Ratio Analysis of BPL:Ratio Analysis is a widely used tool of financial analysis.

It is defined as
the systematic use of ratio to interpret the financial statements so that the strength and weakness
of a firm as well as its historical performance and current financial condition can be determined.
A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values
taken from an enterprises financial statements. Often used in accounting, there are many
standard ratios used to try to evaluate the overall financial condition of a corporation or other
organization. Financial ratios may be used by managers within a firm, by current and potential
shareholders (owners) of a firm, and by a firms creditors. Financial analysts use financial ratios
to compare the strengths and weaknesses in various companies. If shares in a company are traded
in a financial market, the market price of the shares is used in certain financial ratios.Ratios can
be expressed as a decimal value, such as 0.10, or given as an equivalent percent value, such as
10%. Some ratios are usually quoted as percentages, especially ratios that are usually or always
less than 1, such as earnings yield, while others are usually quoted as decimal numbers,
especially ratios that are usually more than 1, such as P/E ratio; these latter are also called
multiples. Given any ratio, one can take its reciprocal; if the ratio was above 1, the reciprocal
will be below 1, and conversely. The reciprocal expresses the same information, but may be
more understandable: for instance, the earnings yield can be compared with bond yields, while
the P/E ratio cannot be: for example, a P/E ratio of 20 corresponds to an earnings yield of
5%. Sources of data for financial ratios
Values used in calculating financial ratios are taken from the balance sheet, income statement,
statement of cash flows or (sometimes) the statement of retained earnings. These comprise
the firms accounting statements or financial statements. The statements data is based on the
accounting method and accounting standards used by the organization.
Ratios Analysis
Liquidity Ratios:
Liquidity ratio measures the firms ability to meet its obligations, ability to pay its obligation and
when they become due. These ratios establish relation between cash and other current asset and
current liabilities. Commonly used ratios are
Current Ratio
Quick Ratio
Current Ratio
Curre 2008
2009
2010
2011
nt
Ratio
Curren 28618916542602032 69167378932321451 61916678312513157 71484627532648161
t assets 267
642
232
988
Curren

t
1.10:1
liabilit
y

2.98:1

2.50:1

2.70:1

Analysis: The current ratio measures the companys ability to pay off its current liability. Here
we can see that current ratio was highest in 2009 with compare in preceding years. But it also
denotes that company has huge idle money, so it is not good sign for the Beximco
Pharmaceuticals Ltd. So in a concluding note I would like to say company should utilize their
idle money in a profitable manner.
Quick Ratio
Quick 2008
2009
2010
Ratio
(Total (2861891654
(6916737893
(6191667831)
Current 1505288093)260203 1722953284)232145 (1983809444)251315
Assets 2267
1642
7232
Inventor
y)
Current
Liability
0.52:1

2.24:1

1.67:1

2011
(7148462753)
(2291844631)264816
1988

1.83:1

Analysis:
Quick ratio is the most conservative ratio in calculating liquidity position. Here we can see that
acid-test was quite stable in first years, but it was increased dramatically in 2009, than 2010
decreases aging 2011 increases. The companys current liquidity position is more than
satisfactory.
Activity Ratio
Activity ratios are used to evaluate the competence, which the company manages and utilizes on
its asset. This ratio also calls the turnover ratios because they indicate the speed with which the
assets are transformed or turnover into sales. A proper balance between assets and sales
generally reflects on that the assets.
The Activity ratio we can satisfy on the three ratios, those are:

Receivable turnover.
Inventory turnover
Assets turnover

Average
Collection
Period
(A/R x
360
days)

2008

Total
Credit
Sales

2009

(503916401 x
360)
4010167059

45.24 days

2010

(694111730 x
360)
4868254915

51.33 days

2011

(821356439 x
360)
6490847353

(978224317
360)
78902418

45.55 days

44.63 days

Average Collection Period:Analysis:

This ratio helps to find out average collection period of accounts receivables. The lower the
collection periods the higher the management efficiency measure collect the account receivables.
We see that average collection period was better in 2011. But previous three years it was
increased due to increase of sales volume.

Receivable turnover

A/R Turnover

2008

360 days
Average Collection
Period

360 days45.24 360 days51.33 360 days45.55 360 days44.63

days
days
days
days
7.96 times

2009

7.01 times

2010

7.90 times

2011

8.07 times

Analysis:

Accounts receivables turnover is measure the number of times per year that the average
amount of receivables is collected and transfers the cash amount. If the organization
account receivable turnover increase then the average collection period decrease and
vice-versa. Here we see that in 2011 is 8.07 times account receivable turnover Highest
and Average collection period less. It was last three years increase or decrease of account
receivable.

Inventory
2008
Turnover
Cost of Goods Sold 2002871181
Average Inventory (3157768384)/2

Inventory turnover
in days: 365/IT
Average Payment
period
(ITD)

1.27 times
360
1.27

283.46 days

2009

2010

2011

2566206626
(3228241377)/2

3317640254
(3706762728)/2

4103709021
(4275654075)/2

1.59 times
360
1.59

1.79 times
360
1.79

1.92 times
360
1.92

226.42 days

201.12 days

187.5 days

Inventory Turnover
Analysis:
Inventory turnover ratio measures how fast the inventory become cash or accounts receivable. If
the turnover number is more than the companys position is good and vice versa. In 2008 it is
1.27 times and in 2009 is 1.59 times in 2010 it is 1.79 times in 2011 it is 1.92. Here we see the
turnover is increasing over the time. It shows a positive impact on their management efficiency
but the speed is very slow .It should be more fast.
(ITD)
Average payment period tell about how many time a company takes to pay its accounts payable.
If a company quickly pays the accounts payable then it means they cant use their capital
properly on the other hand if it take too much time to pay its accounts payable then it will
hamper their reputation toward its debtors. It wills create problem for further loan. Here we have
seen their average payment period is decreasing over the year. In 2011 the period slightly
decreases then the previous year. The overall position is good.
Asset 2008
2009
2010
2011
Turnov
er
Sales 40101670 4868254915(34711598 6490847353(412643329 7890241843(444057400

