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7,000,000,000 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000,000 0 2008 2009 2010 Industry Beximco Square
In the 3 years, both Beximco and Square Pharmas Net working Capital was below the industry average. Beximco Pharmas NWC increased in 2009 compared to 2008 , however it decreased in 2010 which is a worrying sign. However, Square Pharma is looking better even though the NWC was low in the first two years, it showed a significant increase in 2010. Cash Conversion Cycle
350 300 250 200 150 100 50 0 Industry Beximco Square
The cash
2008
2009
2010
conversion
cycle is the net number of days from the outlay of cash for raw material to receiving payment from the customer. Because this
number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims at a low net count. Having a CCC as low as a company can is the best condition but staying under the industry is a much better situation. In the above graph we can see that the industry has an average CCC of 212 days. Square Pharma looks in a good position since it has managed to stay below the industry in all of the three years. The story is however very different for Beximco as they only came below in 2009 and just barely. They should rethink their strategy about inventories, receivables and payables as in 2010 their CCC was abnormally higher thanc the industry. 2. Profit Margin
The profit margin is mostly used for internal comparison. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin.
0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 2008 2009 2010 Industry Beximco Square
Squares Profit
Margin although on the decline was higher than the industry in all of the three years. Beximcos profit margin was matched the industry in the last two years before rising a little in 2010. Return on Asset This ratio gives the idea of how much many each Tk worth of asset can generate. It's a useful number for comparing competing companies in the same industry.
0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 2008 2009 2010 Industry Beximco Square
Squares ROA was a lot higher than the industry indicating that it is making much better use of its assets compared to the other companies in the industry. The same cannot be said for Beximco, their ROA was well below the industry. The only comfort for them is that the ROA seemed to increase from 2009 to 2010. Return on Equity This ratio is one for the investors. It indicates the amount of money each TK worth of investment in the company generates.
0.20 0.15 Industry 0.10 0.05 0.00 2008 2009 2010 Beximco Square
The scenario is pretty similar to ROA. Square has Return on Equity much higher than the industry (almost double). And as before, Beximco Pharmas ROE is much lower than the industry. Fixed Asset Turnover Ratio The higher the FATO ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. A declining ratio may indicate that the business is over-invested in plant,
Square Pharmas FATOR is above the industry average indicating that is in a good position unlike Beximco.
Total Asset Turnover Ratio Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company.
1.00 0.80 0.60 0.40 0.20 0.00 2008 2009 2010 Industry Beximco Square
This graph also depicts Beximcos dismal performance and Square Pharmas superior position compared to the industry. 3. Weighted Average Cost of Capital
The WACC is the minimum return that a company must earn on an existing asset base to satisfy its creditors, owners, and other providers of capital, or they will invest elsewhere.
2008 Industry Beximco Square 0.07
0.05
2009 0.08
0.04
0.08
0.05
0.11
0.14
0.13
0.13
0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0.00 2008 2009 2010 Industry Beximco Square
According
to
the
traditional
approach,
an
optimal
financial
structure does exist, which will allow the company to maximize its value through the right amount of debts and financial
leverage. The company minimizes its WACC, in other words, the cost of financing. The cost of debt is lower than the cost of equity (Kd < Ke) as there is less risk. From that standpoint, any increase in debt will reduce the WACC. However, increasing debts creates a higher risk for shareholders. The market will therefore require a higher Ke. The more the company borrows, the higher the rate of interest as the risk increases. The optimal structure is therefore one in which the WACC is minimal. At this rate, the value of the company is maximized. 4. Debt to Equity Ratio
capitalization. The total capitalization indicates the balance between money versus the money or assets owned. Generally, creditors prefer a lower ratio financial risk while investors prefer a higher ratio to realize the return benefits of financial leverage.
Average
Debt Equity Ratio(x)
Industry 0.26
Beximco 0.15
Square 0.09
Since both Beximco Pharmas and Square Pharmas D/E Ratio is less than one, we can safely say that they are mostly financed by equity. A debt/equity ratio below 0.50 is ideal; however, many stable companies have a ratio of 1.0 or higher. But a debt/equity ratio above 2.0 most likely spells trouble.Since
both D/E ratios are a lot less than 0.5, then the companies might contemplate on taking debt in order to get the tax
The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio.
Average
Payout Ratio,POR(x)
Industry
0.19
Beximco 0.15
Square 0.21
Unfortunately, there really is no ideal payout ratio. It varies both by industry as well as individual company. The best way is to compare it to other companies in the same industry. Here
Square Pharma has a ratio higher than the industry and Beximcos ratio is lower. 6.
Average
Price per Earning Ratio,P/E(x)
Beximco
34.18
Square 25.30
P/E
Ratio
(meaning
the
Stock
Price/Earnings
ratio)
is
an
important metric in assessing the health of a stock. A very low P/E means that the investors do not trust neither the company nor its stock. 7.
2008 Industry Beximco Square 18,86,72,42,850 10,45,02,02,145 8,41,70,40,705
8.
2008 Industry
Beximco 1,44,66,00,500 1,92,49,33,065 1,92,49,33,065 1765488876.67 Square 60,25,84,615 44,97,57,608 1,03,26,33,110 694991777.67
9.
Industry
20,91,64,27,965
10.
11.
2008
12.
2008
Industry
2,95,67,30,80,442
3,05,21,13,64,936
4,14,77,04,85,994
338551643790.66
Beximco
24,99,82,17,243
32,01,26,06,765
36,15,47,86,977
31055203661.56
Square
34,79,64,98,941
57,82,30,13,910
48,72,48,34,178
47114782343.00
13.
2008 Industry Beximco Square
True Value
2009 2010 4,11,81,29,19,819 34,22,98,53,912 47,69,22,01,068 Average 3,36,09,11,63,136 29,28,97,14,785 46,41,97,90,565
14.
value at which an asset is carried on a balance sheet. It is also the initial outlay for an investment. This value is extremely misleading in some cases. This is because it states the amount that could have been put years ago and it does not take into account the time value or the current value of the firm. The market values are calculated using the current price of shares or debt. The fair value of the apartment will be same as the market value, if the market is efficient. The purchase value is same as the market value. The other values are completely different since they take other things into consideration. The true value of the firm is the market value minus the debt.