Financial Performance Analysis

on British American Tobacco

Bangladesh Company Ltd.
 Course Name: Principles of Finance
Course Code: FNB 106
Title: Financial Performance Analysis on British American Tobacco Bangladesh Company
Ltd.

Prepared For:
Debashis Saha
Associate Professor
Department Of Finance and Banking

Prepared By:
Group Name: TEAM TRAILBLAZER
Group Members:
1. Abu Shama Jumayel, ID: 1710
2. Mahdir Farhan Zaman, ID: 1716
3. Nuzhat Nuery, ID: 1744
4. Md. Shariful Islam, ID: 1699
5. Md. Samir Ahmed, ID: 1707
Batch: 13th
Department of Finance and Banking

Date of Submission: November 28, 2023

 Letter of Transmittal

June 14, 2023

Debashis Saha
Associate Professor
Department Of Finance and Banking
Jahangirnagar University

Subject: Submission of a business report on “Financial performance analysis of British

American Tobacco Bangladesh Company Ltd.”.

Sir:

With due respect, we, the undergraduate student of the Department of Finance and Banking
13th batch, have reported on British American Tobacco Bangladesh Company Ltd. financial
performance analysis under the course: Principle of Finance, (FNB 106).

Though we are on a learning curve, this report has enabled us to gain insight into the core fact
of making a business report on “British American Tobacco Bangladesh Company Ltd”. So, it
becomes an extremely challenging and interesting experience. Thank you for your supportive
consideration for formulating an idea. Without your inspiration, this report would have been
an incomplete one.

Lastly, we would be thankful once again if you please give your judicious advice on effort. I
beg your kind consideration, and it will be helpful for us if you accept the report and oblige
thereby.

Yours sincerely,
Abu Shama Jumayel
ID NO: 1710
On behalf of the TEAM TRAILBLAZER
Batch: 13th
Department of Finance and Banking
Jahangirnagar University
 Acknowledgement

At the beginning, we are very much grateful to the Almighty Allah for giving the strength to
complete the report properly.

Next, we would like to thank our course instructor Debashis Saha Sir for designing the course
with this report and providing us with such an immense opportunity. Without his valuable
supervision and direction, it would not have been possible to complete this report.

Lastly, we would also like to take the opportunity to express our wholehearted gratitude to
our fellow friends and seniors who offered encouragement, information, inspiration and
assistance during preparing this report.
 TABLE OF CONTENTS

SUBJECT PAGE
NO.

Executive Summary
CHAPTER 1: INTRODUCTION
1.0 Introduction 1
1.1 Origin of the Report 1
1.2 Objective of the study 1
1.3 Research Question 2
1.4 Significance of the study 2
1.5 Literature Review 2
1.6 Limitation of the study 3
1.7 Methodology 3

CHAPTER 2: OVERVIEW OF BRITISH AMERICAN TOBACCO BANGLADESH

2.1 Introduction to British American Tobacco 5
Bangladesh
2.2 Board of Directors 6
2.3 All listed Tobacco’s 6
2.4 Corporate Purpose 8

CHAPTER 3: FINANCIAL ANALYSIS

3.1 Liquidity Ratio 9
3.1.1 Current Ratio 9
3.1.2 Quick Ratio 9
3.2 Activity Ratio 13
3.2.1 Inventory Turnover Ratio 13
3.2.2 Total Asset Turnover Ratio 13
3.2.3 Average Age of Inventory 13
3.2.4 Average Collection Period 14
3.2.5 Average Payment Period 14
3.3 Debt Management Ratio 20
3.3.1 Debt Ratio 20
3.3.2 Time’ Interest Earned Ratio 20
3.3.3 Fixed Payment Coverage Ratio 20
3.4 Profitability Ratio 24
3.4.1 Gross Profit Margin 24
3.4.2 Net Profit Margin 24
 3.4.3 Operating Profit margin 24
3.4.4 Return on Total Asset 24
3.4.5 Return on Equity 25
3.4.6 EPS 25
3.5 Market Ratio 30
3.5.1 The Price Earning Ratio 30

CHAPTER 4: FINDINGS RECOMMENDATION AND CONCLUSIONS

4.1Findings 32
4.2Recommendation 32
4.3Conclusions 33

APPENDED PART
References
Appendix 1: Current Ratio
Appendix 2: Asset Management Ratio
Appendix 3: Debt Management Ratio
Appendix 4: Profitability Ratio

TABLE OF TABLES
NO. SUBJECT PAGE NO.

1 Liquidity Ratio 10
2 Activity Ratio 15
3 Debt Ratio 21
4 Profitability Ratio 26
5 Market Ratio 21

TABLE OF FIGURES
NO. SUBJECT PAGE NO.

1 Current Ratio 11
2 Quick Ratio 12
3 Inventory Turnover Ratio 16
4 Total Asset Turnover Ratio 17
5 Average Age of Inventory 18
6 Average Collection Period Ratio 18
7 Average Payment Period Ratio 19
8 Debt Ratio 22
9 Time’s Earned Interest Ratio 22
10 Fixed Payment Coverage Ratio 23
11 Gross Profit Margin Ratio 27
12 Net Profit Margin Ratio 28
13 Operating Profit Margin 28
14 Return on Asset 29
15 Return on Equity 30
16 Earning Per Share 30
17 Price Earning Ratio 32
 Executive Summary