Averag 59
e Total
Assets

863)/2

31)/2

42)/2

0.28 times

0.31 times

0.36 times

Asset Turnover
Analysis: Here was see that total assets turnover has increased in 2010 and 2011 compare to
2009. Sales and total assets increase in 2011.2010. But compare to 09 and 08; ratio is slightly
dropped in 2009. After that it was recovered marginally.
Solvency /Debt Coverage Ratio
Debt ratios are calculated to judgment the long-term This ratio indicate, mix of funds provided
by owners and lenders, the manner in which the assets are finance, the extent of earning that is
magnified or leveraged by use of debt and finally the extent of limited stakeholders control over
the company.
The Debt- coverage ratio we can satisfy on two ratios, those are:
Debt to total assets
Time interest earned.
Debt to total assets
Debt Ratio
Total Liabilities

2008

2009

2010

2011

4369463296

Analysis:
In debt ratio is decreased from 2008, 2010, 2011 not 2009 in the Beximco Pharma Company
because their asset was increased at a higher rate than from the last year. If any company debt
ratio decreases day by day it is a good position for those for the company.
Time interest earned
Times Interest Earned 2008
EBIT (Earnings
before interest and
taxes)

714121010

2009

2010

2011

214066707867467427
2483708501361532326
508432384
1677849252
567645757
Interest 3.34 times3.49 times2.68 times2.96 times
Analysis: In this discussion we realize that the higher ratio of time interest earned, it indicated
the company has higher ability to pay the interest from their opportunity income. We see that
ratio is quite fluctuating over the last few periods. So Beximco Pharma should aware of it. In
2008 is 3.34 times, 2009 is 3.49 times, good position compare to last two years in 2010 is 2.68
times and 2011 it is 2.96 times.
Profitability Ratio
Profitability ratio represents the organizations ability to translate sales dollars at different stages
of measurement. The ratio measures profitability after consideration of all revenues and
expenses, including interest taxes and non-operating items. This ratio specify the capacity of the
company to survive difficult circumstances, which might occur from a number of basis, such as
declining price, increasing coast and declining sale.
The profitability ratio we can justify on the five ratios, those are as follows
Gross Profit Margin Ratio
Net profit Margin Ratio
Return on Investment/ Asset Ratio
Return on Equity Ratio
Market Price Ratio:- (1.Price Earning Ratio, 2.Dividend Payout ratio, 3.Earning Per
Share)
Gross Profit Margin
Ratio

2008

Gross Profit
Net Sales 50.06%47.29%48.89%48.00%

2009

2010

2011

Gross Profit Margin Ratio

Analysis:
Gross margin ratio is used to analyze how efficiently a company is using its materials, labor and
manufacturing related fixed assets to generate profits. A higher gross margin percentage is a
favorable profit indicator and vice-versa. This ratio helps organization to fix their product price.
If the ratio minimum percentage then indicates the product market price lower or product
production cost high. Here we see that gross margin ratio was quite stable and it is good sign for
Beximco Pharmaceuticals Ltd
Net Profit Margin

2008

2009

2010

2011

Net Profit
Net Sales

13.60%12.83%16.20%15.19%

Net Profit Margin Ratio

Analysis:
Net income to sales ratio is very important in operating performance measurement. This ratio is
helpful in identifying the proportion of sales unit that remains after the deduction of all expenses.
This ratio indicates the net amount of profit on each sales taka. The amount of net income
includes all types of non operating items that may occur in a particular period. The ratio dropped
in 2009, then increase in 2010. But it again fell in 2011. As a result company has generated
more profit.
Return on Investment Ratio/ Asset (ROI)
Return on Total
Assets

2008

2009

2010

2011

Net Income
Total Asset

3.68% 3.14%

4.92%

5.20%

Analysis:
Return on total assets indicates how profitable a company is relative to its total assets. It also
indicates the management efficiency to utilize total assets to make profit. In 2011 it has been
slightly increased compared to the previous year. So it can be said that company generates
3.68%, 3.14%, 4.92%, and 5.20% return on the assets that it employs in its operations in this four
year time period.

Return on Equity Ratio (ROE)

Return on Equity

2008

2009

2010

2011

Net Income
Average Shareholder Equity

5.21% 5.74% 6.58% 7.00%

Analysis:
Return on equity is the measurement of shareholders wealth maximization. It indicates how
much shareholders earned from their investment. The higher the ratio indicates higher the
shareholders wealth maximization. Return on equity is highest in 2011 return shows 7.00%. So
its good news for Beximco Pharmaceuticals Ltd. that its present ROE is better than previous
year.
Market Measures Ratios
1.Price Earning Ratio
Price Earnings Ratio
Market Price Per Share
3.61 155.8

2008

2009

2010

2011

167.7

4.13 135.1
4.18

93.60

4.76
Earnings Per Share 46.45 times 37.72 times 32.32times 19.66 times
Analysis:
Price earnings ratio is the most widely used indictors in investment decision. It indicates how
much an investor would be paying for every taka earnings. Price earnings ratio was height in
2008 but it has decreasing in 2009. So it means market price of BPL was fall in 2011. So
company should aware of their P/E ratio.
2. Dividend Payout Ratio
Dividend Payout Ratio
Dividend Per Share

2008

2009

2010

2011

Earnings Per Sharex100x100 x100 83.10% 36.32%

47.85% 44.12 %

Analysis:
Dividend payout ratio is an indicator of how well earnings support the dividend payment. Here
we see that in 2008 pay highest dividend but in 2009 is also decrease, the in 2010 increase again
in 2011 is also decrease. So company is not moving towards shareholders wealth maximization.
3. Earnings Per Share Ratio
Earnings Per Share

2008

Net profit After Tax

545341273

2009

2010

2011

151149296624740307
1511492961051648808
2517678101198525342
251767810 No. of Outstanding Shareholder 3.61 Tk4.11 Tk4.18 Tk4.76 Tk
Analysis:
Shareholders are mostly concern about earning per share (EPS), because EPS is widely used
indicator in investment decision. In 208 EPS was TK. 3.61 but in next two years it is increasing
day by day. Beximco Pharmaceutical Ltd. in 2011 EPS it reaches 4.76 TK. Its good sign for
company reputation and investors will be interested to invest on the company.
5. Costing Function of BPL:
Costing procedure of a Pharmaceuticals company is very important and vast thing. It needs to
update in a regular basis. Moreover, all Pharmaceuticals firms try to keep this information secret
in this competitive market. Like all other pharmaceuticals company Beximco follows standard
costing method for medicine productions. The unit price of each medicine is calculated by batch
wise. About 70-80 percent of all manufacturing materials are purchased from the foreign county.
Only 20- 25 percent of the total are collected from the local markets. Beximco purchases more
than 600 items of raw materials and more than 3,000 packaging materials for manufacturing of
medicine.
Major reasons for which the price of the materials is affected are-LC opening charge, Demurrage
charge, Inflation, Exchange rate changes and C & F commissions, etc. Yearly increment of
salary is one of the major issues of labor rate increasing. Beximco Pharma provides salary
increment every year. Therefore, the cost of direct labor is increased. The reasons for increasing
the overhead cost are- Markets rates of utilities like gas, electricity and water, Repair and the
maintenance costs, Insurance premiums etc. are increased due to reducing the life of the

