casefuls, such as common stock and prefer stock. He likewise showed that dividends are the outcome of investment. So, common stocks are an ownership claim once muchst primarily palpable or productive asset (Higgins, 1995), but he also said that if the company prospers, stockholders are the foreland beneficiaries, if it falters, they arc the chief losers. Smith (1988) presented that stocks arc one of the most popular forms of investment.\r\nPeople buy stocks for versatile soils: Some are stakeed in the semipermanent growth of their investment by buying low termsd stock of a new company in the hope of substantially growth of share legal injury over the ne xt few categorys. Another reason he suggested that in a well realised unwavering stockholders study the stock growth will be stable over the massive run. (Smith. 1988). Stockholders expect dividend but it is not promised (Gitman, 10th edition). Common stocks are hold by true owners of the business. Sometimes they are known as residual owners’ as they receive whatever left later winding up of the company (Gitman, 10th edition; Higgins 1995).\r\nAnother type of stock is known as prevalently owned stock. Common stock owned by a broad group of unrelated investors or institutional investors is called as generally owned stock. However, all common stock of a riotous owned by a small group of investors is denoted as nigh owned stock. When all the stock is owned by a single person is known as privately owned stock. Due to the limit of number of share, stock can be classified in to four types. Such as authorize share, enceinte share, treasury stock and issued stock (Gitman , 10th edition). authorize shares represent the maximum number of shares a unshakable allows to issue.\r\nOutstanding shares are hold by public. exchequer stock is repurchased by regular itself and it is no thirster considered as heavy(p) share. Issued shared are the shares that urinate been put into circulation. Recently stock repurchase survival is very popuLar as it is able to increase stock value by decreasing outstanding stock number ( sort. 1976). Port also suggested that firms should negate issuing stock to pay dividend as they lento down company growth. According to Short and Wclsch (1990), Johns (1998) and Port (1976), a dividend is a usually distributed in cash form to stock holders of a corporation ratified by the board of film director.\r\nIt may also involve stock dividend or other forms of payment. A stock dividend represents a distribution of additional shares to common stockholders (Higgins, 1995). On the other hand. Ross et al. (2005) divided earnings in to two part; either it is retained or paid as dividend. Whereas Wild et al. (2001), Johns (1998) and Kieso et al. (2004) argued that retained earnings are the primary source of dividend distribution to the stockholder. Dividends are unaccompanied cash payments regularly made by corporations to their stockholders (Johns, 1998).\r\nHe also specified that they are decided upon the declaration by the board of the directors and can range from zero to some any amount the corporation can leave to pay. 4|Page Jones (2005) said that dividends are the only cash payment a stockholder receives at present from firm and these are the rigation of valuation for common stocks. Stock equipment casualty response to an unexpected dividend change announcement is related to the dividend preferences of the marginal investor in that firm where other things remaining same(p) (Denis et al. , 1994). In addition, a company. Which changes dividend policy, is expected to xperience upward or downward trend s in share returns (Gunasekarage et al. , 2006). They also said that for the initiating firms, the share prices keep to rise even after the initial public offering (IPOs). Higgins (1995) said that if the company will conduct less money to invest or it will have to raise more money from out-of-door sources to make the same investments stockholders claim on emerging cash flow, which reduces share price appreciation. Moreover, during dividend announcement period stock price also fluctuate repayable to announcement of dividend. Mulugetta et al. 2002) examined the impact of Standard and Poor are ranking changes on stock prices. In addition, Affleck-Graves & Mendenhall (1992) found that stock price reacts after 8 age on second-rate up to 54 days of such earning announcement. With this