Chapter One

Introduction

1
Introduction
Financial analysis is the process of identifying the financial strengths and weaknesses of the firm
by properly establishing relationship between the items of the balance sheet and the profit and
loss account Pandey (1979). Financial Statements (income statement, cash flow statement,
owners’ equity statement and balance sheet) contain a wealth of information which, if properly
analyzed and interpreted, can provide valuable insights into a firm’s performance and position.
Performance measurement of public enterprises has been the subject matter of discussion for
planners, administrators, managers, economists and academics since long. But some lack of
clarity about performance and the existence of defensive attitude on the part of those who have
to take responsibility for inefficient operations have the effect of inhibiting both frame
discussion and decisive action in this regard Bunnett (1987). Analysis of financial statements is
of interest to lenders, security analysts, managers and others Prasanna (1995). Trade creditors are
interested in the firm’s ability to meet their claims. Their analysis will therefore, confine to the
evaluation of the firm’s liquidity position. The suppliers are concerned with the firm’s solvency
and survival. They analyze the firm’s profitability over time. Long term creditors place more
emphasis on the firm’s solvency and
profitability. The investors are most concerned about the firm’s earnings. So, they concentrate on
the analysis of the firm’s present and future profitability as well as earning ability and risk Abu
Sina and Arshed Ali (1998). Publicly traded companies are the economic pulse of a nation. Their
birth, prosperity and demise generally reflect the financial condition of the country. A fairly
reliable index of an economy in its process of growth and development is the rate of growth and
decline of publicly traded companies. With the rapid growth of trade, commerce and industries,
the numbers of publicly traded companies are considerably increasing in Bangladesh.
Pharmaceutical is an important adjunct of industrialization in the country. There are 20 listed
Pharmaceutical Companies in Dhaka Stock Exchange and 16 listed in Chittagong Stock
Exchange. Analyzing the Industrial Life Cycle, it has been found that all of the listed companies
have just reached the middle stage. No company could reach the maturity stage. In a word, the
Pharmaceutical industry of the country is just improving. It is well known that the
Pharmaceuticals industry is one of the key to earning foreign currency. On the other hand, most
of the internal demand for drugs is fulfilled by the domestic Pharmaceutical industry of the
country. But this industry of Bangladesh depends on foreign country for raw-material and

2
technology. Now the time to make the Pharmaceutical firms self sufficient for the betterment of
the country. At this time, performance of manufacturing enterprise, like Pharmaceutical, needs to
be measured and analyzed. But evaluation of performance is not a regular practice in the country.
Against this backdrop this study is an attempt to evaluate performance of some selected
Pharmaceuticals for the period under study.

Design of the Study

Ratio analysis is a technique adapted to analysis and interprets general financial statements to
assess the profitability position. Further a comprehensive analysis is carried by applying
statistical techniques namely mean, standard deviation, co-efficient of variance, multiple
regressions and analysis of variance. Sample Design As the complete source list of all the
Pharmaceutical Companies is not available; the data for this study is selected basedon
convenience sampling method. Among the companies listed with major stock exchange of
Bangladesh namely, Bombay Stock Exchange and National Stock Exchange of Bangladesh,10
companies with consistent financial data are selected. Certain companies are excluded owing to
irregular and/or inconsistent financial data support. The following are the selected
Pharmaceutical companies of this study.

 Square Pharmaceuticals Ltd.

 Baximco Pharmaceuticals Ltd.
 Renata Pharmaceuticals Ltd.
 ACME Pharmaceuticals Ltd.
 Ibn sina Pharmaceuticals Ltd.
 ACI Pharmaceuticals Ltd.

3
Concept Introduction
“The Bangladeshi Pharmaceutical Industry is a success story providing employment for millions
and ensuring that essential drugs at affordable prices are available to the vast population of this
sub-continent.”The Bangladeshi Pharmaceutical Industry today is in the front rank of
Bangladeshs science-based industries with wide-ranging capabilities in the complex field of drug
manufacture and technology. It ranks very high in the third world, in terms of technology, quality
and range of medicines manufactured. From simple headache pills to sophisticated antibiotics
and complex cardiac compounds, almost every type of medicine is now made
indigenouslyplayinga key role in promoting and sustaining development in the vital field of
medicines. Bangladeshi Pharmaceuticals Industry boasts of quality producers and many units
have been approved by the regulatory authorities. International companies associated with this
sector have stimulated, assisted and spearheaded this dynamic development in the past 53 years
and helped to put Bangladesh on the pharmaceutical map of the world.
The Pharmaceutical Industry in Bangladesh meets around 70 percent of the country's demand for
bulk drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals
and injectibles. There are about 250 large units and about 8000 Small-Scale Units, which form
the core of the Pharmaceutical Industry in Bangladesh. These units produce the complete range
of pharmaceutical formulations, i.e., medicines ready for consumption by patients and about 350
bulk drugs, i.e., chemicals having therapeutic value and used for production of pharmaceutical
formulations.

Problem of the Study

The pharmaceutical industry continues to face a significant PR problem, as evident by the recent
rhetoric by leading politicians as they start to ‘act tough’ on drug pricing in the US. To counter
this, there needs to be greater transparency between medicine developers and medicine users /
payers etc.
Indeed, it is fair to say that most people do not have an awareness of the inner workings within a
pharmaceutical company, and therefore do not know tha amount of time and infrastructure
needed to make a new medicine. Simply put, it should be known that that built into all new
medicines is a great deal of time and investment over a period of many years (up to a decade in
many cases) with, I might add, no guarantee of success.

4
So with that said, it is therefore incorrect to base the cost of a new medicine (not talking generics
here) largely on the manufacturing costs. This is just like many other industries that develop
innovative products, not only the pharmaceutical industry. For example, a cost of a new car is
not only a reflection of parts and labor costs. Manufacturers at least will need to recover all of
the R&D costs. If they cannot, there will be no profit and no new cars. Same can be said for big
pharma. No profit, no new medicines.
I am not saying that the pharmaceutical industry has it right on drug pricing, and I agree with
most that there is still some way to go. Those working in the industry can still attempt to help
others understand the process of developing a new medicine.

