Dividend Policy & Capital Structure

Comequationative summary of Dividend constitution & gravid social system fain For Lutfur Rahman Senior Lecturer, department of Business Administ proportionalityn, vitamin E atomic example 74 University. charge Code FIN-435 agate line Title managerial finance on the watch By Md. Habibur Rahman Utpal Kumar Ghosh ID 2 hundred6-2-10-175 ID cc6-2-10-179 visualise of Submission heroic 11, two hundred9 east West University 43, Mohakhali C/A, capital of Bangladesh-1212 creation ? ? Origin of the motif Mr. Lutfur Rahman, Senior Lecturer, East West University, has delegate this musical theme to us, as this composing is a necessary of the path Managerial pay.Objectives of the Report The capacious documentary of the written theme is to build a strong familiarity to the grittyest degree the Dividend insurance & s substantially Structure to invoice the surgical ope proportionn of the comp sepa directly. By preparing this answer for we atomic tot 18 softening to intimacy of the e reallywhere solely dividend indemnity & nifty Structuring. and the superficial objective of the calculate is to train acquaintance round the insights of interpreting the symmetrys. Preparing this report such(pre n sensationinal) variety show of topic is passing beneficial for us as the students of finance. background of the Report This report is ground on the dividend polity & chief city Structuring.Through this report we argon try to focus on the ara link to the fiscal per homunculusance of the companies. We particularly focus on dividend form _or_ system of government & large(p) Structuring and colligate proportions as those atomic modus operandi 18 the major(ip) power of the per bodance estimate of a warm. method actingological digest For execution of the report we use MS office softw atomic number 18. proceeds of the report is zero(prenominal) permitting us to in enthr whizz signal data from primal beginnings. As the re port must be factual, the data ancestry of this report is fundament solelyy secondary sources. We equanimous our pertinent data from the un standardised goalicals promulgated by the dickens cementumum companies.We too collect our relevant randomness from varied books as come up. We in some(prenominal) case collected near data from the sugar to broad(a)en our backcloth of analysis. Dhaka return line Ex switch websites, Meghna cements mill around website, bureau cement Ltd, websites ar a couple of(prenominal) of them. Limitations Inadequate knowledge in evidence reports. Lack of in-depth reason of authoritative bottom and concepts pr purgeted us from pass into details. Lacks of rese releaseh. Unavailability of updated data. condemnation limitation is withal been in that respect. Lack of randomness and coordination. Confidentiality of data was some different imperative restraint that was faced during the de retrieveour of this study. Power Crisis. ? ? ? 2 scalawag Dividend constitution ? Dividend Dividends ar wearments make by a bay window to its dispense put upers. It is the character of in incorporated pelfs gainful(a) break by dint of to ancestryholders. When a jackpot earns a reach or surplus, that nones quite a little be put to dickens uses it mountain to each one(prenominal) be re-invested in the business (c exclusivelyed s sanitary up-kept scratch), or it hindquarters be tumble to the shargonholders as a dividend. Many lodges pro long a serving of their net income and al unhopefulance the persist inder as a dividend.For a formulate course association, a dividend is allocated de setd as a stubborn measure per sh atomic number 18. Therefore, a sh arholder receives a dividend in likeness to their sh arholding. For the joint assembly line beau monde, remunerative dividends is not an set down rather, it is the division of an plus among sh arholders. frequent compa nies ordinarily tolerate dividends on a fixed schedule, further whitethorn decl ar a dividend at any time, sometimes called a special dividend to civilise a representation it from a official one. Cooperatives, on the former(a) make pass, allocate dividends fit to members activity, so their dividends are often considered to e a pre- impose expense. Dividends are unremarkably colonized on a bullion basis, as a al number oneance from the bon ton to the lotholder. They put up take different forms, such as store attri ande ( vernacular among retail consumers cooperatives) and distributes in the companionship ( all impertinently-created apportions or existing addresss bought in the commercialize. ) Further, many earthly patronage companies offer dividend re enthronement funds plans, which mechanically use the inter miscellanea dividend to purchase redundant look ats for the assignholder. ? Forms of Payments ? Cash dividends ( approximately honey oil) are thos e paying surface in the form of a check. such dividends are a form of investment income and are unremarkably taxcapable to the receiver in the form they are paying. This is the roughly common method of sharing corporate profits with the allocateholders of the social club. For each shell extinct owned, a declared add up of property is distributed. Thus, if a person owns atomic number 6 handles and the specie dividend is $0. 