This report is prepared with an intention to make capital structure and dividend policy analysis of the assigned two firms which are FU-WANG food limited and Rangpur dairy and food limited who are the participants of food and allied sectors. In an effort to performed capital structure and dividend policy analysis the paper first consider a general overview of the food and allied sector based on some information and analysing the Porter's five competitive factors model. After that this report demonstrates company overview for both the selected firm. The company overview generally contains some basic information of the selected firms and briefly discusses the corporate goals of the firms.
Then the capital structure analysis has been conducted based on the stock variable, flow variable and flow concept. Summarizing the result is like that - Under stock concept FU-WANG food has higher financial debt, D/E and financial leverage than those of Rangpur dairy. It indicates FU-WANG food is carrying more debt in its capital than Rangpur dairy. Under flow concept Rangpur dairy has greater cash flow coverage and interest coverage ratio whereas debt service coverage ratio is higher for FI-WANG food. Based on the checklist it has been found that tangibility is higher for Rangpur dairy. But in case of rest of the factors which are profitability (measured in both return on asset and return on operating asset), growth rate, financial slack and uncertainty of operating income is higher for FU-WANG food.
This report also performed five factors extended DuPont analysis that reveals FU-WANG food has substantial higher return on equity than that of Rangpur dairy. This result occurs mainly due to the higher interest burden and financial leverage of the firm. In the analysis of dividend policy this report also demonstrates the trends of the earnings per share, dividend pay-out for the last five years. It has revealed that both of the firm is following residual dividend policy. In this policy investment is the major priority. If any amount of residual cash is available to the firm after making investment then the firm will distribute cash dividend. Both of the firms are not paying any cash dividend during the last five years so that it can be understood that the firms have no residual amount of cash is available to them after making investment to distribute cash dividend.
Inhaltsverzeichnis (Table of Contents)
- 1. Introduction
- 2. Objectives of the Report
- 3. Sources of Data
- 4. Scope of the report
- 5. Limitations of the Report
- 6. Industry Overview
- 6.1.1 Status of Exports of Agro-Based Products
- 6.1.2 GDP Impact
- 6.1.3 Porter's Five factor Analysis of Food and Allied Sector
- 7. Company Overview
- 7.1 Overview of Rangpur Dairy & Food Products
- 7.2 Corporate goal of Rangpur Dairy & Food Products
- 7.3 Corporate Social Responsibility of Rangpur Dairy & Food Products
- 7.4 Overview of FU-WANG FOOD Limited
- 7.5 Corporate goal of FU-WANG FOOD Limited
- 7.6 Corporate Social Responsibility of Rangpur Dairy & Food Products
- 8. Analysis of Capital Structure
- 8.1 Stock Concept
- 8.1.1 Financial Debt Ratio
- 8.1.2 Debt to Equity Ratio
- 8.1.3 Financial Leverage
- 8.2 Flow Concept
- 8.2.1 Interest Coverage Ratio
- 8.2.2 Debt Service Coverage Ratio
- 8.2.3 Cash Flow Coverage Ratio
- 8.3 Checklist
- 8.3.1 Tangibility
- 8.3.2 Uncertainty of Operating Income
- 8.3.3 Profitability
- 8.3.4 Sustainable Growth Rate
- 8.3.5 Financial Slack
- 8.1 Stock Concept
- 9. DuPont Analysis
- 9.1 Tax Burden
- 9.2 Interest Burden
- 9.3 EBIT or Operating Income Margin
- 9.4 Asset Turnover Ratio
- 9.5 Equity Multiplier
- 9.6 DuPont Return on Equity
- 10. Dividend Policy
- 10.1 Types of dividends
- 10.2 Types of Dividend Policy
- 10.3 The stylized fact of dividend policy
- 10.4 Analysis of Dividend Policy of FU-WANG food
- 10.5 Analysis of Dividend Policy of Rangpur Dairy
- 10.6 The stylized facts of Dividend policy of the selected firm
- 11. Pecking Order Theory
- 11.1 Pecking Order theory test for Rangpur Dairy
- 11.2 Pecking Order theory test for FU-WANG Food
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The report aims to analyze the capital structure and dividend policies of FU-WANG Food Limited and Rangpur Dairy and Food Limited, two companies in Bangladesh's food and allied sector. It uses a comparative approach, examining their financial data and applying relevant theoretical frameworks.
- Capital structure analysis using stock and flow concepts.
- Comparative analysis of financial ratios and leverage.
- Examination of dividend policies and payout ratios.
- Application of the Pecking Order theory.
- Analysis of the food and allied sector in Bangladesh.
Zusammenfassung der Kapitel (Chapter Summaries)
6. Industry Overview: This chapter provides a general overview of the food and allied sector in Bangladesh. It includes an analysis of the sector's export status for agro-based products, its impact on GDP, and a Porter's Five Forces analysis to assess the competitive landscape. This sets the stage for the subsequent company-specific analyses by providing a macroeconomic context. The information presented here will form the background against which the performance of FU-WANG Food Limited and Rangpur Dairy and Food Limited will be evaluated. The Porter's Five Forces analysis likely provides crucial insights into the challenges and opportunities faced by companies within this sector.
7. Company Overview: This chapter presents detailed overviews of both FU-WANG Food Limited and Rangpur Dairy & Food Products. It covers basic company information, corporate goals, and corporate social responsibility initiatives. This section lays the groundwork for the detailed financial analysis that follows by providing essential background information on the selected companies. The inclusion of corporate social responsibility initiatives suggests a focus on the broader societal impact of the businesses and not just their financial performance.
