Ratio Analysis of Heidelberg Cement Bangladesh

Liquidity Ratios
1. Current Ratio
Formula
The formula of the current ratio is:
Current Ratio = Current Assets / Current Liabilities
Table and Graph for Current Ratio of Heidelberg cement:
2021 2020
Current assets (in BDT) 9144000 9234000
Current Liabilities (in BDT) 5210000 5471000
Current Ratio 1.75 1.68

Current Ratio
1.76

1.74

1.72

1.7

1.68

1.66

1.64
2020 2021

Findings:
According to the current ratio of Heidelberg Cement, the current ratio increased from 1.68 in
2020 to 1.75 in 2021. This is a good sign as the company’s current liabilities are less than its
current assets. Thus, Heidelberg Cement will be able to meet its short-term obligations.

2. Quick Ratio
Formula
The formula of the quick ratio is:
Quick Ratio = (Current Assets-Inventories) / Current Liabilities
Table and Graph for Quick Ratio of Heidelberg Cement
2021 2020
Current assets (in BDT) 9234000 9144000
Inventories (in BDT) 6553210 7007900
Current Liabilities (in BDT) 5471000 5210000
Quick Ratio 0.49 0.41

Quick Ratio
0.5

0.48

0.46

0.44

0.42

0.4

0.38

0.36
2020 2021

Findings:
The quick ratio of Heidelberg cement was 0.41 in 2020, and 0.49 in 2021. The quick ratio rose
from 2020 to 2021, which means the business has better liquidity than the previous year, but it
would still face difficulty as the assets are not enough to be converted to cash quickly.

Activity Ratios
1. Accounts Receivable Turnover Ratio
Formula
The formula of the accounts receivable turnover ratio is:
Accounts Receivable Turnover Ratio = Net Sales/ Average Accounts Receivable
Table and Graph for Accounts Receivable Turnover Ratio of Heidelberg cement
2021 2020
Net Sales (in BDT) 14328000 10,521,732
 Average Accounts 399108 892,527
Receivable (in BDT)
Accounts Receivable 35.9 11.7
Turnover Ratio

Accounts Receivable Turnover Ratio

40

35

30

25

20

15

10

0
2020 2021

Findings:
The accounts receivable turnover ratio was 11.7 in 2020, and 35.9 in 2021. However, the
turnover ratio is more than 10, which indicates that Heidelbergcement’s accounts receivable
turnover ratio is high. This means its collection of receivables is efficient, and customers pay off
their debts faster.

2. Inventory Turnover Ratio

Formula
The formula of the Inventory turnover ratio is:
Inventory Turnover Ratio = Net Sales/ Average Inventory
Table and Graph for Inventory Turnover Ratio of Heidelbergcement

2021 2020
Net Sales (in BDT) 14328000 10,521,732
Average Inventory 2018028 1,187,668
(in BDT)
 Inventory Turnover 7.1 8.9
Ratio

Inventory Turnover Ratio

10

0
2020 2021

Findings:
The inventory turnover ratio of Heidelberg cement decreases from 8.9 in 2020 to 7.1 in 2021.
A lower turnover ratio means the company sells its inventory slower, generating less sales and
experiencing less cash flow. As their goods are sold slower, it means they have considerably less
demand in the market.

3. Asset Turnover Ratio

Formula
The formula of the asset turnover ratio is:
Asset Turnover Ratio = Net Sales/ Average Total Assets
Table and Graph for Asset Turnover Ratio of Heidelbergcement
2021 2020
Net Sales (in BDT) 14328000 10,521,732
Average Total 8955000 9,143,753
Assets (in BDT)
Assets Turnover 1.6 1.2
Ratio
 Asset Turnover Ratio
1.8

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2020 2021

Findings:
Heidelbergcement Bangladesh Ltd’s asset turnover ratio was 1.2 in 2020 and became 1.6 till
2021. As this ratio measures how efficiently Heidelbergcement uses its assets to generate
revenue, a higher ratio means that it’s using its assets efficiently.