The report provides the background and the financial position of the BRITISH
AMERICAN TOBACCO BANGLADESH. At first, we started with introduction
where We discussed the background of the organization, its product portfolio.
Moreover, we have done analysis on the common size statement of BATB. We have
focused on ratio analysis. We have done a ratio analysis of BATB for the last 10 years
from 2013 to 2022. In calculating the ratio analysis, We have used the information of
balance sheet and income statement from the annual report of those years. In ratio
analysis we have interpreted only time series analysis. Furthermore, we have analyzed
the risk and return of the company. Here we have used the information about the
company’s price of the stock, the market price of the stock and the risk free rate. In
addition, we have analyzed the Liquidity ratios, Activity ratios, Debt ratios,
Profitability ratios, Market ratio. In Liquidity ratio we have analyzed the Current ratio
and Quick test ratio. Inventory Turnover ratio, Total Asset turnover ratio, Average
payment period, Average age of inventory, Average age of accounts receivable have
been analyzed in the Activity ratio. Debt ratio and Times interest earned ratio of
BATB also Being analyzed in the Debt ratio. We have emphasized the Gross profit
margin and Net profit margin, Operating profit margin, Return on asset, Return on
common equity, Earning per share in the Profitability ratio section. Earning per share
(EPS) and The price earning per share of BATB.
 CHAPTER 1

INTRODUCTION
1.0 Introduction
British American Tobacco Bangladesh is one of the biggest MNC as well as company in
Bangladesh. It is well known for selling best quality cigarettes and covering maximum share
among the smokers in our country. But as cigarettes is a controversial product, BATB has to
maintain a lot of strict rules and regulations from paying the highest tax to the government for
conducting massive CSR Activities to maintain its Corporate Image.

My report consists of a rigorous financial analysis of British American Tobacco across ten years
from 2013to 2022 to determine how they have performed through the years and to forecast how
they might perform in the future. The report also determines what may be the value of the
organization through the price of their share or stock.

1.1 Origin of the Report

Debashis Saha Sir proposed this study for the company's financial performance analysis to all the
first-year undergraduate students in Department of Finance and Banking, Jahangirnagar
University. The teacher indicated forming a group that consists of 5 members. The group has the
authorization to choose a particular company freely without any kind of restrictions. In addition,
the student were asked to find out the previously mentioned key points of the chosen company,
which would be included in a business report.

1.2 Objective of the study

The objective of this report was to exhibit the company’s financial performance analysis. It
includes ratio analysis. Furthermore, to provide all the information regarding BAT Bangladesh
future business strategies about how they will be developing.

1
1.3 Research Questions

In the period of making this report we have faced some question’s, the answer of these
question’s have given in the report.

• What is BAT Bangladesh?

• What is Liquidity Ratio?
• What is Activity Ratio?
• What is Debt Ratio?
• What is Profitability Ratio?
• What is Market Ratio?

1.4 Significance of the study

My research will help an individual understand:

How BATB have significantly been able to improve their Net Turnover and Net Profit across
the years

How they have performed in terms of liquidity, asset management, debt management,
profitability

How much risk they are able to take and how much return they expect to receive for it
What is the structure of BATB’s capital and the cost of it

1.5 Literature Review

Financial analysis is an aspect of the overall business finance function that involves examining
historical data to gain information about the current and future financial health of a company.
Financial analysis can be applied in a wide variety of situations to give business managers the
information they need to make critical decisions. The ability to understand financial data is
essential for any business manager. Finance is the language of business. Business goals and
objectives are set in financial terms and their outcomes are measured in financial terms. Among
the skills required to understand and manage a business is fluency in the language of finance—
the ability to read and understand financial data as well as present information in the form of
financial reports (Springer, 2005)

2
Financial ratios are the principle tools of financial analysis. Sometimes referred to simply as
benchmarks, ratios standardized financial information so that comparisons can be between a
firms past and present performance.

Risk and Return analysis is important because it is necessary to understand how rates of return for
investments are explicitly tied to risk. The greater the risk, the greater the required rate of return
needed to attract investors. This concept mostly presented from the perspective of investors it holds
equal importance for a financial manager considering an investment to develop a new product line.

Stock valuation is an important process in financial management. An understanding of valuation,

both the concepts and procedures, supports the financial officer’s objectives of maximizing the
value of the firm.

The importance and usefulness of weighted average cost of capital (WACC) as a financial tool for
both investors and the companies are well accepted among the financial analysts. It is important for
companies to make their investment decisions and evaluate projects with similar and dissimilar risks.
Calculation of important metrics like net present values and economic values added requires WACC.
It is equally important for investors for arriving at valuations of companies.

1.6 Limitation of the study

Due to the constraint of time and confidentially of financial information, this report will only
concentrate on the financial information of BATB available to the public at large for complete
transparency. In this report an overall financial analysis will present BATB’s past performance
compared with their present and determine if improvements are required for a better sustainable
future.

1.7 Methodology

To make a credible research paper, the usage of data from primary and secondary data is highly
significant. The research team has focused heavily on the internet for secondary data. The research
team used a computerized database Publish & Perish, known as the full-text database, to search for
reliable research papers. In terms of published secondary data, the researchers have collected
information from various research papers and business sources in the form of research journals,
books, and newspapers. The newspapers and websites were used to gather information about

3
British American Tobacco Bangladesh. In conclusion, the data gathered from these sources were
aimed to enhance the validity of this business report. For primary data, interview transcripts,
photographs, paintings, films, historical documents, and official statistics were analyzed to
conduct this research.

The term sample size refers to the size of the sample that has been used to conduct this research.
For this research, we did not conduct any kind of survey and no individual data has been taken.
The period refers to the time that has been given to conduct this study. The particular study
started with the cooperation of five members from June 7, 2023, to June 13, 2023.

This chapter will show the research hypothesis, which is a conjectural statement, a logical
supposition, a reasonable guess, and an educated prediction about the nature of the relationship
between two or more variables that we expect to happen in our study. The dependent variables will
be dependent on the independent variables, and it will affect the overall system of a company.

