Introduction

The term project entitled Square Pharmaceutical Company focuses on the overall financial situation of the company. It gives a scenario of their financial condition. How they are doing in the industry, what is their capability and what they need to improve. Then different ratio analyses state the Liquidity, Asset Management, Debt Management, Profitability and Stock Market situation of the company. The DuPont ratio suggest the problems they need to overcome.

Strategic business unit of Square

Pharmaceuticals Consumer Brands Agro Business Crop Care & Public Health Animal Health

Square has the following subsidiaries:

Square Formulations Ltd. Square Trading Ltd. Square Salt Limited Square Foods Limited Square Pure Flour Limited

Competitors of Square:
The major competitors of Square in the pharmaceutical market are: ACI Pharmaceuticals Limited Incepta Pharmaceuticals Limited Beximco Pharmaceuticals Limited The Acme Laboratories Limited Opsonin Chemical Industries Limited Renata Limited Reckitt-Benkeizer

Ratio Analysis:
LIQUIDITY RATIO Current ratio =

Year 2008 2009 2010 2011 2012

Current Ratio 1.21 1.45 2.15 1.50 1.59

Interpretation: In 2012, the companys current assets were 1.59 times of their current liabilities. From the time series point of view, performance has increased from 1.50 to 1.59. so the ratios performance is good. The proportionate change in current liability is lower than proportionate change in current asset.

 Quick ratio or acid test ratio

Year 2008 2009 2010 2011 2012

Quick Ratio .63 .62 1.16 .96 .96

Interpretation: In 2012, the companys current asset excluding inventories was 0.96 times of their current liability. From the time series point of view, performance remain same than the previous year. So the ratio is representing favorable. The company has not taken inventory a lot that is reason of same performance.

ASSET MANAGEMENT RATIOS

Inventory turnover

= Year 2008 2009 2010 2011 2012 Inventory Turnover 2.49 2.57 2.97 3.03 3.41

Interpretation: In the year 2012, the company has completely Sold out and restocked its inventory 3.41times.

From the time series standpoint, this ratio has improved during the year 2012. Performance is good. The relative change in Cost of goods sold was much more than the relative change in inventory thats why the ratio goes up.

Total asset turnover

= Year 2008 2009 2010 2011 2012 Total Asset Turnover

0.69 0.73 0.76 0.80 0.87

Interpretation: For the year 2012, Squares total asset turnover was 0.87, which means every 1 taka worth of total asset, the firm is generating 0.87 taka worth of sales. From the time series perspective, the ratio has improved from 0.80 to 0.87 from 2011 to 2012. Performance is good. The relative change in sales is much more than the relative change in total asset.

Average collection period

Year 2008 2009 2010 2011 2012

Days Sales Outstanding

31
18 16 18 35

Interpretation: For the year 2012, Squares average collection period was 35 days on average which means it took a total of 35 days for them to collect their Receivables from the debtors.

 Average payment period

Year 2008 2009 2010 2011 2012

Average Payment period 15 10 28 35 35

Interpretation: For the year 2012, on an average Square took about 35 days to make payments to the creditors.

DEBT MANAGEMENT RATIOS Debt ratio = * 100 Year 2008 2009 2010 2011 2012 Debt ratio

37% 25% 23% 28.9%

24.2%

Interpretation: The debt to equity ratio for Square in 2012 is 24.2% which means 24.2% of total assets were financed by debt. Capital structure of this company consists of 24.2% debt and the remaining 75.8% of equity. It cannot be indicated as good or bad as this ratio depends on the capital structure of the company.

Times Interest Earned = Year 2008 2009 2010 2011 2012 Times Interest Earned

4.85 6.64 10.23

7.66

Interpretation: In the year 2012, EBIT was 7.66 times higher than that of interest expense. From the time series point of view, in the year 2012 the value decreased than previous year. In the year 2012, relative change in EBIT is much lower than the relative change in interest expense. That is why the ratio has gone down during the year.

PROFITABILITY RATIOS Gross Profit Margin = Year 2008 2009 2010 2011 2012 * 100 Gross Profit Margin

41% 42% 36% 37.02% 37.04%

Interpretation: In the year 2012, Squares every 100 taka worth of sales, the company generates 37.04% taka worth of gross profit. From the time series standpoint, the firms ratio has increased so good performance. Relative change in sales was lower than the relative change in Gross profit thats why ration has up.

 Operating profit margin = Year 2008 2009 2010 2011 2012

* 100 Operating Profit margin

21% 24% 20%

17.69% 17.86%

Interpretation: For the year 2012, squares operating profit margin was 7.86% which means every 100 taka of sales is producing 17.86 taka worth of operating profit, or in this case earnings before interest and tax (EBIT) From the time- series perspective, operating profit margin increased from 2011 to 2012. Relative change in sales is much more than the EBIT.

Net profit margin

= Year 2008 2009 2010 2011 2012

* 100 Net Profit Margin 17% 19% 16% 16.85% 16.34%

Interpretation: For the year 2012, Squares net profit margin was 16.34% which means every 100 taka of sales is creating 16.34 taka worth of net income. The time series analysis shows the firms net profit margin was decreasing from 2011 to 2012. Poor performance. Relative change in Sales is much higher than the relative change in Net profit.

 Return on asset =

* 100 Year 2008 2009 2010 2011 2012 Return on asset 9% 14% 14% 13.50 % 14.16%

Interpretation: In the year 2012, every 100 taka worth of total assets generates 14.16 taka of net profit. From the time series point of view, its ratio has increased slightly than the previous year. This means Square is effectively using their assets to earn net income for them. Relative change in total asset was lower than relative change in Net profit.

Return on equity Year 2008 2009 2010 2011 2012

* 100

Return on Equity 16 % 19% 13.8% % %

Interpretation: In the year 2011, every 100 taka worth of total equity generates 2.86 taka of net income. From the time series point of view, its return on equity ratio was slightly increased than previous year .From the cross sectional standpoint, It is below than the IA which is 21.51 %. Poor performance.

Relative change in net profit was more than relative change in equity.