Desco Final Account Analysis

8/13/2019 Desco Final Account Analysis

1/26

Analyzing Financial Statements

Submitted To:

Mr. Sheikh Abu Taher

Lecturer and Course Teacher

FNB 106 : Financ ial Accounting

Submitted By:

Student name ID

Nadisha ahmed 591

Rafiur Rahman 600

K.M. Sakib (Group Leader) 605

Mohsi nihad mosabbir ornab 613

August 24,2011Assignment

Department of Finance & Banking

J ahangirnagar University, Dhaka, Bangladesh


2/26


3/26

35DESCO Annual Report 2010

Financial Statements


4/26DESCO Annual Report 201036

APPLICATIONOF FUND

Non Current AssetsProperty, Plant&Equipment 2 8,440,892,392 7,293,090,558

Capital Work -in- Progress 3 335,313,744 50,442,120

InvestmentinShares 4 29,131,000 23,392,193

8,805,337,136 7,366,924,871

Current Assets

StoresandSpares 5 4,671,791,624 4,840,363,451

AccountsReceivable 6 2,375,140,475 2,130,059,408

Advances&Deposits 7 134,659,063 204,155,440

AdvanceIncomeTax 8 438,322,022 386,901,394

CashandBank Balances 9 9,668,541,622 8,491,302,150

17,288,454,805 16,052,781,843

Current LiabilitiesCreditorsforGoods/Works 10 1,028,992,195 1,081,397,673

AccountsPayable 11 1,865,308,079 1,631,201,600

CreditorsforOtherFinance 12 747,920,808 714,182,281

CreditorsforExpenses 13 79,095,756 78,605,476

CurrentMaturityofLongTermLoans 14 257,279,761 254,502,284

AccruedInterestonLoans 15 359,487,193 488,677,181

ProvisionforIncomeTax 16 405,311,657 718,119,385

4,743,395,449 4,966,685,880

Net Current Assets 12,545,059,356 11,086,095,962

21,350,396,492 18,453,020,833

SOURCESOF FUND

Capital &Reserves

ShareCapital 17 1,601,704,440 1,334,753,700

ShareMoneyDeposit 18 75,000,000 75,000,000

GOBEquity 19 1,552,140,000 1,552,140,000

ProposedDividend 38 - 600,639,165

Retainedearnings 20 5,531,011,195 3,757,874,232

Equity 8,759,855,635 7,320,407,097

Long Term Liabilities

LoanfromADB/GOB 21 6,482,508,563 5,368,637,037

DeferredTaxLiability 35.2 1,213,835,706 990,291,231

DuetoDESA(forassetstakenover) 22 4,039,671,539 4,039,671,539

ConsumerSecurityDeposits 23 854,525,049 734,013,930

12,590,540,857 11,132,613,736

21,350,396,492 18,453,020,833

Thesefinancialstatementsshouldbereadinconjunctionwiththeannexednotes.

CompanySecretary Director (Finance) Director ManagingDirector

Signedintermsofour separatereportofevendateannexed.

Dhaka, 31 October, 2010 Aziz HalimKhair Choudhury

CharteredAccountants

Balance Sheet as on 30 June 2010

Particulars Note 30 June 2010 30 June 2009

Taka Taka


5/26DESCO Annual Report 2010 37





OPERATING REVENUE

EnergySales(NetofVat) 24 10,810,974,226 9,799,615,712OtherOperatingRevenue 25 178,217,188 205,225,995

Total Revenue fromOperation 10,989,191,414 10,004,841,707

COST OF ENERGY SALES

EnergyPurchase(includingwheelingCharge) 26 7,845,646,912 7,117,531,238

OperatingExpenses 27 243,981,218 223,793,553

Depreciation(Operating) 34 566,749,957 518,475,544

8,656,378,087 7,859,800,335

Gross Margin 2,332,813,327 2,145,041,372

COST &EXPENDITURE

AdministrativeExpenses 28 126,159,977 104,840,703

EmployeeExpenses 29 619,018,529 334,395,921

BadDebtsProvision 6.2 12,007,263 11,015,698

Depreciation(NonOperating) 34 41,347,127 36,666,370

798,532,896 486,918,692

Operating Profit 1,534,280,431 1,658,122,680

NONOPERATING INCOME/(EXPENSE)

