TERM PAPER

On

Performance Evaluation of IFAD Autos LTD. And AFTAB Automobiles LTD.

Performance Evaluation Of IFAD Autos LTD. And Aftab Automobiles LTD.

Course Code: FIN-201

Section: 04

Prepared for:
Mohammed Humayun Kabir
Lecturer,
Department of Business Administration
East West University
DHAKA

Prepared by:

Name ID

Date of Submission: 05th December, 2019

 Letter of Transmittal

5th December, 2019

Mohammad Humayun Kabir
Lecturer,
Department of Business Administration
East West University
DHAKA
Subject: Application for submission of term paper on “IFAD Autos LTD. and Aftab
Automobiles LTD.

Sir,
With due respect, we would like to inform you that it is our great pleasure to have the
opportunity to submit the report on the “IFAD Autos LTD. and Aftab Automobiles LTD. as part
of our course FIN201.
We are thankful to all those persons who provided us important information and gave us
valuable advices. We would be happy if you read the report carefully and we will be trying to
answer all the questions that you have about the term paper.
We have tried our label best to complete this term paper meaningfully and correctly, as much as
possible. We do believe that our tiresome effort will help you to get ahead with this sort of
venture. In this case it will be meaningful to us. We tried to undertake all the related issues in
this report within several limitations. We sincerely hope and believe that these finding will be
able to meet the requirement of the course.
Therefore, we would like to place this report for your kind judgment and valuable suggestions.
Sincerely yours,

NAME ID
 Acknowledgement

The writing this report has been one of the most significant academic challenges we have ever
had to face. This curriculum by the course of “Business Finance” by Lecturer, Mohammad
Humayun Kabir, Department of Business Administration, and East West University.
At first we express our deep gratitude and sincere thanks to Almighty Allah for providing us
sufficient strength to make this term paper successfully. We truly would like to express our
appreciation to our honorable course instructor Mohammad Humayun Kabir for his inspiration,
kind assistance, valuable suggestions and wise guidance during making this term paper. His
precious suggestion and supervision have made this term paper a good manner. It was a
knowledgeable event which will tremendously help us in future. It will help to improve our
expertise to an extraordinary expense. We are exceptionally thankful for his important and
minding directions and propositions.
We also want to extend my greatest thanks to all those who are associated and contributed in this
term paper.
 Executive Summary

Understanding ratio analysis of a company is important to be a successful financial analyst.

By understanding different ratios of a company, an analyst can easily show the company’s
current position. Research of company is mandatory to know the needs and wants of that
company. In our report, we have try level our best to identify ,capture, interpret company’s
position in the current market, gives opinions, views towards that particular companies.
Especially “Ifad Autos” and Aftab Automobiles LTD.. are the leading company. Aftab
Automobiles LTD. is one of the leaders in Bangladesh. Different people like these two
companies for different reasons. It is obvious that different people have different opinion
about their financial position in the market. As a result, we have tried to capture the real
position of the two companies. In our report, we have also focused on the findings and
recommendation of their financial statements. We have tried to highlight the ratios, charts and
external factors of “Ifad Autos” and “Aftab Automobiles LTD.”
Contents
Performance Evaluation Of IFAD Autos LTD. And Aftab Automobiles LTD........................................2
Letter of Transmittal..............................................................................................................................3
Recommendations...................................................................................................................................9
Conclusion...............................................................................................................................................9
 Objectives of the study

The study has been undertaken with the following objectives:

1) To find out the mission and vision of Ifad Autos Limited and Aftab Automobiles Limited.
2) To find out the annual condition of Ifad Autos Limited and Aftab Automobiles Limited.
3) To find out the asset management of Ifad Autos Limited and Aftab Automobiles Limited.
4) To find out the Debt management of Ifad Autos Limited and Aftab Automobiles Limited.
5) To realize the year by year profitability analysis of Ifad Autos Limited and Aftab
Automobiles.
6) To realize the trend analysis of Ifad Autos Limited and Aftab Automobiles Limited.

