Credit Performance Analysis: A Study on Dream71 Bangladesh Ltd.

Abstract

This internship report presents a comprehensive Credit Performance Analysis of Dream71 Bangladesh Ltd., a leading software and IT service provider, conducted during the internship period. The primary objective of the study was to evaluate the company's effectiveness in managing its accounts receivable, assess associated risks, and understand the impact on its overall financial health. The analysis is based on the company's audited financial statements from the fiscal years 2019 to 2022. Key financial ratios were calculated to measure liquidity, leverage, profitability, and, most critically, credit management efficiency. The findings reveal a tale of two contrasting financial narratives. On one hand, Dream71 Bangladesh Ltd. demonstrates exceptional profitability and growth. The company's Return on Equity (ROE) and Return on Assets (ROA) reached phenomenal levels of 87.3% and 80.9% in 2021, respectively, normalizing to still-impressive figures of 36.3% and 34.8% in 2022. Furthermore, the company maintains a robust, low-risk financial structure with minimal debt dependency, as evidenced by a Debt-to-Equity ratio of only 0.046. On the other hand, the analysis uncovers a significant critical challenge in credit management. The most salient finding is the severe elongation of the cash conversion cycle. The Days Sales Outstanding (DSO) ratio stood at approximately 191 days in 2022, indicating it takes the company over six months on average to collect payments from its customers. This has resulted in a substantial portion of the company's assets (over 47%) being locked in accounts receivable, creating a major constraint on cash flow. This issue is compounded by a high concentration of credit risk with a few large clients. The report concludes that while Dream71 is highly profitable and financially stable, its reliance on long credit periods poses a threat to its operational liquidity and long-term sustainability. To mitigate this risk, key recommendations include implementing stricter credit control procedures, diversifying the client base, renegotiating payment terms with major clients, and leveraging banking instruments to secure timely payments. In essence, this report finds that Dream71 Bangladesh Ltd.'s path to enduring success hinges on mastering its credit management to ensure that its impressive profitability is seamlessly converted into robust financial liquidity.