InterestIncome 30 872,083,490 666,222,788

InterestExpenses 31 (221,200,045) (169,794,396)

Exchange(Loss)/Gain 32 (32,193,487) (10,580,118)

Appreciation/ (diminution)invalueofInvestment 4.1 5,738,807 (5,738,807)

MiscellaneousIncome 33 2,603,285 2,577,507

Non Operating Income(Net) 627,032,050 482,686,974

Net Profit before tax 2,161,312,481 2,140,809,654

INCOME TAX

CurrentTaxProvision 35.1 (149,037,371) (533,472,132)

DeferredTaxProvision 35.2 (223,544,475) -

(372,581,846) (533,472,132)

Net Profit After Tax 1,788,730,635 1,607,337,522

Basic Earnings per Share 36 111.68 100.35


Income Statement for the year ended 30 June 2010

Particulars Note 2009-2010 2008-2009

Taka Taka


6/26DESCO Annual Report 201038

FOR

THE YEAR

EN

DED30

JUN

E20

10

Balance at 1st July 2009 1,334,753,700 75,000,000 1,552,140,000 3,757,874,232 600,639,165 7,320,407,097

GOBEquity - - - - - -

Netprofitfortheyear - - - 1,788,730,635 - 1,788,730,635

Priorsyear'sadjustment 37 - - - (15,593,672) - (15,593,672)

Stock Dividendpaid 266,950,740 (266,950,740) -

CashDividendpaid - - - - (333,688,425) (333,688,425)

Balance at 30June 2010 1,601,704,440 75,000,000 1,552,140,000 5,531,011,195 - 8,759,855,635

FORTHE YEARENDED 30JUNE 2009

Balance at 1st July 2008 1,334,753,700 75,000,000 1,264,440,000 1,478,782,960 317,798,500 4,470,775,160

GOBEquity - - 287,700,000 - - 287,700,000

Netprofitfortheyear - - - 1,607,337,522 - 1,607,337,522

Priorsyear'sadjustment 37 - - - 1,272,392,915 - 1,272,392,915

ProposedDividend - - - (600,639,165) 600,639,165 -

Dividendpaid - - - - (317,798,500) (317,798,500)

Balance at 30June 2009 1,334,753,700 75,000,000 1,552,140,000 3,757,874,232 600,639,165 7,320,407,097






Statement of Changes in Equity for the year ended 30 June 2010

Particulars Note Share Share Money GOB Reserve Proposed Total

Capital Deposit Equity & Surplus Dividend Taka


7/26DESCO Annual Report 2010 39

A.CASH FLOW FROM OPERATING ACTIVITIES

ReceivedfromEnergySales 10,736,499,500 9,714,268,126CollectionofGovt.Duty, VAT &Tax 589,913,372 552,723,170

ReceivedfromOtherOperating&NonOperatingActivities 319,559,818 249,396,178

ReceivedagainstFinancial Income 803,683,195 598,413,710

PaymentforEnergyPurchase (7,842,804,434) (6,838,886,262)

PaymentforEmployeeExpenses (619,900,904) (331,336,879)

PaymentforAdministrative&OtherExpenses (124,787,322) (101,367,992)

PaymentforInterestonLongTermLoan (195,862,119) (279,224,646)

IncomeTaxPaid (431,843,705) (562,712,744)

PaymentforGovt.Duty, Vat&Tax (774,193,750) (526,897,787)

Net cash inflowfromoperating activities 2,460,263,651 2,474,374,874

B.CAS

H FLO

W FRO

MIN

VESTIN

GAC

TIVITIES

AcquisitionofProperty&Plant (193,473,710) (557,901,078)

AcquisitionofStores&Equipment (2,096,556,826) (3,584,094,636)

Net cash used in investing activities (2,290,030,536) (4,141,995,714)

