26April, 2015

Dr. Mahmood Osman Imam

Professor
Department of Finance
Faculty of Business Studies
University of Dhaka
Subject: Submission of report on Corporate Finance.

Dear Sir,
It is my recognition to inform you that I took a great pleasure in preparing the
report on Corporate Finance. I have collected the annual reports of Confidence
Cement Limited for preparing the report. During preparing the report, I have
gained lots of experience contrary to the limited theoretical knowledge on various
aspects.

Your crafted guidance made it possible for me to prepare this report successfully.

Yours truly,
Masud Rana
ID# 26043

Page | 1

Acknowledgement

It is my great privilege to express gratitude to our creator Allah for such great
opportunity to prepare the report. I also have to put our heartened feelings and
gratitude for the kindness and assistance that was provided to me to complete my
assigned report as on the topic.
I am deeply indebted to Prof. Dr. Mahmood Osman Imam for his inspiring and
invaluable guidance throughout the work. I would like to thank him for all the
advice, encouragement, help and everything that we learnt from him. Without him
this report would not have been possible.

Masud Rana
ID# 26043

Page | 2

ABSTRACT
The thesis applies performance evaluation of pharmaceutical company in
Bangladesh. It means evaluate how well the company performs. The main aim is
achieved through ratio analysis of two pharmaceutical (ORION and IBN SINA
pharmaceutical) companies in Bangladesh. The main data collection from the
annual financial reports on ORION and IBN SINA pharmaceutical companies in
2009 to 2013.Different financial ratio are evaluated such liquidity ratios, asset
management ratios, profitability ratios, market value ratios, debt management
ratios and finally measure the best performance between two companies from 2009
to 2013. The mathematical calculation was establish for ratio analysis between two
companies from .It is most important factors for performance evaluation. The
graphical analysis and comparisons are applies between two companies for
measurement of all types of financial ratio analysis. Liquidity ratio is conveying
the ability to repay short-term creditors and it total cash. It determines perform of
short term creditor of both pharmaceutical companies under the three categories
such as current ratio, quick ratio and cash ratio. Asset management ratio is
measurement how to effectively a company to use and controls its assets.
Profitability ratio is evaluate how well a company is performing by analyzing and
how profit was earned relative to sales, total assets and net worth for both
pharmaceutical companies. Debt coverage ratio is performing that the property
insufficient to collect their mortgage for both companies and market value is
perform the stockholder to analysis their future market value of the stock market.
Overall analyses are measurement the best one between ORION and IBN SINA
pharmaceutical companies.

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Table of Contents
Contents
Executive Summary.....................................................................................................................................1
Corporate Goal............................................................................................................................................2
Valuation.....................................................................................................................................................4
Financial Statements, And Analysis.............................................................................................................7
Cost of Capital and Capital Structure........................................................................................................16
Dividend Policy.........................................................................................................................................18
CREDIT RISK GRADING SCORE SHEET.............................................................................................25
Appendix...................................................................................................................................................31

Page | 4

Overview
Orion Pharma Limited (Orion Pharma/Company), previous name Orion
Laboratories Limited, a company of ORION GROUP, was incorporated in 1965;
and owns and operates a modern pharmaceutical factory and produces and sells
pharmaceutical drugs and medicines. It also owns approximately 21.76% shares of
Orion Infusion Limited, a public company listed with Dhaka Stock Exchange and
Chittagong Stock Exchange since 1996, manufacturing and marketing intravenous
fluids. At present, the company has tablet, capsule, PFS, ampoule, cephalosporin
injectable, cream and ointment products of different therapeutic group. Its
consolidated sales in 2013 is Tk. 11,011.88 million with a growth of approximately
15.35% compared to 2012. The Company has a market share of around 2% of the
pharmaceuticals market of the country which is approximately Tk 1,00,000 million
with 8% growth in 2013. Orion Pharma Ltd. is one of the premier pharmaceutical
companies of Bangladesh for manufacturing and marketing branded-generic
primary & chronic care medicines, maintaining strict compliance of WHO cGMP
standards. Given vast experiences of over four decades imbibed with advanced
technical and professional expertise, Orion Pharma now levers a wide array of
therapeutic areas including lifesaving anticancer drugs and injectable having more
than 120 generics in 225 presentations.