Limitations of study

All the group members gave their best effort. But at the time of collecting data, it would have
been better if the organization gave us time. We collect the necessary information and
sometimes guidance for better study. But sometimes there is shortage of authentic data, there
are many website with fake amount of data.
 Introduction

Background of the study: We studied the annual reports of both Ifad Autos Limited and
Aftab Automobiles 2014, 2015,2016,2017 and 2018 monetary years and find out some
important information that we need for our term paper. We included ratio analysis on our
term paper. We took help from the website of Dhaka Stock Exchange, Ifad Autos Website and
Aftab Automobiles website for doing our task done.

Methodology of the study:

Term paper is conclusive as well as descriptive in nature. The purpose of the paper is together
a practical knowledge. To collect the primary data, the following steps have been followed to
obtain the term paper objectives:
1) Collecting data from various website and other internet sources.
 Company overview
#IFAD Autos:

IFAD Autos Ltd. was founded in 1985 as a private company and underwent an IPO in late 2014.
The company provides a full line of heavy duty turcks, buses and special service vehicles from
Ashok Leyland of India. In addition, the LCV range offers lighter cargo vehicles and passenger
vans made by Ashok Leyland in joint venture with Nissan of Japan.
IFAD Autos Limited is engaged in the business of dealing in vehicles in various sectors of
Bangladesh. The Company is engaged in importing, marketing and body-building of different
models of vehicles, through its own marketing staffs, dealers and selling agents in various
districts of the country. The types of vehicles include air-conditioned buses, deluxe buses, goods
trucks, dump trucks and prime movers. It imports various models of Ashok Leyland Limited,
Indian vehicles to promote in Bangladesh. The Company has sales outlets at Khulna, Rajshahi,
Chittagong divisions, which cover the districts, such as Jessore, Faridpur, Mymensingh,
Rangpur, Comilla and Sylhet in Bangladesh. It offers 52 seat bus, 42 seat bus and 38 seat bus. It
offers Lynx diesel buses. It offers Tusker Super 1613 covered vans. It also offers milk tankers,
tippers and Taurus carrier. Its light commercial vehicle (LCV) offers lighter cargo vehicles. It
serves both private and public sector customers.

BASIC INFORMATION
Total Employees: Purchase the Ifad Autos Limited report to view the information.
Outstanding Shares:Purchase the Ifad Autos Limited report to view the information.
Registered Capital: Purchase the Ifad Autos Limited report to view the information.
Financial Auditors: Purchase the Ifad Autos Limited report to view the information.
Incorporation Date: 1985
#AFTAB Automobiles:

In 1981 the Company was converted into Public Limited Company which is the lone largest
assembler-cum-progressive manufacturer of Toyota & Hino vehicles in the private sector of the
country.
The Company is mainly a vehicle assembler and bus-body fabricator. It has been successfully
assembling TOYOTA & HINO vehicles for Bangladesh market since 1982.
The Company was listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange
Limited in the year 1987 and 1996 respectively.
The principal activities of the Company throughout the period were assembling of Toyota Land
Cruiser soft top/ Pick-up, Land Cruiser Prado, Hino Bus, Hino Mini Bus/ Truck with a yearly
production capacity of 2400 units of vehicles in 3 shifts. The Company have also a subsidiary
companies, e.g. Navana Batteries Limited.
Presently, the Company is mainly engaged in assembling and body fabrication of HINO luxury bus
of model RM2 which is in great market demand now-a-days.
HINO buses are widely operated in all the routes of the country. We have also introduced
environmental friendly (CNG driven) AK1JMKA model HINO Bus for the first time in Bangladesh.
Navana Batteries Limited (NBL) is a fully owned subsidiary company of Aftab Automobiles Limited
(AAL) holding 99.95% share. The Company has newly introduced ‘motorcycle batteries” in order to
streamline its profit earning.
Further HINO luxury buses are also plying in the International Routes, e.g. Dhaka ~ Kolkata~Dhaka
and Dhaka ~ Agartola~Dhaka.
The Bus Body Building Unit of the Company has also been modernized by introducing high-tech
equipments. where vehicles including RM-2  (New model) buses are being painted with fully
automation ensuing international quality.

