I am so glad to submit the project report to you on "Financial Performance Analysis of Pharmaceutical Industry (Led Companies of DSE)". Tania Akter, ID major in Finance, Department of Business Economics, Påskelilje International University has completed the project report under my supervision. She has done this report on "Financial Performance Analysis of Pharmaceutical Industry (Led Companies of DSE)" as part of the requirement to obtain the degree of Master of Business Administration.
First of all, I give special thanks to Almighty Allah who gave me the opportunity to successfully complete and develop the report on time. Mohammad Shibli Shahriar, Associate Professor, Faculty of Business and Entrepreneurship and Daffodil International University for his continuous support, advice and guidance throughout the process of completing the report. I would like to express my sincere thanks to all the faculty members of my Department of Business Administration for their contribution and support in the preparation of this report and the successful completion of the MBA program.
Financial Statements and Performance Analysis of Beximco Pharmaceuticals Ltd.”, “Square Pharmaceuticals Ltd.” I have made an attempt to analyze the various ratios to understand how they have affected the company's performance over the past five years. The first part of the report I discuss the objectives, methodology and limitations of the report.
Introduction
- Objectives of the Study
- Methodology of the Study
- Limitations of the Study
- Overview of Pharmaceutical Industry of Bangladesh
- Competitive structure of the pharmaceuticals industry
- Selection of Pharmaceutical Companies
- Beximco Pharmaceuticals Ltd. (Beximco Pharma)
- Historical Background
- Mission of Beximco Pharmaceuticals Ltd
- SWOT Analysis of Beximco Pharmaceuticals Ltd
- Square Pharmaceuticals Ltd. (SPL)
- Historical Background
- Mission of Square Pharmaceuticals Ltd
- SWOT Analysis of Square Pharmaceuticals Ltd
- Theory of Ratio
- Uses of Financial Ratios
- Bankers and Lenders: Bankers and lenders use financial ratios especially profitability, liquidity and investment to find out whether the company is capable or not to pay interest
- Investors: Investors use profitability ratio to figure out how much the company earns profits as they wants more profit from their investments
- Government: Government uses profitability ratio because government may use profit as a basis of taxation, grants and subsidies
- Suppliers: Suppliers use liquidity ratio to figure out the capability of the company of paying the dues. If the liquidity ratio is not enough good then the suppliers will not supply
- Management: Management uses all the ratios to find out the financial performance and financial condition of the company
- Types of Financial Ratios
- Liquidity Ratio
- Efficiency Ratio
- Asset Activity Ratio
- Leverage Ratio
- Profitability Ratio
- Liquidity Ratio
- Asset Activity Ratio
- Leverage Ratio
- Profitability Ratio
- Common Size Analysis
- Ratio Analysis
It is possible that the information shown in annual reports or on websites is just window dressing and does not accurately reflect the status of the company. The company's website was not updated enough to easily collect necessary information. Since 1985, Square Pharmaceutical Limited, the company's flagship, has held a leading position in the pharmaceutical market of Bangladesh and is currently on its way to becoming a high-performing player on the international stage.
Investors: Investors use profitability ratio to find out how much the company earns profit as they want more profit from their investments. Employees: As employees are more concerned about their job security, bonus, they use profitability, activity and liquidity ratio to find out the company's performance. If the company's performance is not good, the employees may not get salary on time or may not get bonus.
Suppliers: Suppliers use the liquidity ratio to find out whether the company has the ability to pay its dues. Management: Management uses all ratios to find out the financial performance and financial condition of the company. We can determine whether the company's current assets will be sufficient to meet its debts as they become due by using the liquidity ratio.
Current Ratio: The current ratio is used to find out the ability of the company to pay its current obligation by utilizing its current assets. If the company has a very high current ratio compared to other peer groups, it indicates that the company may not be using its assets efficiently. On the other hand, if the ratio is low, it means that the company does not have enough assets to pay its short-term liabilities.
If the ratio is high, it means that the company is liquid and has the ability to meet the short-term obligations. If the ratio is low, the company's liquidity is not sufficient to meet obligations. It is very useful for existing and new shareholders who are interesting to invest in the company.
The company's capacity to earn income after deducting all costs is shown by the profitability ratio. By analyzing the company's income and expenses, many investors and analysts use this ratio to determine business performance.
Asset Activity Ratio
Interpretation: Total asset turnover of Beximco Pharma and Square Pharma in 2021 are 0.565 and 0.611 respectively. From the comparison, we can see that Square Pharma is in good position as they can generate more sales by properly utilizing the total assets. On the other hand, Beximco Pharma is not using its total assets to generate more sales.
They have to work hard to increase the total assets turnover by using the total assets effectively to increase the sales.
Equity Turnover
Profitability Ratio
Gross Profit margin
Net Profit Margin
From the comparison, we can see that Square Pharma has a good ROA in 2021, which means that the company is using its total assets properly to generate more profit. On the other hand, Beximco Pharma cannot generate more profit through total assets. If this continues to happen, it will cause them problems as it is one of the most important indicators to analyze the performance of the company.
Return On Asset
Leverage Ratio
Return On Equity
The higher ratio indicates that the company keeps itself in a risky position as its interest rate may rise suddenly. On the other hand, Square Pharma is less risky than Beximco Pharma as it has a low ratio.
Debt Ratio
Common Size Analysis
- Beximco Pharmaceuticals Ltd
Debt To Equity Ratio
- Square Pharmaceuticals Ltd
- Findings
- Recommendations
- Beximco Pharma has high debt to equity ratio in 2021. That means the company uses more debt to finance its business activities but they should maintain the ratio as interest rate can
- Conclusion
But in 2021, Square Pharmaceuticals Ltd's current ratio is higher than other years, which means that the company has kept its current assets idle and it has enough assets to pay its current debts. Square Pharma is quickly finding itself in a bad position because they are not paying their current debts regularly. Square Pharma's equity turnover ratio is unsatisfactory because they cannot generate more sales by properly utilizing its total equity.
It is not good for the company as investors will invest after analyzing this ratio. The company is unable to reduce the cost of goods sold which is not good for the company. The company is not able to reduce its operational and non-operational costs which is not good for the company.
Beximco Pharma is in a riskier position because it has a higher debt ratio than Square Pharma. Beximco Pharma has a high debt-to-equity ratio in 2021 compared to Square Pharma, meaning the company uses more debt to finance its business operations. Square Pharma's current ratio is higher than other years, which means that the company has kept its current assets idle and that it has enough assets to pay its short-term debts.
Square Pharma's quick ratio is in a bad position because the company does not need to pay their current liabilities regularly but reserve more cash. The company does not require to keep a lot of quick assets and should invest their spare cash in several projects. The company needs to increase their efficiency by using total assets and should bring update equipment to increase production, need to reduce inventory.
If the company wants to increase GPM, they must reduce the cost of goods sold by reducing raw materials, direct labor, and factory overhead. If the company wants to increase NPM, they must reduce all costs (cost of goods sold and operating expenses), otherwise it will not be good for the company as investors sometimes use this ratio to analyze performance. If the company wants to increase ROE, the company must effectively leverage investors' investments.
If the company wants to reduce its debt ratio, it must use more equity to purchase its assets and reduce its use of debt. That means the company uses more debt to finance its business operations, but they must maintain the ratio because the interest can borrow to finance its business operations, but they must maintain the ratio because the interest rate can be increased at any time.