Page | 5

INTRODUCTION

Performance evaluation of a company is usually related to how well a company

can use it assets, shareholder equity and liability, revenue and expenses. Financial
ratio analysis is one of the best tools of performance evaluation of any company. In
order to determine the financial position of the pharmaceutical company and to
make a judgment of how well the pharmaceutical company efficiency, its operation
and management and how well the company has been able to utilize its assets and
earn profit.
We used ratio analysis for easily measurement of liquidity position, asset
management condition, profitability and market value and debt coverage situation
of the pharmaceutical company for performance evaluation. It analysis the
company use of its assets and control of its expenses. It determines the greater the
coverage of liquid assets to short-term liabilities and it also compute ability to pay
pharmaceutical company monthly mortgage payments from the cash generate. It
measures pharmaceutical company overall efficiency and performance. It
Page | 6

determines of share market condition of pharmaceutical company. We are choosing

two pharmaceutical companies in Bangladesh. At first we discuss square
pharmaceutical company. It is the most famous company in Bangladesh. It was
established in 1965 .It is the good position among all national ,multination, private
and public of pharmaceutical company of Bangladesh. Their mission is to produce
and provide quality healthcare relief of people, maintain strongly ethical standard
in business operation also ensuring benefit to 6 the shareholder, stakeholder, and
society.

VISION
To be regarded as a world-class corporate house through products, services &
values.

MISSION

Continuous development of people competency

Page | 7

Recognizing individual contribution

Introducing new and innovative products and technologies
Assuring quality products from advanced manufacturing facilities
Exceeding customer satisfaction and granting trust through quality servicesssion

VALUES
To achieve its aspired vision, Orion subscribes the following values:
Quality in everything we do
Live up to our commitments
Transparent and fair in all our dealings
Take initiative to exceed standards
Trust and respect to each other

Page | 8

 Work as a team
Share social responsibility

Corporate social responsibility

Enliven Patients Assistance Program (EPAP)
Orion Pharma Ltd. defines Corporate Social Responsibility (CSR) as a concept
whereby a company integrates social and environmental concerns in its
business operation and in its interaction with its stakeholders on a voluntary
basis. As a
continuation of our CSR practice Orion Pharma Ltd. introduces Enliven
Patients Assistance Program (EPAP). EPAP is an endeavor to provide Enliven
capsule (Imatinib 100 mg) at subsidised price or in some cases at free of cost
for the underprivileged blood cancer patients in Bangladesh.
Free Medical Camp
Page | 9

Orion Pharma Ltd. offers free medicines to poor patients in different institutions
of Bangladesh. During times of natural disasters like earthquakes, floods,
cyclones and droughts, Orion Pharma Ltd. rushes help to the victims through
providing a variety of medical aid.
Orion Medical Scholarship
Orion Pharma Ltd. always appreciates the going-to-be-doctor who already got
admitted into the medical college and decided to sacrifice their life in exchange
of bringing smile to the face of ailing humanity. Orion Pharma Ltd. Has decided
to be with those masterminds in this voyage towards a noble mission by
offering scholarship to those medical students of the country who cannot afford
the exorbitant cost of medical education.

METHODOLOGY
Data collection
Main data for our thesis are the annual financial reports on ORION AND IBN
SINA pharmaceutical company in 2009 to 2014. When we measurement the
Page | 10

ratio analysis for any company, we must be used in annual financial report
otherwise we dont measurement. We have also used four main financial
statements for ratio analysis of pharmaceutical company such as; balance
sheets, an income statement, cash flow statement; statement of shareholders
equity.
Data analysis
We used the model for performance evaluation of pharmaceutical company. It is
briefly discusses next page. It indicates the different steps such Selection of
financial report, Identification of balance sheet, income statement and cash flow
statement, ratio analysis, mathematical calculation, statistical analysis of
companies, comparison of among both companies and declaration of best one
among both companies.
First step of model, we do a selection of financial report that means a chose of
annual financial report. The annual financial report present financial data of a
company's position, operating performance, and funds flow for an accounting
period .We use the annual reporting of both pharmaceutical companies in 2007
to 2008. Second step of model, we identify the balance sheet, income statement,
cash flow statement from the annual financial report. We used some data from
balance sheets for 16 different kind of ratio such as liquidity ratios, asset
management ratios, debt management ratios. In contrast, we was used some
sources from income statement. When we analysis the ratio of profitability and
debt management ratio we must be use income statement for those companies.
Nevertheless, we can use some data from the cash flow statement for ratio
analysis such as market value ratio.
Page | 11