machines. Product development costs are increased due to highly competition in the medicine
markets both home and abroad.
Materials- Controlling and Costing of BPL
Materials Management
An effective materials management is essential in order to
(1) Provide the best service to customers,
(2) Produce at maximum efficiency, and
(3) Manage inventories at predetermined levels to stabilize investments in inventories.
Successful materials management requires the development of a highly integrated and
coordinated system involves:
Sales Forecasting,
Purchasing,
Receiving,
Storage,
Production,
Shipping,
And Actual Sales.
The stages of material management may be enumerated as follows:
1. Procedures of materials acquisition
2. Cost of materials acquisition
3. Product costing and cost allocations
Materials Acquisition Procedure
Materials:
In Beximco Pharma Material is divided into two parts. These materials are the direct material for
the product. The classification of materials is as follows:
Raw material.

Packing material.
Before going to the report part, lets have a look that what are the steps are involved in case of
purchasing raw and packing materials from local and abroad.
Both types of materials are purchased in two forms such as:
Local purchase.
Import of materials.
Local Purchase of Raw & Packing Materials:
The domestic purchase of raw material includes following business functions;
Processing purchase order
Receiving goods, material and services
Recognizing the liability
Processing and recording cash disbursement
Processing Purchase Order
The procedure begins with need recognition. The respective department identifies its need, gets
approval of the departmental head and with the approval an authorized person sends purchase
requisition to purchase department to initiate purchase. In case of property, plant and equipment
acquisition, before sending purchase requisition, a budget has to be prepared by the user
department. If the departmental head or higher authorities, whichever is required, approve the
proposed budget a purchase requisition is sent to purchase department. And in case of raw or
packing materials, the planning department determines the quantity and timing of raw materials.
This department informs the purchase department when to buy materials.
When the purchase department got the requisition, it calls for quotation or tender. After receiving
the quotation or tender, supplier has been selected. The supplier may be local or international. If
the terms and conditions are in favor of both BPL and the selected supplier, an order for the
purchase is than issued by the purchase department. In case of raw or packing material, the
purchase order is issued by the factory. A purchase register is maintained by the purchase
department in which they maintain all the required information relating to a consignment.
Receiving Material, Goods and Services
Generally the goods and services are received by the user department who has issued the
purchase requisition or in some cases by the authorized department. Materials are received by
Quality Assurance Department (QAD) in the factory. After receiving materials, goods and

services an MRR (Material Receiving Report) is issued for material and other than material a
GRR (Goods Receiving Report) is issued by receiving department to purchase department. In
the mean time the invoice or bill is received by the purchase department.
Before using the product by user department that is at the time of delivery, it has been inspected
by the inspection team or QCD (Quality Control Department), by user department or by
authorized department. QCD examined the materials on a sample testing basis and provide a
certificate. Normally,
1. QCD inspects standardized items like raw material, packing material etc.
2. User department inspects non standardized items like services, stationeries etc.
3. Inspection department inspects machineries, plants etc.
Again at BPL there are some authorized departments for inspection. For example, computer or
IT related products are inspected by IT department, furniture are by HR department. If the
received goods, material and services are not according to purchase requisition BPL may

Refuse the order

Reorder the item
Received on condition

Before taking any action, there is a discussion between BPL and the supplier. After recommunication it has been decided whether the payment to the supplier will be made or not.
Vendor
Warehouse/ Factory/ Ready for Use
Accept Delivery by User department/ Factory
Account & Inspect goods by respective departments
Purchasing order by Purchase/ Planning Dept

MRR/ GRR
Vendor
Packing slip
Goods & services
Packing
Slip
Goods & services
Goods & services
MRR/GRR
Receiving Function
Recognizing the liability

The purchase department compares the invoice/bill and MRR/ GRR/ QC with the purchase
order. If everything has been complied, the amount payable to supplier is approved by the
purchase department. There is a seal on the invoice named Approved By with the signature of
purchase manager. It means the purchase department is satisfied with the information mentioned
in the bill. A copy of all this documents is kept by purchase department and the main copies
along with copies not negotiable are sent to accounts and finance department.
The accounts and finance department is then ready for giving provision voucher. An authorized
person is liable for giving provision voucher. He examines the not negotiable copy of bill/
invoice at the time of giving provision voucher. Generally the liability is recognized when the
vendor sends the invoice or bill. But in some cases it may be recognized at the time of goods
received.
Processing and Recording Check/ Cash Disbursement
After a certain period of time when the date becomes matured for the liability the payment is
made by BPL. The matured date has been calculated in the aged payable report for each
vendor. The due amount for an individual vendor is identified from vendor business position
report. In this stage another report is prepared for forecasting cash requirement. An individual
person enters data in MAPICS for having this reports and forecasts. The same person checks the
arithmetical accuracy, casts, cross casts, deductions and payable amounts. If the checking is
matched with those reports checks are issued to pay vendor.
The mode of payment is usually are numbered check. In most cases the payment is made by
payee only check. In some cases the payment may be made by cash or by bearer check or paid in
advance fully or partly.
Issuing check is a sensitive issue. It is prepared by that person who will give the payment
voucher. And it is signed by senior management. The payment voucher is given by the same
person who has checked the reports and payable amounts. This voucher includes original bills,
MRR/ GRR, Vat (musok 11) and challan. It is recorded in the record book after the sign has been
made.
After all the procedure has been completed the check is given to vendor and the counter foil of
that check is preserved by BPL. If the payment amount is large part by part payment is made.
Purchase order
Factory/ User department
Vendor
Approve vendor invoices by purchase department
Pay Vendor cash disbursements
Purchase Department
Accounts & Finance Department
Vendor invoice
A/P Payment Voucher
A/P Provision Voucher

