Ratio Analysis of Bata shoe company

INTRODUCTIONBata Shoe Company is one of the largest companies not only in Bangladesh but also in many other countries. Bata Shoes is a large, family owned shoe company based in Bermuda but currently headquartered in Lausanne, Switzerland , and operates 4 business units worldwide – Bata Europe, Bata Emerging Markets, Bata Branded Business and Bata North America. It has a retail presence in over 50 countries and production facilities in 26 countries. In its history the company has sold more than 14 billion pairs of shoes.

Vission

• To make great shoes accessible to everyone .

Mission • To help people look and feel good • To be the customer’s destination of choice • To attract and retain the best people • To remain the most respected Footwear

Company

Current Ratio: The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its short-term liabilities with its current assets.From the ratio we can see that in 2011 the maximum ratio is 1.47. so it is the best among three year. And gradually 1.35 and 1.22.

Liquidity Ratio

Ratio 2011 2012 2013

Current Ratio 1.47 1.35 1.22

Quick Ratio 0.51 0.54 0.63

Cash Ratio 0.17 0.12 0.12

Quick Ratio: Quick Ratio is an indicator of company's short-term liquidity. It measures the ability to use its quick assets to pay its current liabilities. In 2011 the ratio is lower than 1:1 that means in this year the current liabilities or short term loans are high. Gradually in 2012 and 2013 the ratio is increasing.

Cash Ratio: Cash Ratio calculator measures the ability to use its cash and cash equivalents to pay its current liabilities, an indicator of company's short-term liquidity. A cash ratio of 0.5:1 or higher is preferred. In the three year the ratio is below average that means the company is less unable to pay its current liabilities.

Efficiency or activity ratio

2011 2012 2013

Accounts receivable turnover 2.1 3.1 4.8

Average collection period 171.1 117.9 74.9

Inventory turnover 2.4 2.5 2.0

Inventory processing period 147.5 144.1 2.2

Accounts payable turnover 10.5 12.1 9.3

payables payment period 34.4 29.7 38.7

Total asset turnover 1.9 1.9 1.7

current asset turnover 0.99 1.05 7.53

fixed asset turnover 7.8 7.3 69.1

equity turnover 4.3 4.0 3.5

Accounts receivable turnover: Receivables Turnover Ratio is one of the efficiency ratios and measures the number of times receivables are collected, on average, during the fiscal year. Bata Company’s accounts receivable turnover ratio is increasing gradually. In year 2011 the ratio was 2.1 next year 3.1 then it reached to 4.8.Average Collection Period: represents the average number of days it takes the company to convert receivables into cash. Its collection period is not in good position. In 2011 the day was 171 then 117 next year it was 74.9 days. It was decreasing that means acceptable.Inventory Turnover Ratio: is one of the efficiency ratios and measures the number of times, on average, the inventory is sold and replaced during the fiscal year. Low inventory turnover ratio is a signal of inefficiency. Bata Company’s ratio is high in every year that means it is not in good position. But in 2013 the ratio was less than others two years.

• Accounts payable turnover: A short-term liquidity measure used to quantify the rate at which a company pays off its suppliers. Accounts payable turnover ratio is calculated by taking the total purchases made from suppliers and dividing it by the average accounts payable amount during the same period. During three year the ratio was not fixed. It was 10.5 then 12.5 and in 2013 it was 9.3.

•Payable payments period: examines the relationship between credit purchases and payments for them. Accounts payable payment period measures the average number of days it takes an entity to pay its suppliers.in year 2011 the day was 34.4 days next year 29.7 next year was 38.7 days.

• Current asset turnover ratio: The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from its assets by comparing net sales with average total assets. In 2011 and 2013 the ratio is 1.9 which is favorable than 2013, because the ratio of 2013 is 1.7.

Current assets turnover: it shows the relationship between net sells and current assets. In 2011 and 2012 the ratio is not favorable but the higher one 7.5 which is in 2013 is favorable.

Fixed asset turnover: Is an activity ratio that measures how successfully a company utilizing its fixed assets in generating revenue. In 2011 and 2012 the ratio is under control but in the following year the ratio is not stable.

Equity turnover: is a ratio use to measure a company’s financial leverage, calculated by dividing a company’s total liabilities by its stockholders equity. In general higher equity ratio are typically favorable for companies. All three years are stable.

Debt ratio: it is a solvency ratio that a firms total liabilities as a percentage of its total assets. A lower debt ratio usually implies a more stable business. Here .50 is reasonable ratio. It is not exactly appropriate but in all three years ratios are around .50 which is good.

Solvency of leverage ratio

2011 2012 2013Debt ratio 0.56 0.53 0.51

Gross profit margin: is a profitability ratio that calculates the percentage of sales that exceed the cost of goods sold. 2013 is more favorable than other two years.

Profitability ratio 2011 2012 2013Gross profit margin 0.36 0.36 0.38operating profit margin 0.13 0.14 0.15net profit margin 0.09 0.09 0.10return on total asset 0.16 0.17 0.18return on equity 4.24 4.91 5.94

Operating profit margin: it is known as the operating margin ratio. It is a profitability ratio that measures what percentage of total revenues is made up by operating income. Here the comparison happens between same level companies.

Net profit Margin: the net profit margin is the percentage of revenue remaining after all operating expense, interest, taxes and preferred stock dividend.

Return on total assets: the return on assets ratio often called the return on total assets. It is a profitability ratio that measures the net income produce by total assets during a period by comparing net income to the average total assets. In 2013 the ratio .18 which better than other two years.

Return on Equity: it is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company. In 2013 the ratio 5.94 which better than other two years.