4. Average Collection Period

Formula
The formula of the average collection period is:
Average Collection Period = Accounts Receivable / (Total Revenue/365)
Table and Graph for Average Collection Period of Heidelbergcement
2021 2020
Accounts Receivable 997,957 892,527
(in BDT)
Total Revenue (in BDT) 14328000
Average Collection Period 10,521,732
Average Collection 25.4 days 31 days
Period35
30

25

20

15

10

0
2020 2021
Findings:
Heidelberg Bangladesh Limited’s average collection period was 31 days in 2020, and later
decreased to 25.4 days in 2021. It means the company became more efficient in collecting the
bills. The average number of days their customers took to pay off the bills became shorter.

Profitability Ratios
1. Gross Profit Margin
Formula
The formula of the net profit margin ratio is:
Net Profit Ratio = Gross Profit /Total Revenue
Table and Graph for Gross Profit Margin of Heidelbergcement

2021 2020
Gross Profit (in BDT) 1598000 1,301,345
Total Revenue 14328000 10,521,732
(in BDT)
Net Profit Ratio 11.15% 12.4%

Gross Profit Margin

12.5

12

11.5

11

10.5
2020 2021

Findings:
Heidelbergcement Bangladesh Limited’s gross profit margin decreased to 11.15% in 2021 from
12.4% in 2020 which means that the company generated lower gross profit with the total sales
revenue. It became less efficient at making more money for every product sold.

2. Net Operating Margin Ratio

Formula
The formula of the net operating margin ratio is:
Net Operating Margin Ratio = Operating Profit/ Total revenue
Table and Graph for Net Operating Margin Ratio of Heidelbergcement
 2021 2020
Operating income 705000 385,784
(in BDT)
Total Revenue 14328000 10,521,732
(in BDT)
Net Operating Margin 4.92% 3.7%
Ratio

Net Operating Margin

Ratio
6

0
2020 2021

Findings:
The net operating margin ratio rose from 3.7% in 2020 to 4.92% in 2021. This means the
operating income of Heidelbergcement increased more than its operating costs in 2021 than
that of 2020.

3. Net Profit Margin Ratio

Formula
The formula of the net profit margin ratio is:
Net Profit Margin Ratio = Net Income After Tax/Total Revenue
Table and Graph for Net Profit Margin Ratio of Heidelbergcement
2021 2020
Net Income After Tax 475000 (4,917)
(in BDT)
Total Revenue 14328000 10,521,732
(in BDT)
Net Profit Margin 3.3% -0.05%
Ratio
 Net Profit Margin
Ratio
3.5

2.5

1.5

0.5

0
2020 2021

Findings:
The net profit margin ratio, in 2021, rose to around 3.3% from -0.05% in 2020, meaning that the
company made more net income with the total sales achieved than in 2020.

4. Return on Assets (ROA)

Formula
The formula of the return on assets is:
Return on Assets = Net Income after Tax/Total Assets
Table and Graph for Return on Assets of Heidelbergcement
2021 2020
Net Income After Tax 475000 (4,917)
(in BDT)
Total Assets (in BDT) 9234000 9,143,753
Return on Assets 5.1% -0.1%

Return on Assets Findings:

The 6 return on
assets of
5

0
2020 2021
-1
Heidelbergcement Bangladesh Limited in 2021 increased to 5.1% from -0.1% in 2020; meaning
the company earned more taka on less investment.

5. Return on Equity (ROE)

Formula
The formula of the return on equity is:
Return on Equity = Net Income after Tax/Total Equity
Table and Graph for Return on Equity of Heidelbergcement
2021 2020
Net Income After Tax 475000 (4,917)
(in BDT)
Total Equity (in BDT) 3763000 3,933,580
Return on Equity 12.6% -0.1%

Return on Equity
14

12

10

0
2020 2021
-2

Findings:
Heidelbergcement Bangladesh Limited had a rise of ROE from 2020 to 2021, which gave an
ROE of 12.6%% in 2021 and -0.1% in 2020. The higher the ROE, the better as it shows investors
that the capital is being effectively reinvested. High return means Heidelbergcement generated
more cash in 2021 than in 2020.