C.CASH FLOW FROM FINANCING ACTIVITIES

LongTermLoanreceived 1,445,003,853 2,856,377,073

DividendPaid (323,318,100) (125,674,650)

LongTermLoanPaid (235,190,514) (271,128,954)

ConsumerSecurityDeposits 120,511,119 150,708,490

Net cash inflowfromfinancing activities 1,007,006,358 2,610,281,959

D. Cash&Cashequivalentsincrease/(decrease)duringtheyear 1,177,239,472 942,661,119

E. Cash&Cashequivalentsatthebeginningoftheyear 8,491,302,150 7,548,641,031

F. Cash &Cash equivalents at the ending of the year 9,668,541,622 8,491,302,150






Cash Flow Statement for the year ended 30 June 2010

Particulars Note 2009-2010 2008-2009

Taka Taka


8/26

38

Taka

Note June 30, 2008 June 30, 2007

APPLICATION OF FUND

Non Current Assets

Property, Plant & Equipment 2 7,235,269,951 6,919,299,969

Capital Work -in- Progress: 3 51,695,861 68,146,338

Investment in Shares 4 29,135,000 -

7,316,100,812 6,987,446,307

Current Assets

Stores and Spares 5 774,928,505 916,718,318

Accounts Receivable 6 1,827,843,956 1,876,732,950

Advances & Deposits 7 239,853,243 106,318,194

Advance Income Tax 8 134,898,928 87,949,401

Cash and Bank Balances 9 7,548,641,031 5,667,737,073

10,526,165,665 8,655,455,937

Current Liabilities

Creditors for Goods 10 20,174,859 21,199,975

Creditors for Expenses 11 61,803,929 81,076,031

Creditors for Other Finance 12 511,497,336 413,509,773

Accounts Payable 13 1,351,935,828 1,271,910,501

Current Maturity of Long Term Loans 14 253,860,247 172,387,673

Accrued Interest on Loans 15 1,116,597,987 1,040,511,410

Provision for Income Tax 16 762,950,546 260,749,184

4,078,820,731 3,261,344,547

Net Current Assets 6,447,344,934 5,394,111,390

13,763,445,746 12,381,557,698

SOURCES OF FUND

Shareholders Equity

Share Capital 17 1,271,194,000 1,271,194,000

Share Money Deposit 18 75,000,000 75,000,000

GOB Equity 19 1,264,440,000 1,241,940,000

Proposed Dividend 36 381,358,200 317,798,500

Un-appropriated Profit 20 1,478,782,960 882,996,127

4,470,775,160 3,788,928,627

Deferred Tax Liability 34.2 1,608,542,769 1,058,542,769

Long Term Liabilities:

Loan from ADB/GOB 21 3,061,150,839 3,422,286,180

Due to DESA (For assets taken over) 22 4,039,671,539 3,666,534,532Consumer Security Deposits 23 583,305,439 445,265,589

7,684,127,817 7,534,086,302

13,763,445,746 12,381,557,698

This financial statement should be read in conjunction with the annexed notes.

Company Secretary Director (Finance) Director Managing Director

Signed in terms of our separate report of even date annexed.

Dhaka, October 26, 2008 A. Qasem & Co.Chartered Accountants

BALANCE SHEET as on June 30, 2008

DESCO A l R 2008


9/26

DESCO A l R 2008 3

INCOME STATEMENT for the year ended June 30, 2008

Taka

Note 2007-2008 2006-2007

Operating Revenue

Energy Sales (Net of VAT) 24 9,012,673,170 7,219,587,714

Other Operating Revenue 25 176,713,518 161,691,524

Total Revenue from Operation 9,189,386,688 7,381,279,238

Cost of energy Sales

Energy Purchase 26 6,151,294,250 4,946,360,677

Operating Expenses 27 302,356,176 393,778,258

Depreciation (Operating) 33 499,524,522 442,201,454

6,953,174,948 5,782,340,389

Gross Margin 2,236,211,740 1,598,938,849

Cost & ExpendituresAdministrative Expenses 28 77,366,239 73,721,100

Employee Expenses 29 273,295,215 206,076,932

Bad Debts Provision 1.9 99,088,395 9,573,967

Depreciation (Non Operating) 33 34,277,342 27,364,536

484,027,191 316,736,535

Operating Profit 1,752,184,549 1,282,202,314

Non Operating Income/(Expense)