MRR/GRR

Bill/ Invoice
Purchase Order
MRR/ GRR
VAT (MUSOK 11)

Checks
Pay for Goods Function
With approval of the departmental head
Tender / Quotation call
Requisition of respective
department
Issuing order
Receiving goods / Services by factory/ Respective Department
Produce MRR / GRR
Issuing check

Sent bills to accounting department

Comply the bills with order, MRR / GRR and approve

Receiving bills by purchase department
Accounts payable payment voucher

Ready for payment

Accounts payable journal voucher/ provision voucher

By Purchase Department or by User Department

By QAD, or by receiving department
Payment procedure is complied with sec 51(A), 52 of income tax ordinance-1984 and rule 16 of
income tax Rule1984 and Musok 11 of VAT Act 1991
Input Information
1. Purchase Requisition
Its a requisition generate by respective department. Data elements conveyed by a purchase
requisition of BPL include unique number of purchase requisition, CEP and purchase order
number with date name and description of material and service, unit number, required quantity,
unit price and quantity ordered. It also includes signature and approval of authorized person,

suppliers name; mode of payment, advance payment (if any), terms and conditions, MRR
number, invoice number etc.
If the requisition is for fixed asset then a CEP (Capital Expenditure Proposal) is raised by the
user department. In this case, proposed suppliers name, estimated budget, justification for
proposed expenditure and estimated life of proposed expenditure is also required. A sample of
CEP is given in the annexure.
2. Purchase Order
Its a document through which an order is made. The heading contains the purchase order
number, purchase requisition number and date. The body contains the description of required
item, quantity required and ordered, amount with unit price, suppliers name and address, terms
and condition of order, due date, other relevant dates etc. Besides, it also describes the mode of
purchase, advance payment (if any), purchase reference and other relevant information.
1. 4.

Material Receiving Report (MRR) / Goods Receiving Report (GRR)

Its a report produced by the inspection department or receiving department. It is used to reflect
the receipt of goods on consignment or goods returned to supplier. The report indicates item
ordered, name of the material and supplier with the date of arrival of products, its quantity,
quality and description of the received item. It also includes MRR number, order number,
signature of the authorized person etc. The report is also used as inspection report. Because it
mentioned information regarding to

Quantity ordered before quality test

Quantity received after quality test
Quality
Whether as per specification or not
Country of origin
Deliver in time or not
Pricing
Legal requirements etc.

4. Invoice / Bill
This document is generated by supplier/ service provider that mention the quantity and amount,
bill number with date etc. The bill is attached with MUSOK 11, delivery challan etc.
5. Tax and VAT (Musok 11) Report
BPL prepares these reports for calculating the amount of Tax and VAT deducted at source of
suppliers. Tax and VAT amount is deducted from the total amount due. Deduction and
calculation is made according to section 51(A), 52 of ITO- 1984[1], rule 16 of ITR-1984[2], and
the VAT Act-1992 (Mushok 11). The reports contain vendor number, vendor name, and period,

total amount due, tax amount, amount excluding tax amount, VAT amount and amount
excluding VAT. A sample of tax and VAT report is added with annexure.
Import of Raw & Packing Materials:
Another source of raw and packing material is importing from overseas market. For this purpose,
purchase department must open a letter of credit at bank. It ensures the liquidity of foreign
supplier. After opening a letter of credit, Purchase department maintains a file where all the
related documents are kept separately for each LC and sends a copy of each document to the
Finance and Accounts department for further processing of information and to prepare the cost
sheet for the materials received against each LC. This file is called PC (pharmaceutical
consignment) file. The finance and accounts department has three sections:

Treasury
Cost and Budgeting
Accounts

The processing of information related to import procurement takes place in the Cost and
Budgeting section. For the convenience of the users I have discussed the whole thing into three
parts. They are:
INPUT INFORMATION
INFORMATION PROCESSING
OUTPUT INFORMATION
Input Information
Source of information:
Three departments are involved in the entire materials procurement process.
They carry their own responsibilities in this regard. The departments are:

Sales Department
Planning Department
Purchase Department

The entire process looks like:

Sales Department
Sales Forecast

Planning & Inventory Control Dept. Import Procurement schedule

Purchase Dept.
Pro forma Invoice
LC openning
Accounts
PC, IV, BC Files
PC File (For Raw and Packing Materials and Also spare parts for pharmaceuticals machinery)
IV File (For Infusion Raw and Packing materials and also spare parts for Infusion machinery)
BC File (For Basic Chemical)
Materials Acquisition Cost
The cost of inventories comprises of expenditure incurred in the normal course of business in
bringing the inventories to their present location and condition. As a result, the costs of purchase
of inventories comprise the purchase price, import duties and other taxes (other than those
subsequently recoverable by the entity from the taxing authorities), and transport, handling and
other costs directly attributable to the acquisition of finished goods, materials and services. Trade
discounts, rebates and other similar items are deducted in determining the costs of purchase.
Actually, the focal point of this report is to put light on the cost of acquiring of raw and packing
material from local and foreign sources and related accounting conduct.
In case of imported materials
L/C Costing:
The costing procedures of the imported materials (Raw/Packing) Landed cost. To calculate the
unit cost of the imported materials (Raw/ Packing) the term L/C costing is used.
L/C opening process:
The purchase dept. first collects a form of application for the opening of letter of credit from a
bank. An LCA form (in quintuplicate) is also collected. After filling up these forms, they are
submitted to the bank along with the pro forma invoice approved by the Block list of Drug
Administration and IMP form of Bangladesh Bank. The L/C margin (a certain percentage of L/C
amount), bank charges and commissions for opening the L/C, insurance payment (if made at that
time) etc. are also made. The insurance covers all risks from the beginning of transit.
The Cost Sheet:

This is the most important report prepared on the import procurement process of raw materials.
Cost sheets are prepared for individual raw and packing material items, as well as spares and
capital machinery. Cost sheet is generated by the MAPICS software. It is the summary of entries
debited through the journal voucher of L/C. It is used for costing and pricing decisions. The cost
sheets include the following:
Through this cost sheet Beximco Pharma determines per unit landed cost of imported Raw
material and Packing material.
Cost Sheet
Company Name: BEXIMCO PHARMA
Supplier Name:
L/C No:
Date:
Invoice No:
Date:
PARTICULARS
Material Name

