Group no:3

A COMPREHENSIVE ANALYSIS OF FINANCIAL STATEMENT

OF BEXIMCO SYNTHETICS LTD.


2

Group profile:
Name
Roll no.
Sanzida Rahman Liza
18-010
Rahima Nazat Ara
18-074
Fowziah Nahid Priya
18-096
Hamida Akter
18-146
Sneharthi Ghosh
18-152









3

LETTER OF TRANSMITTAL


16
th
February, 2014
Shehub Bin Hasan
Lecturer
Department of Finance
University of Dhaka

Subject: Submission of report on A comprehensive analysis Of Beximco synthetics ltd.
Dear Sir

We are obliged to submit the report entitled A comprehensive analysis of Beximco synthetics
ltd., as a partial requirement of the course Financial management under your instruction.

This report highlights the financial ratio analysis and dividend policy analysis of Beximco
Synthetics Ltd. To prepare this report we have tried to implement our theoretical knowledge with
practical experiences.

We are extremely grateful to you for your valuable guidance, diligent effort & inspiring words.
We have tried our best to follow your instructions, schedule and discipline obediently.
Sincerely,
On behalf of all group members
Sanjida Rahman Liza.









4






We express our thanks to our dear course teacher Shehub Bin Hasan for assigning us a report
dealing with real financial statements of a manufacturing company. In this regard, we would also
like to thank ourselves as our good teamwork and successful team spirit. Without cooperation
and the support from each other, it would not be possible to prepare such a resourceful report.
The presentation of this report is of a great expectation in our BBA program and we are quite
happy to submit it. Theoretical knowledge is valued when it is successfully applied in practical
scenario. In this respect we found this report a great opportunity to deal with some special
concentrations of real world problems.
So lastly we would again like to express our heartfelt thanks to our course teacher for providing
such scope to gain practical knowledge and enrich our study with realistic implication of
knowledge.














ACKNOWLEDGEMENT




5







Financial management is one of the most important courses and is very helpful to our study and
real life. Our honorable course teacher Shehub Bin Hasan vested us with the responsibility to
prepare a report on the topic A comprehensive analysis of Beximco Synthetics Ltd., a
responsibility that we tried our best to fulfill properly.
The company we selected for this purpose is Beximco Synthetics Ltd. We have collected the
annual reports Beximco Synthetics ltd of consecutive five years and calculated the important
ratios of the company to analyze the financial position of the company.
We have also analyzed the dividend policy of Beximco Synthetic ltd. We have showed the
company profile & calculated the liquidity ratios, efficiency and profitability ratios, debt ratios
and market ratios of the company for the last 5 years. We showed the graphical analysis and also
interpreted the calculations clearly in this report. This analysis helped us very much to gather
knowledge about the financial statements of a manufacturing company which will help us in our
future life.












EXECUTIVE SUMMARY


6



Serial
No.
Content Page No.
01. Chapter 01: Introduction



Introduction:
7-8
Origin of the
report:
07
Objective of the
report:
07
Methodology:
07
Scope of the
report:
07
Limitation of the
report:
08
02. Chapter 02:
S Company Introduction

Company Profile:
09
Beximco Synthetics
09
Mission
09
Corporate
governance
09
04. Chapter 03:
Ratio analysis of
financial statements
Liquidity ratios
10-12
Activity ratios
13-17
Profitability ratios

18-21
Debt ratios
22-24
Market ratios
25-26
05. Chapter 04:
Analysis of Dividend
policy
Dividend policy
27-29
Bibliography
30
TABLE OF CONTENT


7


Chapter: 1
Introduction
ORIGIN OF THE REPORT:
This report is a part of a requirement of B.B.A for our Financial Management course (F-206) we
have been assigned at February 05, 2014 & will be submitted at February 16, 2014. While
preparing the report, we gave our best effort to emphasize on the practical implementation of the
knowledge that we learned in our course of Financial Management.

