Financial Ratio Analysis of Bata Bangladesh

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1.0 INTRODUCTION AND METHODOLOGY

1. Background
Bata Shoe Company (Bangladesh) Limited is a leading footwear manufacturing and merchandising company with a powerful combination of skills and resources that provides a platform for delivering strong growth in today’s rapidly changing footwear industry. As a subsidiary of Bata Shoe Organization (BSO), the principal activities of the company are manufacturing and marketing of footwear and hosiery products. It conducts the operational activities in Bangladesh as a principal with its own set-up of manufacturing, marketing and distribution. The company has retail and non retail sales department. It has also dealer stores, DSP (Dealer support program) stores, wholesale stores etc. Among the retail channels are city stores, family stores, Bata Bazaars, and super stores. Taking into consideration the consumer demand in various market segments for new styles and designs without ignoring the necessity for volume sales, the company is constantly introducing new products in all categories. It is always trying to bring new products and new brand names to attract different segments of customers form infants to old. Bata shoe possesses a different outlook due to the excellent technical assistance, innovation in manufacturing, efficient marketing and management information system. The company is playing a major significant role in influencing Bangladesh’s economy. Its sponsorship in various social activities cannot be left unmentioned. Human resource development is always a matter of great concern of the company. For generating skilled manpower it has intensive training program both in home and abroad. The Company has over 1436 number of total employees with an efficient management team and operating very smoothly.

The authorized capital of Bata Shoe Company is BDT 200 million and paid up capital is BDT 136,800,000 with which Bata is one of the most admired and respected company of Bangladesh. The company was enlisted at the Dhaka Stock Exchange (DSE) in 1985. As on 31st December, 2007, the company had 8541 shareholders with 13,680,000 shares. Considered by many a blue chip company in DSE, Bata has a book value of BDT 60.13 and market value of BDT 223.60 on December 2007.

The balance sheet and income statement of a company are analyzed by the Equity shareholders of the company not only to get information about current profit and liquidity but also to find out the value of their investment. Value of the investment means the worth of the own funds of the company from various angles. Own funds are the amounts deployed by the shareholders as well as funds belonging to the shareholders used by the company for its business operations. The book value of the shares of a company refers to the value of own funds for each share of the company. The market value of a company's share refers to the price that is quoted in a recognized stock exchange at which the shares of the company can be bought or sold. The purchase and sale rates at the exchange are determined by a number of factors for example, the profitability of the company, its profit potential, the number of shares outstanding, general market fancy for such shares, and some other certain intangible factors.

The market value can be either more or less than the book value. Market value is determined by the combination of all players in the market such as financial institutions, mutual funds, foreign institutional investors, securities operators and the common investors. The market price is determined by the equilibrium point of the demand and supply position in the market. The market value is viewed as current earnings, future earnings, industrial growth, competitive advantage, and so on. The book value of the shares would also be a factor that is taken into account by the market. It is possible for the market price to be more than the book value. Sometimes the net perception in the market for the company has growth potential whereas it...
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