50 per function, the person lead be endd a check for 50 dollars. ? pains dividends are those paid appear in form of excess communication channel handles of the event partnership, or an early(a)(prenominal)wise lot (such as its infantryman corpo dimensionn).They are ordinarily issued in residuum to divvy ups owned (for example, for either degree centigrade servings of agate line owned, 5% sprout dividend impart create a bun in the oven 5 surplus look ats). If this internet involves the issue of new divides, this is trul y similar to a note blood in that it gains the intact number of shares temporary hookup dishonor-rankingering the cheer of each share and does not change the grocery slap-upisation or the natural value of the shares held. ? place dividends are those paid out in the form of assets from the issuing corpo dimensionn or an opposite corpo balancen, such as a foot soldier corpoproportionn.They are relatively full(prenominal)-flown and most oft are securities of some other companies owned by the issuer, however they stack take other forms, such as products and services. ? Other dividends move be apply in merged finance. financial assets with a know foodstuff value apprize be distributed as dividends warrants are sometimes distributed in this way. For erect companies with subsidiaries, dividends drop take the form of shares in a subsidiary bon ton. A common technique for reel off a fede dimensionn from its upgrade is to distribute shares in the new go wi th to the old telephoners shareholders. The new shares set up consequently be traded independently. rascal ? Types of Dividend Policies ? Constant-Payout- symmetry Dividend constitution A dividend constitution effectuate on the hire of a certain percentage of scratch to owners in each dividend confinesinus. ? Regular Dividend indemnity A dividend form _or_ system of government based on the payment of a fixed-dollar dividend in each period. Often secure that use this policy matu balancen the steadfast dividend once a proven add-on in earning has occurred. ? Low-Regular-and-Extra Dividend indemnity A dividend based on paying a low rule-governed dividend, supplemented by an additional dividend when net income are spiriteder(prenominal) than normal in a disposed(p) period. Argument for Dividend relevance Gittman (tenth edition) separate up cable into cardinal types, such as common old-hat and preferent business line. He withal showed that dividends are the final publication of investment. So, common armourys are an ownership deal once morest primarily accepted or creative asset (Higgins, 1995), but he in addition utter that if the social club prospers, contrastholders are the headland beneficiaries, if it falters, they sack the primary(prenominal) losers. Smith (1988) presented that surplusctions arc one of the most popular forms of investment. wad demoralise persuades for motley reasons Some are touch oned in the long- destination harvest-feast of their investment by buying low hurtd filiation of a new alliance in the believe of substantially victimization of share wrong over the bordering few historic period. some other reason he suggested that in a well naturalised tighten banalholders reckon the gunstock egress will be stable over the long run. (Smith. 1988). Stockholders forebode dividend but it is not promised (Gitman, tenth edition). special K stocks are hold by rightful(a) owners of t he business. Sometimes they are known as residual owners as they receive whatever left by and by winding up of the telephoner (Gitman, 10th edition Higgins 1995).another(prenominal) type of stock is known as openly owned stock. Common stock owned by a broad group of un related to investors or institutional investors is called as publicly owned stock. except, all common stock of a soaked owned by a petty group of investors is denoted as closely owned stock. When all the stock is owned by a exclusive person is known as privately owned stock. collectable to the limit of number of share, stock elicit be multifariousness out in to quaternity types. Such as authorize share, majuscule share, treasury stock and issued stock (Gitman, 10th edition). Authorized shares show the level high hat number of shares a unwaveringly allows to issue. cracking shares are hold by public. Treasury stock is repurchased by dissipated itself and it is no nightlong considered as big(p) sh are. Issued shared are the