8. Analysis of Capital Structure: This chapter forms the core of the financial analysis. It examines the capital structure of both companies using stock and flow concepts. Key metrics like debt ratios, leverage, and various coverage ratios are calculated and compared. A checklist approach, examining factors like tangibility, profitability, growth rate, and financial slack, further enhances the comparative analysis. This comprehensive approach allows for a thorough evaluation of the financial health and risk profiles of the two companies. The comparison between stock and flow concepts provides a multi-faceted perspective on the companies' capital structure, revealing insights that might be missed using a single approach.
9. DuPont Analysis: This chapter delves into a detailed DuPont analysis, breaking down the Return on Equity (ROE) into its component parts. This decomposition offers valuable insights into the drivers of profitability for each company. By examining tax burden, interest burden, operating income margin, asset turnover, and equity multiplier, the report identifies the key factors contributing to the difference in ROE between FU-WANG Food and Rangpur Dairy. This level of granular analysis is crucial for understanding the underlying reasons behind the observed differences in financial performance.
10. Dividend Policy: This chapter analyzes the dividend policies of both companies. It explores different types of dividends and dividend policies and then examines the actual dividend payout trends over the last five years for both FU-WANG Food and Rangpur Dairy. The analysis assesses whether the companies follow a residual dividend policy or other approaches, offering insights into their capital allocation strategies. The focus on the last five years allows for a recent and relevant assessment of the firms’ dividend policies, providing context for the overall financial analysis.
11. Pecking Order Theory: This chapter applies the Pecking Order theory to the case studies. It assesses the extent to which each company's financing decisions adhere to the predictions of the theory. The analysis likely involves examining the order in which the companies have utilized different financing sources (internal financing, debt, equity) and evaluating the consistency of their behavior with the Pecking Order theory's tenets. This section integrates a significant theoretical framework to the empirical findings, enriching the overall analysis and interpretation.
Schlüsselwörter (Keywords)
Capital structure, dividend policy, financial ratios, leverage, profitability, DuPont analysis, Pecking Order theory, FU-WANG Food Limited, Rangpur Dairy and Food Limited, Bangladesh, food and allied sector, residual dividend policy, financial risk.
Frequently Asked Questions: Analysis of Capital Structure and Dividend Policies of FU-WANG Food Limited and Rangpur Dairy & Food Products
What is the main focus of this report?
This report analyzes the capital structure and dividend policies of FU-WANG Food Limited and Rangpur Dairy & Food Products, two companies in Bangladesh's food and allied sector. It uses a comparative approach to examine their financial data and apply relevant theoretical frameworks.
What key themes are explored in the report?
Key themes include capital structure analysis using stock and flow concepts, comparative analysis of financial ratios and leverage, examination of dividend policies and payout ratios, application of the Pecking Order theory, and analysis of the food and allied sector in Bangladesh.
What companies are analyzed in the report?
The report analyzes FU-WANG Food Limited and Rangpur Dairy & Food Products, both operating within Bangladesh's food and allied sector.
What methods are used to analyze capital structure?
The report uses both stock and flow concepts to analyze capital structure. Stock concepts include financial debt ratio, debt-to-equity ratio, and financial leverage. Flow concepts include interest coverage ratio, debt service coverage ratio, and cash flow coverage ratio. A checklist approach examining tangibility, uncertainty of operating income, profitability, sustainable growth rate, and financial slack is also employed.
How is profitability analyzed in the report?
Profitability is analyzed using DuPont analysis, breaking down Return on Equity (ROE) into its component parts: tax burden, interest burden, EBIT or operating income margin, asset turnover, and equity multiplier. This allows for a detailed understanding of the drivers of profitability for each company.
What dividend policy aspects are covered?
The report explores different types of dividends and dividend policies. It analyzes the actual dividend payout trends of both companies over the last five years, assessing whether they follow a residual dividend policy or other approaches.
What theoretical framework is applied to the analysis?
The Pecking Order theory is applied to assess the extent to which each company's financing decisions align with the theory's predictions. This involves examining the order in which the companies have used different financing sources (internal financing, debt, equity).
What is included in the Industry Overview chapter?
This chapter provides a general overview of Bangladesh's food and allied sector, including analysis of export status for agro-based products, GDP impact, and a Porter's Five Forces analysis of the competitive landscape.
What information is provided in the Company Overview chapter?
This chapter presents detailed overviews of both FU-WANG Food Limited and Rangpur Dairy & Food Products, covering basic company information, corporate goals, and corporate social responsibility initiatives.
What are the key financial ratios and metrics used in the report?
Key financial ratios and metrics include debt ratios, leverage ratios, various coverage ratios (interest coverage, debt service coverage, cash flow coverage), the components of the DuPont analysis (tax burden, interest burden, operating income margin, asset turnover, equity multiplier), and dividend payout ratios.
What is the time frame considered for the dividend policy analysis?
The dividend policy analysis focuses on the last five years of data for both FU-WANG Food and Rangpur Dairy.
What are the key keywords associated with this report?
Capital structure, dividend policy, financial ratios, leverage, profitability, DuPont analysis, Pecking Order theory, FU-WANG Food Limited, Rangpur Dairy and Food Limited, Bangladesh, food and allied sector, residual dividend policy, financial risk.
- Quote paper
- Sajjad Hossine Sharif (Author), 2018, Capital Structure and Dividend Policy Analysis of FU-WANG Food Limited and Rangpur Dairy and Food Limited, Munich, GRIN Verlag, https://www.grin.com/document/950923