believe, Hampton (1996) said that value of stock increase by more dividend and share remain undervalued by abase dividend policy. In addition, he also showed that there are two schools of thoug ht regarding with the effect of dividend on stick price, one is dividends do not require market price and the another one is dividend policies have profound effects on a firm’s side in the stock market. Benartzi et al. (1997), Ofer and Siegel’s (1987) and Bae (1996) found a positive correlation among share price and dividend. Furthermore. Campbell and Shiller (1988) found a affinity among stock prices, earnings and expected dividends and he drives a finis that earnings and dividends is powerful in predicting stock returns over several years. Wilkic analyzed a 76 months share price index and dividend announced. He found a correlation coefficient. Which was under 0. 7 for the period 76 months and he also get that the maximum value of the regression coefficient being reached after 79 months.\r\nMoreover. ShilLer (1984. 1989) recommended investors in his study to buy the stocks when price is low relative to dividends and to sell stocks when it is heights payoffs. On the other hand to their opinion, Jensen and Johnson (1995) suggested that, dividend cut results reduction in share price. More interesting matter is that if capital markets are perfect, dividends have no influence on the share price (MilLer and Modgliani, 1961). MiLler and ModgLiani (1961) also states that if the market is imperfect, dividend may affect stock price. ? Current Practices of Dividend Policy in Bangladesh:\r\nAs Bangladesh is a developing country, the corporate culture is growing very slightly in our country. Dividend policy is a major financing finding that involves with the payment to shareholders in return of their investments. Every firm operating in a given effort follows some sort of dividend payment pattern or dividend policy and obviously it is a financial indicator of the firm. Thus, demand of the firm’s share should to some extent. Dependant on the firm’s dividend payment pattern. Many investors like to watch the dividend yield, which is calcu lated as the yearly dividend income per share divided by the stream share price.\r\nThe dividend yield measures the amount of income received in proportion to the share price. If a company has a low dividend yield compared to other companies in its orbit, it can mean two things: (1) the share price is high because the market reckons the company has impressive prospects and isn’t to a fault worried about the company’s dividend payments, or (2) the company is in trouble and cannot afford to pay reasonable dividends. At the same time, however, a high dividend yield can signal a cat company with a depressed share price.\r\nDividend yield is of little importance for growth companies because, retained earnings will be reinvested in expansion opportunities, bighearted shareholders profits in the form of capital gains. 5|Page MEGHNA CEMENT limited (MCML) ? OVERVIEW OF THE COMPANY The Meghna cementum move Limited (MCML) was the first undertaking Bashundhara multitude in t he manufacturing sector. This enterprise produces world-class cement and, as a testimony to this, stands the fact that the concern has been awarded the ISO-9001 credential for sustained quality control effort. The Company markets its cement under the registered trademark of King brand”. ? basic info: Market Category: A 400. 0 225. 0 100 2250040 exotic 0 Public 10 Listing social class:1995 Authorized pileus in BDT (mn) Outstanding Capital in BDT (mn) show cheer good no. of Securities theatrical role dowery Sponsor/ theater director 58 Govt. 0 appoint 32 Graph 1: The Market price of share of MCML in 2008-2009 (Highest Value: 678. 25, Lowest Value: 336. 25) 6|Page ? Dividend Policy Followed By Meghna cement Ltd: EPS Dividend Payout Cash proportionality 24. 15 279 216% 25. 00 22. 80 348 164 25. 00 7. 37 246 75 25. 00 5. 93 277 54 25. 00 5. 35 352 46 30. 00 65. 6 1502 75 one hundred thirty 13. 12 300. 75 26 Table 1: Financial data of MCML from 2004-2008 P/E ratio a ppoint scathe(MKT. ) Dividend fillip Share 0 0 0 0 0 0 0 replete(p) 25. 00 25. 00 25. 00 25. 00 30. 00 130 26 grade 2004 2005 2006 2007 2008 check comely 11. 57 15. 25 33. 38 46. 71 65. 86 172. 77 34. 