The third step of model, we identify the suitable ratio for performance
evaluation and we analysis the ratio such as liquidity ratio, Profitability ratio,
profitability ratio, debt coverage ratio, cheek list, market value etc. All types of
ratio are most important for how well a company to generate its assets, liquidity,
revenue, expense, shareholder equity profit or loss etc.
The Forth step of model, we used the Mathematical calculation for both
companies. Here we identify some figure from the income statement and
balance sheet in 2009 to 2013 in both pharmaceuticals companies. We used
scientific calculators for determine the result.
The five step of model, we used the graphical analysis for evaluation of the
company. The graphical analysis is an inexpensive, easy-to-learn program for
producing, analyzing, and printing graphs. Here we used Microsoft excel for
graph of both companies. We make different kinds of graph of both companies
such as column graph, line graph, area graph, and bar graph. Most of the graph
is column graph .Ever graph has two part one is horizontal another is vertical.
Horizontal indicate the company name and vertical indicate the parentage of
ratio.
The six step of model, we compares between two pharmaceutical companies
about the liquidity position, asset management condition, debt coverage
facilities and profitability, share equity position under the ratio analysis. We also
command why company better than other company and also discuss why not
those companies is not good position compare then other company.

Page | 12

Finally we can dealer the best one between the two pharmaceutical companies.
We can easily measurement the best one because we use different kinds of ratio
and know the result, graphical analysis, compare of both companies.
Modal for performance evaluation of both pharmaceutical companies
Model of
performance
evaluation of
pharmaceutical
company
Checklist

Selection of financial
report

Identification of
balance sheet,
income statement
and cash flow

Profitability ratio

Ratio analysis
Cash flow ratio

Mathematical
calculation
Leverage ratio

Graphical analysis of
both companies

Market value ratio

Comparison of
among both
companies
Declaration of best
one among both
companies

Page | 13

Formula for ratio analysis:

We used different types of formula for calculation of different kinds of ratio. We
collect some formula from the book of Intermediate Accounting by
Kieso,Weygandt, Warfield(2001).We also collect some data from Accounting
Principles by Weygandt, J. J, Kieso, D. E, & Kell, W. G. (1996). So formula is the
most important thing for our thesis without formula we cant calculation the
ratio analysis and we dont measurement of performance evaluation of
pharmaceutical company. There are several formulas revealing each of the five
aspects of performance evaluation and financial condition and short discuss
about as follow as:

Debt Ratio

(STD+LTD)/TA

Debt to Equity Ratio

Financial Leverage

LTD/Equity
NFO/Equity

Operation Liability
Leverage
NFO

OL/NOA

NOA

Operating Asset-Operating
Liabilities(OA-OL)
EBIT/Interest exp
CFO/(Int. exp+PR)

Interest Coverage Ratio

Debt Service Coverage
Ratio
Cash Flow Coverage
Ratio
Tangibility

FO-FA

STD=Short term debt,

LTD=Long term debt

NFO=Net financial
obligation
NOA=Net Operating
Assets
FO=Financial
obligation,
FA=Financial asset

CFO=Cash flow from

operation

CFO/(Int. exp + PR/(1-Tax))

Tangible asset/TA
Page | 14

Uncertainty of Operating
Income
Sales Stability
Retentation Rate

6EBIT(Moving Average)3
years/EBIT(Bar)MA 3 Years
Sales/TA
1-DPS/EPS

Growth Rate

ROE*RR

Return on Asset
Return on Equity
Operating Profit Margin
NOA
Return on Net Operating
Asset (RNOA)
Cash Dividend
Per Share
Stock Dividend
Per Share
Total Dividend
Earnings Per Share (EPS)
Dialuted
Earning Per Share
Dividend Payout Ratio
Rescalled EPS
Rescalled Dividend Per
Share
Operating cash flow per
share
Free Cash Flow
Per Share