OBJECTIVE OF THE REPORT:
The purpose of preparing the report is to learn about the manufacturing companies financial
statements, their financial position and how they calculate the ratios to highlight their position.
We calculated the important ratios, such as liquidity ratios, activity ratios, efficiency ratios and
profitability ratios to make sure about whether the company is running successfully and whether
its financial position is stable or not. By preparing this report we have learned in depth about the
financial statements of manufacturing companies and their various activities theoretically and
practically.
Scope of the report:
Everything has some advantage which helps that work to be completed thoroughly we get some
scope which helps us to make a standard report. Major of them are:
Enough time: we have got enough time to prepare a report so that we could gather information
with much tension free mind.
Easy excess: we have a very smooth access to collect information by the guidelines of our
honorable teacher, by using our text book and by internet. So, we did not face any kind of trouble
in this sector.

LIMITATIONS:
Every study has some limitations. We faced some usual constraints during the course of our
preparation for the report. The major limitations are as follows:


8

Problems in collecting data: Financial Management is an important subject which gives us
enough knowledge to deal with real life trend and procedures of preparing and analyzing
financial statements of a firm. But in case of collecting the annual reports of consecutive 5 years
of the firm we face a lot of problems as they are not available always.
Lack of knowledge: We dont have sophisticated knowledge about how to prepare a report. So
we have to face some problems by this side.
Many terms were unknown to us.
No prior study has been done in any section, so very less number of documents is
available.
The time was very short to do this report.



METHODOLOGY:
At first, we have made a working plan. Then we have made a discussion with all of our group
members and our course teacher, made a list of task. Information for the report has been
obtained both from primary and secondary source. We have used annual reports of Beximco
Synthetics Limited for preparing this report. We have collected consecutive 5 years annual
reports from 2008 to 2012 of Synthetics limited. We have analyzed 5 years financial statements
of Beximco Synthetics limited and shown change in financial position over 5 years.









9

Chapter: 2
Company profile
Beximco Synthetics Limited a member of the BEXIMCO Group, was incorporated in
Bangladesh as a public limited company. It went for public issue of shares and debentures in
1993 and commenced commercial operation in July 1994.
The shares of the Company are listed in the Dhaka and Chittagong stock exchanges of
Bangladesh and the debentures of the Company are listed in the Dhaka Stock Exchange of
Bangladesh. The registered office of the Company is located at House No.17, Road No.2,
Dhanmondi Residential Area, Dhaka-1205. The industrial unit is located at Kabirpur, Savar,
Dhaka..
Mission:
Each of our activities must benefit and add value to the common wealth of our society. We
firmly believe that, in the final analysis we are accountable to each of the constituents with
whom we interact; namely: our employees, our valued customers, our business associates, our
fellow citizens and our shareholders.

Corporate governance:
The maintenance of effective corporate governance remains a key priority to the board of
beximco synthetics ltd. recognizing the importance of it, the board and other senior management
remained committed to high standards of corporate governance. To exercise about clarity of
directors responsibilities towards the shareholders, corporate governance must be dynamic and
focus to the business objectives of the company and create a culture of openness and
accountability. Keeping this in mind, clear structure and accountabilities supported by well
understood policies and procedures to guide the activities of companys management both in its
day to day business and in the areas associated with internal control have been instituted.




10


Chapter: 3
Ratio analysis of financial statement of beximco synthetics ltd
Analysis of Liquidity Ratios
Liquidity means a firms ability to satisfy its short term obligations as it becomes due.
Table of liquidity ratios
Year 2008 2009 2010 2011 2012 Evaluation
Current
ratio(times)
2.09 2.01 1.92 1.83 1.72 Poor
Quick
ratio(times)
0.98 0.93 0.77 0.87 0.86 Poor
Cash ratio 0.003 0.006 0.007 0.016 0.003 Ok
NWL-CL
ratio (%)
10.9 10.1 9.2 8.3 7.2 Poor

Current ratio:
Current ratio measures a firms ability to pay its current liability.
Current ratio=



From the above table we can see that Beximco synthetics current ratio has been decreasing over
the five years. It has happened due to increase in current liability of Beximco synthetics over the
five years.
Quick ratio:
Quick ratio is a measure of liquidity calculated by dividing the firms current assets minus the
inventory by its current liabilities.
Quick ratio=



Here we can see that Beximco synthetics quick ratio is less than one and the value is decreasing
over the 5 years.