Scope and Significance

The present study aims at Financial Performance of Pharmaceutical Industry in Bangladesh. The
study could help the company as well as the investors to understand its financial efficiency. It
aims to help the management to find out its financial problems at present and the specific areas
in the business, which might need some effort for more effective and efficient utilization of its
resources.

Objectives of the Study

The study is designed to achieve the following objectives:
 To know about the Pharmaceuticals Sector
 To know the status of export and import of pharmaceutical sector
 To know the contribution of this financial performance and ratio analysis in
pharmaceutical sectors
 To know the contribution of this national income
 To know the contribution of the sector in GDP

5
Chapter Plan
Profile of the Study Unit
The pharmaceutical industry discovers, develops, produces, and markets drugs or pharmaceutical
drugs for use as medications to be administered (or self-administered) to patients to cure them,
vaccinate them, or alleviate a symptom. Pharmaceutical companies may deal in generic or brand
medications and medical devices. They are subject to a variety of laws and regulations that
govern the patenting, testing, safety, efficacy and marketing of drugs.
The liquidity ratios measure the ability of an enterprise to meet its short-term obligations and
reflect the short-term financial strength of an enterprise. Liquidity is a pre-requisite for the very
survival of an enterprise. Analysis of liquidity is very important in knowing the liquidity status,
movement of funds, idle fund (if any) which will not only help financial management to keep the
liquidity position of the company in order but also make sure of payment to short-term creditors,
interested in short-term solvency of the company. Liquidity ratios reveal the rate at which fixed
and working assets are being converted into cash and the time when the cash will be required.
Current ratio, quick ratio and working capital to total asset ratio can be used to measure the
liquidity position of the enterprise.

Analysis relating to Objective

The pharmaceuticals industry in Bangladesh is one of the most developed hi-tech sectors within
the country’s economy. Before the liberation of Bangladesh, there was hardly any
pharmaceutical company. In 1971, there were only 33 pharmaceuticals companies in
Bangladesh. The development of pharmaceuticals industry has increased at a speedy rate after
the transmission of Drug Control Ordinance-1982. Bangladesh’s contrasting experiences with its
drug policy in 1982 and its health policy in 1990 illustrates a number of lessons about health
policy reform in developing countries.. The skills and knowledge of the professionals and
innovative ideas of the people involved in this industry are the key factors for this development.
The pharmaceutical industry of Bangladesh had the potential to grow and compete in the
international market. This is because from the essential life-saving medicines, it has now
improved a lot. The ability to provide improved quality assurance provides this industry the

6
competitive advantage, and at present, most companies are following the Good Manufacturing
Practice (GMP) standards, set by the UN World Health Organization (WHO).

Methodology
Data has been taken from a sample of 6 Pharmaceuticals in Bangladesh. For the study
only A and B category Pharmaceuticals are considered. “A” category Pharmaceutical
includes those Pharmaceuticals that hold annual general meeting (AGM) and declare
minimum 10% dividend regularly. The trading time of “A” category Pharmaceutical’s
share is T+3. “B” category Pharmaceutical includes those Pharmaceuticals that hold
annual general meeting (AGM) regularly but declare dividend at a rate below 10% on a
regular basis. The trading time of “B” category Pharmaceutical’s share is also T+3. “Z”
category Pharmaceutical includes those Pharmaceuticals that neither hold annual general
meeting (AGM) nor declare dividend on a regular basis. The trading time of “Z” category
Pharmaceutical’s share is T+7. Moreover, the size of the Pharmaceuticals, availability of
information, and year of establishment are also considered for selecting the
Pharmaceuticals. The study covers a three year period from 2005-06 to 2007-08. This
study is based on both primary and secondary data. Secondary data are the annual reports
of the selected Pharmaceuticals firms and various studies made available through library
work. The primary data was collected through personal interview and discussions with
the concerned executives of the selected Pharmaceuticals firms.
The collected data have been tabulated, analyzed and interpreted with the help of
different financial ratios, Multivariate Discriminate Analysis (MDA) as developed by
Prof. Altman and statistical tools like mean, standard deviation (SD), coefficient of
variance (CV) and T- test, etc. The hypothesis has been tested statistically to arrive at
conclusion and policy implication.

7
Conclusion
From the discussion it can be concluded that the financial position and operational performance
of the most of the selected pharmaceuticals were not satisfactory. The inefficiency of financial
management may be a major cause for such a poor position of the state of affairs. This view was
also substantiated by using Prof. Altman’s MDA model. By applying this model it is seen that
the overall financial position of the sample pharmaceuticals was at the lower level of bankruptcy
except only one pharmaceuticals. The main reasons attributed to such a situation were reported
to be poor market demands, scarcity of raw materials, high competition, vanished quota system,
management in attention, lack of realistic goals, strict government regulations, political
instability, increased price of raw materials and others, adverse environmental factors etc. In
order to save the pharmaceuticals from total bankruptcy the financial performance of the sample
pharmaceuticals should be improved as early as possible.

8
 Chapter Two
Literature Review

9
Literature Review
Financial ratios are the simplest tools for evaluating the financial performance of the firm Wen-
Cheng LIN et. Al (2005). One can employ financial ratios to determine a firm’s liquidity,
profitability, solvency, capital structure and
assets turnover. Hannan and Shaheed (1979) used financial ratios to show the financial position
and performance analysis of Bangladesh Shilpa Bank. He showed that techniques of financial
analysis can be used in the evaluation of financial position and performance of financial
institution as well as non financial institutions even Development Financial Institutions (DFI).
Altman (1968) used financial ratios to predict corporate bankruptcy. He found that the
bankruptcy model has an accuracy rate of 93% and is very successful in predicting failed and
non-failed firms. Sina and Arshed Ali (1998) used financial ratios to test the financial strengths
and weaknesses of Khulna Newsprint Mills Ltd. He found that due to lack of planning and
control of working capital, operational inefficiency, obsolete store, ineffective credit policy,
increased cost of raw materials, labor and overhead, the position of the company was not good.
Saleh Jahur and Mohi Uddin (1995) used financial ratios to measure operational performance of
limited company. They used profitability, liquidity, activity and capital structure to measure
operational performance. Saleh Jahur and Parveen (1996) used Altman’s MDA model to
conclude the bankruptcy position of Chittagong Steel Mills Ltd. They found that absences of
realistic goals, strict govt. regulation are the main reasons for the lowest level of bankruptcy.
Ohlson (1980) employed financial ratios to predict a firm’s crisis. He found that there are four
factors affecting a firm’s vulnerability. These factors are the firm’s scale, financial structure,
performance and liquidity.