4
 CHAPTER 2
OVERVIEW OF BRITISH AMERICAN TOBACCO BANGLADESH

2.1 Introduction to British American Tobacco Bangladesh

British American Tobacco Bangladesh is one of the largest multinational corporations, operated by
British American Tobacco in Bangladesh. The company engages in manufacturing of tobacco
products. They are listed on the stock index of the Dhaka Stock Exchange and Chittagong Stock
Exchange. The presence of British American Tobacco in this part of the world can be traced back to
1910. It is doing business for 113 years in this region. the company set up its first sales depot at
Armanitola in Dhaka. After the partition of India in 1947, Pakistan Tobacco Company was
established in 1949. The first factory in Bangladesh (the then East Pakistan) was set up in 1949 in
Fauzdarhat, Chittagong. After the independence of Bangladesh from Pakistan, it was renamed as
Bangladesh Tobacco Company (BTC) in 1972. In 1998, the Company changed its name and identity
to British American Tobacco Bangladesh (BAT Bangladesh or BATB) aligning the corporate
identity with other operating companies in the British American Tobacco Group.BAT Bangladesh is
a part of BAT plc, world's leading tobacco group, with brands sold in 200 markets around the world.
In Bangladesh, British American Tobacco Bangladesh has more than 1,200 people as direct
employees and more than 50,000 people as indirect employees (mostly farmers). They make high
quality tobacco products for the diverse preferences of consumers, spanning the business 'from crop
to consumer', and they are committed to embedding the principles of corporate social responsibility
through their responsible business operation. British American Tobacco Bangladesh's motto is
"success and responsibility go together”. As the largest individual tax contributor to the Government
exchequer, together with a strong presence in the rural Agri-economy, the Company’s socio-
economic impacts have been widespread and large scale.

5
2.2 Board of Directors
• Chairman: Mr. Golam Mainuddin
• Managing Directors: Mr. Shehzad Munim
• Finance Director:Ms. Nirala Singh
• Independent Director: Mr. A. K. M. Aftab Ul Islam FCA
• Independent Director: Mr. K. H. Masud Siddiqui
• Independent Director: Mr. M. Harunur Rashid Ph.D.
• Non-Executive Director: Mr. Md. Abul Hossain
• Non-Executive Director: Mr. Shirajun Noor Chowdhury
• Non-Executive Director: Ms. Zakia Sultana
• Non-Executive Director: Mr. Mohammed Salahuddin
• Non-Executive Director: Mr. Stuart kidd
• Non-Executive Director: Mr. Wael Sabra
• Non-Executive Director: Ms. Monisha Abraham
• Non-Executive Director: Mr. Francisco Toso
• Non-Executive Director: Mr. Gary Tarrant

2.3 All Listed Tobacco’s

There are four types of tobacco’s that is manufactured by British American Tobacco Bangladesh.
These types are,
1.Premium: BENSON & HEDGES

6
2. High: JOHN PLAYER GOLD LEAF, JOHN PLAYER SERIES AND CAPSTAN

3. Medium: LUCKY STRIKE, STAR

4. Low: DERBY, PILOT, HOLLYWOOD, ROYALS & FLAG

7
2.4 Corporate Purpose

8
 CHAPTER 3
RATIO ANALYSIS

3.1 Liquidity Ratios

Liquidity ratios are the ratios which quantify the capacity of a company to meet its short-term
debt commitment. The liquidity ratios are the consequence of allocating cash and other liquid
assets by the short-term borrowings and current liabilities. They indicate the number of times
required to cover the short-term debt obligations by the cash and liquid assets. If the value is
greater than 1, it indicates that the short-term obligations are entirely covered. Liquidity ratios
greater than 1 indicate that the company is in decent financial health and has less possibility to
fall into any financial menace. Liquidity ratios have two classifications:

1. Current Ratio
2. Quick/Acid Test Ratio

Liquidity Ratios British American Tobacco of over the four years 2013-2022 is given below
with analysis of Time series:

3.1.1 Current Ratio:

Current ratio is balance-sheet financial performance measure of company liquidity.
Current ratio indicates a company's ability to meet short-term debt obligations. The
current ratio measures whether or not a firm has enough resources to pay its debts over
the next 12 months.

3.1.2 Quick Ratio:

The quick ratio or acid test ratio is a liquidity ratio that computes the capability of a
company to pay back its current liabilities when they come due without using the
inventories. Cash, cash equivalents, short-term investments or marketable securities, and
current accounts receivable are deemed quick assets.

9
Liquidity Ratio:
Formula:
1. Current Ratio= Current Assets/Current Liabilities
2. Quick Ratio= (Current Assets-Inventories)/Current Liabilities

Year Current Ratio Quick Ratio

2013
1.20 times .40 times

2014 1.07 times .42 times

2015 1.28 times .59 times

2016 1.46 times .44 times

2017 1.30 times .12 times

2018 1.31 times .46 times

2019 1.67 times .69 times

2020 1.40 times .41 times

2021 1.35 times .29 times

2022 1.37 times .49 times

Table 1: Liquidity Ratio

10
Interpretation: Current Ratio
In 2013, the company’s Current Assets were only 1.20 times of their Current Liability. The
Current Ratio had decreased in 2014 compared to 2013. In 2015 the percentage increased and
became 1.28. In 2015,2016 and 2017 it was 1.46,1.30 and 1.31 consecutively. In 2019 the
current ratio was highest as it became 1.67 which was a good sign. But in 2020 it falls to 1.40,
and again in 2021 it fall to 1.35. But in 2022 it saw a minor increase which was 1.37.

Current Ratio
1.8
1.67
1.6
1.46 1.40
1.31 1.35 1.37
1.4 1.28 1.30
1.20
1.2
1.07
1

0.8

0.6

0.4

0.2

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 1: Current Ratio

11
Interpretation: Quick Ratio

In 2022, the company’s Current Assets excluding inventories were only 0.35 times of their
Current Liability. Quick ratio has increased significantly from the last year. The inventory level
in 2022 increased compared with 2021 and so this resulted in a non-satisfactory quick ratio. So,
the company is able to meet its short-term obligations with its most liquid assets.