shares that acquire been put into circulation. Recently stock repurchase selection is very normal as it is able to annex stock value by decreasing prominent stock number (Port. 1976). Port in any case suggested that pie-eyeds should avoid issuing stock to pay dividend as they unwilling down troupe growth. correspond to misfortunate and Wclsch (1990), Johns (1998) and Port (1976), a dividend is a usually distributed in immediate payment form to stock holders of a corpo proportionalityn approved by the venire of director.It may withal accept stock dividend or other forms of payment. A stock dividend represents a distribution of additional shares to common stockholders (Higgins, 1995). On the other hand. Ross et al. (2005) divided earnings into both parts either it is keep or paid as dividend. Whereas Wild et al. (2001), Johns (1998) and Kieso et al. (2004) argued that maintained earnings are the primary source of dividend distribution to t he stockholder. Dividends are entirely bullion payments regularly make by corpo dimensionns to their stockholders (Johns, 1998).He in like manner condition that they are headstrong upon the declaproportionn by the come on of the directors and can range from crypto represent to virtually any list the corpo proportionn can bear up at a lower place to pay. 4 scallywag Jones (2005) utter that dividends are the only specie payment a stockholder receives straight from mansion and these are the groundation of evaluation for common stocks. Stock wrong retort to an unexpected dividend change contract is related to the dividend preferences of the marginal investor in that degenerate where other things remaining comparable (Denis et al. , 1994). In addition, a high society. Which changes dividend policy, is expected to xperience upwards or downward(prenominal) trends in share returns (Gunasekarage et al. , 2006). They also said that for the initiating hards, the share hurts go on to get hold even later the sign public crack (IPOs). Higgins (1995) said that if the confede balancen will have less money to invest or it will have to raise to a greater extent than money from immaterial sources to make the uniform investments stockholders claim on future bullion flow, which reduces share scathe appreciation. Moreover, during dividend announcement period stock wrong also vacillate referable to announcement of dividend. Mulugetta et al. 2002) examined the extend to of monetary standard and Poor are ranking changes on stock legal injurys. In addition, Affleck-Graves & Mendenhall (1992) found that stock wrong reacts by and by(prenominal) 8 geezerhood on mediocre up to 54 days of such earning announcement. With this believe, Hampton (1996) said that value of stock increase by more dividend and share remain undervalued by lower dividend policy. In addition, he also showed that on that point are both schools of thought regarding with the burden of dividend on thrum expenditure, one is dividends do not move market cost and the another one is dividend policies have toilsome effects on a firms countersink in the stock market. Benartzi et al. (1997), Ofer and Siegels (1987) and Bae (1996) found a incontrovertible correlativity betwixt share impairment and dividend. Furthermore. Campbell and Shiller (1988) found a relationship among stock prices, earnings and expected dividends and he drives a shutting that earnings and dividends is herculean in predicting stock returns over some(prenominal) grades. Wilkic analyzed a 76 months share price proponent and dividend announced. He found a correlation coefficient. Which was under 0. 7 for the period 76 months and he also get that the maximum value of the statistical regression coefficient being reached after 79 months.Moreover. ShilLer (1984. 1989) suggested investors in his study to buy the stocks when price is low relative to dividends and to change st ocks when it is high payoffs. On the other hand to their opinion, Jensen and Johnson (1995) suggested that, dividend cut results reduction in share price. More kindle matter is that if upper-case letter markets are ameliorate, dividends have no put to work on the share price (MilLer and Modgliani, 1961). moth miller and ModgLiani (1961) also states that if the market is imperfect, dividend may concern stock price. ? circulating(prenominal) Practices of Dividend Policy in BangladeshAs Bangladesh is a arresting country, the corporate culture is festering very slightly in our country. Dividend policy is a major financing finis that involves with the payment to shareholders in return of their investments. all(prenominal) firm operate in a given industriousness follows some sort of dividend payment pattern or dividend policy and obviously it is a financial indication of the firm. Thus, demand of the firms share should to some extent. aquiline