Interest Income 30 529,177,699 247,105,883

Interest Expenses 30 (255,564,990) (283,783,491)

Exchange Gain/(Loss) 31 45,371,936 5,657,843

Miscellaneous Income 32 1,162,371 9,895,780

Total Non Operating Income/(Expense) 320,147,016 (21,123,985)

Net Profit before tax 2,072,331,565 1,261,078,329

Income Tax Expense

Current Tax Provision 34.1 (521,500,000) (150,000,000)

Deferred Tax Provision 34.2 (550,000,000) (400,000,000)

(1,071,500,000) (550,000,000)

Net Profit After Tax 1,000,831,565 711,078,329

Basic Earnings per Share 78.73 55.94

These financial statements should be read in conjunction with the annexed notes.



Dhaka, October 26, 2008 A. Qasem & Co.

Chartered Accountants


10/26


11/26

DESCO A l R 2008 4

Taka

Particulars Note Share Share Money GOB Reserve & Proposed Total

Capital Deposit Equity Surplus Dividend

Balance at Ist July 2006 1,271,194,000 75,000,000 1,235,940,000 413,600,294 254,238,800 3,249,973,094

GOB Equity - - 6,000,000 - - 6,000,000

Net profit for the year - - - 711,078,330 - 711,078,330

Prior year's adjustment 35 76,116,003 76,116,003

Proposed Dividend 36 - - - (317,798,500) 317,798,500 -

Dividend paid (254,238,800) (254,238,800)

Balance at June 30, 2007 1,271,194,000 75,000,000 1,241,940,000 882,996,127 317,798,500 3,788,928,627

Balance at Ist July 2007 1,271,194,000 75,000,000 1,241,940,000 882,996,127 317,798,500 3,788,928,627

GOB Equity - - 22,500,000 - - 22,500,000

Net profit for the year - - - 1,000,831,565 - 1,000,831,565

Prior year's adjustment 35 - - - (23,686,532) - (23,686,532)Proposed Dividend 36 - - - (381,358,200) 381,358,200 -

Dividend paid - - - - (317,798,500) (317,798,500)

Balance at June 30, 2008 1,271,194,000 75,000,000 1,264,440,000 1,478,782,960 381,358,200 4,470,775,160

These financial statements should be read in conjunction with the annexed notes.



Dhaka, October 26, 2008 A. Qasem & Co.Chartered Accountants

STATEMENT OF CHANGES IN EQUITY for the year ended June 30, 2008


12/26

Analyzing The Financial

Statements


13/26

Types Name of

Ratio

Numerator Denominator Applied to June

2010

Short term

liquidity

Ratios

Current Ratio Current

Assets

Current

Liabilities

17,288,454,805

4,743,395,449

=

3.64 16

4,

Quick Ratio CurrentAssets -

Inventories

CurrentLiabilities

(17,288,454,805- 4,671,791,624)

4,743,395,449

=

2.66 (1- 4

=

Accounts

Receivable

Turnover

Sales Average

Accounts

Receivable

10,989,191,414

2,375,140,475

=

4.63 10

2,

Average

collection

period (In

days)

365 Accounts

Receivable

Turnover

365 4.6267543

=

78.89 36

4.