Quick Ratio
0.8
0.69
0.7
0.59
0.6
0.49
0.5 0.44 0.46
0.4 0.42 0.41
0.4
Quick Ratio
0.29
0.3

0.2
0.12
0.1

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Figure 2: Quick Ratio

12
3.2 Activity Ratios

Activity ratio is a type of financial metric that indicates how efficiently a company is leveraging
the assets on its balance sheet, to generate revenues and cash.

3.2.1 Inventory Turnover Ratio:

The inventory turnover ratio is a proficiency ratio that shows how adequately inventory
is managed by comparing cost of goods sold with average inventory for a period. This
measures how many times average inventory is “sold out and restocked” during a period.

3.2.2 Total Asset Turnover Ratio:

The asset turnover ratio is an efficiency ratio that quantifies a company's capacity to
generate sales from its assets by comparing net sales with average total assets. In other
words, this ratio conveys how proficiently a company can use its assets to generate sales.

3.2.3 Average Age of Inventory:

The average age of inventory is the average number of days it takes for a firm to sell off
inventory. It is a metric that analysts use to determine the efficiency of sales.

13
3.2.4 Average Collection Period:
The days sales outstanding calculation, also called the average collection period or days'
sales in receivables, calculates the number of days required by a company to collect cash
from its credit sales. The lesser day a company takes to collect the receivables the more it
is convenient for them to have a healthy financial condition.

3.2.5 Average Payment Period:

This ratio measures how much time a company takes in paying back their payables to
their creditors.

Activity Ratio:

Formula:

1. Inventory Turnover Ratio= Cost of the Goods sold/Inventory

2. Total Asset Turnover Ratio= Sales/Total Asset
3. Average Age of Inventory= 365/Inventory Turnover
4. Average Collection Period= Accounts Receivable/Average Sales Per Day
5. Average Payment Period= Accounts Payable/Average Purchase Per Day

14
 Inventory Total Asset Average Average Average
Year Turnover Turnover Age of Collection Payment
Ratio Ratio Inventory Period Period

2013
2.64 times 1.69 times 138.26 days 9.01 days 77.20 days

2014 2.13 times 1.32 times 171.76 days 18.09 days 129.71 days

2015 2.48 times 1.35 times 147.18 days 8.60 days 134.94 days

2016
1.71 times 1.24 times 213.45 days 8.86 days 125.55 days

2017 1.56 times 1.12 times 233.97 days 16.26 days 135.65 days

2018 1.40 times 0.97 times 261.65 days 27.88 days 141.60 days

2019 1.81 times 0.96 times 201.66 days 16.78 days 148.41 days

2020 1.30 times 0.93 times 281.85 days 0.85 days 210.96 days

2021 1.01 times 0.96 times 361.39 days 13.56 days 194.52 days

2022 1.39 times 1.01 times 262.59 days 2.95 days 161.13 days

Table 2: Activity Ratio

15
Interpretation: Inventory Turnover Ratio
In 2013 the company had “sold out and restocked “its inventory by 2.64 times. Inventory
Turnover Ratio decreased by 2.13 the next year which was not satisfactory. It became 2.48 times
in 2015 and after that it gradually decreased till 2019 when it was 1.81. then it falls again in 2020
and 2021. In 2021 it was 1.10 times. In 2022 the Inventory Turnover Ratio became 1.39 times,
which was satisfying than the previous 2 years.

Inventory Turnover Ratio

3
2.64
2.48
2.5
2.13
2 1.81
1.71
1.56
1.4 1.39
1.5 1.3
1.01
1

0.5

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

: Inventory Turnover Ratio

Figure 3: Inventory Turnover Ratio

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Interpretation: Total Asset Turnover Ratio

In 2013, every 1 Taka worth of Total Asset generated 1.69 Taka worth of Sales. Total Asset
Turnover ratio decreased in 2014 which was 1.32, which signaled poor performance. But in 2015
it saw a minor increase, which was 1.35. Again, it started falling gradually and signaled poor
performance. But saw a minor growth in 2021 where the Total Asset Turnover Ratio became
0.96 times and again increased in 2022 where it was 1.01 times, and it was a positive signal for
the organization. The rise in the ratio in 2022 indicates a satisfactory performance for BATB.

Total Asset Turnover Ratio

1.8 1.69
1.6
1.32 1.35
1.4
1.24
1.12
1.2
1.01
0.97 0.96 0.93 0.96
1
0.8
0.6
0.4
0.2
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Total Asset Turnover Ratio

Figure 4: Total Asset Turnover Ratio

Interpretation: Average Age of Inventory Ratio

In 2013, the Average Age of Inventory was 138.26 days. In 2014 it increased to 171.76 days
which is unfavorable. It decreased in 2015 as it became 147.18 days but after that it gradually
increased for the next three years. But in 2019 it decreased to 201.66 days which is favorable for
the company. The Average Age of Inventory again increased the next two years but falls in 2022
to 262.59 days.

17
 Average Age of Inventory Ratio
400 361.39
350
281.85
300 261.65 262.59
233.97
250 213.45 201.66
200 171.76
138.26 147.18
150
100
50
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Average Age of Inventory Ratio

Figure 5: Average Age of Inventory Ratio

Interpretation: Average Collection Period Ratio

In 2013, Average Collection Period of the company was 9.01. It increased to 18.09 days in 2014.
But it decreased to 8.60 days in 2015 which indicates that the company has improved its
efficiency in collecting receivables. But again, increased for three years. It saw a drastic fall in
2020 when the Average Collection Period Ratio became 0.85 but the next year it increased to
13.56 days. In 2022 it again decreased to 2.95 days which is a positive signal.

