Report on Ratio Analysis

Report on Financial Ratio Analysis

Of

Square Pharmaceuticals Limited

Prepared For

Eliza Haque

Assistant professor
School of Business & Economics

United International University (UIU)

Prepared By

Name Id Remarks
Md. Shakibur Rahman 111 162 068
Sabbir Ahmed Bhuiyan 111 142 226
Fahim Masrur Mehedi 114 163 008

Date of submission
17th December 2019
 Letter of transmittal
To,

Eliza Haque

Assistant Professors

United International University

Subject: Submission of financial statement Report

Dear Madam,

We would like to submit our report on Financial Statement Analysis of the Square Pharmaceuticals
Limited. On this report, we have followed the instructions that you have advised us. It has been a great
experience to work on this project. In addition, we want to thank you for give us opportunity to work on
financial statement analysis & we had learned many things while doing this report. If you need any
further information while evaluating the project report, we would love to you the same with profound
pleasure.

May I therefore pray and hope that, we would be obliged if you go through our report and give your
assessment to our work considering our abridgement

Sincerely yours

Md. Shakibur Rahman

ID: 111 162 068

On behalf of the group members

 Acknowledgement

At first, we would like to thanks our gratefulness to the Almighty Allah for giving us the potency
and opportunity to complete the report within the scheduled time successfully. Last but not the
least; we would like to thank our each and every member for their cooperation as without their
help this report would not indeed be possible. This report helps us to gather a lot of experience.
 Table of Contents

Contents
Executive Summary.....................................................................................................................................6
Chapter 1.....................................................................................................................................................7
1.1 Introduction...........................................................................................................................................7
Chapter-2.....................................................................................................................................................8
Company Overview.....................................................................................................................................8
SWOT analysis of Square Pharmaceuticals Ltd............................................................................................9
Chapter 3...................................................................................................................................................11
Ratio Analysis............................................................................................................................................11
Reference..................................................................................................................................................21
Executive Summary

Square Pharmaceuticals Ltd is one of the largest medicine producers in Bangladesh, in this
phase of our education. We have received the practical knowledge related with the education.
Additionally, we have achieved commendable knowledge about the corporate finance industry.
We are going to cover up the policies that Square Pharmaceuticals Ltd actually follows to run
their business and going to understand their financial statement and evaluate the performance.

This report starts with an introduction part. Introduction part included with objectives, scopes,
methodology and limitations of the report we have been discussed. After that, we have added a
company overview. In the overview part, history, mission and vision of the company are briefly
discussed also it contains a graphical presentation of Square Pharmaceuticals Ltd. from
beginning till today. All types of related Ratio we discussed later.
 Chapter 1
1.1 Introduction

What we learn from books is accomplished only when we are able to apply our learning in
practical fields. To cope with the changing modern business world, we have to be capable of
learning of own findings by exercising the knowledge we have accumulated.

This is the era of globalization. We can speculate the rapid change in economy of developing
and under developed countries all over the world. This deportment has caused in boost of
disposable income for a large fragment of population. Square Pharmaceuticals Limited (Square
Pharma) is currently the market leader of pharmaceuticals industry now providing reasonable
medicines capturing the largest market share.

Square Pharmaceuticals ltd. the flagship company of Square group has been holding the strong
leadership in the pharmaceuticals industry and now has become a high-performance global
competitor by exporting drugs to 36 countries. Square Pharmaceuticals ltd produces more than
500 products including herbal, nutraceuticals, agrovet and pesticides.
 Chapter-2

Company Overview

2.1. Company Overview

Square Pharmaceuticals Limited is capturing the largest market share of pharmaceutical
products and ingredients in Bangladesh. Square Pharma is the largest pharmaceutical company
in Bangladesh and has been in the 1st position among all national and multinational companies
since 1985.

2.2 Mission
Their mission is to produce and provide quality & innovative healthcare relief for people,
maintain stringently ethical standard in business operation also ensuring benefit to the
shareholders, stakeholders and the society at large.