InventoryTurnover

Cost ofGoods Sold

AverageInventory

8,656,378,087 4,671,791,624 =

1.85 7,84,8

Long Term

solvency

Ratios

Total Debt to

Total Assets

Total

Liabilities

Total Assets 17333936306

26093791941

0.664 16

23

Total Debt To

Total Equity

Total

Liabilities

Total Equity 17333936306

8,759,855,635 =

1.98 16

7,3

Interest

Coverage

EBIT Interest

Expense

2,161,312,481

221,200,045 =

9.77 2,

16

Profitability

Ratios

Return on

Equity

Net Income Average

Common

Equity

1,788,730,635

8,759,855,635 =

0.204 1,

7,3

Return onAssets

EBIT Average TotalAssets

2,161,312,481 26093791941=

0.082 2,23

Gross profit

Rate

Gross Profit Sales 2,332,813,327

2,375,140,475 =

0.982 2,

2,

Assets

Turnover

Sales Average Total

Assets

2,375,140,475

26093791941=

0.091 2,

23


14/26

EBIT to Sales EBIT Sales 2,161,312,481

2,375,140,475 =

0.91 2,

2,

Return on

Sales

Net Income Sales 1,788,730,635

2,375,140,475 =

0.752 1,

2,

Earnings Per

Share

Net Income

- dividends

Average

C.S.O

111.68 111.68 10

Market

price &

Dividend

Ratios

Price

earnings

Market Price

of Common

Share

EPS 1,446 111.68 = 12.94 14

=

Book value

per share

Common

Equity

Numbers

Common

Shares

Outstanding

8,759,855,635

29,130 =

300715.95 7,3

29

Market to

book value

Ratio

Market Price

of Common

Share

Book Price of

Common

Share

1446 1000 = 1.446 14

DividendYield

Dividendper

common

Share

Market Priceof Common

Share

11099.14 1446 =

7.6757 4314

Dividend

payout

Dividend

per

common

Share

EPS 11099.14

111.68 =

99.383 43

=


15/26

Types Name of

Ratio

Numerator Denominator Applied to June

2008

Short term

liquidity

Ratios

Current Ratio Current

Assets

Current

Liabilities

10,526,165,665

4,078,820,731=

2.58 8,6

3,2

Quick Ratio Current

Assets -Inventories

Current

Liabilities

9751237160

4,078,820,731=

2.39 77

3,2

Accounts

Receivable

Turnover

Sales Average

Accounts

Receivable

9,189,386,688

1,827,843,956 =

5.027 7,3

1

Average

collection

period (In

days)

365 Accounts

Receivable

Turnover

365

5.0274459=

72.60 36

3.9

Inventory

Turnover

Cost of

Goods Sold

Average

Inventory

6,953,174,948

774,928,505 =

8.97 5,

91

Long Term

solvency

Ratios

Total Debt to

Total Assets

Total

Liabilities

Total Assets 11762948548

17842266477=

0.66 10

15

Total Debt To

Total Equity

Total

Liabilities

Total Equity 11762948548

4,470,775,160 =

2.63 10

3,7

Interest

Coverage

EBIT Interest

Expense

2,072,331,565

255,564,990 =

8.11 1,2

28

Return on

Equity

Net Income Average

CommonEquity

1,000,831,565

3,788,928,627 =

0.26 7

4,4

Return on

Assets

EBIT Average Total

Assets

2,072,331,565

17842266477=

0.12 1,2

15


16/26

Profitability

Ratios

Gross profit

Rate

Gross Profit Sales 2,236,211,740

9,189,386,688 =

0.24 1,5

7,3

Assets

Turnover

Sales Average Total

Assets

9,189,386,688

17842266477=

0.52 7,

15

EBIT to Sales EBIT Sales

2,072,331,5659

,189,386,688 =

0.23 1,

7,3

Return on

Sales

Net Income Sales 1,000,831,565

9,189,386,688 =

0.11 71

7,3

Earnings Per

Share

Net Income

- dividends

Average

C.S.O

78.73 78.73 55

Market

price &

Dividend

Ratios

Price

earnings

Market Price

of CommonShare

EPS 938.75 78.73

=

11.92 95

=

Book value

per share

Common

Equity

Numbers

Common

Shares

Outstanding

3,788,928,627

29,130 =

130,069.64 4,

2

Market to

book value

Ratio

Market Price

of Common

Share

Book Price of

Common

Share

938.75 1000 = 0.93875 95

Dividend

Yield

Dividend

per

commonShare

Market Price

of Common

Share

10856.66

938.75 =

11.57 86

95


17/26

Performance Indicators

Net Income (BDT in Millions)

Net income is an important measure of how profitable the company is over a

period of time. The measure is also used to calculate earnings per share. Net

income, like other accounting measures, is susceptible to manipulation through

such things as aggressive revenue recognition or by hiding expenses. When

basing an investment decision on net income numbers, it is important to review

the quality of the numbers that were used to arrive at this value.