In the article “The Assessment of Financial and Operating Performance of the Cement Industry:
A Case Study of Confidence Cement Limited”, Dutta and Bhattacharjee (2001) found that the
investment in cement was fairly profitable. Salauddin (2001) examined the profitability of the
Pharmaceutical Companies of Bangladesh. By using ratio analysis, mean, standard deviation and
co-efficient of variation he found that the profitability of the Pharmaceuticals sector was very
satisfactory in terms of the standard norms of return on investment. Hye & Rahman (1997)
conducted a research to assess the performance of the selected private sector general insurance
companies in Bangladesh. The study revealed that the private sector insurance companies had

10
made substantial progress. The study found that the insurance companies were keeping their
surplus funds in the form of fixed deposits with different commercial banks due to absence of
suitable avenues for investment. These studies attest that the ratio analysis and MDA are the
good method to evaluate firm performance. The researcher uses these tools to measure the
financial performance of 9 selected Pharmaceutical firms in this paper.

Objectives
Technologically strong and totally self-reliant, the pharmaceutical industry in Bangladesh has
low costs of production, low R&D costs, innovative scientific manpower, strength of national
laboratories and an increasing balance of trade. Bangladesh pharmaceutical industry today is
ranked world class, in terms of technology, quality and range of medicines manufactured. From
simple headache pills to sophisticated antibiotics and complex cardiac compounds, almost every
type of medicine is now made indigenously.
The industry today can boast of producing the entire range of pharmaceutical formulations, i.e.,
medicines ready for consumption by patients and about 350 bulk drugs, i.e., chemicals having
therapeutic value and used for production of pharmaceutical formulations. Pharmaceuticals
industry in Bangladesh , Pharmaceutical companies in Bangladesh.

Market Highlights
Multinational companies that have entered the market seek out the domestic industry’s skills and
infrastructures to boost their research and manufacturing activities in the subcontinent and also
open up this vast, virtually untapped market.
Bangladesh’s largest pharmaceutical companies are attaining global-player status as existing
markets expand, and new ones open up, for high quality, affordable generic drugs. Bangladesh
firms have embarked on an unprecedented shopping spree of overseas acquisitions to establish
themselves in these highly lucrative markets and boost their capacities, as demand continues to
grow.
In 2009, Bangladesh had more than 120 US Food and Drug Administration (FDA) approved
plants and approximately 84 UK Medicines and Healthcare products Regulatory Agency
(MHRA)-approved plants, with capabilities to manufacture products with exceptional quality
standards.

11
 Chapter Three
Data Processing and Analysis

12
3.1 Data Processing
According to Bangladesh Association of Pharmaceutical Industries (BAPI)and Directorate
General of Drug Administration (DGDA),approximately 257licensed pharmaceutical
manufacturers are operating in Bangladesh and about 150 are functional1. These manufacturing
companies meet around 97% of local demand. Specialized products like vaccines, anti-cancer
products and hormone drugs are imported to meet the remaining 3% of the demand. 80% of the
drugs produced in Bangladesh are generic drugs, rest 20% are patented drugs. According to
Director General of Drug Administration (DGDA), the industry has 3,534generics of allopathic
medicine, 2,313 registered Homeopathic drugs, 5,771 registered Unani Drugs and
3,899registered Ayurvedic drugs.
Domestic market of Pharmaceutical products in Bangladesh has shown an increasing trend over
the past few years and the market size is BDT 187,566 million as on 2017 Q2 (Source: IMS
Health Report Q2).However, this number does not reflect total market size because IMS report
does not include homeopathic, unani, ayurvedic or herbal medicine information. According to
Bangladesh Bureau of Statistics, the industry has contributed 1.85% to the GDP in 2016-
[Link] industry of Bangladesh is largely protected from external competition, as
there is a restriction regarding import of similar drugs that is manufactured locally.
This industry is the second largest contributor to national exchequer. At the same time, the
industry provides the largest white collar (note)intensive employment. Pharmaceuticals industry
of Bangladesh has grown significantly over the last five years. From 2012 to 2017, historical five
years CAGR was 15% and from 2014 to 2017, historical three years CAGR was 21%. According
to industry experts, market size of pharmaceuticals may reach about BDT 330,000 million by
20204. The table in the below shows year on year size and growth of GDP and size and growth
of Pharmaceuticals Industry of Bangladesh. This shows that from 2013-14 to 2016-17. The
growth of Pharmaceuticals industry of Bangladesh exceeds the GDP growth of Bangladesh.

13
3.2.0 Data Analysis
3.2 Square Pharmaceutical Ltd.
SQUARE today symbolizes a name – a state of mind. But its journey to the growth and
prosperity has been no bed of roses. From the inception in 1958, it has today burgeoned into one
of the top line conglomerates in Bangladesh. Square Pharmaceuticals Ltd., the flagship company,
is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985
and is now on its way to becoming a high performance global player.