2.3 Vision
They view business as a means to the material and social wellbeing of the investors, employees
and the society at large, leading to accretion of wealth through financial and moral gains as a part
of the process of the human civilization
SWOT analysis of Square Pharmaceuticals Ltd

The following SWOT analysis captures the main strengths and weaknesses within the
company and describes the opportunities and threats of the company.

Strengths
Square Pharmaceuticals has highly experienced working team of which members are
internationally experienced. Also, mid-level managers are highly skilled and efficient. It is a very
reputed company as it has been providing medicine and related product quite a long time. Also,
it has created a very strong and large customer base. The resources they use are collected
locally, so it is very much available and inexpensive which give a door-way to cost efficiency.

Weakness
It does not use advanced technology in its manufacturing unit as it’s expensive and not yet
available in Bangladesh. Also, the internal and external operations are not organized enough. As
a Bangladeshi company, like others, it has bureaucratic decision-making process. As a result,
the decision comes from the upper level which is very much time consuming. Square
Pharmaceuticals has inefficiency in asset management system. Lastly, as it offers its products at
a very cheap price, the profit margin is much lower than other pharmaceutical companies.

Opportunities
The government of Bangladesh has huge support for pharmaceuticals companies. As a result,
the company can gather capital easily from a different type of sources. So, expansion
opportunity is high. As Square is a reputed company and produce a quality product, it has huge
opportunities to go global. And locally, it has earned reputation. As a result, there is a chance of
gaining more market share in future. If it provides this type of product consistently, the
competitors will not be able to defeat this company.

Threats
Due to price hike of raw material, the production cost is going higher day by day. As it’s a local
company, it will not affect much, but for going global, it’s a big barrier in the sense of price.
Inadequate supply of electricity disrupts the production system. Private power system requires
more expenditure. For importing raw materials, or exporting its products, it depends on
currency exchange which is very volatile. It makes the profit margin uncertain. Lastly, the
industry is a growing one. So, the competitors are growing in number day by day.
 Chapter 3

Ratio Analysis

Current Ratio:

Industry average

2016 2017 2018 2019

3.15 3.89 4.36 8.64

current ratio CA/CL

29.68
30

25

20
current ratio CA/CL
12.93
15
9.81
10 6.34

0
2016 2016 2016 2016

Interpretation: From the graph we can say that Square Pharmaceuticals Ltd. has a sharp
rise in the current ratio over the period. From 2016 to 2019 the current ratio has increased by
14.68%. So we can conclude that they are in a very good position to fulfill their short term
obligations.

Quick Ratio: industry average

2016 2017 2018 2019

2.16 2.96 3.53 7.45

Quick ratio

30 26.13

25

20

15 10.91
8.23
10
4.97
5

0
2016 2017 2018 2019

Interpretation: From the graph we can say that Square Pharmaceuticals Ltd. has a sharp
rise in the quick ratio over the period. From 2016 to 2019 .but we also see that in every year
that company maintained higher ratio that industry average. So we can conclude that they are
in a very good position to fulfill their short term obligations.

Inventory turnover ratio: Industry average

2016 2017 2018 2019

0.5273 0.5209 0.5175 0.5193

Inventory turnover

0.52 0.52

0.52

0.51 0.51

0.51 0.5
0.5
0.5

0.5

0.49
2016 2017 2018 2019

Interpretation: Inventory Turnover Ratio deals with how efficiently inventory is managed
by comparing the cost of goods sold with average inventory for a period. Over the last 4 years
Inventory turnover ratio has been increasing. Starting from 2016 to 2019 company maintained
unstable inventory turnover ratio .every year company maintained almost nearly to industry
average

days sales outstanding: Industry average

2016 2017 2018 2019

33.03 46.03 39.93 38.6

days sales outstanding

25 21.71

20
14.54 14.67
15 12.77

10

0
2016 2017 2018 2019

Interpretation: Square Pharma has a fluctuating trend of days sales outstanding. The
account receivables had the same trend which has affected the DSO. It declined from 15days to
13 days from 2016 to 2019. Again it was raised to 21 days in 2017. It indicates they take now
more days to collect the cash from the customers. As seen in the cash conversion cycle
increasing DSO could have caused CCC to rise but the increasing accounts payable managed to
keep CCC downwards.