NPAT/TA
NPAT/Equity
profit from operation/Sales
OA-OL
NPAT/NOA

Market Price
Instituational Ownership
Sponsor Ownership
GDP Growth

DPS=Dividend per
share
RR=Retentation Rate

CD Per share
ST Per share
Cash + Stock
NPAT/Outstanding shares
NPAT/After stock outstanding
shares
Cash dividend/EPS
EPS*(1+Stock dividend %)

Net cash from operating

activities/outstanding shares
NEt cash from operating activitiesCapital expenditure/outstanding
shares
% of instituational ownership
% Of sponsor ownership

Page | 15

RESULTS AND ANALYSIS:

In this part we present the result from our data analysis. This part
is separate into five categories. At first, we briefly examined the
performance of liquidity position of both pharmaceutical
companies. Second, we present the asset management condition
of those companies .Third, we demonstrate the performance of
profitably those companies, Forth we discussion the debt
management position and finally we represent the market value
of those companies.

Capital structure ratio:

Debt ratio:

A financial ratio that measures the extent of a companys or consumers

leverage. The debt ratio is defined as the ratio of total debt to total assets, expressed in
percentage, and can be interpreted as the proportion of a companys assets that are
financed by debt. The higher this ratio, the more leveraged the company and the greater its
financial risk. Debt ratios vary widely across industries, with capital-intensive businesses
such as utilities and pipelines having much higher debt ratios than other industries like
technology.

Debt Ratio

ORION

0.27

0.33

0.36

0.02

0.30

IBNSINA

0.09

0.07

0.08

0.19

0.41

INDUSTRY

0.28

0.29

0.33

0.19

0.31

Page | 16

0.45

0.41

0.40

0.36

0.35
0.30

0.33

0.33

0.27

0.31

0.30

0.29

0.28

0.25
0.19 0.19

0.20
0.15
0.09

0.10

0.08

0.07

0.05
0.00

0.02
2013-2014

2012-2013

Debt Ratio ORION

2011-2012

2010-2011

Debt Ratio IBNSINA

2009-2010

Debt Ratio INDUSTRY

Analysis:

Debt to equity: the debt-to-equity ratio shows the proportion of equity and debt a firm is
using to finance its assets, and the ability for shareholder equity to fulfill obligations to
creditors in the event of a business decline. A low debt-to-equity ratio indicates lower risk,
since debt holders have less claim on the company's assets. A higher debt-to-equity ratio,
on the other hand, shows that a company has been aggressive in financing its growth with
debt, and there may be a greater potential for financial distress if earnings do not exceed the
cost of borrowed funds.
Debt to
Equity Ratio

ORION
0.23
IBNSINA
0.02
INDUSTRY 0.18

0.46
0.04
0.31

0.52
0.02
0.34

0.00
0.18
0.14

0.35
0.19
0.25

Page | 17

0.60
0.52
0.50

0.46

0.40
0.30

0.35

0.34

0.31

0.25

0.23
0.18
0.14

0.18

0.20
0.10

0.04

0.02
0.00

2013-2014

2012-2013

0.19

0.02
2011-2012

Debt to Equity Ratio ORION

0.00
2010-2011

2009-2010

Debt to Equity Ratio IBNSINA

Debt to Equity Ratio INDUSTRY

Analysis:

Financial leverage: Companies rely on a mixture of owners' equity and debt to

finance their operations. A leverage ratio is any one of several financial
measurements that look at how much capital comes in the form of debt (loans), or
assesses the ability of a company to meet financial obligations.

Financia
Leverage

ORION
IBNSINA
INDUSTR
Y

0.05
-16.47
-0.25

0.19
-15.81
-0.33

0.29
-16.06
-0.06

-0.75
-27.71
-0.36

0.32
-32.80
-0.06

Page | 18

5.00
0.00
-5.00
-10.00
Financia Leverage ORION
-15.00

Financia Leverage IBNSINA

Financia Leverage INDUSTRY

-20.00
-25.00
-30.00
-35.00

Analysis:

Operating liability leverage: Operating leverage is the ratio of a

company's fixed costs to its variable costs.