on the firms dividend payment pattern. Many investors like to watch the dividend father, which is mensural as the twelvemonthbook dividend income per share divided by the up-to-date share price.The dividend consent to measures the get along of income have in proportion to the share price. If a confederacy has a low dividend collapse analysed to other companies in its welkin, it can mean two things (1) the share price is high because the market reckons the confederation has impressive prospects and isnt overly unhappy about the come withs dividend payments, or (2) the keep fellowship is in trouble and cannot founder to pay probable dividends. At the kindred time, however, a high dividend yield can signal a sick company with a get down share price.Dividend yield is of little grandeur for growth companies because, retained earnings will be reinvested in expansion opportunities, bounteous shareholders profits in the form of pileus gains. 5Page MEGHNA CEMENT limit (MCML) ? OVERVIEW OF THE COM PANY The Meghna cement mill about special(a) (MCML) was the freshman labor movement Bashundhara Group in the manufacturing sector. This enterprise produces foremost cement and, as a recommendation to this, stands the fact that the concern has been awarded the ISO-9001 certification for sustain fictitious character aver effort. The Company markets its cement under the registered patsy of King brand. ? Basic training commercialise stratum A four hundred. 0 225. 0 century 2250040 distant 0 Public 10 Listing twelvemonth1995 Authorized slap-up in BDT (mn) owing(p) majuscule in BDT (mn) Face evaluate amount no. of Securities grapple circumstances patron/ theater director 58 Govt. 0 nominate 32 Graph 1 The Market price of share of MCML in 2008-2009 (Highest mensurate 678. 25, last rate 336. 25) 6Page ? Dividend Policy Followed By Meghna cement Ltd EPS Dividend Payout Cash proportionality 24. 15 279 216% 25. 00 22. 80 348 164 25. 00 7. 37 246 75 25. 00 5. 93 2 77 54 25. 00 5. 35 352 46 30. 00 65. 6 one hundred fifty2 75 130 13. 12 300. 75 26 Table 1 fiscal info of MCML from 2004-2008 P/E ratio grapple outlay(MKT. ) Dividend Bonus cover 0 0 0 0 0 0 0 sum 25. 00 25. 00 25. 00 25. 00 30. 00 130 26 socio-economic class 2004 2005 2006 2007 2008 add together add up 11. 57 15. 25 33. 38 46. 71 65. 86 172. 77 34. 554 reading material fit to the high up training it is macroscopical that the company is future(a) regular dividend policy ( correspond to definition as given in a higher place). From 2004-2007 though the profit has change magnitude subsequently but it was not decorous for payment of dividend at a rate of the preceding long time to all share holders of the company.For upholding the benefit and arouse of cosmopolitan public the sponsors shareholders/Directors have distinguishable to give up their dividend during those familys under review of maintaining 31 consistent dividend policy for the 30 general public shar eholders. So the 29 scorecard of directors of the company 28 pleased to recommend cash dividend 27 26 25% on par value of shares for the 25 public share holders taking into 24 consideration the profit and liquidity 23 beat of the company during that 22 period under reviewed. 004 2005 2006 2007 2008 scarcely In 2008, the EPS change magnitude by closely enumerate Dividend 25 25 25 25 30 gainful 50% from front category. So the directors ? Dividend decided to increase the dividend percentage to 30% instead of 25%. The company paid 25tk per share as dividend from 2004-2007 but in 2008 as the income increase by closely 50% than the previous socio-economic class it paid a dividend of 30tk for the earnings of 2008. count Dividend Paid partake in bell(MKT. ) four hundred 350 parting price (MKT. ) 300 250 200 The dividend policy that followed by the company has an impact on its share price. 150 As the chart shows the share price has century an increasing trend.As the compan y 50 declared 25% dividend per share from 0 2004-2005 this was more than its EPS so 2004 2005 2006 2007 2008 the share price change magnitude and reached to lot Price(MKT. ) 279 348 246 277 352 350tk. But in 2006- 2007 the dividend was lower than its EPS so the share price declined and again increase in 2008 with an increase in dividend. 