Average Collection Period Ratio

30 27.88

25

20 18.09
16.26 16.76
13.56
15
9.01 8.6 8.86
10

5 2.95
0.85
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Average Collection Period Ratio

Figure 6: Average Collection Period Ratio

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Interpretation: Average Payment Period Ratio

On an average, in 2013 it took BATB 77.20 days to make the payment to the customers. But in
2014 it took more time to make the payment as the ratio was 129.71 days. In 2016 it decreased
little and became 125.55. then the time to make payment increased and became 210.96 days in
2020 which indicates that the company takes longer time to make its payment. But the Average
Payment Period Ratio decreased in 2021 and 2022. In 2022 the ratio was 161.13

Average Payment Period Ratio

250
210.96
194.52
200
161.13
141.6 148.41
150 134.94 135.65
129.71 125.55

100
77.2

50

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Average Payment Period Ratio

Figure 7: Average Payment Period Ratio

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3.3 Debt Management Ratio

A ratio of a company’s debt to its overall financing is called debt management ratio. The debt
management ratio calculates how much a company’s operation comes from its debt instead of
other sort of financing, such as stock or personal savings. Owners and creditors are interested in
debt management ratio because it specifies the risks of the firm’s position. There are two ratios
under the debt management ratio. They are-

3.3.1 Debt Ratio:

Debt ratio is a solvency ratio that quantifies a firm's overall liabilities as a percentage of
its total assets. In other words, the debt ratio exhibits a company's ability to pay off its
liabilities with its assets.

3.3.2 Times Interest Earned Ratio:

The times interest earned ratio, sometimes called the interest coverage ratio, is a coverage
ratio that calculates the proportionate amount of income that can be utilized to cover
interest expenses in the future. As with most fixed expenses, if the company fails to make
the payments, it can go bankrupt and cease to exist. Thus, this ratio can be considered a
solvency ratio.

3.3.3 Fixed Payment Coverage Ratio:

Fixed payment coverage ratio is financial matric used to assess a company’s ability to
meet its interest expenses and lease payments with its operating income. It provides
insight into the company’s capacity to cover its fixed cost with its operating earnings.

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Debt Management Ratio:

Formula:

1 Debt Ratio= (Total Debts/Total Assets)*100

2 Times Interest Earned Ratio= EBIT/ Interest Expense
3 Fixed Payment Coverage Ratio=(EBIT+Interest Expense)/(Interest Expense+ lease Payment)

Debt Times Interest Fixed Payment

Year
Ratio Earned Ratio Coverage Ratio

2013 51.79% 2.29 10.68

2014 57.66% 2.52 62.58

2015 50.63% 2.00 4.53

2016 46.58% 2.49 76.8

2017 50.2% 1.99 1.72

2018 47.8% 2.28 3.61

2019 39.8% 2.30 18.22

2020 47.5% 2.18 25.98

2021 52.6% 2.12 34.24

2022 50.6% 2.08 28.78

Table 3: Debt Management Ratio

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Interpretation: Debt Ratio

In 2013, 51.79% of the total assets were financed by debt. Debt ratio increased from the last year
in 2014 when it was 57.66%. There wasn’t any large during 2015 to 2018, but the debt ratio falls
in 2019 to 39.85. During 2020 and 2021 the debt ratio saw a growth but again decreased in 2022,
when it was 50.60%.

Debt Ratio
70.00%
57.66%
60.00% 51.79% 50.63% 50.20% 52.60% 50.60%
46.58% 47.80% 47.50%
50.00% 39.80%
40.00%
30.00%
20.00%
10.00%
0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Debt Ratio

Figure 8: Debt Ratio

Interpretation: Times Interest Earned Ratio

In 2013, the Times Interest Earned Ratio was 2.29. in 2014 it increased and became 2.52 but
decreased in 2015 and became 2.00. The ratio saw rise and fall repeatedly during 2016 to 2018.
In 2019 the ratio was 2.30 and after that the ratio started falling slowly and in 2022 the ratio
stood 2.08.

Time's Earned Interest Ratio

3 2.52 2.49
2.29 2 1.99 2.28 2.3 2.08
2.18 2.12
2

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Time's Interest Earned Ratio

Figure 9: Time’s Interest Earned Ratio

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Interpretation: Fixed Payment Coverage Ratio

In 2013, the Fixed Payment Coverage Ratio was 10.68, which means the company generated
10.68 times more earnings than the amount needed to cover its fixed payments. The ratio
changed drastically each year. In 2016 the Fixed Payment Coverage Ratio was highest, and it
was 76.8. In 2017 the ratio was the lowest among the last ten years and it was 1.72. In 2022 the
ratio stood 28.78.

Fixed Payment Coverage Ratio

100
76.8
80
62.52
60
34.24
40 25.98 28.78
18.22
20 10.68
4.53 1.72 3.61
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Fixed Payment Coverage Ratio

Figure 9: Fixed Payment Coverage Ratio

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3.4 Profitability Ratio
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings as compared to its expenses and other relevant costs incurred during a specific
period of time. For most of these ratios, having a higher value relative to a competitor's ratio or
the same ratio from a previous period is indicative that the company is doing well.

3.4.1 Gross Profit Margin:

Gross profit margin is a financial metric used to assess a firm's financial health by
revealing the proportion of money left over from revenues after accounting for the cost of
goods sold. Profit margin serves as the source for paying additional expenses and future
savings.

3.4.2 Net profit margin:

Net margin is the ratio of net profits to revenues for a company or business segment -
typically expressed as a percentage – that shows how much of each dollar earned by the
company is translated into profits.

3.4.3 Operating Profit Margin:

Operating profit margin is a financial metric that measures a company's profitability by
expressing its operating profit as a percentage of its revenue.

3.4.4 Return on Asset (ROA):

Return on total assets (ROA) is an indicator of how profitable a company is relative to its
total assets. ROA gives an idea as to how efficient management is at using its assets to
generate earnings. Calculated by dividing a company's annual earnings by its total assets,
ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".

24
3.4.5 Return on Equity (ROE):

Return on equity (ROE) is the amount of net income returned as a percentage of

shareholders’ equity. Return on equity measures a corporation's profitability by revealing
how much profit a company generates with the money shareholders have invested.