Shipment No:
Date:
Exchange rate:
CEP:
Date:
2
Total

MRR No
MRR Date:
Invoice Quantity
FC Cost/ Unit
Total FC Cost
L/C Margin Opening Charge Document Retirement Duty, LCA, IDSC &
others C & F Commission Insurance Premium Miscellaneous Expenses
TOTAL COST
COST PER UNIT

Table: 9 Cost Sheet

Cost Summary:
Cost summary is a summary of the cost sheets prepared on a monthly basis. It is a MS Excel
worksheet. All the information is extracted from the cost sheet. The column heads are:
Month
L/C Number

PC/IV/BC Number
Materials Name
Quantity
C&F Rate
Foreign currency Cost
Currency [US$/EURO/YEN]
Exchange rate
C&F in Taka [Exchange Rate*FC Cost]
Other costs [Duty/ LCA, C&F Commission, Insurance premium, Misc. Exp., Opening
Charge]
Landed cost [C&F in Taka + Other Costs]
Cost per Unit [Landed Cost / Quantity]
Supplier Name and Country
L/C Balance:
This is prepared to facilitate the payment of L/C liabilities. It is used by various departments
including the treasury. The columns are:

L/C Number
Total Taka
Opening Date
C&F Value in Taka

Material Costing:
In case of imported materials some important formulas are as follows:
1. Assessable Value= Invoice Value X Exchange Rate X 1.01(Insurance) X 1.01 (Landed
Charge)
2. Customs Duty= Assessable Value X Customs Duty Rate (from Bill Of Entry)
3. Supplementary Duty= (Assessable Value + Customs Duty) X SD Rate (from Bill Of
Entry)
4. Pre-Shipment Inspection(PSI)= (Invoice Value X Exchange Rate) X PSI rate (from Bill
Of Entry)

5. Regulatory Duty= If CD% is greater than or equal to 25% then Assessable Value X 5%
Landed Cost = C&F Amount + CD amount +SD amount + PSI amount + RD amount + Others
expenses (C&F Commission, Insurance premium, Opening Charge, Misc. Exp.)
In case of Locally Procured Materials:
In case of locally procured materials the landed cost is Purchase order rate or Invoice rate
Sample Material cost sheet:
BEXIMCO PHARMACEUTICALS LTD.
COSTING OF (PRODUCT NAME)

Pack size:

PRODUCT CODE:

Date:

PRODUCT CODE:
Composition

Material code Landed cost Per Tablet

Quantity

Raw Materials:

Active:
Raw material 1
Raw material 2
Excipients:
Raw material 1
Raw material 2 RAW MATERIAL COST Packing Materials:
Primary Packing:
Packing material 1
Packing material 2
Secondary Packing:

Cost

Per Pack
Quantity Cost

Packing material 1
Packing material 2 PACKING MATERIAL COST Total RM + PM cost
Table: 10 Material Cost Sheet
Product costing and cost allocations
Product Costs:
Product costs include all costs involved in acquiring or making a product. In the cases of
manufactured goods, these costs consist of direct materials, direct labor, and manufacturing
overhead. Product costs attach to units of product as the goods are purchased or manufactured,
and they remain attached as the on the goods go into inventory awaiting sale. Product costs are
initially assigned to an inventory account on the balance sheet. When the goods are sold, the
costs are released from inventory as expenses and matched against sales revenue. Product cost is
also called Manufacturing costs.
Components of Product cost:
Direct Materials:- Raw Material (Active), Packing Material (Primary & Secondary Packing)
Direct Labor
Manufacturing Overhead:- Prime cost, Conversion cost, Non manufacturing cost, selling &
administrative Expenses
Some items and bases which are used in BPL are as follows
Items of Overhead
Rent, Insurance of Building, Depreciation of
Building.
Electricity
Power
Fire Insurance
Insurance and Depreciation of Machinery
Supervision
Medical Expenses
Canteen Expenses
Store-keeping Expenses
Fringe benefits
Purchase Department expenses
Internal Transport
Other items
Cost of Production:

Basis of Distribution
Floor Space Occupied
Meter reading
Machine Hour
Asset Value
Capital Value
Number of Workers
Number of Workers
Number of meals
Number of Requisitions
Number of workers
Number of Purchase order
Number of Requisitions
Machine hours, Wages.

In Beximco Pharma, they use normal historical costing for determining cost of production. Also
in some cases they use the standard costing method. They have standard cost sheet for every
components of the manufacturing cost. They also use standard cost sheet for proper control and
measure their performance. They also calculate variance from standard and actual. For doing the
costing early they use predetermined factory overhead. For using normal historical costing
systems they determine the over applied or under applied factory overhead and dispose this over
applied or under applied factory overhead through cost of goods sold statement. They also do the
variance analysis. They generally does the Spending variance and Idle capacity variance. They
compare their budgeted and actual amount for calculation of spending variance
Inventory valuation methods and Beximco Pharmas Practices:
The major inventory valuation methods are In the direct (or variable) method, only the variable
discussed as follows: The Direct or
manufacturing costs are capitalized, or charged to the inventory.
Variable Method
Full absorption costing (also referred to as full costing and
The Full Absorption Method
absorption costing) is a traditional method where all
manufacturing costs are capitalized in the inventory, i.e., charged
to the inventory and become assets.
Activity based costing is a relatively new type of procedure that
The Activity Based Method
can be used as an inventory valuation method. The technique was
developed to provide more accurate product costs. This improved
accuracy is accomplished by tracing costs to products through
activities. In other words, costs are traced to activities (activity
costing) and then these costs are traced, in a second stage, to the
products that use the activities.
The throughput method was developed to complement a concept
The Throughput Method
referred to as the theory of constraints. In this method only direct
material costs are charged to the inventory. All other costs are
expensed during the period
Beximco Pharmas Practices:
In BPL they use Absorption costing concept for determining product cost. They charge their
selling and administrative overhead to the income statement. They dont fully use ABC costing
by they try to apply concept of Activity based costing for determining product cost.
Implementation of ABC is very complex country like Bangladesh. In case of allocating factory
overhead they use concept of ABC as far as possible. BPL dont use through put costing and
direct costing.
Determination of Manufacturing Cost per unit:
In BPL, they determine manufacturing cost per unit through the following cost sheet:
Beximco Pharmaceuticals Ltd.