6. Earnings Per Share (EPS)

Formula
The formula of the Earnings Per Share is:
Earnings Per Share = Net Income/Number of Common Stocks Outstanding
Table and Graph for Earnings Per Share of Heidelbergcement
2021 2020
EPS 8.4 -0.1

Earnings Per Share (EPS)

9

0
2020 2021
-1

Findings:
The EPS of Heidelbergcement increased to 8.4 in 2021 from 2020. That means earnings
increased in 2021 than in 2020.

Solvency Ratios

1. Debt to Equity Ratio:

Formula
The formula of the debt to equity ratio is:
Debt to Equity Ratio = Total debt /Total Equity
Table and Graph for Debt-to-Equity Ratio of Heidelbergcement
2021 2020
Debt to Equity Ratio 1.3 1.18

Debt to Equity Ratio

1.35

1.3

1.25

1.2

1.15

1.1
2020 2021

Findings:
The table shows that the debt-to-equity ratio decreased to 1.3 in 2021 from 1.18 in 2020, still
more than 1. It refers that the company has more debt than its equity in 2021.

2. Debt to Total Assets Ratio:

Formula
The formula of the debt to total assets ratio is:
Debt to Total Assets Ratio = Total Liabilities/ Total Assets
Table and Graph for Debt to Total Assets Ratio of Heidelbergcement
2021 2020
Total Liabilities 5471000 5,210,174
Total Assets (in BDT) 9234000 9,143,753
Debt to Total Assets 0.59 0.57
Ratio
 Debt to Total Assets
Ratio
0.595

0.59

0.585

0.58

0.575

0.57

0.565

0.56

0.555
2020 2021

Findings:
There was a incline to 0.59 in 2021 from 0.57 in 2020, meaning the company used more debt to
generate revenue in 2021 than in 2020 and has more leverage. Thus, the risk rincreased to some
extent than in 2020.

3. Times Interest Earned Ratio:

Formula
The formula of the Times Interest Earned Ratio is:
Times Interest Earned Ratio = EBIT/ Interest
Table and Graph for Times Interest Earned Ratio of Heidelbergcement
2021 2020
Times Interest Earned 10.7 2.2
Ratio
 Times Interest Earned
Ratio
12

10

0
2020 2021

Findings
The table of Times Interest Earned shows the ratio inclined to 10.7 in 2021 from 2.2 in 2020.
This means the company has more earnings to meet its interest payments.

Altman’s Z score analysis

https://heidelbergcementbd.com/financial-statements
 Horizontal Analysis
Horizontal analysis of Income Statement of last 2 financial years of Heidelberg cement is given
below:
Income statement (Tk in millions)
Particulars 2020 (Base year) 2021 Change % Change
Revenue 10521 14328 3807 36.18%
Gross profit 1301 1598 297 22.82%
Income from 386 705 319 82.645
operations
EBIT 373 670 297 80%
Net income -5 475 480 9600%
National 2417 4149 1732 72%
exchequers

Balance sheet (Tk in millions)

Particulars 2020 (Base year) 2021 Change % Change
Total Assets 9144 9234 90 0.98%
Total liabilities 5210 5471 261 5%
Equity 3934 3763 -171 -4.34%
Net working -967 -981 -14 -1.44%
capital

Vertical Analysis

Formula
Income Statement (Tk in millions)
Particulars 2020 2020(%) 2021 2021(%)
Net Revenues 10521 100 14328 100
Gross profit 1301 12.36 1598 11.15
Income from 386 3.66 705 4.92
operations
EBIT 373 3.54 670 4.67
Net income -5 -0.04 475 3.31
National 2417 23 4149 29
exchequer

Balance Sheet (Tk in millions)

Particulars 2020 2020 (%) 2021 2021(%)
Total assets 9144 100 9234 100
Total liabilities 5210 57 5471 59.24
Equity 3934 43 3763 40.75
NWC -967 -10.57 -981 -10.62