Financial Ratio Analysis of Square Pharma & Beximco Pharma |Financial Ratio Analysis | | | |Performing Year: 2008 &

2009 | | | | Beximco Pharmaceuticals ltd. & Square Pharmaceuticals ltd. Submitted by Group Name: Peace Messengers Islam Mohammad Samiul (09-14649-3) Hamid Faisal (09- 15037 -3) Course Name: Financial Management Section: H AIUB Letter of Transmittal 01/03/2011 Mrs. Farzana Islam Honorable Faculty A.I.U.B. Dear Madam, It gives us immense pleasure to submit a report on Financial Ratio Analysis. This report is submitted as a partial fulfillment/ as a part of our course Financial M anagement . We have choose two renowned pharmaceuticals companies of the country who are Beximco Pharmaceuticals Ltd. and Square Pharmaceuticals Ltd.The preparation of the report has given us in-depth knowledge on Financial Ratio Analysis. We have given our best effort to make it a worthy one and each aspect of the problem is considered and studied as required. If any confusion arises or further explanation is needed, we shall be available to explain the matter to you as and when required despite having limitations. Yo ur compassionate and authoritative advice will encourage us to conduct further f lawless research in future. Yours sincerely, Islam Mohammad Samiul (09-14649-3) Hamid Faisal (09-15037 -3) Course Name: Financial Management

Section: H AIUB Financial Ratios Financial ratios are useful indicators of a firm's performance and financial sit uation. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. Financial ratios can be classified according to the information they provide. Th e following types of ratios frequently are used: 1. Liquidity ratios 2. Activity ratios 3. Debt management ratios 4. Profitability ratios 5. Market value ratios 1. LIQUIDITY RATIOS Liquidity ratios are the first ones to come in the picture. These ratios actuall y show the relationship of a firms cash and other current assets to its current l iabilities. Two ratios are discussed under Liquidity ratios. They are: i. Net Working Capital ii. Current ratio iii. Quick/ Acid Test ratio. i. Net Working Capital: A measure of both a company's efficiency and its short-t erm financial health. Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a compa ny currently is unable to meet its short-term liabilities with its current asset s (cash, accounts receivable and inventory).The working capital ratio is calcula ted as: Net Working Capital = Current Assets Current Liabilities |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |2,861,891,654 - 2,602,032,267 |4,411,836,436 - 3,500,845,103 | | |=Tk. 259,859,387 |=Tk. 910,991,333 | |2009 |6,916,737,893 2,321,451,642 | 3,843,512,855 - 2,640,868,554 | | |=Tk. 4,595,286,251 |=Tk. 1,202,644,301 | ii. Current ratio: This ratio indicates the extent to which current liabilities are covered by those assets expected to be converted to cash in the near future . Current assets normally include cash, marketable securities, accounts receivab les, and inventories. Current liabilities consist of accounts payable, short-ter m notes payable, current maturities of long-term debt, accrued taxes, and other