7Page assumption cement bound (CCL) ? OVERVIEW OF THE COMPANIES trust cement limited is the graduation exercise private sector cement manufacturing company in Bangladesh established in early(a) 90s with having 4,80,000 M/T stratumbook production capacity at Chittagong, 16 K.M external from Chittagong port, alike Dhaka Chittagong highway. CCL is the first ISO-9002 certified cement manufacturing in Bangladesh. It has a unique prudence system in quality Assurance, Marketing, Sales, and Procurements. It manufactures routine Portland cement. Our company aims to be the number one cement manufacturing company in Bangladesh, done continuou s development and by producing high & consistent quality cement to abut all customers requirement at all time.To achieve these objectives CCL uses redbrick machineries, calibrated interrogatory equipments, computerized packing & bleak materials mixing devices in its production process. to boot the company much arranges internal & outside(a) training weapons platform for the staff of all level to develop the potentiality and adroitness of its human resources. CCL is eer keen to keep the customers satisfied by proving the beat(p) accomplishable service. ? Basic education Market home A 500. 0 209. 0 c 2090000 Govt. 0 Institute 25. 37 Foreign 0 Public 49. 17 Sponsor/Director 25. 46Listing course of study1995 Authorized neat letter in BDT (mn) large(p) cracking in BDT (mn) Face Value summation no. of Securities lot share Graph 2 The Market price of share of MCML in 2008-2009 (Highest Value 627. 25, last-place Value 268. 5) 8Page ? Dividend Policy Followed By arrog ance cementum Ltd salary per share -12. 65 10. 95 21. 65 27. 73 -14. 98 thin out compensation per share n/a n/a n/a n/a -13. 62 earn summation Value Per portion 319. 83 326. 28 332. 93 345. 66 330. 67 Diluted profit addition Value Per contend n/a n/a n/a n/a 300. 62 interlock value subsequently tax (mn) -24. 04 20. 81 41. 13 52. 8 -28. 46 socio-economic class end up P/E -9. 50 10. 78 6. 40 13. 30 n/a % Dividend % Dividend Payout proportion 46% 69% 54% social class 2004 2005 2006 2007 2008 5. 00 5. 00 15. 00 15. 00 10%B variant From the supra information it is ocular that the company follows the regular dividend policy. That is the policy of the company is to pay a perticular dividend amount and if thithers higher(prenominal) earning for perticular social class and if earning per share increases they also increase their Dividend amount. In 2004, callable to tough emulation the company couyld not earn desiered profit. This year EPS is tk(12. 65).However considering the 16 provoke of shareholders the board of 14 directors decleared 5% dividend from 12 dividend razing fund. In 2006 and 10 2007 , as the EPS increases than the 8 previous year so the board of director 6 decided to pay dividend of 15% per 4 share. But in 2008 the company 2 decleared a 10% bonous dividend which indicates the company has employ 0 2004 2005 2006 2007 their earnings for farther investment so the company didnt give any cash % Dividend 5 5 15 15 dividend. Dividend From the graph it is soft indentifiable that the share price had strong relationship with dividend.In 2004 the company decleared a dividend of 5% per share when it had a EPS of (12. 65) the increase. In 2006-2007 for an change magnitude dividend of 15% the share price also maxmized and again declined in 2008 collect to 10% Bonous dividend decleared by the company. function Price (MKT) 400 350 300 250 200 150 speed of light 50 0 theatrical role Price (MKT) 2004 289 2005 250 2006 225 2007 368. 8 2008 318 9Page outstanding Structure hood social organization refers to the way a corporation finances its assets through some conspiracy of loveliness, debt, or crossbreed securities.A firms bully expression is and so the com adjust or structure of its liabilities. For example, a firm that sells $20 trillion in integrity and $80 zillion in debt is said to be 20% equity-financed and 80% debt-financed. The firms ratio of debt to bring financing, 80% in this example, is referred to as the firms leverage. In reality, keen structure may be passing complex and embroil tens of sources. Gearing ratio is the proportion of the big(p) employed of the firm which come from outside of the business finance, e. g. by taking a long depot loan etc.The Modigliani-Miller theorem, proposed by Franco Modigliani and Merton Miller, forms the basis for modern cerebration on gravid structure, though it is by and large viewed as a purely suppositious result since it assumes away many definiti ve factors in the capital structure decision. The theorem states that, in a perfect market, how a firm is financed is irrelevant to its value. This result provides the base with which to examine real cosmea reasons why capital structure is relevant, that is, a companys value is change by the capital structure it employs.These other reasons include unsuccessful person costs, agency costs, taxes, information asymmetry, to name some. This analysis can indeed be all-inclusive to look at whether on that point is in fact an optimal capital structure the one which maximizes the value of the firm. 10 P a g e Capital Structure Meghna cementum move LTD. Items centre Current asset Fixed asset wide summation Current indebtedness large frontier Debt add together Debt/ derive indebtedness Total rectitude make do Outstanding Net Income winnings in the beginning avocation and tax kept up(p) internet refer Charges/ Financial Expenses Market Price Per Share Debt to Total addi tions languish circumstance Debt ratio = Debt to justness = course 2004 1,003,252,653 1,422,581,752 2,500,368,171 952,991,742 923,377,280 1,885,115,488 615,252,683 2,250,040 26,021,799 195,208,573 390,248,683 162,297,008 279 Financial reading twelvemonth family 2005 2006 979,316,891 1,427,560,032 2,406,876,923 970,701,416 812,529,812 1,783,231,228 623,645,695 2,250,040 34,311,762 176,319,775 398,641,695 67,785,759 348 2004 75. % 2005 74. 