fixed assets turnover: Industry average

2016 2017 2018 2019

1.54 1.03 1.25 1.36

fixed assets turnover

1.31
1.32
1.3
1.28
1.24
1.26
1.24 1.21
1.21
1.22
1.2
1.18
1.16
1.14
2016 2017 2018 2019

Interpretation: form this graph we can see that square pharma have unstable earnings from
fixed assets.but that company maintained almost nearly to industry average

total assets turnover: Industry average

2016 2017 2018 2019

0.8188 0.678 0.754 0.9167

 total assets turnover
0.75
0.8 0.7
0.65
0.7 0.61

0.6

0.5

0.4

0.3

0.2

0.1

0
2016 2017 2018 2019

Interpretation: In case of total asset turnover ratio the higher ratio is more preferable. As it
measures how a firm uses its assets to generate sales. From 2016 to 2019 Square Pharama had
a steady decrease . As the assets have decreased that has caused the fall in the total asset
turnover ratio. Hence their total asset turnover ratio is unstable

debt to toatal assets : Industry average

2016 2017 2018 2019

0.2787 0.2905 0.3107 0.3044

 debt to toatal assets
0.08
0.09
0.08
0.07
0.07 0.06
0.06
0.06
0.05
0.04
0.03
0.02
0.01
0
2016 2017 2018 2019

Interpretation: Debt ratio measures the financial leverage of Square Pharma. It had a declining
trend over the time period as the liability has decreased and the assets have increased over
time. In 2016 the debt ratio was 8% and within 4years it came to 6% decreasing by 2%. So it can
be interpreted that the portion of Square Pharma’s asset which is financed by debt has
decreased in a significant amount which has been continued every year

net profit margin :Industry average

2016 2017 2018 2019

0.1881 0.1666 0.1871 0.1707

 net profit margin

0.3 0.29

0.29
0.29

0.29 0.28

0.28
0.28

0.28

0.27
2016 2017 2018 2019

Interpretation: Net Profit Margin Ratio of Square Pharma has a significant increase over the
period. The significant amount of increase in total revenue is the possible reason for increase in
net profit margin. That means the portion of revenue which is translated into profit had
increased. We see that in 2017 has high net profit margin than it decrease
ROA: Industry average

2016 2017 2018 2019

0.1543 0.1146 0.1303 0.1256

 ROA
0.21
0.21 0.2

0.2

0.19 0.18

0.18 0.17

0.17

0.16

0.15
2016 2017 2018 2019

Interpretation: ROA tells us the profit that was generated against the invested capital. And
ROA. It’s decresing every year. But for 2016 and 2017 it stood still at 21%. But still Square
Pharma has a quite good ROA.
ROE: : Industry average

2016 2017 2018 2019

0.2219 0.1530 0.1877 0.1724

 ROE

0.25 0.23
0.22
0.19
0.19
0.2

0.15

0.1

0.05

0
2016 2017 2018 2019

Interpretation: While calculating the ROE, we measure the firm’s performance from investor’s
point of view. Square Pharma has a down word going ROE reflecting the decrease of net income
through the period. Though, the changes are not very big but still they have a good ROE. For 4
years the ROE was decreased from 22% to 18%.
 Reference

https://www.squarepharma.com.bd/

https://www.squarepharma.com.bd/mission-vision.php

https://en.wikipedia.org/wiki/Square_Pharma

https://www.stockopedia.com/share-prices/Square-pharmaceuticals-LON:BXP/

Stephen H. Penman, “Financial Statement Analysis”

https://www.investopedia.com

http://www.squarepharma.com.bd/annual-reports.php

https://www.dsebd.org/

https://www.dsebd.org/displayCompany.php?name=SQURPHARMA

http://lankabd.com/dse/stock-market/SQURPHARMA/square-pharmaceuticals-limited/stock-
price?stockId=150

http://www.pharmatips.in/Articles/Pharma-Companies/Top-Pharmaceutical-Companies-In-
Bangladesh.aspx