554 edition: According to the above information it is subgross that the company is following regular dividend policy ( match to comment as given above). From 2004-2007 though the profit has change magnitude subsequently but it was not sufficient for payment of dividend at a rate of the preceding years to all share holders of the company.\r\nFor upholding the benefit and interest of general public the sponsors shareholders/Directors have decided to give up their dividend during those years under review of maintaining 31 consonant dividend policy for the 30 general public shareholders. So the 29 board of directors of the company 28 fortunate to recommend cash dividend 27 26 @ 25% on par value of shares for the 25 public share holders taking into 24 consideration the profit an d liquidity 23 locating of the company during that 22 period under reviewed. 004 2005 2006 2007 2008 But In 2008, the EPS change magnitude by almost tot Dividend 25 25 25 25 30 Paid 50% from forward year. So the directors ? Dividend decided to increase the dividend percentage to 30% instead of 25%. The company paid 25tk per share as dividend from 2004-2007 but in 2008 as the income increased by almost 50% than the previous year it paid a dividend of 30tk for the earnings of 2008. Total Dividend Paid Share Price(MKT. ) 400 350 Share Price (MKT. ) 300 250 200 The dividend policy that followed by the company has an impact on its share price. 150 As the represent shows the share price has 100 an change magnitude trend.\r\nAs the company 50 declared 25% dividend per share from 0 2004-2005 this was more than its EPS so 2004 2005 2006 2007 2008 the share price increased and reached to Share Price(MKT. ) 279 348 246 277 352 350tk. But in 2006- 2007 the dividend was begin than its EPS so the share price declined and once again increased in 2008 with an increase in dividend. 7|Page federal agency cement Limited (CCL) ? OVERVIEW OF THE COMPANIES say-so cement Limited is the first private sector cement manufacturing company in Bangladesh established in early 90s with having 4,80,000 M/T yearbook drudgery capacity at Chittagong, 16 K.\r\nM away(p) from Chittagong port, besides Dhaka Chittagong highway. CCL is the first ISO-9002 certified cement manufacturing in Bangladesh. It has a unique management system in quality Assurance, Marketing, Sales, and Procurements. It manufactures ordinary Portland cement. Our company aims to be the number one cement manufacturing company in Bangladesh, through continuous development and by producing high & consistent quality cement to meet all customers requirement at all time.\r\nTo achieve these objectives CCL uses recent machineries, calibrated testing equipments, computerized packing & raw materials mix device s in its production process. Additionally the company frequently arranges internal & external training program for the faculty of all level to develop the potentiality and acquisition of its human resources. CCL is always keen to keep the customers well-provided by proving the take up possible service. ? Basic Information: Market Category: A 500. 0 209. 0 100 2090000 Govt. 0 Institute 25. 37 Foreign 0 Public 49. 17 Sponsor/Director 25. 46\r\nListing class:1995 Authorized Capital in BDT (mn) Outstanding Capital in BDT (mn) organisation Value Total no. of Securities Share role Graph 2: The Market price of share of MCML in 2008-2009 (Highest Value: 627. 25, Lowest Value: 268. 5) 8|Page ? Dividend Policy Followed By assertion cementum Ltd: Earnings per share -12. 65 10. 95 21. 65 27. 73 -14. 98 Diluted Earnings per share n/a n/a n/a n/a -13. 62 web addition Value Per Share 319. 83 326. 28 332. 93 345. 66 330. 67 Diluted light up Asset Value Per Share n/a n/a n/a n/a 300. 62 net profit service after levy (mn) -24. 04 20. 81 41. 13 52. 8 -28. 46 socio-economic class eradicate P/E -9. 50 10. 78 6. 40 13. 30 n/a % Dividend % Dividend Payout proportionality 46% 69% 54% Year 2004 2005 2006 2007 2008 5. 00 5. 00 15. 00 15. 00 10%B Interpretation From the above information it is visible that the company follows the regular dividend policy. That is the policy of the company is to pay a perticular dividend amount and if there’s high earning for perticular year and if earning per share increases they also increase their Dividend amount. In 2004, due to tough competition the company couyld not earn desiered profit. This year EPS is tk(12. 65).