20102009

2008 2007

year

0

500

1000

1500

2000

year

Figure: Desco (Net Income)

According to the graph and ratios, we can see the advancement of income of

DESCO. The company is ga ining profit and also it has a positive rate of

increment.


18/26

Profit (BDT in Millions)

The primary objective of a business entity is to make profit and increase the

wealth of its owners. The profit margin is mostly used for internal comparison. It is

difficult to accurately compare the net profit ratio for different entities. Individual

businesses' operating and financing arrangements vary so much that differententities are bound to have different levels of expenditure, so that comparison of

one with another can have little meaning. A low profit margin indicates a low

margin of safety: higher risk that a dec line in sales will erase profits and result in a

net loss, or a negative margin.

Profit margin is an indicator of a company's pricing strategies and how well it

controls costs. Differences in competitive strategy and product mix cause the

profit margin to vary among different companies.

0

1000

2000

3000

2010 2009 2008 2007

Year

Year

Figure: Desco (Profit)

DESCO has been going through a cross section. In the year 2009, it has a fall on

the profit whether it has got it back on 2010. But the indicator is positive anyway.


19/26

Total Assets(BDT in Millions)

Assets are bought to increase the value of a firm or benefit the firm's operations.

Anything tangible or intangible that is capable of being owned or controlled to

produce value and that is held to have positive economic value is considered

an asset. Simply stated, assets represent ownership of value that can beconverted into cash (although cash itself is also considered an asset).

20102009

20082007

year

0500

1000

1500

2000

2500

3000

year

Figure: Desco (Total Assets)

As we know that asset is an indicator of profitability, DESCOs graph shows an

increasing trend. The asset is raising but a problem here is storing asset can

cause its fall apart.

Return on Assets (BDT in Millions)

An indicator of how profitable a company is relative to its total assets. ROA gives

an idea as to how efficient management isat using its assets to generateearnings. The assets of the company are comprised of both debt and equity.

Both of these types of financing are used to fund the operations of the

company.


20/26

The ROA figure gives investors an idea of how effectively the company is

converting the money it has to invest into net income. The higher the ROA

number, the better, because the company is earning more money on less

investment. From the graph we can see that it a mixed sec tion and also it has a

raising trend.

20102009

20082007

year

0

0.05

0.1

0.15

year

Figure: Desco (Return on Assets)

Earnings Per Share (BDT in Millions)

It measures performance from the perspec tive of investors and potential

investors. Additionally, it shows the amount of earnings available to each

ordinary shareholder, so that it indicates the potential return on individual

investments. These results can be achieved by comparing the EPS of either

different entities or the same entity's in different accounting periods, or evenbetter, using both. Sometimes, the trend in EPS may be more accurate

performance indicator than the trend in profit, though it is based on profit on

ordinary activities after taxation.


21/26


22/26

Total debt to Total Assets(BDT in Millions)

This ratio indicates how strong the program is. It relates admitted assets and

liabilities by dividing assets of the micro program scheme by its total liabilities.Clearly this needs to be over 1 for the scheme to be technically solvent.

0.6

0.65

0.7

2010 2009 2008 2007

YearYear

Figure: Desco (Total debt to Total Assets)

Growth of the Company:

The growth of the Company can be better conceived from the figures and

graphs. It appears from these figures and graphs that starting from a consumer

base of 71,000 nos with load demand of 90 MW in 1998, the Company has

grown to cater about 4,46,000 nos of consumers as of December 2010. At the

same time the shareholders equity increased from Tk. 7,320 million last year to Tk.

8,760 million, recording a growth of 19.67%. A graph can show the actual growth

of DESCO.