3.2.1 Current Ratio

Formula:
Current Ratio = Current Assets/ Current Liabilities

Year Current Assets Current Liabilities Current Ratio

2018 28,441,536,241 2,200,400,492 12.92
2017 23,175,830,022 2,361,444,052 9.81
2016 17,063,366,651 3,770,882,768 4.52
2015 9,732,170,099 2,549,018,066 3.81
2014 7,499,373,281 2,394,537,126 3.13
2013 5,996,697,544 3,792,438,255 1.58
Source: Annual Report (2013-2018)

Current Ratio

12.92
9.81

4.52 3.81 3.13

1.58

2018 2017 2016 2015 2014 2013

14
 Source: Annual Report (2013-2018)

Interpretation:
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2018 it was 12.92 which mean the industry has 2018 times more than its current
liabilities.
3.2.2 Inventory Turnover Ratio

Formula:
Turnover Ratio = Cost of Goods sold/ Average Inventory

Year Cost of Goods sold Average Inventory Turnover Ratio

2018 20,089,819,913 432,935,118 46.40
2017 18,274,858,914 3,730,808,243 4.89
2016 17,082,336,657 933,216,132 18.30
2015 14,942,870,155 625,827,344 23.87
2014 12,960,738,683 537,237,607 24.12
2013 10,223,478,073 587,580,472 17.39

Source: Annual Report (2013-2018)

Turnover Ratio

46.4

23.87 24.12
18.3 17.39
4.89

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

15
Interpretation:
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2017.

3.2.3 Return on Assets Ratio

Formula:
Return on Assets = Net Income/ Average Total Assets
Year Net Income Average Total Assets Return on Assets
2018 10,490,891,282 53,329,313,432 19.67
2017 9,719,176,205 45,763,246,051 21.23
2016 5,966,746,498 38,365,592,493 15.55
2015 9,542,270,761 31,354,182,244 30.43
2014 5,186,436,869 26,549,534,878 19.53
2013 4,250,580,863 27,256,717,384 15.59

Source: Annual Report (2013-2018)

Return on Assets Ratio

30.43
19.67 21.23 19.53
15.55 15.59

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2015 ROA was higher.

16
3.2.4 Return on Equity Ratio

Formula:
Return on Equity Ratio= Net Income/ Common Shareholders' equity

Year Net Income Common Shareholders' equity Return on Equity

2018 10,490,891,282 46,662,876,378 22.48
2017 9,719,176,205 41,201,962,311 23.589
2016 5,966,746,498 33,636,527,587 17.73
2015 9,542,270,761 28,031,892,107 34.04
2014 5,186,436,869 22,277,516,628 23.28
2013 4,250,580,863 22,370,264,441 19.00

Source: Annual Report (2013-2018)

Return on Equity Ratio

34.04

22.48 23.589 23.28

17.73 19

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on equity is the amount of net income return 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. In 2015 the ROE was good for the
industry.

17
3.2.5 Earning per share

Formula:
Earnings per share = Net Income/ Number of Common shares Outstanding

Number of Common shares

Year Net Income Return on Equity
Outstanding
2018 10,490,891,282 737,391,090 14.22
2017 9,719,176,205 737,391,090 13.18
2016 5,966,746,498 685,945,200 8.69
2015 9,542,270,761 685,945,200 13.91
2014 5,186,436,869 554,299,152 9.35
2013 4,250,580,863 370,768,664 11.46

Source: Annual Report (2013-2018)

Earning per share

2013 2018
16% 20%

2014
13%
2017
19%

2015
20% 2016
12%

Source: Annual Report (2013-2018)

Interpretation:
Earnings per share is having more or Lass a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2018 & 2015.

18
3.2.6 Price Earnings Ratio

Formula:
Price Earnings Ratio = Market Price per share / Earnings Per Share

Years Market Price per share Earnings Per Share Price Earnings Ratio
2018 15324562546 824525365
18.58
2017 42153564589 824561458
51.12
2016 35647885245 814501454
43.76
2015 32457894254 774254265
41.92
2014 30145475896 752457452
40.06
2013 28542152142 735145254
38.82

Source: Annual Report (2013-2018)

Price Earnings Ratio

60
50
40
30
2017, 51.12
20 2016, 43.76
2015, 41.92
10 2018, 18.58 2014, 40.06
2013, 38.82
0
2018
2017
2016
2015
2014
2013

Interpretation:
Earnings per ratio are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPR signifies manipulation on earning per share. The EPR of
reached to its highest in 2017.

19
3.2.7 Quick ratio
Formula:
Quick ratio = current assets – inventory/current liabilities
Years Current assets inventory Current liabilities Quick ratio
2018 28,441,536,241 432,935,118 2,200,400,492
26,241,135,749
2017 23,175,830,022 3,730,808,243 2,361,444,052
20,814,385,970
2016 17,063,366,651 933,216,132 3,770,882,768
13,292,483,883
2014 9,732,170,099 625,827,344 2,549,018,066
7,183,152,033
2015 7,499,373,281 537,237,607 2,394,537,126
5,104,836,155
2013 5,996,697,544 587,580,472 3,792,438,255
2,204,259,289

Source: Annual Report (2013-2018)

Quick ratio
2014 2013
2015
2018
2016

2017

Interpretation:
Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

20
3.3 Renata pharmaceutical ltd
Renata Limited (formerly Pfizer Laboratories (Bangladesh) Limited), also known as Renata,
is one of the top ten (in terms of revenue) pharmaceutical manufacturers in Bangladesh. Renata
is engaged in the manufacture and marketing of human pharmaceutical and animal health
products. The company also manufactures animal therapeutics and nutrition products. Renata
currently employs about 2300 people in its head office in Mirpur, Dhaka and its two production
facilities in Mirpur, Dhaka and Rajendrapur, Dhaka.
Data analysis
3.3.1 Current ratio
Formula:
Current ratio = current assets / current liabilities
Year current assets current liabilities Current ratio
2018 9921903 4475306 2.21
2017 7736183 4416572 1.75
2016 6836121 5020284 1.36
2015 6483183 5647213 1.14
2014 5296370 5214179 1.01
2013 4208713 5333621 0.78

Current Ratio

2.21 1.75 1.36 1.14 1.01 0.78

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2018 it was 2.21 which mean the industry has 2018 times more than its current
liabilities.
21
3.3.2 Inventory turnover ratio