Product Name: Pack size

Product Code: Date:
Composition
Raw Materials:

Material Code

Per Tablet
Quantity

Cost

Per Pack
Quantity

Raw material 1
Raw material 2Total Raw material cost Packing Material:
Packing material 1
Packing material 2Total Packing material cost Total (RM+PM) cost Total Raw material cost
per pack
Total Packing material cost per packTotal (RM + PM) cost per pack Factory Overhead
DepreciationTotal Factory Cost Total Manufacturing Cost Per Pack
Table: 11 manufacturing cost sheet for per unit
Batch costing:
Batch costing is a modification of job costing. A batch of similar products is treated as a job.
Each batch receives an order number and the costs are accumulated on that basis. When
production is of repetitive nature, and consists of a definite number of articles, batch costing is
used. In batch costing all costs are collected according to batch order number and total costs are
divided by total numbers in a batch to arrive at the unit cost of production.
Determination of EBQ:
In batch costing, determination of economic size of the batch is an important step. Economic size
of a batch is determined by applying the following formula:
EBQ =
Where,
A= Annual demand for the product.
S= Setting up cost per batch.
C= Carrying cost per unit of production.
Beximco Pharmas Practices:

Cost

In BPL they use batch costing system. They collect all costs by batch order number. They divide
total costs by total numbers in a batch to arrive at the unit cost of production. IOC&BP section of
Accounts and finance department does the batch costing. This section does not determine the
batch size. Batch size is determined by the Planning department of the BPL. By determining
EBQ they determine economic batch sizes.
Batch Cost Sheet:
Accounts and finance department of BPL determine the batch cost sheet. To determine batch
cost sheet planning department helps costing department giving adequate data. The main factor
of the batch cost sheet is commercial yield. Through this they determine per unit cost.
A sample batch cost sheet is in the following page
Batch Cost Sheet
Product Name:

Pack Size:

Product Code

Batch Size:

Batch No:
SRR (Store Received Report) M. Code
Number: Material Name
Raw material 1

Unit (gm/kg) Quantity

Rate

Value

Raw material 2Raw material Cost Packing Material 1

Packing Material 2Packing Material Cost Total Cost (RM + PM) Per unit RM [ Total RM /
Commercial yield] Per unit PM [ Total PM / Commercial yield] Per unit Total Cost
(RM+PM) [(RM+PM)/ Commercial yield]

Standard Yield:
Actual Yield:

Commercial Yield:
QC Sample:

Information LCs Processing

Information processing is done through three stages. The records and reports prepared in those
stages are different. The stages are:

L/C Opening Stage

L/Cs in Transit Stage

L/C Opening Stage

L/C opening process:
The purchase dept. first collects a form of application for the opening of letter of credit from a
bank. An LCA form (in quintuplicate) is also collected. After filling up these forms, they are
submitted to the bank along with the pro forma invoice approved by the Block list of Drug
Administration and IMP form of Bangladesh Bank. The L/C margin (a certain percentage of L/C
amount), bank charges and commissions for opening the L/C, insurance payment (if made at that
time) etc. are also made. The insurance covers all risks from the beginning of transit.
Purchase Department
(Pro Forma Invoice, Drug, IMP)
Local Bank
(L/C Margin, Opng Chrg, Bank Charge)

Foreign Bank
As mentioned earlier (see: 1.2.1) the accounts department gets copy of the L/C and the Banks
statement mentioning other related cost. It is done through the foreign exchange account of
BEXIMCO PHARMA held with different banks.
Records and Reports:
Various records are kept during this stage. Data related to L/C are maintained in two ways. They
are:

MS Excel Worksheets
MAPICS

MS Excel Worksheets:
Two different sets of spreadsheets are prepared. The spreadsheets contain the following
information. I am just mentioning the column heads of the spreadsheets and explanations where
necessary.

Spreadsheet containing Data on L/C Margin and Opening Charges:

o L/C Number
o Margin in Taka
o Opening Commission [p]

o
o
o
o
o

Courier service Charge [q]

Supplementary Tax [r]
VAT [s]
Amendment Charge [t]
Total taka ([p]+[q]+[r]+[s]+[t])
Spreadsheet containing Data on Document Retirement
o L/C number
o PC/IV/BC Number
o Retirement Date
o Payment
o Payment Date

Negotiation:
Bill of exchange
Commercial Invoice
Packing List
Bill of Lading
Certificate of Origin
Shipment Advice
MAPICS Entries:
MAPICS (Management Accounting Production
Inventory Control System) is a software
custom made for BEXIMCO GROUP which serves the both the financial and management
accounting needs. In the L/C opening stage two types of entry are made into the software:

Database Entry
Journal Voucher
Database Entry:

This entry is made to maintain a database of L/Cs and shipments. The entry includes:

L/C Number
PC Number
Shipment Date
Retirement Date

This database is also linked with the accounting system built within the software. Whenever a
journal entry is made with the L/C account this database is linked with that entry. It detects any
inconsistency with the L/C number and PC number.

Journal Entry:
The journal entry made at this stage includes the opening charges, L/C margin, Bank charges,
Courier Charges, Amendment Charges, etc. The Journal Entry made through the Bank Voucher.
The entry is:
L/C Margin

DR

Opening Charge

DR

Amendment Charge
Courier Service
VAT

DR
DR

DR

Bank Charges

DR

Bank A/C
CR
VAT Rules, 2007. Rule 19(2): The tax payer can claim 60% of the VAT as claim against input
tax in respect of charges for . L/C services..
All the debit entries are posted to the L/C group account. These are all considered as
expenditures. All the amounts are found in the summary spreadsheet prepared with MS Excel.
L/Cs in transit stage
The opening bank sends a copy of L/C to the advising bank and another copy is also sent by the
company to the local agent or indenting company. The supplier then takes necessary measures to
ship the materials. It sends the non-negotiable shipping documents to the buyer (the firm) by
courier within 7 days and submits negotiable copy of all documents to the negotiating bank.
Then the supplier asks the negotiating bank to make the payment. After paying off the supplier,
the advising bank asks the L/C opening bank to pay the amount within 72 working hours (3
working days). The opening bank then pays it off within the stipulated time. The bank then
collects the L/C payment from the firm (applicant) on an agreed upon date.
Records and Reports prepared at this stage:
Two records could take place during this stage. Both the records are made using the MAPICS
software in the form of journal entries through Payables voucher and Bank Voucher. The
transactions are:
Payment of Insurance Premium:
Insurance premium is set on the invoice price. The materials are normally insured to make cover
for fire/marine and war/strike risks. A VAT of 15% is imposed on the insurance premium. To

facilitate the journal entry a spreadsheet analysis is made using MS Excel, which contains: I. L/C
Number II. PC Number III. Item name
1.
2.
3.