\r\nHowever considering the 16 interest of shareholders the board of 14 directors decleared 5% dividend from 12 dividend play offization fund. In 2006 and 10 2007 , as the EPS increases than the 8 previous year so the board of director 6 decided to pay dividend of 15% per 4 share. But in 2008 the company 2 d ecleared a 10% bonous dividend which indicates the company has used 0 2004 2005 2006 2007 their earnings for farther investment so the company didn’t give any cash % Dividend 5 5 15 15 dividend. Dividend From the graph it is slowly indentifiable that the share price had strong relationship with dividend.\r\nIn 2004 the company decleared a dividend of 5% per share when it had a EPS of (12. 65) the increased. In 2006-2007 for an increased dividend of 15% the share price also maxmized and again declined in 2008 due to 10% Bonous dividend decleared by the company. Share Price (MKT) 400 350 300 250 200 150 100 50 0 Share Price (MKT) 2004 289 2005 250 2006 225 2007 368. 8 2008 318 9|Page Capital Structure Capital social organisation refers to the way a corporation finances its assets through some confederacy of equity, debt, or hybrid securities.\r\nA firms capital structure is then the composition or ‘structure of its liabilities. For example, a firm that sells $20 billio n in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firms ratio of debt to total financing, 80% in this example, is referred to as the firms leverage. In reality, capital structure may be highly complex and include tens of sources. wagon train proportion is the proportion of the capital employed of the firm which come from outside of the business finance, e. g. by taking a long term loan etc.\r\nThe Modigliani-Miller theorem, proposed by Franco Modigliani and Merton Miller, forms the basis for modern thinking on capital structure, though it is generally viewed as a purely theoretical result since it assumes away many important factors in the capital structure decision. The theorem states that, in a perfect market, how a firm is financed is contrary to its value. This result provides the base with which to examine real world reasons why capital structure is relevant, that is, a companys value is affected by the capital structure it emplo ys.\r\nThese other reasons include bankruptcy costs, agency costs, taxes, information asymmetry, to mention some. This analysis can then be widen to look at whether there is in fact an optimal capital structure: the one which maximizes the value of the firm. 10 | P a g e Capital Structure Meghna cement Mills LTD. Items Total Current Asset frozen Asset Total Asset Current financial obligation big term Debt Total Debt/ Total Liability Total uprightness Share Outstanding concluding Income Earnings onwards interest and tax Retained Earnings enkindle Charges/ Financial Expenses Market Price Per Share Debt to Total Assets ???????????????????? ???????????????? ???????????????????? ???????????????????????? big term Debt ratio ???????????????????? ???????? ???????????????? = ???????????????????? ???????????????????????? Debt to righteousness ???????????????????? ???????????????? = ???????????????????? ???????????????????????? Year 2004 1,003,252,653 1,422,581,752 2,500,368,171 95 2,991,742 923,377,280 1,885,115,488 615,252,683 2,250,040 26,021,799 195,208,573 390,248,683 162,297,008 279 Financial Information Year Year 2005 2006 979,316,891 1,427,560,032 2,406,876,923 970,701,416 812,529,812 1,783,231,228 623,645,695 2,250,040 34,311,762 176,319,775 398,641,695 67,785,759 348 2004 75. % 2005 74. 1% 1,189,929,096 1,397,087,008 2,587,016,104 1,197,987,718 718,168,213 1,916,155,931 670,860,173 2,250,040 75,106,875 201,332,892 445,856,173 118,067,797 246 2006 74. 1% Year 2007 1,064,749,181 1,378,737,392 2,443,486,573 1,128,318,964 787,868,674 1,916,187,638 527,298,935 2,250,040 105,096,707 236,610,206 88,286,676 120,127,996 277 2007 78. 4% Year 2008 1,588,397,601 1,307,816,629 2,896,214,230 1,443,833,003 833,152,269 2,277,035,172 619,228,958 2,250,040 148,181,023 278,378,580 57,399,542 99,849,906 352 2008 78. 6% coherent line Debt Solvency 6. 9% 33. 8% 27. 8% 32. 2% 28. 8% 3. 06 2. 86 2. 86 3. 63 3. 68 Times please take in ???????????????? = ????????????????? ??????????????? ???????????????????????????? 1. 20 2. 60 1. 71 1. 97 2. 79 Interpretation: According to the above information we can vocalise that the company has a higher debt in its capital structure. As its Debt/Asset ratio shows from 2004-2008 it has been maintaining almost same amount of debt which is 75% of total assets in its capital structure. It indicates the company is a highly leveraged firm and more risky in terms of debt.