23/26

Figure: Profitability Of DESCO

Share Information:

The distribution of shareholding, market value of shares, type of shareholding of

the company are shown below:

General

Authorized Capital: M.Tk.5000.00

Paid up Capital: M.Tk.1601.70

Class of Share: Ordinary Shares of Tk. 100/- each

Stock Exchange Listing

The issued Ordinary shares of Dhaka Electric Supply Company Ltd. (DESCO) are

listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE).


24/26

Future financial prospects

The future financial prospects of the DESCO will largely depend on the following

three critical factors:

1. Efficiency improvements involving reduction in losses, improvement in

collection rates, and reductions in operational and administration

costs.

2. Commercialization involving better management practices:

Management should be given full operational authority and

responsibility with accountability. Management should have the

authority to hire and fire staff and determine salary scales.

Performance should be measured against targets and

management and staff should be rewarded or penalized based on

their performance.

3. Implementation of cost reflective tariffs that are regularly adjusted.

The power sector of Bangladesh is currently imposing heavy financial burdens

on the Government budget. It isessential that this dependence is gradually

reduced over the coming years so that the countrys resources are targeted

more towards the soc ial and other needs of c itizens. In the long-term, the power


25/26

sec tor should be self-sufficient, and be in a position to secure financ ing for its

investment requirements from internal cash generation and on the strength of its

balance sheet.

Our views

The financial statements are being prepared in accordance with Bangladesh

Accounting Standards (BAS). It gives a true and fair view of the state of the

companys affairs as of J une 30, 2010 and of the results of its operations and its

cash flows for the year then ended and comply with the applicable section of

the Companies Act 1994, the Securities and Exchange Rules 1987 and other

applicable laws and regulations.

Although the operational and financial performance of the power sector in

Bangladesh has improved over recent years, the overall performance still

remains poor. The financial situation of the sec tor as a whole is weak and it reliesheavily on Government and donor support for its investment requirements.

Operational inefficiencies, lack of commercial focusand inadequate elec tricity

tariffs over the years have led to the poor financial health of the sector.

Electricity tariffs are below cost of service and the sec tor has failed to meet all of

itsdebt service obligations to the Government over the years.

Analyzing those data we have got several ratios.

From the table and also from the short chart we can say that, the company

DESCO is in a good form. Because


26/26

01.As per the short table, the current ratio shows an uprising sign. Short-term

creditors prefer a high current ratio since it reduces their risk. There is also

the quick ratio. The quick ratio is an alternative measure of liquidity thatdoes not include inventory in the current assets. It also has the increasing

trend. Though The Accounts Receivable is in the same level or can be saidthat it has not changed a lot, it can be predicted that the company has

been minimizing its risk level.

02.Financial leverage ratios provide an indication of the long-term solvencyof the firm. Debt Equity ratio does not provides the increasing trend

because we can see that in the FY 2007-08, it was 73.27 then it was 60.40

and now it is 67.33. It can be both uprising and low rising.

03.Profitability ratios offer several different measures of the success of the firm

at generating profits. The g ro ss p ro fit m a rg inis a measure of the gross

profit earned on sales. The grossprofit margin considers the firm's cost of

goods sold, but does not include other costs. We can see that it has adecreasing rate and Re turn o n a sse tswhich is a measure of how

effectively the firm's assets are being used to generate profits is also in a

decreasing trend. Re turn o n e q uityis the bottom line measure for the

shareholders, measuring the profits earned for each dollar invested in thefirm's stock. It is also in a dec reasing rate. So it can be predicted that the

company could face some financial problem in some days.

04.Earnings per share helps in determining the market price of the equity

share of the company. It also helps to know whether the company is able

to use its equity share capital effectively with compare to other

companies. It also tells about the capacity of the company to pay

dividends to its equity shareholders. From the chart it can be said that ithas an increasing rate.

05.The Market-to-Book Ratio relates the firm's market value per share to its

book value per share. Since a firm's book value reflects historica l cost

accounting, this ratio indicates management's success in c reating value

for its stockholders. The table shows an increasing trend there.

So analyzing all of the ratios and also by seeing the trends we can say that the

company will go on profitably without some dispersed incidents.

Documents

Desco Final Account Analysis