IV.
V.
VI.

Insurance Premium
VAT

Total Insurance Premium (see figure A: premium bill)

VAT on Insurance Premium (see figure A: premium bill)
Net Insurance Premium (Total Premium-80%of VAT)
DR [VI]

DR [80% of VAT]

Accounts Payable (Insurance

Company)

CR

The journal entry is often made through payables voucher. The entry is:
VAT Rules, 2007. Rule 19(1): The tax payer can claim 80% of the VAT as claim against input
tax in respect of charges for . Insurance services..
Advance payment to the C&F Agent: The C&F agents are responsible to make customs
clearance from the ports and make delivery to the factory at Gazipur or wherever required. The
estimated amount for clearing and forwarding process is paid in advance. The journal entry is
made through Bank voucher using MAPICS software. The entry is:
C&F Agent (Advance)
Bank A/C

DR

CR

Factors That Affects the Costing Procedure at Beximco Pharma

The Major reasons for which the price of the materials affected are identified below:
LC opening charge: The LC opening charge increases with the amount of LC opened. It will
affect the actual price of the materials.
Insurance premium: For the safety of the materials it is necessary to give insurance premium
for that material. Numbers of insurance companies are interest to open insurance for the firm.
But this also affects the material price.
Demurrage charge: It has to be given to the port authority by the BPL in case of delaying in
material receive.
Inflation: Due to inflation rate material price can also be increased which has impact on
purchasing of materials. The company would have nothing to do if there is occurred high
inflation in the imported country.

Exchange rate changes: material price can also be affected by the exchange rates changes. In
spite of, the unchanged material price the cost of it can be increased by the change in foreign
exchange rates.
C & F commissions: Clearing and forward commissions are charged by the agents which are
works for the Beximco. There are number of agents who receive the goods, pay all types of duty
charges to the government and bring the materials to the factory storehouse. The C & F
commissions include:
Documentation
Customs duty and taxes
Super urgent delivery expenses
Wharf rent and removal
Pay order commissions
Cooly wages for loading and unloading
Transport, Agency commission
All the above items of C & F commissions are added with the cost of the material. Therefore the
actual price of the material is increased. Management Accounting Practice At Beximco
Pharmaceuticals Ltd
Miscellaneous expenses: Besides the above factors some other costs are incurred in case of
material import. These costs are also included with the material price.
Exchange Rate: Basically, 70-80 percent materials are purchased from outside of the country.
So payments for the imported goods are made in dollars maximum time. So the increase in the
exchange rate would increase the prices of the materials. According to the survey data the, it was
found that 66 percent employee that that the exchange rates affects moderately and 33 percent
employee thought that the exchange rates has less effects. The reason behind such opinions was
that for the last numbers of months dollar is stable against taka. Furthermore, the payment was
made in dollar maximum time. Another thing was the exchange exercised by the customs was
almost fixed for number of months. So, when the exchange rates changes abruptly only then
there would be a high impact over price of the materials.
Yearly increment of salary: This is one of the major issues of labor rate increasing. Beximco
Pharma provides salary increment every year. Therefore, the cost of direct labor is increased.
Increase in market labor rate: This is due to inflation rate of a country. The market rate of
labor payment has been increasing for last two or three years. So, this has also a great impact on
direct labor cost.

Other benefits of the labor: Besides the monthly payments, the labors are provided some other
benefits which also affect the costing. At Beximco factory, there are labor unions which deal
with the management about their needs and benefits.
The reasons for increasing the overhead cost areMarkets rates of utilities like gas,
electricity and water,
Repair and the maintenance costs,
Insurance premiums etc. are increased due to reducing the life of the machines.
C & F BILL against PC #_________

Amount
Customs Duty and Taxes
####
Wherfrent and Removal
###
Documentation
##
Cooly wages
###
Transport
##
Misc. Expenses
##
Expenses under section 82
###
Audit/ treasury/ Bank Exp.
###
Agency Commission @ 0.0x%
###
TOTAL #####
Less: Income tax on Agency commission
(##)
ADVANCE (#####)
DUE ###
Bangladesh Customs Authority
Bill of Entry
Type
Customs Duty
Supplementary Duty
VAT
AIT
Development
Surcharge

Tax base
[a]
[b]
[b]
[a]
[a]

Rate
*
*
*
*
*

Amount
[b]
[c]
[d]
[e]
[f]

Note: The alphabets used in this table will used for further reference in the chapter to come.
Calculation of taxes:
Type
Customs Duty
Supplementary Duty
VAT
AIT
Development
Surcharge

Tax base
[a]
[b]
[b]
[a]
[a]

Rate
*
*
*
*
*

Amount
[b]
[c]
[d]
[e]
[f]

Note: The alphabets used in this table will used for further reference in the chapter to come.
6. Findings of the Report
Majors findings of the report are as follows
The employees of departments of Beximco Pharma are very much co-operative and
interdependent to each other.
BPL provide A complete set of financial statements includes a balance sheet, an income
statement, a cash flow statement, a statement showing either all changes in equity or changes in
equity other than those arising from investments by and distributions to owners, a summary of
accounting policies, and explanatory notes
There are positive relationship exists among assets, sales and net income.
Finance and Accounting department is one of the most important departments of BPL, they
are responsible to make profit for the organization.
The recent liquidity position of BPL is very high, which reflect company has more idle
money. The average collection period and average payable period both are decreasing.
The portion of debt in total asset and time interest earned is increasing.
The equity value per share of BPL is less than its current market price per share.
The operating expenses of BPL have dramatically increased for the last five years, which
has a significant influence to lower the net income
Beximco Pharma follows the batch costing method and collocate their factory overhead on
the basis of the total production of the batches. Beximco Pharma uses pre determined factory
overhead for determining factory overhead early for costing purpose.