11

Cash ratio:
Cash ratio measures the amount of available cash and cash equivalents relative to current
liability. It measures the ability of a business to repay its current liabilities by only using its cash
and cash equivalents and nothing else.
Cash ratio=



Beximco synthetics has less amount of cash and cash equivalents compared to its debt in all the
five years. Its cash ratio has increased from 2008 to 2011 and decreased in 2012.
NWC-CL ratio:
NWC-CL measures the net working capital relative to a firms current liability.
NWC-CL ratio=



Here Beximco synthetics NWC-CL ratio has decreased from 2008 to the subsequent years. It has
happened due to the increase in current liability.
From the above analysis we can say that Beximco synthetics overall liquidity position has
deteriorated from 2008 to the subsequent years. Its current ratio, quick ratio, NWC-CL ratio has
decreased over the five years which indicate lower liquidity over the five years. It indicates that
Beximco synthetics does not have enough liquidity to cover its current liability.
Graphical presentation of liquidity ratios
Chart:Liquidity Ratios(Times)
0
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1.5
2
2.5
2008 2009 2010 2011 2012
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Current ratio
Quick ratio
Cash ratio


12







Chart: Liquidity Ratios (Percentage)











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2008 2009 2010 2011 2012
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Net working Capital to Current liability Ratio
Net working Capital to
Current liability Ratio


13

Analysis of Activity Ratios
Activity ratios measure the speed with which various accounts are converted into sales or cash-
inflows and outflows. Sometimes measures of liquidity, in respect of current accounts are not
adequate. Because there may be difference in the composition of a firms current assets and
current liabilities and this difference can significantly affect its actual liquidity. For this, the firm
should calculate and analyze the activity ratios to assess the actual liquidity efficient.
Table of activity ratios
Names of Ratios 2008 2009 2010 2011 2012 Evaluation
Inventory turnover
(Times)
1.01 .87 1.05 1.52 1.23 Good
Days in Inventory
(Days)
361.38 419.54 347.62 240.13 296.75 Ok
Accounts Receivable
turnover
(Times)
1.81 1.50 2.09 2.14 1.57 Ok
Average collection period
(Days)
201.66 243.33 174.64 170.56 232.48 Ok
Accounts Payable turnover
(Times)
14.49 9.01 10.51 17.12 17.57 Poor
Average Payment period
(Days)
25.19 40.51 34.73 21.32 20.77 Poor
Total Asset turnover
(Times)
.31 .27 .35 .50 .43 Ok
Fixed Asset turnover
(Times)
.62 .53 .69 1.06 .99 Ok

Inventory turnover ratio:
Inventory turnover generally measures the activity or liquidity of a firms inventory. It is
calculated as follows.


14

Inventory turnover =

From the above table we can see that the inventory turnover ratios of Beximco Synthetics
Limited for the past five years from 2008 to 2012 are 1.01, 0.87, 1.05, 1.52 and 1.23
respectively. As this firm is a manufacturing firm, the inventory turnover ratio is not satisfactory.
But, the ratio is stable over the years.
Average age of inventory:
Inventory turnover can be easily converted into an average age of inventory by dividing it into
365. It represents how quickly the inventory of an organization is liquidated or cleared or sold.
The average age of inventory is calculated as follows.
Average age of inventory =

From the table stated above, it is visible that the average age of inventory for the last five years
from 2008 to 2012 is 361.38 days, 419.54 days, 347.62 days, 240.13 days and 296.75 days.
There are some fluctuations in the graph of average age of inventory. But the overall result is ok.
Average collection period:
The average collection period is useful to evaluate credit and collection period. It is calculated by
dividing the average days of sales into the accounts receivable. The average collection period is
calculated as follows:
Average collection period =



Here, we can see from the table that the average collection period of Beximco Synthetics limited
from the year 2008 to 2012 is 201.66 days, 243.33 days, 174.64 days, 170.56 days and 232.48
days respectively. The average collection period is increasing day by day and it is not good for
the organization. It indicates a poorly managed credit or collection department, or both.