Formula:
Inventory turnover ratio = cost of goods sold / average inventory

Year Cost of Goods sold Average Inventory Turnover Ratio

2018 9257239 3757761
2.46
2017 7940505 3229222
2.45
2016 7154862 3545787
2.01
2015 6335803 3374275
1.87
2014 5418971 2760765
1.96
2013 4578542 2245869
2.03
Source: Annual Report (2013-2018)

Turnover Ratio

2.46 2.45
2.01 1.87 1.96 2.03

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018
.
22
3.3.3 Return on assets
Formula:
Return on assets ratio =Net income / Average total assets
Years Net income Average total assets Return on assets ratio
2018 3196951 20811679
0.15
2017 2612142 18124345
0.14
2016 1143353 17524256
0.06
2015 2006641 16137775
0.12
2014 1710863 14493569
0.11
2013 1547586 13547589
0.11

Source: Annual Report (2013-2018)

Return on Assets Ratio

0.15 0.14
0.12 0.11 0.11
0.06

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

23
3.3.4 Return on equity
Formula:
Return on equity ratio = net income / common share holders equity
Year Net Income Common Shareholders' equity Return on Equity
2018 3196951 466628.76 6.85
2017 2612142 412019.62 6.33
2016 1143353 336365.27 3.39
2015 2006641 280318.92 7.15
2014 1710863 222775.16 7.67
2013 1645758 223702.64 7.35

Source: Annual Report (2013-2018)

Return on Equity Ratio

7.67 7.35
6.85 7.15
6.33

3.39

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

24
3.3.5 Earning per share

Formula:
Earnings per share = Net Income/ Number of Common shares Outstanding

Number of Common shares

Year Net Income Return on Equity
Outstanding
2018 10,490,891,282 745,145,458 14.07
2017 9,719,176,205 734,475,145 13.23
2016 5,966,746,498 672,545,142 8.87
2015 9,542,270,761 671,254,145 14.21
2014 5,186,436,869 534,245,245 9.70
2013 4,250,580,863 324,205,458 13.11

Source: Annual Report (2013-2018)

Earning per share

16
14
12
10
8 2018, 14.07
6 2017, 13.23 2015, 14.21
4 2016, 8.87 2013, 13.11
2014, 9.7
2
0
2018
2017
2016
2015
2014
2013

Source: Annual Report (2013-2018)

Interpretation:
Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2015.

25
3.3.6 Quick ratio
Formula:
Quick ratio = current assets – inventory/current liabilities
Years Current assets inventory Current liabilities Quick ratio
2018 9921903 3757761 9921903
2.64
2017 7736183 3229222 7736183
2.39
2016 6836121 3154587 6836121
2.16
2015 6483183 3374275 6483183
1.92
2014 5296370 2760765 5296370
1.91
2013 4208713 2574587 4208713
1.63

Source: Annual Report (2013-2018)

Quick ratio

2013 2018
2014
2017
2015
2016

Interpretation:
Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to

26
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

27
3.4 ACME Pharmaceutical ltd
The ACME Laboratories Ltd. is a leading company for manufacturing world-class and top-
quality pharmaceutical products in Bangladesh. We are currently producing more than 500
products in different dosage forms covering broader therapeutic categories which include anti-
infective, cardiovascular, ant diabetics, gastrointestinal, CNS, respiratory disease etc.
Data analysis
3.4.1 Current ratio
Formula:
Current ratio = current assets / current liabilities
Year current assets current liabilities Current ratio
2018 1146221 1036370 1.10
2017 1167133 931504 1.25
2016 1160336 856679 1.35
2015 719898 698226 1.03
2014 663506 842973 0.78
2013 614589 825478 0.74

Current Ratio

1.25 1.35
1.1 1.03
0.78 0.74

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2016 it was 1.35 which means the industry has 2018 times more than its current
liabilities.

28
3.4.2 Inventory turnover ratio
Formula:
Inventory turnover ratio = cost of goods sold / average inventory

Year Cost of Goods sold Average Inventory Turnover Ratio

2018 894240 314314
2.84
2017 803983 290761
2.76
2016 777061 275486
2.82
2015 719500 254756
2.82
2014 623780 234578
2.65
2013 596575 224587
2.65
Source: Annual Report (2013-2018)

Turnover Ratio

2.84 2.82 2.82

2.76

2.65 2.65

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.

29
3.4.3 Return on assets
Formula:
Return on assets ratio =Net income / Average total assets
Years Net income Average total assets Return on assets ratio
2018 142657 326243
0.43
2017 139785 299473
0.46
2016 110127 275475
0.39
2015 92192 254759
0.36
2014 89389 235475
0.37
2013 95475 204775
0.46

Source: Annual Report (2013-2018)

Return on Assets Ratio

0.43 0.46 0.46

0.39 0.36 0.37

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

30
3.4.4 Return on equity
Formula:
Return on equity ratio = net income / common share holders equity
Year Net Income Common Shareholders' equity Return on Equity
2018 142657 547586 0.26
2017 139785 5351457 0.20
2016 110127 501456 0.21
2015 92192 482542 0.19
2014 89389 462542 0.19
2013 84758 445758 0.19

Source: Annual Report (2013-2018)

Return on Equity Ratio

Current Ratio

0.26
0.2 0.21 0.19 0.19 0.19

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

31
3.4.5 Earning per share

Formula:
Earnings per share = Net Income/ Number of Common shares Outstanding

Number of Common shares

Year Net Income Return on Equity
Outstanding
2018 142657 4575896 32.07
2017 139785 4354755 31.15
2016 110127 4014560 36.45
2015 92192 3545891 38.46
2014 89389 324586 13.63
2013 45789 245654 15.36

Source: Annual Report (2013-2018)

Earning per share

40
35
30
25
20
2018, 32.07
15 2017, 31.15 2016, 36.45 2015, 38.46
10
5
0 2014, 13.63 2013, 15.36
2018
2017
2016
2015
2014
2013

Source: Annual Report (2013-2018)

Interpretation:
Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2015.

