AN ANALYSIS OF FINANCIAL SITUATION OF BESTWAY CEMENT COMPANY LIMITED
(RESEARCH AND ANALYSIS PROJECT)
PROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH
REASONS FOR CHOOSING THE TOPIC AND COMPANY
There have been a few factors which helped me in the selection of the topic and company which I have discussed below:
•INTEREST: Analyzing the financial situation of an organization is interesting and full of learning activity. Not only for this reason but I also wanted to gain expertise in this subject as I invest in stocks.
•APPLICATION OF KNOWLEDGE: Being an ACCA student, it’s essential for one to learn the key skill of analyzing the financial statements as it is a part of syllabus for different papers.
•WIDE INFORMATION BASED: BWCL is a public limited company and is listed on all the Stock Exchanges of Pakistan therefore, its information is widely available and some of the information can easily be viewed on the internet which is up-to-date, relevant, meaningful and understandable.
•CEMENT SECTOR: The cement sector in Pakistan is prospering due to readily available industrial financing and home building credit facilities; demand is also increasing in neighboring countries. Analyzing the financial situation of BWCL, a company operating in this sector, has enabled me to get in depth understanding of how the cement sector may contribute to Pakistan’s economy.
•COMPANY: BWCL is one of the most diversified and leading companies in the cement sector of Pakistan. Being a renowned company, information gathering was relatively easy.
Each type of analysis has a purpose or use that determines the different relationships emphasized in that analysis. (Weston & Brigham, 1979)
The aims and objectives of this Research and Analysis project are:
•To analyze the company performance in terms of:
Profitability- to asses a firm’s ability to create economic value in excess of value expended, to grow, remain solvent and repay debt. (John E. McKinley, 1984)
Liquidity- to measure the short term financial health of the organization; to assess the ability of the firm to pay its short-term debts. (Peter Stimpson, 2002)
Debt & capital structure- to measure the financial risk in company’s long-term capital structure.
Cash flows- assess the cash flows of the company and its ability to repay its obligations on a timely basis.
Investment- to assess the value and quality of investment in the ordinary shares of a company and the prospects of financial gain.
•The purpose of the SWOT analysis is to conduct a general and quick examination of a business’s current position so that it can identify preferred and likely directions in future. It involves looking at the internal strengths and weaknesses of a business and the external opportunities and threats. (Dave Hall, Rob Jones, Carlo Raffo, 1999)
•Porter’s five-force model (barriers to new entrants, threat of substitutes, bargaining power of suppliers and customers and rivalry among existing businesses) is used in making a qualitative evaluation of a firm's strategic position. (McGahan, A. 2004)
•Identification of different business and financial risks faced by the company.
•To reach a logical conclusion based on above analysis (ratio analysis, SWOT analysis, porter’s five forces model, risk analysis) and suggest what can be done better.
•A brief overview about the future plans of the company.
In order to ensure that my project has the appropriate structure and that I have clear objectives in mind, I established some research questions after the selection of my topic which included: •What is the current literature on the subject and the underlying theory? •What sources are helpful to collect the...