\r\nAccording to Long term debt ratio the company maintained a long term debt of around 33% from 2004 †2008, which also indicates that the company had higher short term debt than it’s long term debt. Time interest earn ratio indicates that the company has enough liquid asset to payback its interest expenses. However Debt/ legality ratio shows the company had a capital structure containing higher debt than its equity. The total debt amount fluctuates throughout this given 5 years but it remains almost leash times than its total equity. 11 | P a g e Capital Structure: confidence cementum Mills LTD.\r\nFinancial Information Items Year 2004 Year 2005 482627000 570818000 1053645000 429290000 4421000 52985936 433711722 619933000 1900000 20814000 176,319,775 208362754 21573000 250 Year 2006 424937956 580334331 1005272287 362205475 10501799 61807398 372707274 661065000 1900000 41132000 201,332,892 220862754 17559894 225 Year 2007 535307861 564884690 1100192551 413902667 1040702 97073198 414943369 685249000 1900000 52684000 236,610,206 240862754 19968848 368. 8 Year 2008 564074297 590057449 1154131746 525841496 0 58606753 525841496 628290000 1900000 -28459000 278,378,580 221862754 26294826 318\r\nTotal Current Asset Fixed Asset Total Asset Current Liability Long term Debt Account Payable/ raft Creditors Total Debt/ Total Liability Total righteousness Share Outstanding Net Income Earnings beforehand interest and tax Retained Earnings kindle Charges/ Financial Expenses Market Price Per Share 357315000 579526135 936841360 3 29088697 83293 39197784 329171990 607669370 1900000 -24039000 195,208,573 207412754 25264715 289 12 | P a g e Long confines Debt Solvency Debt to Total Assets ???????????????????? ???????????????? = ???????????????????? ???????????????????????? 2004 35. 1% 2005 41. 2% 006 37. 1% 2007 37. 7% 2008 45. 6% Long term Debt ratio ???????????????????? ???????? ???????????????? = ???????????????????? ???????????????????????? Debt to Equity = ???????????????????? ???????????????? ???????????????????? ???????????????????????? 0. 00% 0. 4% 1. 0% .01% 0. 00% 0. 05 0. 02 .02 .01 .01 Times Interest take in ???????????????? = ???????????????????????????????? ???????????????????????????? -1. 951485 -0. 035183 2. 54968 2. 9453453 -2. 0823 Interpretation: According to the above information we can say that the company has a lower debt in its capital structure.\r\nAs its Debt/Asset ratio shows from 2004-2008 it has been maintaining increasing amount of debt in its capital structure which was 35. 1% in 2004 & reached to45. 5% in 2008. It indicates the company is a moderately levered firm and risky in terms of debt. According to Long term debt ratio the company maintained cypher long term debt only 2% in 2006, which also indicates that the company had higher short term debt than it’s long term debt. Time interest earn ratio indicates that the company has did not had enough earning to payback of its interest other than the year of 2006 &2007.\r\nHowever Debt/Equity ratio shows the company had a capital structure containing lower debt than its equity. The total debt amount remained almost constant throughout this given 5 years which is very paltry than its total equity. 13 | P a g e comparative Analysis 14 | P a g e Divedend Policy Comparative Financial Data Analysis The financial data we gathered to find out the relationship between various variables with price of two different cement companies arc given. We attempted to explore some conclusion on the behavioral pattern of changing the share market price due to dividend, dividend policies followed.\r\nThe data are extracted from annual reports of two selected companies that are The Meghna cement Mills Limited (MCML) and effrontery cementum Limited . The annual data of these companies has been taken from the annual reports and other annual publications of Dhaka Stock Exchange. self-assurance cementum Ltd Net Net Year % Asset network End Dividend Value After P/E Per revenue enhancement Share (mn) Meghna cement Ltd Net Year % Profit End Dividend After P/E revenue (mn) sedulousness Average Net Year % Profit End Dividend After P/E Tax (mn) Year Earning per share % Dividend Payout balance Earning per share Net Asset Value Per Share Dividend Payout Ratio Earning per share Net Asset Value Per Share % Dividend Payout Ratio 2004 2005 2006 2007 2008 -12. 