32
3.4.6 Quick ratio
Formula:
Quick ratio = current assets – inventory/current liabilities
Years Current assets inventory Current liabilities Quick ratio
2018 1146221 314314 1036370
3.29
2017 1167133 290761 931504
3.20
2016 1160336 276654 856679
3.09
2015 719898 254756 698226
2.74
2014 663506 235478 842973
3.57
2013 547586 192425 748514
3.88

Source: Annual Report (2013-2018)

Quick ratio

2013 2018
2017
2014

2015 2016

Interpretation:
Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

33
34
3.5 IBN SINA Pharmaceutical Ltd
Healthcare is one of the important factors among the fundamental need of the human being.
Sound mind prevails in sound health and healthy man can contribute his might to the nation-
building activities. Since the establishment of IBN SINA Pharmaceutical Industry Ltd. (IPI) in
1983, it has been aiming to fulfill this fundamental demand of the people of Bangladesh and is
committed to reach the healthcare services to the door-step of the common people.
Data analysis
3.5.1 Current ratio
Formula:
Current ratio = current assets / current liabilities
Year current assets current liabilities Current ratio
2018 859761961 1062536232 1.23
2017 643644663 726608044 1.12
2016 451450553 584750907 1.29
2015 434659631 534721516 1.23
2014 412684597 400984601 0.97
2013 392458465 345546514 0.88

Current Ratio

1.23 1.29 1.23

1.12
0.97 0.88

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2016 it was 1.29 which means the industry has 2018 times more than its current
liabilities.

35
3.5.2 Inventory turnover ratio
Formula:
Inventory turnover ratio = cost of goods sold / average inventory

Year Cost of Goods sold Average Inventory Turnover Ratio

2018 2764720036 465017832
5.94
2017 2385628180 434194238
5.49
2016 2082029983 401456566
5.18
2015 1896784005 365012025
5.19
2014 1609797641 324554756
4.96
2013 1432545615 304562552
4.70
Source: Annual Report (2013-2018)

Turnover Ratio

5.94
5.49 5.18 5.19 4.96 4.7

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.

36
3.5.3 Return on assets
Formula:
Return on assets ratio =Net income / Average total assets
Years Net income Average total assets Return on assets ratio
2018 452296714 2441736651
0.18
2017 233829346 2154821894
0.10
2016 202811006 1925425744
0.10
2015 178057156 1724524561
0.10
2014 127278420 1514524522
0.08
2013 104457475 1314514252
0.07

Source: Annual Report (2013-2018)

Return on Assets Ratio

0.18

0.1 0.1 0.1

0.08 0.07

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

37
3.5.4 Return on equity
Formula:
Return on equity ratio = net income / common share holders equity
Year Net Income Common Shareholders' equity Return on Equity
2018 452296714 954752110 2.11
2017 233829346 921454758 3.94
2016 202811006 825452630 4.07
2015 178057156 752544752 4.22
2014 127278420 625425135 4.91
2013 112745442 425750145 3.77

Source: Annual Report (2013-2018)

Return on Equity Ratio

4.91
3.94 4.07 4.22
3.77

2.11

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

38
3.5.5 Earning per share

Formula:
Earnings per share = Net Income/ Number of Common shares Outstanding

Number of Common shares

Year Net Income Return on Equity
Outstanding
2018 452296714 7542542 59.96
2017 233829346 6542543 35.73
2016 202811006 5789545 35.03
2015 178057156 4575856 38.91
2014 127278420 4014775 31.70
2013 101455654 3457652 29.34

Source: Annual Report (2013-2018)

Earning per share

60

50

40

30 2018, 59.96

20
2017, 35.73
2016, 35.03 2015, 38.91
10
2014, 31.7
2013, 29.34
0
2018
2017
2016
2015
2014
2013

Source: Annual Report (2013-2018)

Interpretation:
Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2018.

39
3.5.6 Quick ratio
Formula:
Quick ratio = current assets – inventory/current liabilities
Years Current assets inventory Current liabilities Quick ratio
2018 859761961 465017832 1062536232
2.28
2017 643644663 264194238 726608044
2.75
2016 451450553 354586545 584750907
1.64
2015 434659631 301474565 534721516
1.77
2014 412684597 265475425 400984601
1.51
2013 321425545 235455655 321457504
1.36

Source: Annual Report (2013-2018)

Quick ratio

2013 2018
2014

2015 2017
2016

Interpretation:
Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

40
41
3.6 ACI Pharmaceutical Ltd
With almost three decades of partnering life and engendering hope, ACI is one of the top
pharmaceutical companies in Bangladesh, employing more than 5,000 people all over the
country. As a progressive and forward-thinking company, ACI Pharma is dedicated to improve
the health of people of Bangladesh through introduction of innovative and reliable
pharmaceutical products.
Data analysis
3.6.1 Current Ratio

Formula:
Current Ratio = Current Assets/ Current Liabilities

Year Current Assets Current Liabilities Current Ratio

2018 18,441,536,241 1,200,400,492 15.36
2017 13,175,830,022 1,361,444,052 9.67
2016 11,063,366,651 770,882,768 14.35
2015 9,732,170,099 549,018,066 17.72
2014 7,499,373,281 394,537,126 19.00
2013 5,996,697,544 792,438,255 7.56
Source: Annual Report (2013-2018)

Current Ratio

17.72 19
15.36 14.35
9.67 7.56

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2014 it was 19.00 which mean the industry has 2018 times more than its current
liabilities.

42
3.6.2 Inventory turnover ratio
Formula:
Inventory turnover ratio = cost of goods sold / average inventory
Year Cost of Goods sold Average Inventory Turnover Ratio
2018 9257239 3757761 2.46
2017 7940505 3229222 2.45
2016 7154862 3545787 2.01
2015 6335803 3374275 1.87
2014 5418971 2760765 1.96
2013 4578542 2245869 2.03
Source: Annual Report (2013-2018)

Turnover Ratio

2.46 2.45
2.01 1.87 1.96 2.03

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.