https://www.investing.com/equities/ifad-autos-ltd-company-profile

https://www.aftabautomobiles.com/brief-history/
 Analysis

Asset Management:

Inventory Turnover Ratio:

Inventory turnover ratio measures the efficiency of the firm’s inventory management. A higher
ratio indicates that inventory does not remain on the shelves but fills rapidly after sale. This ratio
can be calculated as following:

Cost of Goods Sold

Inventory Turnover =
Average Inventory

Inventory Turnover Ratio 2014 2015 2016 2017 2018

Aftab Autos -1.65 -1.94 -1.58 -1.74 -2.00

Ifad autos -13.74 -5.04 -5.98 -7.44 -8.39

Aftab Automobiles: Aftab automobiles went into production -1.65 time in 2014. Later it
decreased by -1.94 in 2015. But in 2016 it again increased by -1.58 times which means the sales
had increased and more inventory was used for production. In 2017, 2018 it decreased
significantly to -1.74 and -2.00 times.
IFAD Automobiles: Inventory turnover of this company is very low at -13.74 times which
means the company suffered a severe inventory management crisis in 2014.But in 2015 and 2016
the company’s ratio was slightly better in comparison to 2014 but it was still negative as it is
below zero “0” which the company was suffering inefficient inventory management. And in
2017-2018 it only got worse.
Comparison: Between the two companies Ifad’s inventory turnover ratio is way worse
compared to Aftab but both of their ratios are in the negative which is a bad indicator for both of
the companies.

Days Sales Outstanding:

Days' sales outstanding ratio is used to measure the average number of days a business takes
to collect its cash after they have sold a product. It is an activity ratio and gives information
about the efficiency of sales collection activities. Ratio can be calculated as:

Accounts Receivable
Days sales Outstanding =
Average Daily Sales

Days sales 2014 2015 2016 2017 2018

outstanding

Aftab Autos 143 151 157 124 166

Ifad Autos 441 763 671 538 474
Aftab Automobiles: DSO of Aftab Autos. Is not optimal because to collect cash from its credit
sales it almost takes more than a hundred days(143) in 2014. In 2015,2016 the situation became
worse. In 2017 it got a little better but in 2018 it went way worse.
IFAD Automobiles: DSO of Ifad Autos is pretty bad 2014 in 441 days which means it takes 441
days to get credit sales. In 2015 it got worse:763 days. In 2016 it DSO was 671 days. But in 2017
and 2018 DSO got better which is 538 and 474 days.
Comparison: Between the two companies Aftab’s DSO is better than IFAD autos in all the
years listed.

Total Assets Turnover:

Total Asset Turnover ratio measures how much sales revenue a company can earned by using
its total assets. It is calculated by taking sales revenue divided by average total assets. The
ratio is calculated as:
Sales
Total Asset Turnover =
Average Total Assets

Total assets 2014 2015 2016 2017 2018

turnover

Aftab Autos 0.35 0.36 0.31 0.40 0.35

Ifad Autos 0.53 0.30 0.36 0.46 0.52
Aftab Automobiles: By using its total asset the company had gain sales revenue by 0.35 times
in 2014. In 2015 it was pretty similar at .36 times. But in 2016 in decreased to .31. The company
had its best turnover in 2017 at 0.40 times. But it decreased to .35 in 2018
IFAD Automobiles: IFAD auto’s total asset turnover is at.53 at in 2014 which means it used its total
asset to gain revenue by .53 times. In 2015 it lowered to .30 but increased in 2016,2017,2018 by .36, .46,
.52 times.