3.4.6 Earnings per Share (EPS)

Investors would like to know how much profit is generated by each share they hold and
EPS provides this valuable information. The market fetches higher prices for high profit
growth companies. Small capitalization companies with high profits will naturally show
attractive EPS.

Profitability Ratio:

1. Gross Profit Margin: (Sales- Cost of Goods Sold)/Sales*100

2. Net Profit Margin:(Earnings Available for Common
Stockholders/Sales) *100
3. Operating Profit Margin:(Operating Profit/Sales) *100
4. Return on Total Assets:(Earnings Available for Common
Stockholders/Total Asset) *100
5. Return on Common Equity:( Earnings Available for
Common Stockholders/Common Stock Equity)*100
6. Earnings Per Share

25
 Operating Return on Earning
Gross Profit Net Profit Return on
Year Profit Common Per
Margin Margin Total Assets
Margin Equity Share

2013 43.95% 15.59% 30.43% 26.67% 22.71% 81.14

2014 44.33% 17.62% 32.36% 23.20% 23.75% 104.70

2015 46.82% 14.65% 33.08% 19.85% 22.61% 97.43

2016 45.39% 17.30% 31.82% 21.45% 23.44% 126.37

2017 47.69% 15.06% 34.25% 16.87% 18.85% 130.50

2018 50.40% 18.33% 38.10% 17.71% 22.24% 166.87

2019 47.25% 16.30% 33.02% 15.59% 18.47% 51.37

2020 48.92% 17.92% 36.86% 16.69% 16.82% 60.48

2021 53.53% 19.96% 42.36% 19.30% 8.86% 27.42

2022 52.51% 21.24% 42.21% 21.33% 18.29% 33.10

Table 4: Profitability Ratio

26
Interpretation: Gross Profit Margin Ratio

In 2013, every 100 BDT worth of sales generated 43.95 BDT worth of gross profit. The net
profit margin in the next two years increased and it was 46.82 BDT in 2015.Then we see a slight
drop in 2016 which was 45.39 BDT and from then the net profit margin again increased to 50.40
BDT in 2018.From 2019 to 2022 we see a mixed change in the gross profit margin and finally
every 100 BDT worth of sales generated 52.51 BDT in the year of 2022.So in conclusion, as
there is frequent ups and downs in this margin the performance is quite unpredictable.

Gross Profit Margin Ratio

60.00% 53.53% 52.51%
47.69% 50.40% 48.92%
43.95% 44.33% 46.82% 45.39% 47.25%
40.00%

20.00%

0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Gross Profit Margin Ratio

Figure 11: Gross Profit Margin Ratio

Interpretation: Net Profit Margin Ratio

In 2013, every 100 BDT worth of sales generated 15.69 BDT worth of Net Profit. Net Profit
Margin had increased in the next year which was 17.62..Then we see a mixed change in the
percentage in the next four years. From the year of 2019 to 2022 the Net Profit Margin gradually
increased from 16.30 to 21.24 respectively. As BATB’s performance in this is good in recent
years so it is considered satisfactory.

Net Profit Margin Ratio

25.00% 19.96% 21.24%
17.62% 17.30% 18.33% 17.92%
20.00% 15.59% 14.65% 15.06% 16.30%
15.00%
10.00%
5.00%
0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Net Profit Margin

Figure 12: Net Profit Margin Ratio

27
Interpretation: Operating Profit Margin Ratio

In 2013, every 100 BDT worth of sales generated 30.43 BDT worth of operating profit.
Operating Profit Margin had increased till 2015.Then again the operating profit increased in the
recent years. In the year of 2022 it increased to 42.21 BDT for every 100 BDT worth of sale.In
conclusion BATB’s performance was satisfactory since it performed better in the recent years
compared to the previous years.

Operating Profit Margin Ratio

50.00%
42.36% 42.21%
38.10% 36.86%
40.00% 34.25%
30.43% 32.36% 33.08% 31.82% 33.02%
30.00%

20.00%

10.00%

0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Operating Profit Margin

Figure 13: Operating Profit Margin

Interpretation: Return on Total Assets Ratio

In 2013, every 100 BDT worth of total assets generated 26.67 BDT of net profit. Return on
Assets decreased in the next two year. But increased again in 2016 and it was 21.45. After that
year the ratio saw some minor increase and decrease but in 2022 the Return on total asset saw a
major growth and it was 21.33%.

Return on Total Assest

30.00% 26.67%
23.20% 21.45% 21.33%
19.85% 17.71% 19.30%
20.00% 16.87% 15.59% 16.69%

10.00%

0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Return on Total Asset

Figure 14: Return on Total Asset

28
Interpretation: Return on Common Equity Ratio

In 2013, the common shareholders earned 22.71 BDT for every 100 BDT invested into the
company. Return on Common Equity increased slightly the next year but decreased again in
2015 and stood 22.61 but again increased the next year and became 23.44. the ratio had a drastic
fall after 2018 and became the lowest in 2021, which was 8.86. but it increased in 2022 and
became 18.29.

Return on Common Equity

25.00% 22.71% 23.75% 22.61% 23.44% 22.24%
18.85% 18.47% 18.29%
20.00% 16.82%
15.00%
8.86%
10.00%
5.00%
0.00%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Return on Common Equity

Figure 15: Return on Common Equity

Interpretation: Earnings Per Share (EPS)

Starting from 2013 the Earning Per Share was 81.14 BDT.In 2015 there was slight drop which was
97.43.Then again the growth continued till 2018.In 2018, the common shareholders have earned
166.87 BDT per share which is highest in last 10 years.And then from 2019 to 2022 Earnings per
Share have decreased down to 33.10 BDT per share as a result it is considered unsatisfactory.