accrued expenses (principally wages). Current Ratio=Current Assets/Current Liabilities |Year |Beximco Pharmaceutical |Square Pharmaceutical | |2008 | 2,861,891,654 / 2,602,032,267 | 4,411,836,436 / 3,500,845,103 | | |=1.09 Times |=1.26 Times | |2009 | 6,916,737,893 / 2,321,451,642 | 3,843,512,855 / 2,640,868,554 | | |= 2.98 Times |=1.45 Time | iii. Quick/ Acid Test ratio: This ratio indicates the firms liquidity position a s well. It actually refers to the extent to which current liabilities are covere d by those assets except inventories. Quick Ratio=(Current Assets-Inventories)/Current Liabilities |Year |Beximco Pharmaceutical |Square Pharmaceutical | |2008 | (2,861,891,654 - 1,505,288,093) / 2,602,032,267 | (4,411,836,436 - 2,026 ,736,322) / 3,500,845,103 | | |=0.53 Times |=0.69 Times | |2009 | (6,916,737,893 1,722,953,284) / 2,321,451,642 | (3,843,512,855 - 2,098,7 55,231) / 2,640,868,554 | | |=2.23 Times |=0.67 Times | Summary: In the liquidity ratio we can see that NWC of Beximco Pharma. Ltd. is h igher than Square pharma. Ltd. both current ratio and quick ratios are also impr oved over time marginally. Both companies situations are stable. 2. ACTIVITY RATIOS An indicator of how rapidly a firm converts various accounts into cash or sales. In general, the sooner management can convert assets into sales or cash, the mo re effectively the firm is being run. Activity ratios measure the efficiency of the company in using its resources. The ratios are: i. Inventory Turnover Ratio ii. Average Collection period Ratio iii. Fixed Asset Turnover Ratio iv. Total Asset Turnover Ratio v. Accounts Receivable Turnover Ratio i. Inventory Turnover Ratio: This ratio is a relationship between the cost of go ods sold during a particular period of time and the cost of average inventory du ring a particular period. It is expressed in number of times. The formula is: Inventory Turnover Ratio = Cost of goods sold / Inventory

|Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |2,002,871,181 / 1,505,288,093 |4,856,061,933 / 2,026,736,322 | | |=1.33 Times |=2.39 Times | |2009 |4,868,254,915 / 1,722,953,284 |5,672,565,973 / 2,098,755,231 | | |= 2.83 Times |=2.71 Times | ii. Average Collection period Ratio: The average collection period ratio represe nts the average number of days for which a firm has to wait before its debtors a re converted into cash. Following formula is used to calculate ; Average collection period = Accounts Receivable / Annual Sales |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |503,916,401 / 4,010,167,059 |1,510,502,334 / 9,565,715,902 | | |=0.12 Times |=0.15 Times | |2009 |694,111,730 / 4,868,254,915 |693,157,720 / 11,366,597,928 | | |=0.14 Times |=0.06 Times | iii. Fixed Asset Turnover Ratio: Fixed assets turnover ratio is also known as sa les to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. The ratio is calculated by using following formula: Fixed Assets Turnover Ratio = Sales / Net Fixed Assets |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |4,010,167,059 / 11,921,072,697 |9,565,715,902/ 4,088,432,171 | | |= 0.33 Times |=2.33 Times | |2009 |4,868,254,915 / 12,966,587,178 |11,366,597,928 / 4,899,679,832 | | |=0.37 Times |=2.31 Times | iv. Total Asset Turnover Ratio: Asset turnover measures a firm's efficiency at u sing its assets in generating sales or revenue - the higher the number the bette r. It also indicates pricing strategy: companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset t urnover. The formula is : Total Asset Turnover Ratio = Sales / Total Assets |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |4,010,167,059 / 14,819,665,441 |9,565,715,902 / 12,703,127,420 | | |=0.27 Times |=0.76 Times |

|2009 |4,868,254,915 / 14,819,665,441 |11,366,597,928 / 13,251,242,856 | | |=0.32 Times |=0.86 Times | v. Accounts Receivable Turnover Ratio: An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receiv ables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. The formula is: Accounts Receivable Turnover Ratio = Sales / Accounts Receivable |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |4,010,167,059 / 503,916,401 |9,565,715,902 / 1,510,502,334 | | |=7.96 Times |=6.33 Times | |2009 |4,868,254,915 / 694,111,730 |11,366,597,928 / 693,157,720 | | |=7.01 Times |=16.39 Times | Summary: Both the companies changes are normal. Beximco is in better position. 3. DEBT MANAGEMENT RATIOS A ratio that indicates what proportion of debt a company has relative to its ass ets. The measure gives an idea to the leverage of the company along with the pot ential risks the company faces in terms of its debt-load. The ratios are: i. Debt Ratio ii. Debt Equity Ratio iii. Times-Interest-Earned (TIE) Ratio i. Debt Ratio: The debt ratio compares a company's total debt to its total asset s, which is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on lever age. The formula is: Debt Ratio = Total Liability / Total Assets |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |4369463296 / 14,819,665,441 |4286086715 / 12,703,127,420 | | |= 29% |=33.75% | |2009 |9006226808 / 19,891,933,422 |3301845222/ 13,251,242,856 | | |=45% |=24.92% | ii. Debt Equity Ratio: The debt-equity ratio is another leverage ratio that comp ares a company's total liabilities to its total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committe d to the company versus what the shareholders have committed. The formula is:

Debt Equity Ratio = Total Debt / Total Share Holders Equity |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |4369463296 / 10,450,202,145 |5551255643 / 8,417,040,705 | | |= 41% |=65.96% | |2009 |9006226808 / 10,885,706,614 |3978587430 / 9,949,397,634 | | |=82% |=39.99% | iii. Times-Interest-Earned (TIE) Ratio: A metric used to measure a company's abi lity to meet its debt obligations. It is calculated by taking a company's earnin gs before interest and taxes (EBIT) and dividing it by the total interest payabl e on bonds and other contractual debt. It is usually quoted as a ratio and indic ates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. The for mula is: TIE ratio = EBIT / Interest Expense |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |998,794,848 / 249,654,298) |1,709,305,818 / 351,868,423) | | |=4 Times |=4.86 Time | |2009 |1,001,282,411 / 910,840,798 |2,368,437,227 / 397,135,963 | | |=1.09 Times |=5.97 Times | Summary: 4. PROFITABILITY RATIOS Profitability is the net result of a number of policies and decisions. Profitabi lity ratios show the combined effects of liquidity, asset management and debt on operating results. There are four important profitability ratios that we are going to analyze: i. Gross Profit Margin ii. Operating Profit Margin iii. Net Profit Margin iv. Return on Total Assets i. Gross Profit Margin: Gross Profit Margin gives us the amount of Gross profit a firm is earning per dollar of its sales. The equation is as follows: Gross Profit Margin (GPM) = Gross profit / Sales |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |2,007,295,878 / 4,010,167,059 |3,401,781,806 / 9,565,715,902 | | |=50.05% |=35.56% |

|2009 |2,302,048,289 / 4,868,254,915 |4,148,230,595 / 11,366,597,928 | | |=47.28% |=36.50% | ii. Operating Profit Margin: The operating profit margin is a type of profitabil ity ratio known as a margin ratio. The information with which to calculate the o perating profit margin comes from a company's income statement. The formula is : Operating Profit Margin = Operating Income / Sales |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |998,794,848 / 4,010,167,059 |1,709,305,818 / 9,565,715,902 | | |=24.91% |=17.87% | |2009 |1,001,282,411 / 4,868,254,915 |2,368,437,227 / 11,366,597,928 | | |=20.57% |=20.84% | iii. Net Profit Margin: Net Profit Margin gives us the net profit that the busin ess is earning per dollar of sales. The equation is as follows: Net Profit Margin = Net Profit After Taxes / Sales |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |545,341,273 / 4,010,167,059 |1,381,863,093 / 9,565,715,902 | | |=13.60% |=14.44 % | |2009 |624,740,307 / 4,868,254,915 |1,890,052,929 / 11,366,597,928 | | |=12.84% |=16.63% | iv. Return on Total Assets: Return of total asset measures the amount of Net Inc ome earned by utilizing each dollar of Total Assets. The equation is: Return on Total Assets (ROA) = Net Profit After Tax / Total assets |Year |Beximco Pharmaceuticals ltd. |Square Pharmaceuticals ltd. | |2008 |545,341,273 / 14,819,665,441 |1,381,863,093 / 12,703,127,420 | | |= 3.68% |=10.88% | |2009 |624,740,307 / 19,891,933,422 |1,890,052,929 / 13,251,242,