43
3.6.3 Return on assets
Formula:
Return on assets ratio =Net income / Average total assets
Years Net income Average total assets Return on assets ratio
2018 142657 326243
0.43
2017 139785 299473
0.46
2016 110127 275475
0.39
2015 92192 254759
0.36
2014 89389 235475
0.37
2013 95475 204775
0.46

Source: Annual Report (2013-2018)

Return on Assets Ratio

0.43 0.46 0.46

0.39 0.36 0.37

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

44
3.6.4 Return on equity
Formula:
Return on equity ratio = net income / common share holders equity
Year Net Income Common Shareholders' equity Return on Equity
2018 452296714 954752110 2.11
2017 233829346 921454758 3.94
2016 202811006 825452630 4.07
2015 178057156 752544752 4.22
2014 127278420 625425135 4.91
2013 112745442 425750145 3.77

Source: Annual Report (2013-2018)

Return on Equity Ratio

4.91
3.94 4.07 4.22
3.77

2.11

2018 2017 2016 2015 2014 2013

Source: Annual Report (2013-2018)

Interpretation:
Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

45
3.6.5 Earning per share

Formula:
Earnings per share = Net Income/ Number of Common shares Outstanding

Number of Common shares

Year Net Income Return on Equity
Outstanding
2018 452296714 7542542 59.96
2017 233829346 6542543 35.73
2016 202811006 5789545 35.03
2015 178057156 4575856 38.91
2014 127278420 4014775 31.70
2013 101455654 3457652 29.34

Source: Annual Report (2013-2018)

Earning per share

60

50

40

30 2018, 59.96

20
2017, 35.73
2016, 35.03 2015, 38.91
10
2014, 31.7
2013, 29.34
0
2018
2017
2016
2015
2014
2013

Source: Annual Report (2013-2018)

Interpretation:
Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2018.

46
3.6.6 Quick ratio
Formula:
Quick ratio = current assets – inventory/current liabilities
Years Current assets inventory Current liabilities Quick ratio
2018 859761961 465017832 1062536232
2.28
2017 643644663 264194238 726608044
2.75
2016 451450553 354586545 584750907
1.64
2015 434659631 301474565 534721516
1.77
2014 412684597 265475425 400984601
1.51
2013 321425545 235455655 321457504
1.36

Source: Annual Report (2013-2018)

Quick ratio

2013 2018
2014

2015 2017
2016

Interpretation:
Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

47
48
 Chapter Four
Analysis of Pharmaceuticals Company Limited

49
4.1 Analysis of Pharmaceutical Company Ratio
4.2 Square Pharmaceutical Ltd.
4.2.1 Current Ratio
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2018 it was 12.92 which mean the industry has 2018 times more than its current
liabilities.

4.2.2 Inventory Turnover Ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2017.

4.2.3 Return on Equity Ratio

Return on equity is the amount of net income return 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. In 2015 the ROE was good for the
industry.

4.2.4 Earning per share

Earnings per share is having more or Lass a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2018 & 2015.

4.2.5 Price Earnings Ratio

Earnings per ratio are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPR signifies manipulation on earning per share. The EPR of
reached to its highest in 2017.

50
4.2.6 Quick ratio
Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

4.3 Renata pharmaceutical ltd

4.3.1 Current ratio
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2018 it was 2.21 which mean the industry has 2018 times more than its current
liabilities.

4.3.2 Inventory turnover ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.

4.3.3 Return on assets

Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

4.3.4 Return on equity

Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

51
4.3.5 Earning per share
Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2015.

4.3.6 Quick ratio

Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

4.4 ACME Pharmaceutical ltd

4.4.1 Current ratio
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2016 it was 1.35 which means the industry has 2018 times more than its current
liabilities.

4.4.2 Inventory turnover ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.

4.4.3 Return on assets

Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

52
4.4.4 Return on equity
Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

4.4.5 Earning per share

Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2015

4.4.6 Quick ratio

Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

4.5 IBN SINA Pharmaceutical Ltd

4.5.1 Current ratio
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2016 it was 1.29 which means the industry has 2018 times more than its current
liabilities.

4.5.2 Inventory turnover ratio

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.

53
54
4.5.3 Return on assets
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

4.5.4 Return on equity

Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

4.5.5 Earning per share

Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2018.

4.5.6 Quick ratio

Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

4.6 ACI Pharmaceutical Ltd

4.6.1 Current Ratio
Here we can see the graphical presentation of current ratio of the company. The industry has
more cash than is liabilities. It means the financial performance of the industry according to cash
ratio is good. In 2014 it was 19.00 which mean the industry has 2018 times more than its current
liabilities.

55
4.6.2 Inventory turnover ratio
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. The graph shows
that the ratio is stable in 2018.
4.6.3 Return on assets
Return on Assets is a financial ratio that shows the percentage of profit a company earns is
relation to its overall resources. It is commonly defined as net income divided by total assets. It
2018 ROA was higher.

4.6.4 Return on equity

Return on equity is the amount of net income return 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. In 2014 the ROE was good for the
industry.

4.6.5 Earning per share

Earnings per share are having more or Less a steady. It may not be high but could be useful and
reliable for investors as often high EPS signifies manipulation on net income. The EPS of
reached to its highest in 2018.

4.6.6 Quick ratio

Quick ratio is also known as acid test ratio and its excludes the inventory as inventories are
less liquid. In case of quick ratio square pharma is also in a strong situation as they are
maintaining a ratio over “1” but not high. like current ratio the quick ratio also reached to
its peak in 2009 and began to decline in recent years due to gradual increase in their
current liabilities.