15

Average payment period:
Average payment period is the average amount of time needed to pay accounts payable. The
average payment period is derived by dividing the average purchases per days into the accounts
payables. It is calculated as follows:
Average payment period =



Here, from the table stated above we can see that the average payment period of Beximco
Synthetics Limited for the last five years from 2008 to 2012 is 25.19 days, 40.51 days, 34.73
days, 21.32 days and 20.77 days respectively. The average payment period is decreasing over the
years, which is also not a good sign. It indicates that the firm is making payment to its creditors
more quickly which the firm could retain for a greater period to earn more profit.
Total asset turnover:
Total asset turnover measures the efficiency with which the firm uses its assets to generate sales.
The higher the firms total asset turnover, the more efficiently its assets have been used. Total
asset turnover is calculated as follows:
Total asset turnover =

From the table it is visible that the Total asset turnover from 2008 to 2012 is .31 times, .27 times,
.35 times, .50 times and .43 days respectively. There are several fluctuations in the ratio. But the
average ratio is ok. It indicates that the firms operations have been financially efficient.
Fixed asset turnover:
Fixed asset turnover measures the efficiency with which the firm uses its fixed assets to generate
sales. The higher the firms fixed asset turnover, the more efficiently its fixed assets have been
used. Fixed asset turnover is calculated as follows:
Fixed asset turnover =

16

From the table it is visible that the fixed asset turnover from 2008 to 2012 is .62 times, .53 times,
.69 times, 1.06 times and .99 days respectively. The fixed asset turnover ratio is increasing over
the years. It indicates that the firms operations have been financially efficient.
Overall analysis of Activity ratios:
Beximco Synthetics Limiteds inventory appears to be in good shape. Its inventory management
seems to have improved over the years. The firm may be experiencing some problems with its
accounts receivable. The average collection period is increasing over the years. But Beximco
Synthetics limited appears to be very swift in paying its bills. The management of receivables
and payables should be examined. Beximco Synthetics limiteds total asset turnover reflects an
increase in the efficiency of total asset utilization between 2008 and 2012. Although there are
several fluctuations in the total asset turnover ratio, the average financial efficiency is good.
Graphical presentation of activity ratios

Chart: Activity Ratios (Times)

0
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12
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16
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2008 2009 2010 2011 2012
A
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Inventory turnover Ratio
Accounts receivable
turnover
Accounts Payable turnover


17


Chart: Activity Ratios (Days)


Chart: Activity Ratios (Times)

0
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300
350
400
450
2008 2009 2010 2011 2012
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Days in Inventory
Average collection period
Average payment period
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0.6
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2008 2009 2010 2011 2012
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Total asset turnover
Fixed asset turnover


18

Analysis of Profitability ratios
These ratios indicate how to evaluate the firms profits with respect to a given level of sales, a certain
level of assets, or the owners investment.
Table of Profitability Ratios






Gross Profit Margin:
It measures the percentage of each sales dollar remaining after the firm has paid for its goods.
Gross profit margin=

Although gross profit margin was increasing from 2008 to 2009 but decreasing in 2010,after that
the ratio has increased till 2012
Operating Profit Margin:
It measures the percentage of each sales dollar remaining after all costs and expenses othert than
interest, taxes and preferred stock dividends are deducted.
Operating profit margin=

The overall aspect is good in case of operating profit margin.
Net profit margin:
It measures the percentage of each sales dollar remaining after all costs & expenses, including
interest, taxes, and preferred dividends, have been deducted.
Name of ratios 2008 2009 2010 2011 2012 Evaluation

Gross profit margin(%) 14.6 16.1 13.2 15.8 18.6 Good
Operating profit margin(%) 13.1 14.4 11.7 14.6 17.2 Good
Net profit margin(%) 2.0 1.5 2.7 7.0 5.6 Ok
Return on asset(%) 0.63 0.4 0.96 3.5 2.4 Ok
Return on equity(%) 0.9 0.57 1.4 5.1 0.37 Poor
Earnings per Share 3.92 2.10 4.61 1.58

1.02 Poor


19

Net profit margin=

Changes in operating expenses & finance cost from 2008 to 2012 appear to have caused the
fluctuations of net profit margin, such as lower levels of operating expenses & finance cost are
liable for the increase of net profit margin in 2011,the opposite direction is caused for decreasing
net profit margin in 2012.
Return on assets:
It measures the overall effectiveness of management in generating profits with its available
assets.
Return on assets=



The firms return on asset behaved much as its net profit margin did over the 2008-2012.
Return on Equity:
It measures the return earned on the common stockholders investment in the firm.
Return on equity=