The entire department should be well informed regarding their goal and objectives. It is
essential to execute company objective into individual target.
There must be clear allocation of responsibilities , authority and accountability
The company should introduce more promotional activities.
The company should take initiative to develop an effective research and development centre
to get innovative ideas to capture the competitive market
Beximco Pharma is one the best and leading pharmaceuticals company in Bangladesh. Beximco
is pioneer Pharma company export Medicine to the abroad and earned many foreign currency.
Beximco Pharmaceuticals is a good growing company if they maintain the cost production,
relative cost in operating and made good and quality medicine then BPL will be good position in
the near future.
Recommendation of the Report:
The overall performance of BPL shows a satisfactory position although they are suffering last
few years. It is not easy to recommend some suggestion to enhance the performance level of the
organization during two month practical experience in BPL. I have observed some shortcoming
regarding operational and other aspects. On the basis of my observation I would like to present
the following recommendations:
Though BPL has qualified employee in Finance and Accounting department, but the
organization should recruit some new employee to run this department smoothly.
BPL should increase their equity capital in their capital structure, because debt capital is
already higher.
BPL should utilize their assets properly by investing them in more profitable projects as there
liquidity is higher than actual need.
They should increase dividend per share that will serve as a promotional tool.
Contribution analysis for each of the product lines to optimize profit in light of demand
factors.
Effects to bring selling prices in line with costs having regard to competition and other
market factors.
They should minimize their financing expenses to make higher net profit. They should
maximize the average collection period and average payable period.
They should be careful about the market price of share, because the price of share would
decrease in future.

Standard set-up for staff and officers to minimize administrative overhead.

Provision for the training of officers and employees in modern management techniques.
Necessary measures to be taken for the prompt seminars, advertisement and promotional
activities by the representatives.
In the face of todays global competition with open market operation, BPL must develop and
retain the high achievers and motivated work force and equip them with the latest skills and
technologies
Conclusion
In Bangladesh, Pharmaceutical sector is one of the most developed hi-tech sectors which are
contributing in the countrys economy. Pharmaceutical sector is one of the fast growing and most
developed scientific sector in Bangladesh. There are about 265 registered pharmaceutical
companies operating in Bangladesh pharmaceutical industry. The market is highly competitive.
BPL succeeded in gaining trust and confidence of the doctors and patients all over the country.
Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company and is a member of the
BEXIMCO Group, the largest private sector industrial conglomerate in Bangladesh. Beximco
Pharma is also the largest exporter of pharmaceuticals from Bangladesh, spreading its presence
in many developing and developed countries across the globe. Recently, BPL has successfully
made its footmark in the global market when it made its debut on the London Stock Exchange as
the first Bangladeshi company to be listed in the worlds most prestigious bourse. This milestone
event has widened the responsibility, accountability and transparency of the company beyond
geographical border. This was an added challenge to all the accounting staffs as the listing the
accountability of the organization has gained a global reach. The ever expanding export trade
also indicates greater responsibility to the world. The Finance and Accounts department took the
challenge and prove their mettle by the timely publication of 2011 Annual Financial Reports
globally. Each and every section in the department deserves to be complemented for their
endeavor. From raw material import to the bringing of smile for the society, on every level,
professionalism and dedication is the key to this success.
Beximco Pharma is the largest exporter of pharmaceuticals in the country and the only company
to win National Export Trophy (Gold), the highest national accolade for export, for record Four
times. The company is the largest producer of Metered Dose Inhalers (MDIs) in the country,
and the first to produce CFC free inhalers. BPL is also the first company to produce antiretroviral drugs (ARVs) locally.
In this report, we have tried my level best to identify Financial analysis is helpful in assessing the
financial position and profitability of a concern. This is done through comparison by ratios for
the same concern over a period of years; or for one concern against another; or for one concern
against the industry as a whole (called inter firm operation); or for one concern against the
predetermined standards; or for one department of a concern against other departments of the
same concern (called intra firm comparison). Accounting ratios calculated for a number of years

show the trend of the change of position. The trend is upward or downward or static. The
ascertainment of trend helps us in making estimates for the future.
Thus we can say that there is lots of application of financial analysis in the modern days of
business. To assess any business condition financial analysis gives a clear financial picture of
any business organization. This helps to evaluate the trend and condition of organization.
From small to big business organization financial analysis helps a great deal in decision-making
process. As it helps to give idea about the financial condition, thus it helps in future financial
projection and decision making process of any business house.
If there is no doubt Beximco Pharma is a leading pharmaceutical company in Bangladeshi
pharmaceutical industry, but there some lacking to Finance and Accounting department. Because
there financial position not so much good compare their competitive leading company. In this
situation they should be careful there costing sector. In todays complex yet highly competitive
business environment management needs quality information for decision making purpose.
Beximco believes that quality and control should be ensured and these can be ensured by using
proper cost accounting information. Relevant and reliable cost information can be ensured by
implementing by using effective cost accounting methods. There unproductive assets should
invest productive sector and minimize their liability. And they do the best one fit in the context
of Bangladesh. I trust that Beximco Pharma go ahead day by day galaxy.
Bibliography:

Annual Report of Beximco Pharmaceuticals Limited 2000 2011

Newspaper, Journal, Magazine
Bangladesh Association of Pharmaceutical Industries
World Pharmaceutical Association
Fundamentals of Financial Management, by Brigham and Houston
Annual Reports Square Pharmaceuticals Ltd.
Annual Reports Incepta Pharmaceuticals Ltd.
Annual Reports Renata Pharmaceuticals Ltd.

Web-site:
http//www.beximco-pharma.com
http://www.bpl.com.bd/financial_statement
http//www.wikipedia.org
http//www.pharmaceutical-industry.info
http://ims-global.com
http://www.dse.com.

Consultation with the Following Persons:

Mr. Md. Fazlul Haque, Deputy Manager, Accounts and Finance BPL
Ms. Jannaton Nahar Assist. Professor, Business Administration of Bangladesh University
Mr. Amit Kumar, Accounts Officer, Accounts and Finance BPL
Mr. Md. Jasim Chowdhury, Accounts Officer, Accounts and Finance BPL
Md. Nazmul Muneer, Accounts Officer, Accounts and Finance BPL

Beximco Pharma office Address

Operational Headquarter
19 Dhanmondi R/A, Road No. 7
Phone: +880-2-8619151, +880-2-8619091
Fax: +880-2-8613888
Email: info@bpl.net
Website: www.beximco-pharma.com
Corporate Headquarter
17 Dhanmondi R/A, Road No. 2
Dhaka 1205, Bangladesh
Phone: +880-2-8611891
Fax: +880-2-8613470
Email: beximchq@bol-online.com
Website: www.beximco.net