Comparison: Between the two companies IFAD is in a better position compared to Aftab’s in
2014,2016,2017 and 2018. The only exception is 2015 when IFAD’s ratio .30 was lower than AFTAB’s.

Profitability Ratio:

Profit Margin:

Profit margin is calculated as net income divided by revenue, or net profits divided by sales.
This ratio indicates how much a company can earn from its sales after deducting all the
operating and non-operating costs.
Net Income
Profit Margin =
Sales

Profit Margin 2014 2015 2016 2017 2018

Aftab Autos 10% 8% 9% 8% 5%
Ifad Autos 6% 7% 8% 10% 10%
Aftab Automobiles: By making its sales the company made a profit margin of 10% in 2014. But
in the other years the profit margin started declining to a point where in 2018
IFAD Automobiles: By making its sales the company made of profit margin of 6% in 2014.
Then from 2015-2018 the ratio started to increase consistently.

Comparison: Here IFAD’s profit margin is increasing at a steady rate over the years while
Aftab autos’ is decreasing overtime.

Return on Assets:

Return on assets shows the percentage of profit a company earns in relation to its total assets.
It is commonly defined as net income divided by total assets. Like other profitability ratios it
also indicates better performance of the company when the ratio is higher.
Net Income+ After Tax Interest
Return on Asset ¿
Average Total Assets

Return on Assets 2014 2015 2016 2017 2018

Aftab Autos 3% 3% 3% 3% 2%
Ifad Autos 3% 2% 3% 5% 5%

Aftab Automobiles: After using the total asset the net income was gained by 3% in 2014. It
stayed the same from 2015-2017. But in 2018 it decreased to 2%
IFAD Automobiles: After using total assets the income gained was 3%. In 2015 it declined to
2% but in 2016 it increased to 6%. Between 2017-2018 it stayed the same
Comparison: When comparing the two companies we can gather that Aftab autos’ ROA stayed
the same from 2014-2017 which shows consistency. But declined in 2018. But IFAD autos’
ROA changed a little bit over the years and stayed constant at 2017-2018

Return on Equity:
Return on equity is a part of profitability ratio which represents the amount of net income
returned as a percentage of shareholders equity. It measures a company’s profitability by
indicating how much profit a company can generates from the money they received from the
shareholders’ investment. Companies with higher ratio indicate better performance.
Net Income
Return on Equity ¿
Average Shareholder s ' Equity

Return on Equity 2014 2015 2016 2017 2018

Aftab Autos 5% 6% 5% 7% 4%

Ifad Autos 12% 7% 12% 18% 18%

Aftab Automobiles: From the money received from the shareholders the company was able to
generate ROE of 5% in 2014. In 2015 and 2016 it was 6% and 5%. In 2017 it increased to 7%.
But it declined to 4%.
IFAD Automobiles: IFAD had an ROE of 12% in 2014. In 2015 it declined to 7%. But in 2016
it rose to 12%. And in 2017-2018 it stayed at 18%.
Comparison: Compared to Aftab, IFAD had better ROE from 2014-2018 consistently even in
2015 when IFAD had the lowest ROE.

Recommendations

However the satisfaction level of both company Aftab Automobiles LTD. Bangladesh and
IFAD Autos LTD.is good enough.To minimize the effect of such inefficiency in terms of
share price movement and the stock market, the following recommendations are provided:

• Both company should create royal and also Loyal customer

• Increase sales and promotional activity
• Increase conference with engineer, and mason
• Chain of command should be strong
• Increase number of employee
• Import system has to be faster
• Reduces the overdue amount.
• Maintaining quality with low price

Conclusion

The automobiles industry is one of the newer but a promising industry of the country. There is a
huge room for growth of this industry in Bangladesh in the near future. By making the ratio
analysis we can see these two companies are not doing good at the present time. So they have to
focus more on their investment and working process to sustain in the long run.