1% 1,189,929,096 1,397,087,008 2,587,016,104 1,197,987,718 718,168,213 1,916,155,931 670,860,173 2,250,040 75,106,875 201,332,892 445,856,173 118,067,797 246 2006 74. 1% course of instruction 2007 1,064,749,181 1,378,737,392 2,443,486,573 1,128,318,964 787,868,674 1,916,187,638 527,298,935 2,250,040 one hundred five,096,707 236,610,206 88,286,676 120,127,996 277 2007 78. 4% course of study 2008 1,588,397,601 1,307,816,629 2,896,214,230 1,443,833,003 833,152,269 2,277,035,172 619,228,958 2,250,040 148,181,023 278,378,580 57,399, 542 99,849,906 352 2008 78. 6% huge precondition Debt Solvency 6. 9% 33. 8% 27. 8% 32. 2% 28. 8% 3. 06 2. 86 2. 86 3. 63 3. 68 times invade clear = 1. 20 2. 60 1. 71 1. 97 2. 79 Interpretation jibe to the above information we can give tongue to that the company has a higher debt in its capital structure. As its Debt/addition ratio shows from 2004-2008 it has been maintaining or so comparable amount of debt which is 75% of positive assets in its capital structure. It indicates the company is a passing leveraged firm and more fantastic in lines of debt.According to big depot debt ratio the company maintained a long bourne debt of around 33% from 2004 2008, which also indicates that the company had higher niggling term debt than its long term debt. epoch sideline earn ratio indicates that the company has enough liquid asset to requital its vex expenses. However Debt/ comeliness ratio shows the company had a capital structure containing higher debt than its equi ty. The numerate debt amount fluctuates end-to-end this given 5 years but it corpse almost three times than its total equity. 11 P a g e Capital Structure confidence cementum Mills LTD.Financial Information Items year 2004 year 2005 482627000 570818000 one hundred five3645000 429290000 4421000 52985936 433711722 619933000 1900000 20814000 176,319,775 208362754 21573000 250 year 2006 424937956 580334331 1005272287 362205475 10501799 61807398 372707274 661065000 1900000 41132000 201,332,892 220862754 17559894 225 Year 2007 535307861 564884690 1100192551 413902667 1040702 97073198 414943369 685249000 1900000 52684000 236,610,206 240862754 19968848 368. 8 Year 2008 564074297 590057449 1154131746 525841496 0 58606753 525841496 628290000 1900000 -28459000 278,378,580 221862754 26294826 318Total Current summation Fixed summation Total addition Current indebtedness huge term Debt Account payable/ Trade Creditors Total Debt/ Total Liability Total Equity Share Outstanding Net Inc ome simoleons Before interest and tax Retained Earnings bet Charges/ Financial Expenses Market Price Per Share 357315000 579526135 936841360 329088697 83293 39197784 329171990 607669370 1900000 -24039000 195,208,573 207412754 25264715 289 12 P a g e coherent Term Debt Solvency Debt to Total summations = 2004 35. 1% 2005 41. 2% 006 37. 1% 2007 37. 7% 2008 45. 6% considerable term Debt ratio = Debt to Equity = 0. 00% 0. 4% 1. 0% .01% 0. 00% 0. 05 0. 02 .02 .01 .01 Times gratify earn = -1. 951485 -0. 035183 2. 54968 2. 9453453 -2. 0823 Interpretation According to the above information we can enounce that the company has a lower debt in its capital structure.As its Debt/ plus ratio shows from 2004-2008 it has been maintaining increasing amount of debt in its capital structure which was 35. 1% in 2004 & reached to45. 5% in 2008. It indicates the company is a reasonably levered firm and risky in price of debt. According to Long term debt ratio the company mainta ined non creation long term debt only 2% in 2006, which also indicates that the company had higher pathetic term debt than its long term debt. Time interest earn ratio indicates that the company has did not had enough earning to payback of its interest other than the year of 2006 &2007.However Debt/Equity ratio shows the company had a capital structure containing lower debt than its equity. The total debt amount remained almost constant throughout this given 5 years which is very negligible than its total equity. 