Earnings Per Share

200
166.87
150 126.37 130.5
104.7 97.43
100 81.14
51.37 60.48
50 27.42 33.1

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Earnings Per Share

Figure 16: EPS

29
3.5 Market Ratio

These ratios give an indication of how investors perceive the company; it is past performance,
prospects, etc. The performance of the company's shares in the stock market is crucial from
shareholders’ point of view and management as well. In some organizations top management
bonus is linked to the share price in the stock market.

3.5.1 The Price-Earnings ratio (P/E Ratio)

It is the ratio for valuing a company that measures its current share price relative to its
per-share earnings.

Market Ratio:

Formula:

Price Earnings Ratio: (EPS/Market Price Per Share)

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Price
Earnings 15.64 20.19 18.78 24.36 25.16 32.17 9.90 11.66 5.34 6.34
Ratio

Table 5:Market Ratio

30
Interpretation: Price Earnings Ratio

In 2013, the common shareholders were willing to pay 6.34 BDT for every 1 BDT of reported
earnings. In 2015 the Price Earning Ratio was 5.32 and after that year the ratio decreased
gradually till 2018. In 2021 it was the highest (18.71).

Price Earnings Ratio

18.71
20
15.67
15
10.09
10 8.57
6.34
4.94 5.32 4.1 3.97
5 3.11

0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Price Earnings Ratio

Figure 17: Price Earnings Ratio

31
 CHAPTER 4

FINDINGS, RECOMMENDATION AND CONCLUSIONS

4.1 Findings

Looking at the financial statements of British American Tobacco Bangladesh, at a glance it

would seem they are performing with flying colors since all the figures seems to be increasing
such as net turnover, net profit, their assets and such. On the other hand, when a rigorous ratio
analysis is performed a different picture can be seem. It seems BATB had been performing much
better in previous years in some aspects. In terms of liquidity, BATB had performed better in
2019 comparing the year of 2013. In the activity ratio we can find toatal asset turnover was
effective and efficient at the year of 2020.The average payment period of BATB was also good
at the year in 2020 while the avarage payment periods was 210.96 days. Observing their Debt
ratio BATB had a better standing in 2019 than in 2020 and the following year. But was alarming
for BATB at the year 2014 which indicators BATB has more debt in Against of its assets. A
great number of amount of assets were financed by debt and also they could have covered their
interest expenses a huge number of times with ease. In terms of profitability, BATB’s gross
profit decreased due to high amount of taxes needed to be paid, on the other hand their net profit
margin increased in 2022 compare to 2021. since last year since they earned some tax in return.
Also their return on assets in increased significantly. BATB performed exceptionally well in the
area of share market. The performance of the company shares in the stock market is crucial from
shareholders’ point of view and management as well .BATB provided the highest amount of
earnings per share in 2018 when the investors have earned 166.87 BDT per share than any other
year. BATB doing their task with effectively and efficiently.

4.2 Recommendation
To sum it up, British American Tobacco Bangladesh’s performance is not the best they are
capable of and this mostly because of the increasing amount of tax they have to pay to the
government for being a tobacco manufacturing company. They have a few areas of
improvement, and this is achieved through their various types of projects that are conducted.
Therefore, the effective implementation of these project are crucial for the betterment of British
American Tobacco Bangladesh.

32
4.3 Conclusions

British American Tobacco Bangladesh is one of Bangladesh's most valuable corporate entity in
existence for the last 112+ years in the country. It is the leading company in the tobacco market.
Even so they do not have the optimum control over the market volume. Currently BATB has
coverage or 738 thousand outlets all around the nation. They require the coverage of 870
thousand outlets to gain 80% volume control in the market to give them the optimum results they
want to achieve. To do so they have to reach outlets they are unable to reach but using the most
efficient and effective of ways to keep costs to a minimum. For this very purpose they have come
with a project named ―Route to Market . This project is implemented whenever BATB realizes
they have to change their strategy due to the always changing market, for sustainable growth and
performance. One of the major step in the Route to Market project to make their performance
better is known as Multi-Category Distributor, where BATB hired third parties to help them
reach the area of the market they cannot reach or would be too costly for them to reach. The
project started in 2016. Till 2022 the project is benefiting the company from various aspects.
British American Tobacco Bangladesh made a profit of Tk 1,496.88 crore in 2021. The company
made Tk 1,787cr profit in 2022. And year by year the multinational company is generating more
profits and becoming more well organized. They are leading the cigarette industry in Bangladesh
with a market share of more than 50%, employing more than 1,300 people directly. They provide
indirect employment to more than 30,000 people as farmers, distributors and local suppliers.For
a company like BATB, operating in a highly controversial and sensitive industry, their internal
communication is very important to facilitate decision making and making them able to face the
stakeholders. Thought challenging, BATB is doing a successful job in devising a successful
portfolio of tools for internal communication and the process of continuous improvement keeps
their model functional. The organization has gone through different financial level where it saw
falls and rise. But the proper management and financial controlling of the organization has made
the organization more resilient and adept and the company became stronger financially.

33
 REFERENCES

• British American Tobacco Bangladesh website- www.batbangladesh.com/

• British American Tobacco Bangladesh 2013- “British American Tobacco Bangladesh
Annual Report 2013”.
• British American Tobacco Bangladesh 2014- “British American Tobacco Bangladesh
Annual Report 2014”.
• British American Tobacco Bangladesh 2015- “British American Tobacco Bangladesh
Annual Report 2015”.
• British American Tobacco Bangladesh 2016- “British American Tobacco Bangladesh
Annual Report 2016”.
• British American Tobacco Bangladesh 2017- “British American Tobacco Bangladesh
Annual Report 2017”.
• British American Tobacco Bangladesh 2018- “British American Tobacco Bangladesh
Annual Report 2018”.
• British American Tobacco Bangladesh 2019- “British American Tobacco Bangladesh
Annual Report 2019”.
• British American Tobacco Bangladesh 2020- “British American Tobacco Bangladesh
Annual Report 2020”
• British American Tobacco Bangladesh 2021- “British American Tobacco Bangladesh
Annual Report 2021”
• British American Tobacco Bangladesh 2022- “British American Tobacco Bangladesh
Annual Report 2022”
• Keown, A. J., Martin, J. D., Petty, J.W., Scott, D. F. (2013-2014) Financial
Management: Principles and Applications, Tenth Edition
• Lanka Bangla Portal
• Market Research
• Wall Street Journal
 APPENDIX