65 10. 95 21. 65 27. 73 -14. 98 319. 83 326. 28 332. 93 345. 66 330. 67 24. 04 20. 81 41. 13 52. 68 28. 46 -9. 5 10. 78 6. 4 13. 3 n/a 10%B 5 5 15 15 46% 69% 54% 11. 57 15. 25 33. 38 46. 71 65. 86 273. 44 26. 02 277. 17 34. 31 298. 15 320. 42 275. 20 75. 11 105. 10 148. 18 24. 21 25. 00 20. 61 25. 00 216% -0. 54 164 13. 1 75 27. 515 54 37. 22 46 25. 44 301. 72 315. 55 333. 04 302. 93 27. 56 58. 12 78. 89 59. 86 15. 69 7. 02 9. 61 5. 35 15 20 20 30 105 72 54 46 296. 63 0. 99 7. 5 15 216 7. 64 5. 92 5. 35 25. 00 25. 00 30. 00 15 | P a g e Interpretation: Earnings Per Share: The effort fair(a) of EPS is tk. (. 54), 13. 1, 27. 51, 37. 22, and 25. 44 for the year 2004, 2005,2006,2007,2008 consecutively. In 2004 EPS of Meghna cement Ltd was 11. 57 & after that EPS has increased and reached up to 65. 86 in 2008, So that, the graph shows that the EPS of Meghna Cement is well above of the patience amount EPS. In 2004 EPS of bureau Cement Ltd was (12. 65) & after that EPS has increased and reached up to 27. 63 in 2007. After that EPS has fall again and reached to (14. 8)So that, the graph shows that the EPS of trust Cement is well on a lower floor of the constancy bonnie EPS. Comperative EPS 70 60 50 40 30 20 10 0 -10 -20 2004 2005 2006 2007 2008 authorisation -12. 65 10. 95 21. 65 27. 73 -14. 98 Cement Ltd Meghna 11. 57 15. 25 33. 38 46. 71 65. 86 Cement Ltd assiduity Average -0. 54 13. 1 27. 515 37. 22 25. 44 So, check to our Comparative EPS analysis, we can easily say that Meghna Cement Ltd. is in the scoop out position where self-reliance Cement Ltd is the bruise position. Price Earnings Ratio: The manufacture norm of P/E ratio is tk. 7. 5, 15. 69, 7. 02, 9. 61, and 5. 5 for the year 2004, 2005,2006,2007,2008 consecutively. In 2004 P/E ratio of Meghna Cement Ltd was 24. 21 & after that P/E has decreased gradually and reached to 5. 35 in 2008, so concord to labor second-rate, the graph shows that the P/E ratio of Meghna Cement is well above up to 2006 of the persistence average P/E, then in 2007 it’s ratio falls downstairs the diligence average and in 2008 e qual to diligence average due nonexistence of P/E ratio of self-assurance Cement in 2008. Comparative P/E Ratio 30 25 20 15 10 5 0 -5 -10 -15 cartel Cement Ltd 2004 -9. 5 2005 10. 78 2006 6. 4 7. 64 2007 13. 5. 92 2008 Meghna 24. 21 20. 61 Cement Ltd 5. 35 In 2004 P/E ratio of Confidence Cement Ltd was Industry 7. 35 15. 69 7. 02 9. 61 5. 35 Average (9. 5), after that EPS has increased to 10. 78 in 2005, then again decrease in 2006 and in 2007 it has increased to 13. 3. In 2008 there is no existence of P/E due to no cash dividend declared by the company. So, gibe to Industry average, the graph shows that the P/E ratio of Confidence Cement is well below up to 2006 of the manufacture average P/E, then in 2007 its ratio rise above the industry average and in 2008 no P/E as discussed earlier.\r\nSo, according to our Comparative P/E ratio analysis, we can easily say that Meghna Cement Ltd. is in the stovepipe position where Confidence Cement Ltd is the worst position. 16 | P a g e Comparative Dividend Dividend Per Share: The industry average of DPS is tk. 15, 15, 20, 20, and 30 for the year 2004, 2005,2006,2007,2008 consecutively. From 2004 to 2007 DPS of Meghna Cement Ltd was 25 & after that DPS has increased to 30 in 2008 due to extra earning as discussed before. So according to Industry average, the graph shows that the DPS of Meghna Cement is well above up to 2007 of the industry average DPS.\r\nIn 2008 DPS is equal to industry average due nonexistence of Dividend of Confidence Cement in 2008. 35 30 25 20 15 10 5 0 Confidence Cement Ltd Meghna Cement Ltd Industry Average 2004 5 25 15 2005 5 25 15 2006 15 25 20 2007 15 25 20 2008 30 30 From 2004 to 2005 DPS of Confidence Cement Ltd was 5 & from 2006-2007 DPS has increased to 15 in 2008 due to extra earning as discussed before. So according to Industry average, the graph shows that the DPS of Confidence Cement is well below up to 2007 of the industry average DPS.