Financial Performance Analysis of Advanced Chemical Industries (ACI) Limited

Abstract

ACI Limited is one of the reputed, renowned, and trusted companies in Bangladesh for their goods and services. ACI has four well-diversified business units operating in different parts of the country. Ratio analysis and Altman z-score model are used to analyze the performance of the company. All the data is collected from secondary sources. The last 5 years (from 2015 to 2019) data from financial statements is used to calculate the ratios. Ratio analysis indicates that ACI’s financial condition is turmoil. All of the ratios except some are inconsistent. First of all, Liquidity ratios are continuously decreasing in the last five years and the quick ratio was below the industry average. This illustrates that the company’s capability is not adequate to pay back its current liabilities using current assets. The profitability ratio indicates that sales revenue and gross profit margin are increasing every year but other profitability ratios- net profit margin, return on assets, return on equity is decreasing. It indicates that net profit is not increasing due to the increase in operating and non-operating expenses because of various reasons. The solvency ratio shows that the company continuously increases debt securities in the capital structure last five years. This increases interest expense which decreases the net profit margin of the company. Market value ratios of ACI are somewhat consistent compare to other ratios. While the dividend yield ratio remains somewhat constant but P/E, NAV, and the dividend payout ratio is greater in the last year than the previous four years. Altman z-score model indicates that the company is in the risk of getting bankrupt. The Z-score of ACI is 1.33 which is in the distress zone (0 to 1.8) of the model. This indicates that the probability of getting bankrupt is very high for the company.