Liquidity Ratio:

Year Current Ratio Quick Ratio

2013 9950631/8314769 (9950631-6626703)/8314769

(15056444-
2014 15056444/14102835
9098197)/14102835

(15925816-
2015 15925816/12450286
8553377)/12450286

(19935710-
2016 19935710/13636965
13979180)/13636965

(25499348-
2017 25499348/19597386
23112438)/19597386

(300596642-
2018 30059642/22922858
19429201)/22922858

(28226049-
2019 28226049/17014377
16537884)/17014377

(33735532-
2020 33735532/24189169
23780680)/24189169

(44091288-
2021 44091288/39776301
34425100)/32776301

(44851119-
2022 44851119/32737583
28769599)/32737583
Activity Ratio:

Inventory Total Asset Average Average

Average Payment
Year Turnover Turnover Age of Collection
Period
Ratio Ratio Inventory Period
770916/
17501330/ 31225437/
2013 365/2.64 (31225437 3701889/47949
6626703 18463798
/365)
1766817/
19332215/ 35641986/
2014 365/2.125 (35641986/365) 6870420/52965
9098197 27075019

21212511/ 39894894/ 940758/

2015 365/2.48 7842726/58117
8553377 29590831 (39894894/365)

23890895/ 43753775/ 1062450/

2016 365/1.71 8218406/65455
13979180 35347583 (43753775/365)

27180742/ 51963743/ 2315757/

2017 365/1.56 10101621/74468
17469089 46414508 (51963743/365)

27096297/ 54639767/ 4174125/

2018 365/1.40 10518444/74236
19429201 56543229 (54639767/365)

29972780/ 56821330/ 2609916/

2019 365/1.81 12187229/82118
16537884 59430237 (56821330/365)

30792689/ 60290627/ 141439/

2020 365/1.30 17798121/84364
23780680 64747265 (60290627/365)

34770586/ 74827561/ 2768918/

2021 365/1.01 18530880/95289
34425100 77555880 (74827561/365)

39994846/ 84231572/ 682195/

2022 365/1.39 171656262/109575
28769599 83429888 (84231572/365)
Debt Management Ratio:

Times Interest Earn Fixed Payment

Year Debt Ratio
Ratio Coverage Ratio

(9562208/18463798)
2013 9504368/4148114 9593164/99131
*100

(15611509/27075019)
2014 11534652/4584357 21722156/187504
*100

(14981312/29590831)
2015 13200527/6585538 13343088/2942561
*100

(16465001/35347583)
2016 13926734/5587918 3878169/50497
*100

(23302070/46414508) 17802421/8929663
2017 17994247/10491826
*100

(27014375/56543229)
2018 20819780/9302290 21305538/5905758
*100

(23636782/59430237)
2019 18766993/8157578 19348944/1061642
*100

(30747550/64747265)
2020 22223587/10203363 22550087/894898
*100

(40765108/77555880)
2021 31704351/14933157 31741531/936784
*100

(42246284/83429888)
2022 35557916/17120999 36121743/1254920
*100
 Profitability Ratio:

Gross Profit Net Profit Operating Return on Return

Year EPS
Margin Margin Profit Margin Asset on Equity

(13724097/ (4868649/ (9504368/ 4924127/ 1870814/

2013 31225437) 31225437)* 31225437)* 18463798 8236694 81.14
*100 100 100 *100 *100
(15768957 (8281922/ (11534652/ 6281922/ 2564398/
2014 /3561987) 35641986)* 35641986)* 27075019 10798615 104.74
*100 100 100 *100 *100
(18682383/ (5846008/ (13200527/ 5874074/ 3152252/
2015 398948940)* 39894894)* 39894894)* 29590831 13944623 97.43
100 100 100 *100 *100
(16573033/ (13926734/ 7582962/ 4271316/
(7573063/
2016 43753775)* 43753775)* 35347583 18217686 126.37
43753775)*100
100 100 *100 *100
(24783001/ (17802421/ 7829856/ 4232537/
(7829856/
2017 5163743)* 51963743)* 46414580 22447542 130.50
51963743)
100 100 *100 *100
(27543470/ (20819780/ 10016416/ 6420100/
(10016416/
2018 54639767)* 57639767)* 56543229 28863958 166.87
54639767)*100
100 100 *100 *100
(26848550/ (18766993/ 9264601/ 6268036/
(9264601/
2019 56821330)* 56821330)* 59430937 33928559 51.37
56821630)*100
100 100 *100 *100
(39497938/ (22223587/ 10806260/ 5406260/
(10806260/
2020 60290627)* 60290627)* 64747265 32134819 60.48
60290627)*100
100 100 *100 *100
(44034872/ (31704351/ 14968529/ 2777497/
(14941069/
2021 74827561)* 74827561)* 77555880 31325878 27.72
74827561)*100
100 100 *100 *100
 (802376726/ (17892830/ (35557916/ 17892830/ 6534310/
2022 842315720)* 84231572) )* 84234572)* 83429888 35718708 33.10
100 100 100 *100 *100

Market Ratio:

Year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Price
518.70/ 518.70/ 518.70/ 518.70/ 518.70/ 518.70/ 518.70/ 518.70/ 518.70/ 518.70/
Earning
81.14 104.70 97.43 126.37 130.50 166.87 51.37 60.48 27.72 38.10
Ratio