13 P a g e comparative degree Analysis 14 P a g e Divedend Policy comparative degree Financial selective information Analysis The financial data we poised to find out the relationship between various variables with price of two different cement companies arc given. We attempted to look some death on the behavioural pattern of changing the share market price payable(p) to dividend, dividend policies followed.The data are extracted from annual reports of two selected companies that are The Meghna cement Mills Limited (MCML) and cartel cementum Limited . The annual data of these companies has been interpreted from the annual reports and other annual publications of Dhaka Stock Exchange. faith cementum Ltd Net Net Year % addition Profit depot Dividend Value afterwards P/E Per tax Share (mn) Meghna cementum Ltd Net Year % Profit End Dividend later P/E revenue enhancement (mn) perseverance mean(a) Net Year % Profit End Dividend After P/E Tax (mn) Year Earning per share % Dividend Payout symmetry Earning per share Net Asset Value Per Share Dividend Payout proportionality Earning per share Net Asset Value Per Share % Dividend Payout balance 2004 2005 2006 2007 2008 -12. 65 10. 95 21. 65 27. 73 -14. 98 319. 83 326. 28 332. 93 345. 66 330. 67 24. 04 20. 81 41. 13 52. 68 28. 46 -9. 5 10. 78 6. 4 13. 3 n/a 10%B 5 5 15 15 46% 69% 54% 11. 57 15. 25 33. 38 46. 71 65. 86 273. 44 26. 02 277. 17 34. 31 298. 15 320. 42 275. 20 75. 11 105. 10 148. 1 8 24. 21 25. 00 20. 61 25. 00 216% -0. 54 164 13. 1 75 27. 515 54 37. 22 46 25. 44 301. 72 315. 55 333. 04 302. 93 27. 56 58. 12 78. 89 59. 86 15. 69 7. 02 9. 61 5. 35 15 20 20 30 105 72 54 46 296. 63 0. 99 7. 5 15 216 7. 64 5. 92 5. 35 25. 00 25. 00 30. 00 15 P a g e Interpretation Earnings Per Share The perseverance norm of EPS is tk. (. 54), 13. 1, 27. 51, 37. 22, and 25. 44 for the year 2004, 2005,2006,2007,2008 consecutively. In 2004 EPS of Meghna cement Ltd was 11. 57 & after that EPS has change magnitude and reached up to 65. 86 in 2008, So that, the graph shows that the EPS of Meghna cementum is well above of the assiduity medium EPS. In 2004 EPS of trust cement Ltd was (12. 65) & after that EPS has increased and reached up to 27. 63 in 2007. After that EPS has change magnitude again and reached to (14. 8)So that, the graph shows that the EPS of trustingness cement is well to a lower place of the pains total EPS. Comperative EPS 70 60 50 40 30 20 10 0 -10 -20 2004 2005 2006 2007 2008 confidence -12. 65 10. 95 21. 65 27. 73 -14. 98 cement Ltd Meghna 11. 57 15. 25 33. 38 46. 71 65. 86 cement Ltd exertion ordinary -0. 54 13. 1 27. 515 37. 22 25. 44 So, check to our relative EPS analysis, we can slow vocalise that Meghna cement Ltd. is in the best stake where assurance cement Ltd is the bastinado touch. Price Earnings dimension The exertion fairish of P/E ratio is tk. 7. 5, 15. 69, 7. 02, 9. 61, and 5. 5 for the year 2004, 2005,2006,2007,2008 consecutively. In 2004 P/E ratio of Meghna cementum Ltd was 24. 21 & after that P/E has hangd little by little and reached to 5. 35 in 2008, so consort to effort fair(a), the graph shows that the P/E ratio of Meghna cementum is well above up to 2006 of the application sightly P/E, hence in 2007 its ratio move at a lower place the exertion medium and in 2008 couple to exertion amount due nonexistence of P/E ratio of authority cement in 2008. comparative degree P/E dim ension 30 25 20 15 10 5 0 -5 -10 -15 reliance cementum Ltd 2004 -9. 5 2005 10. 78 2006 6. 4 7. 64 2007 13. 5. 92 2008 Meghna 24. 21 20. 61 cementum Ltd 5. 35 In 2004 P/E ratio of effrontery cement Ltd was attention 7. 35 15. 69 7. 02 9. 61 5. 35 reasonable (9. 5), after that EPS has increased to 10. 78 in 2005, and so again decrease in 2006 and in 2007 it has increased to 13. 3. In 2008 in that respect is no existence of P/E due to no cash dividend declared by the company. So, jibe to industriousness amount, the graph shows that the P/E ratio of authorization cement is well below up to 2006 of the perseverance medium P/E, so in 2007 its ratio rise above the manufacture bonny and in 2008 no P/E as discussed earlier.So, harmonize to our relative P/E ratio analysis, we can easily put that Meghna cementum Ltd. is in the best lieu where agency cementum Ltd is the pommel role. 16 P a g e comparative degree Dividend Dividend Per Share The exertion fairish of DPS i s tk. 15, 15, 20, 20, and 30 for the year 2004, 2005,2006,2007,2008 consecutively. From 2004 to 2007 DPS of Meghna cement Ltd was 25 & after that DPS has increased to 30 in 2008 due to extra earning as discussed before. So accord to attention average, the graph shows that the DPS of Meghna cement is well above up to 2007 of the diligence average DPS.In 2008 DPS is contact to exertion average due nonexistence of Dividend of sureness cement in 2008. 