A study on the financial soundness of Bangladesh cement industry using Altman z-score on selected listed companies

Abstract

This internship report titled as “A Study on The Financial Soundness of Bangladesh Cement Industry Using Altman Z-Score on Selected Listed Companies” is submitted for the purpose of completion of my undergraduate studies at BRAC Business School and it is based on the internship period of three months (1st January, 2020 to 31st March, 2020) under Finance & Planning Department at Siam City Cement (Bangladesh) Limited. Firstly, this report includes my internship experience about the various tasks I was assigned with, the things I learned and how I contributed to the company as well as the difficulties faced during the internship. Also, a few recommendations such as intern’s access to database, providing challenging work etc. to make the organization’s internship program better. Secondly, this report provides an overall analysis of the organization. Management practices include a brief description of their employment practice, performance evaluation, people excellence policies etc. Marketing practices include information of their products & services, price, promotional activities etc. Financial & Accounting practices include various ratio analysis to understand their financial condition and a brief description about their accounting practices. Operations Management & Information System Practices include brief descriptions about their procurement & production, multimodal logistics service, information system etc. Also, for strategic audit analysis porter’s five forces industry analysis and SWOT analysis were conducted to understand the various issues of the organization along with a brief description of Covid-19 pandemic impact on the organization. Recommendations such as alternative logistics method, re-evaluation of cost analysis etc. were made for the organization. Finally, the project part includes the research of financial soundness of the cement industry based on the analysis of Altman Z-score with the five selected companies listed in Dhaka Stock Exchange. It was conducted using profitability, leverage, liquidity, solvency, and activity parameter ratios to predict financial health. Net working capital to total assets analysis showed the firm’s ability to cover its short-term obligations. Retained earnings to total assets which showed how the firm funds their operations. Earnings before interest and tax to total assets showed the capacity to earn profit and covering immediate debt obligations. Market value of equity to total liabilities describes the firm’s value compared to its liabilities in the market. Sales to total assets showed the firm’s efficiency in using its resources. And all these parameters were used to calculate the final Z-Score which indicated that the financial soundness of the industry is in a precarious situation. Impact of this analysis on my internship organization was also mentioned. Recommendations such as sales & industry management, utilization of assets, re-evaluation of cost management, utilization of export opportunities were made for the companies of the cement industry so that they can perform better and overcome the financial crisis. To conclude, this internship experience has provided me with an opportunity to apply what I have learned during my undergraduate studies as well as gaining professional work knowledge.