The exceptionally high 2011 level of return on equity is the result of increasing net profit margin,
total asset turnover & equity multiplier. But the low percentage of return on equity in 2012 is the
result of low net profit margin, total asset turnover & high equity multiplier. That means it
depends more on debt to finance its assets in 2012.So we can say that it is more risky
Earnings per share:
It indicates the number of dollars earned during the period on behalf of each outstanding share of
common stock.
Earnings per share=





20

Earnings per share was in a high level in 2008 & 2010,but after 2010 it has decreased
continuously because after 2010, number of outstanding share has increased in a large number
for bonus share.
BEXIMCO SYNTHETICS LTD profitability relative to sales from 2008 to 2012 is overall not
good.

Graphical Presentation of Profitability Ratios


Chart: Profitability ratios in percentage










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Profitability ratio
Gross Profit
Operating Profit
Net Profit
Return on Asset
Return on Equity


21









Chart: Earning per shares









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Earning per share


22






Analysis of debt ratio
Debt investment ratios of a firm measure the amount of other peoples money being used to
generate profit. The more debt a firm has the greater its risk of being unable to meet its
contractual debt payments. Since the claim of creditors must be satisfied before the payment to
the stockholders current and prospective shareholders pay close attention to the firms ability to
repay debts.
Table of Debt investment ratios
Name of ratios 2008 2009 2010 2011 2012 Evaluation
Debt to equity
ratio (%)
.48 .43 .42 .45 .51 Ok
Times interest
earning
ratio(times)
1.23 1.20 1.38 2.63 1.76 Good
Cash coverage ratio
(times)
1.51 1.55 1.77 3.03 2 Ok

There are different types of debt investment ratios, some of them are given below:



23

Debt to equity ratio:
Debt to equity ratio measures how much debt a firm holds against its stockholders equity. Lower
the debt equity ratio, the lower the risk of the firm. It is calculated as follows:
Debt to equity ratio =

From the table stated above we can see that the debt investment ratio of Beximco Synthetics
Limited from 2008 to 2012 is 48, 43, 42, 45 and 51 percent respectively. The ratio is increasing
over the years, which indicates that day by day the firm is becoming riskier.
Times interest earning ratio:
Times interest earning ratio measures the firms ability to make contractual interest payments
current earnings. The higher the value, the better able the firm is to fulfill its interest obligations.
Times interest earning ratio is calculated as follows:
Times interest earning ratio =



From the table stated above we find that times interest earning ratio of Beximco Synthetics Ltd.
from 2008 to 2012 is 1.23, 1.20, 1.38 and 1.76. The ratio is increasing over the years, which
indicates that the firm is growing its efficiency of paying interest day by day.
Cash coverage ratio:
Cash coverage ratio measures the amount of cash the firm has to cover its interest expense. The
higher the cash coverage ratio the larger amount of cash the firm holds for its interest payment. it
is a better measurement of interest payment with earning than times interest earning ratio. It is
calculated as follows:
Cash coverage ratio =



From the year 2008 to 2012 Beximco Synthetics Ltd has cash coverage ratio of 1.23, 1.20, 1.38,
2.63, 1.76 times respectively. So, we can say that this firm has enough cash to cover its interest
expense.


24


Overall analysis:
Beximco synthetics ltds indebtedness has increased over the period of five years from 2008 to
2012. But the firms times interest earning ratio and cash coverage ratio are also high which
means that the firm has enough earning and cash to cover the interest expense. So, lastly we can
assume that though the firm has higher debt but it is not in risky position


Graphical presentation of debt ratios

Chart: Debt Ratio (Percentage)
0
0.1
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2008 2009 2010 2011 2012
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debt to equity ratio
debt to equity ratio


25


Chart: Debt Ratios (Times)

Analysis of market ratios
Market ratios relate the firms market value, as measured by its current share price, to certain
accounting values. These ratios indicate how well investors in the market feel the firm is doing
in terms of risk and return. These ratios also reflect the common stockholder assessment of the
firms past and expected future performance
Table of market ratios
Name of
ratios
2008 2009 2010 2011 2012 Evaluation
Book value
of share
418.49 366.01 338.10 30.98 27.96 Poor
Market to
book value
ratio(times)
.39 1.01 1.52 11.89 .87 Ok
Price
earnings
ratio(times)
3.92 2.10 4.61 1.58 1.02 Poor