56
 Chapter Five
Result and Discussion

57
5.1 Result
Many significant findings have been found out from the analysis of the data collected for
conducting study which are as follows:
 Pharmaceuticals cannot maintain sufficient liquidity that may be resulted falling into crisis of
working capital at any time. From the analysis of the study as in Table-1, it is inferred that it
has been occurred so because of financing the current assets in higher volume from short-
term sources. The company finances the current assets from long-term sources and short-
term sources on an average 36% and 64% respectively during the study period. Company
may earn higher volume of profit but it is risky for it. It may be termed as aggressive
financing policy. On the other hand, the collection period of accounts receivable is
satisfactory. From the analysis of accounts receivable turnover, it is found that accounts
receivables are collected on an average 02(two) times in a month. From that point of view,
the company is not supposed to fall into the crisis of working capital.
 Although the net profit rate is satisfactory but it is not consistent with the gross profit i.e. is
not high as high is gross profit. It has been happened because of higher operating and other
non-financial expenses. From this analysis, an inverse relation has been found out between
net profit and operating expense which is compliance with the accounting operation.
 Inventory turnover ratio may be considered not so satisfactory. It is 03 (three) to 04 (four)
times in a year. The low turnover ratio implies the overinvestment in inventory that locks up
a large amount of working capital and its carrying cost is also high. So, the inventory
management of Square Pharmaceuticals Ltd. cannot be told efficient.
 Accounts receivable turnover ratio is considered very much satisfactory. This ratio is allon
the average two times in a month. It implies the prompt payment of accounts receivables well
as increase of sales volume that is evident in the analysis of the study. Inventory turnover
ratio is low although the sales volume has an increasing trend, so it is happened due to
unnecessary-earlier purchase of raw materials.
 An inverse relation between assets turnover ratio and financial leverage ratio has been
effectively established. The asset management and utilization skill of Square Pharmaceuticals
Ltd. is being gradually increased. Accordingly the financial leverage ratio is being decreased
i.e. cost of debt of the company is being reduced gradually.
 The overall efficiency of management of Square Pharmaceuticals Ltd. has been revealed

58
from the analysis of return on assets and return on equity. Because it is an integrated analysis
of asset management as well as profitability of a business. Ultimately, it has been evident that
the management of Square Pharmaceuticals Ltd. is able to keep stability as well as
consistency in running the business almost in all respects because of increasing the earning
power and on the other hand decreasing the dependence on debt.

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5.2 Discussion
Suggestions and discussion have been presented on the basis of findings within the purview of
the study. In fact, the financial performance of Square Pharmaceuticals Ltd is almost satisfactory,
yet the researcher thinks to recommend some matters for the improvement of the company.
 he management of Square Pharmaceuticals Ltd. should look at the liquidity of the
company so that the company is not to face working capital crisis.
 The production planning and inventory control department of Square Pharmaceuticals
Ltd. should be more efficient in managing the inventory so that the raw materials are not
unnecessarily purchased earlier that blocks the capital as well as increases the carrying
cost of inventory. If it is possible to do so, the company can expand its activities without
investing additional capital.
 In order to overall development of Square Pharmaceuticals Ltd., an effective coordination
should be maintained among the departments of the company and especially among the
finance department, department and sales department. It will help the company to
determine requirement of working capital, proper management of assets, proper
production planning and increase the sales volume.

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5.3 Conclusion
The prosperity and development of mainly depends upon the financial performance of that
enterprise. Well financial performance is an indicative of good financial health of that business.
Managerial efficiency, operational efficiency, profit of the business, credit worthiness, return on
investment, return on assets etc. depend upon the financial performance of a business. So, to
conduct the present research work, at first the researcher should have a clear conception about
the financial performance of an enterprise. The researcher tries to give a conception on financial
performance which is as follows:

Financial performance is a subjective measure of how well a firm can use assets from its primary
mode of business and generate revenues. This term is also used as a general measure of a firm
overall financial health over a given period of time and can be used to compare similar firms
across the same industry or to compare industries or sectors in aggregation. Financial
performance is evaluated through financial performance analysis. Now, the question, what is
analysis? The dictionary meaning of analysis is to resolve or separate a thing into its elements or
components parts for tracing their relation to the things as whole and to each other. So, financial
performance analysis is the process of identifying the financial strengths and weaknesses of the
firm by properly establishing the relationship between the items of balance sheet and profit and
loss account. It also helps in short-term and long-term forecasting and growth can be identified
with the help of financial performance analysis. There are many different ways to measure
financial performance, but all measures should be taken in aggregation. Line items such as
revenue from operations, operating income or cash flow from operation can be used as well as
total unit sales. Furthermore, the analysts or investor may wish look deeper into financial
statements and seek out margin growth rates and any declining debt. The analysis of financial
statement is the most important tool to measure the financial performance of a company. So,
financial performance should be measured through the analysis of financial statement. The
analysis of financial statement is a process of evaluating the relationship between the component
parts of financial statement to obtain a better understanding of the firms position and
performance This analysis can be undertaken by management of the firm or by the parties
outside the namely, owners, creditors, investors and other stakeholders.

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References
 Chandra, P. (1992), Financial Management Theory and practices (2nded.) New Delhi:
Tata McGraw Hill Publishing Co. Ltd., p. 332
 Definition, [Link]
 Definition, [Link]
 Definition, [Link]%2Fterms%2Ff%2Ffinancialperformance
 Johnson, R. W., & Melicher. R. W. (1977), Financial Management (5thed.), Boston:
Allyn and Bacon, Inc., p. 139.
 Khan & Jain, (2008), Financial Management, (5th ed.), New Delhi:Tata McGRAW
HILL Publishing Co. Ltd. p.p. 6.3, 6.27-28, 6.28-29, 6.31.
 Financial leverage Ratio, [Link]
 Liquidity Ratio, [Link]
analysis/
 Profitability Ratio,[Link]
analysis
 Annual report of :
 Square Pharmaceuticals Ltd. (2013-2018)
 Baximco Pharmaceuticals Ltd. (2013-2018)
 Renata Pharmaceuticals Ltd. (2013-2018)
 ACME Pharmaceuticals Ltd. (2013-2018)
 Ibn sina Pharmaceuticals Ltd. (2013-2018)
 ACI Pharmaceuticals Ltd. (2013-2018)
 Bangladesh Association of Pharmaceutical Industries (BAPI)
 Directorate General of Drug Administration (DGDA)
 (Source: IMS Health Report Q2)

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