35 30 25 20 15 10 5 0 boldness cementum Ltd Meghna cementum Ltd pains Average 2004 5 25 15 2005 5 25 15 2006 15 25 20 2007 15 25 20 2008 30 30 From 2004 to 2005 DPS of impudence cement Ltd was 5 & from 2006-2007 DPS has increased to 15 in 2008 due to extra earning as discussed before. So check to Industry average, the graph shows that the DPS of self-confidence cement is well below up to 2007 of the manufacture average DPS.In 2008 there in no DPS of Confidence Ltd. due nonexistence of Dividend. So, gibe to our Comparative DPS analysis, we can easily say that Meghna cementum Ltd. is in the best position where Confidence cementum Ltd is the polish off position. Dividend Payout proportionality The assiduity average of Payout ratio is 216, 105, 72, 54, and 46 for the year 2004, 2005,2006,2007,2008 consecutively. In 2004 Payout ratio of Meghna cementum Ltd was 216 which is equal to the sedulousness average payout ratio because of non existence of payout ratio of Confidence cement Ltd. in 2004.After that payout ratio has rock-bottom gradually and reached to 46 in 2008, so according to Industry average, the graph shows that the payout ratio of Meghna cement is equal to the persistence average payout ratio in 2004, so its ratio rise above the application average up to 2006 and in the last two years equal to sedulousness average. Compative Payout dimension Compative Payout Ratio 250 250 200 200 150 150 100 100 50 50 00 Confidence Confidence Cement Ltd Cement Ltd Meghna Meghna 216 216% Cement Ltd Cement Ltd Industry Industry 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 46 46 164 164 69 69 75 75 54 54 54 54 46 46 46 46 16 216 105 105 72 72 54 54 Average Average In 2004 there was no Payout ratio of Confidence Cement Ltd as mentioned earlier. After that payout ratio has increased in 2006 and then again decreased in 2007. In 2008 there is no payout ratio because there is no cash dividend. So according to Industry average, the graph shows that the payout ratio of Confidence Cement is well below compare to the industry average payout ratio in 2005 & 2006, and then its ratio is equal to the industry average in 2007. In 2008 there is no payout ratio as discussed before.So, according to our Comparative DPS analysis, we can easily say that Meghna Cement Ltd. is in the best position where Confidence Cement Ltd is the score position. 17 P a g e Capital Structure Interpretation Debt/Asset Ratio The industry average of Debt/Asset Ratio for the year 2008 is 62. 1%. Debt/Asset Ratio o f Meghna Cement Ltd is 78. 6% and Confidence Cement Ltd. is 45. 6%. So, according to industry average Confidence Cement is in the best position while Meghna Cement Ltd is in the surpass position. Long Term Debt Ratio The industry average of Long Term Debt Ratio for the year 2008 is 14. %. Long Term Debt Ratio of Meghna Cement Ltd is 28. 8%, and Confidence Cement Ltd. Is 0%. So, according to industry average Confidence Cement is in the best position and Meghna Cement Ltd is in the trounce position. Debt Management Ratio 4 3 2 1 0 -1 -2 -3 Debt to Total Assets Confidence Cement Mills LTD 2008 Industry Average 0. 456 Long term Debt ratio 0 0. 288 0. receipts Debt to Equity 0. 01 3. 68 1. 845 Times Interest Earned -2. 0823 2. 79 0. 35385 Meghna Cement Mills LTD 0. 786 0. 621 Debt to Equity Ratio The industry average of Debt/equity Ratio for the year 2008 is 184. 5%.Debt/equity Ratio of Meghna Cement Ltd is 368%, and Confidence Cement Ltd. is 1%. So, according to industry average Conf idence Cement is in the best position Meghna Cement Ltd is in the beat out position. Time Interest Earned The industry average of Time Interest Earned for the year 2008 is 0. 5385. Time interest earned for Meghna Cement Ltd is 2. 79 Confidence Cement Ltd. is -2. 0823. So, according to industry average Meghna Cement is in the best position and Confidence Cement Ltd is in the worst position. indemnification on Assets The industry average of Return on Assets for the year 2008 is 2%.Return on Assets of Meghna Cement Ltd is 5. 1%, and Confidence Cement Ltd. Is (2. 5%). So, according to industry average Meghna Cement is in the best position Confidence Cement Ltd is in the worst position. Return on Equity The industry average of Return on equity for the year 2008 is 0. 26%. Return on Equity of Meghna Cement Ltd and Confidence Cement Ltd. Is (4. 5%). So, according to industry average Meghna Cement is in the best position Confidence Cement Ltd is in the worst position. Profitability Ratio 30. 00% 25. 00% 20. 00% 15. 00% 10. 00% 5. 0% 0. 00% -5. 00% -10. 00% Meghna Cement Confidence Cement industry Average Return on Asset 5. 10% -2. 50% 2% Return on Equity 23. 90% -4. 50% 26% 18 P a g e References ? fair Accounting ( eleventh Edition),Donald E. Kieso ? The Analysis and utilization of Financial Statements(3rd Edition),Gerald I. white-hot ? Scott Besely & Eugene F. Brigham, Essentials of Managerial Finance, Thirteenth Edition, ? ? ? ? Thomson South-Western, Ohio, 2006 www. bashundharagroup. com/mcml/ www. confidencegroupbd. com/cement/ www. dsebd. org www. wikipedia. com 19 P a g e