\r\nIn 2008 there in no DPS of Conf idence Ltd. due nonexistence of Dividend. So, according to our Comparative DPS analysis, we can easily say that Meghna Cement Ltd. is in the best position where Confidence Cement Ltd is the worst position. Dividend Payout Ratio: The industry average of Payout ratio is 216, 105, 72, 54, and 46 for the year 2004, 2005,2006,2007,2008 consecutively. In 2004 Payout ratio of Meghna Cement Ltd was 216 which is equal to the industry average payout ratio because of non existence of payout ratio of Confidence Cement Ltd. in 2004.\r\nAfter that payout ratio has decreased gradually and reached to 46 in 2008, so according to Industry average, the graph shows that the payout ratio of Meghna Cement is equal to the industry average payout ratio in 2004, then it’s ratio rise above the industry average up to 2006 and in the last two years equal to industry average. Compative Payout Ratio Compative Payout Ratio 250 250 200 200 150 150 100 100 50 50 00 Confidence Confidence Cement Ltd Cement Ltd Meghna Meghna 216 216% Cement Ltd Cement Ltd Industry Industry 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 46 46 164 164 69 69 75 75 54 54 54 54 46 46 46 46 16 216 105 105 72 72 54 54 Average Average In 2004 there was no Payout ratio of Confidence Cement Ltd as mentioned earlier. After that payout ratio has increased in 2006 and then again decreased in 2007. In 2008 there is no payout ratio because there is no cash dividend. So according to Industry average, the graph shows that the payout ratio of Confidence Cement is well below compare to the industry average payout ratio in 2005 & 2006, and then its ratio is equal to the industry average in 2007. In 2008 there is no payout ratio as discussed before.\r\nSo, according to our Comparative DPS analysis, we can easily say that Meghna Cement Ltd. is in the best position where Confidence Cement Ltd is the worst position. 17 | P a g e Capital Structure Interpretation: Debt/Asset Ratio: The industry average of Debt/Asset Ratio for the year 2008 is 62. 1%. Debt/Asset Ratio of Meghna Cement Ltd is 78. 6% and Confidence Cement Ltd. is 45. 6%. So, according to industry average Confidence Cement is in the best position while Meghna Cement Ltd is in the worst position. Long Term Debt Ratio: The industry average of Long Term Debt Ratio for the year 2008 is 14. %. Long Term Debt Ratio of Meghna Cement Ltd is 28. 8%, and Confidence Cement Ltd. Is 0%. So, according to industry average Confidence Cement is in the best position and Meghna Cement Ltd is in the worst position. Debt Management Ratio 4 3 2 1 0 -1 -2 -3 Debt to Total Assets Confidence Cement Mills LTD 2008 Industry Average 0. 456 Long term Debt ratio 0 0. 288 0. 144 Debt to Equity 0. 01 3. 68 1. 845 Times Interest Earned -2. 0823 2. 79 0. 35385 Meghna Cement Mills LTD 0. 786 0. 621 Debt to Equity Ratio: The industry average of Debt/equity Ratio for the year 2008 is 184. 5%.\r\nDebt/equity Ratio of Meghna Cement Ltd is 368%, and Confidence Cement Ltd. is 1 %. So, according to industry average Confidence Cement is in the best position Meghna Cement Ltd is in the worst position. Time Interest Earned: The industry average of Time Interest Earned for the year 2008 is 0. 5385. Time interest earned for Meghna Cement Ltd is 2. 79; Confidence Cement Ltd. is -2. 0823. So, according to industry average Meghna Cement is in the best position and Confidence Cement Ltd is in the worst position. give in on Assets: The industry average of Return on Assets for the year 2008 is 2%.\r\nReturn on Assets of Meghna Cement Ltd is 5. 1%, and Confidence Cement Ltd. Is (2. 5%). So, according to industry average Meghna Cement is in the best position Confidence Cement Ltd is in the worst position. Return on Equity: The industry average of Return on equity for the year 2008 is 0. 26%. Return on Equity of Meghna Cement Ltd and Confidence Cement Ltd. Is (4. 5%). So, according to industry average Meghna Cement is in the best position Confidence Cement Ltd is in the worst position. Profitability Ratio 30. 00% 25. 00% 20. 00% 15. 00% 10. 00% 5. 0% 0. 00% -5. 00% -10. 00% Meghna Cement Confidence Cement industry Average Return on Asset 5. 10% -2. 50% 2% Return on Equity 23. 90% -4. 50% 26% 18 | P a g e References ? Intermediate chronicle ( 11th Edition),Donald E. Kieso ? The Analysis and Use of Financial Statements(3rd Edition),Gerald I. sporty ? Scott Besely & Eugene F. Brigham, â€Å"Essentials of Managerial Finance”, Thirteenth Edition, ? ? ? ? Thomson South-Western, Ohio, 2006 www. bashundharagroup. com/mcml/ www. confidencegroupbd. com/cement/ www. dsebd. org www. wikipedia. com 19 | P a g e\r\n'