Operation
Liability
Leverage

ORION
IBNSINA
INDUSTR
Y

0.18
0.86
0.57

0.32
1.14
0.89

0.14
1.24
0.42

0.19
0.93
0.23

0.22
0.42
0.43

Page | 19

1.40

1.24

1.14

1.20
1.00

0.93

0.89

0.86

0.80
0.57

0.60
0.40
0.20

0.18

0.00

0.19

0.14

2013-2014

0.42 0.43

0.42

0.32

2012-2013

2011-2012

Operation Liability Leverage ORION

0.23

2010-2011

0.22

2009-2010

Operation Liability Leverage IBNSINA

Operation Liability Leverage INDUSTRY

Analysis:

Flow:
Interest coverage ratio: A ratio used to determine how easily a company can pay
interest on outstanding debt. The interest coverage ratio is calculated by dividing a
company's earnings before interest and taxes (EBIT) of one period by the company's
interest expenses of the same period.

Interest
Coverage
Ratio

ORION
IBNSINA
INDUSTR
Y

1.81
19.60
2.40

1.94
19.68
2.29

3.23
14.16
3.46

16.31
10.29
6.21

3.69
12.99
4.53

Analysis:

Debt Service Coverage Ratio: A company's debt service coverage ratio refers to its ability to
meet periodic obligations on outstanding liabilities with respect to its net operating revenue.

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Debt Service Coverage Ratio

ORION

0.93

2.14

IBNSINA

2.97

4.21

INDUSTRY

1.07

1.38

16.00
13.59

14.00
12.00
10.00
8.00
6.00
4.21
4.00
2.00

2.97
0.93

0.00

2.14
1.07

2013-2014

1.38

1.92
0.80

2012-2013

1.50

2011-2012

Debt Service Coverage Ratio ORION

0.72 0.99

1.93

1.54

2010-2011

0.00
2009-2010

Debt Service Coverage Ratio IBNSINA

Debt Service Coverage Ratio INDUSTRY

Analysis:

Cash flow coverage ratio:

The cash flow coverage ratio is an indicator of the ability of a

company to pay interest and principal amounts when they become due. This ratio tells the number of
times the financial obligations of a company are covered by its earnings. A ratio equal to one or more
than one means that the company is in good financial health and it can meet its financial obligations
through the cash generated by operating activities. A ratio of less than one is an indicator of
bankruptcy of the company within two years if it fails to improve its financial position.

Cash Flow
Coverage
Ratio

ORION
0.88
IBNSINA
2.46
INDUSTRY 13.16

2.14
3.39
2.00

0.80
1.55
2.43

0.50
0.74
-16.20

0.00
13.59
106.28

Page | 21

120.00

106.28

100.00
80.00
60.00
40.00
20.00
0.00

13.59

13.16
0.88 2.46

2.14 3.39 2.00

0.80 1.55 2.43

2013-2014

2012-2013

2011-2012

0.50 0.74
2010-2011

-20.00

0.00
2009-2010

-16.20

-40.00
Cash Flow Coverage Ratio ORION

Cash Flow Coverage Ratio IBNSINA

Cash Flow Coverage Ratio INDUSTRY

Analysis:

Profitability ratio analysis:

Return on Asset (ROA) : DEFINITION of 'Return on Assets - ROA' An indicator
of how profitable a company is relative to its total assets. ROA gives an idea as to
how efficient management is at using its assets to generate earnings. Calculated
by dividing a company's annual earnings by its total assets, ROA is displayed as a
percentage.

ORION
IBNSINA
INDUSTR
Y

0.04
0.08
0.05

0.04
0.06
0.04

0.04
0.07
0.05

0.03
0.10
0.06

0.06
0.08
0.09

Page | 22

0.12
0.10

0.10

0.08

0.08

0.08

0.07
0.06

0.06
0.04

0.09

0.06

0.05
0.04

0.04

0.04

0.05

0.04

0.06

0.03

0.02
0.00

2013-2014

2012-2013

2011-2012

Return on Asset (ROA) ORION

2010-2011

2009-2010

Return on Asset (ROA) IBNSINA

Return on Asset (ROA) INDUSTRY

Analysis:

Return on equity: ROE' the amount of net income returned as a percentage of

shareholders equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders have
invested.