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times interest earning ratio
cash coverage ratio


26

Here we considered two market ratios:
Market to book value ratio:
It measures how investors view the firms performance. It relates the market value of the firms
shares to their book value. At first we have to calculate the book value per shares to calculate the
market to book value ratio. The formula is as follows:
Market to book value ratio =



Market to book value ratio for Beximco synthetics ltd from the year 2008 to 2012 is .39, 1.01,
1.52, 11.89 and .87 times respectively. Here we can see that though the ratio was increasing until
2011, but it fell in 2012.



Price earnings ratio:
It measures the amount that investors are willing to pay for each dollar of a firms earnings. The
higher the P/E ratio, the greater the confidence that investors have in the firms future
performance. The formula is as follows:
Price earnings ratio =



Price earnings ratio for Beximco Synthetics Ltd from 2008 to 2012 is 3.92, 2.10, 4.61, 1.58 and
1.02 respectively. Here we can see a decreasing trend in price earnings ratio. So the performace
of the firm is not so good according to this ratio. And the investors dont have the enough
confidence on the future performance of the firm.
Overall analysis of market ratios:


27

According to our analysis investors has lower confidence in the firm in 2012 than in the prior
four years. So the overall market risk has increased according to market to book value and price
earning ratio.
Graphical presentation of market ratios

Chart: Market Ratios (times







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Market Ratios
market to book value ratio
price earnings ratio


28


Chapter : 4
Analysis of dividend policy
Dividend Policy
Dividend is that amount which is distributed to the stockholders from the earnings of a firm. The
firms dividend policy is based mainly on two basic objectives, providing for sufficient financing
& maximizing the wealth. A firm allows cash dividend ,stock dividend, stock split, stock
repurchase in case of dividend. Now the dividend policy which beximco synthetics are following
from 2008 to 2012 is described below.
Table of dividend policy






Particulars 2008 2009 2010 2011 2012
No of outstanding
shares
4821547 5544779 5960637 68547320 78829418
Cash dividend --- 7.50 --- --- ---
Stock
dividend(percentage)
15% 7.50% 15% 15% 10%
Stock dividend(amount) 723232 415858 894096 10282 7882942
Share price 164.50 373 514.80 368.25 24.30


29

policy the company follows:
From this table we find that, in this firm, directors have allowed to give stock dividend each year,
not cash dividend every year, they are interested to preserve cash, not to make cash out flow. The
firm has followed constant payout ratio dividend policy that means same percentage (15%) has
been continued from 2008 to 2011.After that the percentage is changed.

A stock dividend does not involve cash. Rather, it is the distribution of more shares of the
corporation's stock. Perhaps the corporation does not want to part with its cash, but wants to give
something to its stockholders. It is the procedure to shift of funds between stockholders equity
accounts rather than an outflow of funds. Since every stockholder received additional shares, and
since the corporation is no better off after the stock dividend, the value of each share should
decrease. In other words, since the corporation is the same before and after the stock dividend,
the total market value of the corporation remains the same.
After analyzing this companys dividend policy, it is clear that they have distributed small stock
dividend which is less than 25% from 2008 to 2012.In 2008, the percentage of stock dividend
was 15%, but in 2009 they allowed both cash and stock dividend in same percentage (equally
distributed in 7.5% in cash dividend & 7.5% in stock dividend).After that, the 15% stock
dividend was distributed in 2010.
In 2011 the total aspect has been changed, suddenly the number of shares has increased because
of stock splits. Although it is not a type of dividend, stock splits have an impact on share price
similar to that of stock dividends. It is used to reduce market price of the firms stock by
increasing the number of outstanding shares. It is nontaxable.
In 2011, the firm realized that its stock was priced too high and that lowering the market price
would increase trading activity. They reduced the price from 515 to 368.So they used 10 for 1
split, then number of shares has become 68547320.But the percentage of dividend has been
constant in 15%.In 2012,the stock dividend has been continued but in lower percentage.


30

Bibliography:
Principles of Managerial Finance, LAWRANCE J.GITMAN
www.GOOGLE .COM