Return on
Equity
(ROE)

ORION
IBNSINA
INDUSTR
Y

0.06
0.12
0.09

0.08
0.10
0.09

0.08
0.12
0.09

0.04
0.22
0.09

0.10
0.23
0.20

Page | 23

0.25

0.23

0.22

0.20

0.20
0.15

0.12
0.09

0.10

0.10
0.08

0.12
0.09

0.06

0.09

0.10

0.08

0.05
0.00

0.09

0.04

2013-2014

2012-2013

2011-2012

Return on Equity (ROE) ORION

2010-2011

2009-2010

Return on Equity (ROE) IBNSINA

Return on Equity (ROE) INDUSTRY

Analysis:

Return on net assets: Return on net assets (RONA) is calculated by dividing a

company's net income in a given period by the total value of both its fixed assets
and its working capital. Increases in RONA indicate higher levels of profitability.

RNOA

ORION

0.06

0.07

0.06

0.14

0.08

IBNSINA

0.25

0.24

0.31

0.24

0.15

INDUSTR
Y

0.08

0.05

0.07

0.11

0.15

Page | 24

0.35
0.31
0.30
0.25

0.24

0.25

0.24

0.20
0.15 0.15

0.14

0.15

0.11
0.10
0.06

0.08

0.07

0.05

0.05
0.00

2013-2014

2012-2013
RNOA ORION

0.06

0.08

0.07

2011-2012
RNOA IBNSINA

2010-2011

2009-2010

RNOA INDUSTRY

Analysis:

Check list analysis:

Tangibility:

Tangibility

ORION
IBNSINA
INDUSTR
Y

0.60
0.35
0.44

0.63
0.35
0.42

0.67
0.34
0.48

0.09
0.53
0.26

0.40
0.55
0.38

Page | 25

0.80
0.70
0.60

0.60

0.50
0.40

0.67

0.63

0.44
0.35

0.55

0.53

0.48
0.42
0.35

0.40
0.34

0.38

0.26

0.30
0.20
0.09

0.10
0.00

2013-2014

2012-2013
Tangibility ORION

2011-2012
Tangibility IBNSINA

2010-2011

2009-2010

Tangibility INDUSTRY

Analysis:

Sales stability:

Sales
Stability

ORION
0.43
IBNSINA
2.01
INDUSTRY 0.67

0.38
1.92
0.57

0.30
1.79
0.57

0.15
2.57
0.64

0.63
2.12
0.90

Page | 26

3.00
2.57
2.50
2.01

2.00

2.12

1.92

1.79

1.50
0.90

1.00
0.50

0.67
0.43

0.00

0.38

2013-2014

0.57

0.57
0.30

2012-2013

Sales Stability ORION

0.64

0.63

0.15

2011-2012

2010-2011

Sales Stability IBNSINA

2009-2010

Sales Stability INDUSTRY

Analysis:

Growth rate: DEFINITION of 'Economic Growth Rate' A measure of economic

growth from one period to another in percentage terms. This measure does not
adjust for inflation, it is expressed in nominal terms.

Growth
Rate

ORION
0.04
IBNSINA
0.05
INDUSTRY 8.82

0.06
0.06
6.75

0.08
0.09
9.23

0.04
0.22
9.67

0.10
0.23
10.72

12.00

10.72

10.00

9.67

9.23

8.82

8.00

6.75

6.00
4.00
2.00
0.00

0.04 0.05
2013-2014

0.08 0.09

0.06 0.06
2012-2013

Growth Rate ORION

2011-2012

Growth Rate IBNSINA

0.04 0.22
2010-2011

0.10 0.23
2009-2010

Growth Rate INDUSTRY

Page | 27

Retantion rate (RR): Retention rate is the percentage of a school's first-time, firstyear undergraduate students who continue at that school the next year. For
example, a student who studies full-time in the fall semester and keeps on studying
in the program in the next fall semester is counted in this rate.

Retantion
rate (RR)

ORION
IBNSINA
INDUSTR
Y

0.64
0.44
-1.09

0.71
0.64
-1.00

1.00
0.82
-2.12

1.00
0.98
-1.43

1.00
0.99
-2.63

1.50
1.00
0.50
0.00

1.00
0.64

0.71 0.64

0.44

2013-2014

2012-2013

1.00 0.98

0.82

2011-2012

1.00 0.99

2010-2011

2009-2010

-0.50
-1.00
-1.50

-1.09

-1.00
-1.43

-2.00
-2.12

-2.50

-2.63

-3.00
Retantion rate (RR) ORION

Retantion rate (RR) IBNSINA

Retantion rate (RR) INDUSTRY

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