COURSE: Introduction to Financial Management(Fin 254 )

Section: 04

Date of Submission: 09-09-2020

Group Name: Fintegic

SUBMITTED TO: Rushdy Md. Bakth

SUBMITTED BY:

Name ID

Abdur Rahaman Kashemi 1520647031

Humayun Rashid Himel 1420484030

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 Table of Content

Introduction: -------------------------------------------------------------------------------------------------- 03

Company Overview: -----------------------------------------------------------------------------------------04

Liquidity Ratios: ----------------------------------------------------------------------------------------------05

1. Current Ratio: --------------------------------------------------------------------------------------05

2. Quick Ratio: -----------------------------------------------------------------------------------------06

Activity Ratios: ------------------------------------------------------------------------------------------------07

3. Inventory Turnover -------------------------------------------------------------------------------07

4. Average Collection Period ----------------------------------------------------------------------08
5. Average Payment Period ------------------------------------------------------------------------09
6. Total Asset Turnover -----------------------------------------------------------------------------10

Debt Ratios: ---------------------------------------------------------------------------------------------------11

7. Debt Ratio ------------------------------------------------------------------------------------------11

8. Times interest Earned Ratio -------------------------------------------------------------------12
9. Fixed-Payment Coverage Ratio ---------------------------------------------------------------13

Profitability Ratios: ------------------------------------------------------------------------------------------14

10. Gross Profit Margin -------------------------------------------------------------------------------14

11. Operating Profit Margin -------------------------------------------------------------------------15
12. Net Profit Margin ---------------------------------------------------------------------------------16
13. Earnings Per Share -------------------------------------------------------------------------------17
14. Return on Total Assets --------------------------------------------------------------------------18
15. Return on Equity ----------------------------------------------------------------------------------19

Market Ratios: -----------------------------------------------------------------------------------------------20

16. Price Earnings (P/E) Ratio -----------------------------------------------------------------------20

17. Market/ book Ratio (M/B) Ratio --------------------------------------------------------------21

Recommendation: -------------------------------------------------------------------------------------------22

Conclusion: ----------------------------------------------------------------------------------------------------23

Appendix: ------------------------------------------------------------------------------------------------------24

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 Introduction
Our selected company was "Renata Pharmaceutical".This report has prepared to analyze ratios
and compare them in terms of time series. Our selected company operated in the
"Pharmaceutical" industry. It is one of the leading and fastest-growing pharmaceutical and
animal health product companies in Bangladesh.

We collect information from the annual reports of the company. Annual reports were available
on the official websites of the company. It helps us to calculate various ratios and analyze them.
In total, we estimated 17 ratios over four years, from 2016 to 2019.

Throughout the ratio calculation, we try to interpret different years' values as well as comparison.
And provide some recommendations for their improvement in different segments. Finally, we
discuss the reasons for investing in this company.

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 Company Overview
Renata Pharmaceutical

In Bangladesh, the Reneta company started its operation in 1972 as Pfizer Limited. In 1993
Pfizer renamed Reneta Limited after the divestment of its Bangladesh operations' ownership to
local shareholders. Renata Limited (formerly Pfizer Limited) is one of the leading and fastest-
growing pharmaceutical and animal health product companies in Bangladesh. The company is
mainly engaged within the manufacture and marketing of human pharmaceutical and animal
health products', holds the largest number four position in a pharmaceutical company, and the
market leader position in animal health products in Bangladesh. Also, Reneta products are
exported to several Asian, African, and European countries. The company is listed on the DSE
(Dhaka Stock Exchange) with Taka 87 billion market capitalization. Renata Limited currently
employs about 4334 people in its eight-manufacturing facilities spread over three manufacturing
sites. Customer satisfaction and conform to the highest ethical standard is their main value focus.
Their mission is to provide maximum value to their customer and communicate where they work
and live. And vision is to establish Reneta permanently among the best of innovative branded
generic companies.

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Liquidity Ratios:
Liquidity ratio gives an idea of the ability of a company to meet its short-term debt. It determines
the ability of a company to meet its short-term liabilities with short term assets.

01.Current Ratio:
Current Ratio= Current Assets/Current Liability

Year 2016 2017 2018 2019

Current Ratio 1.38 1.75 2.21 2.67

Analysis of the Ratios:

The higher the current ratio shows, the more capable a company is to pay its short terms
liabilities by its short-term asset. A current ratio above one indicates the company has enough
current assets to meet its short terms liabilities. If it is below one, that means the company
doesn’t have enough current assets to meet its short-term obligations.
Renata Limited has 1.38 times current ratio in 2016, in which the company has 1.38 taka of the
current asset for each 1-taka of current liabilities. Which is increased to 1.75times in 2017,2.21
times in 2018, and 2.67 times in 2019. It means that they have enough Current assets to meet
their current obligation. The current ratio of Renata is increasing every year, and higher than its
previous year, which means the company is doing good in terms of time series analysis. So, the
company is in a good position to meet its current obligation.

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02. Quick Ratio:
Quick Ratio= Current Assets-Inventory/Current Liability

Year 2016 2017 2018 2019

Quick Ratio 0.71 1.02 1.37 1.77

Analysis of the Ratios:A quick ratio is considered a more conventional measure than the
current ratio. A higher quick ratio of the company means a better liquid position; the lower the
ratio means the company will struggle with current obligations. A quick ratio above one
indicates the company is able to pay its current debts; below one indicates the company is
currently unable to pay its current debts.
Renata Limited has enough liquid assets to pay its current liabilities. In 2019, the quick ratio was
1.77times, which means for 1 BDT of current liabilities, this company has 1.77taka of liquid
assets. In 2016, the company had 0.71 times liquid assets than that of current liabilities. It
increased to 1.02 times in 2017, and in 2018, it increased to 1.37 times from 1.02 times. Overall,
there was an increase, and performance is satisfied.
The quick ratio of Renata is increasing every year, and higher than its previous year, which
means the company is doing good in terms of time series analysis. So that the company is liquid
and in a good position to meet its current obligations.

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Activity Ratio:
The activity ratio indicates how efficiently a company turns its asset into cash and revenue.

(03) Inventory Turnover:

Inventory Turnover = Cost of Goods Sold/Inventory

Year 2016 2017 2018 2019

2.07 2.45 2.46 2.65

Analysis of the Ratios: Inventory turnover determines how many times the company can be
sold and replaced its inventory during a given year. A high inventory turnover indicates a strong
sell, while a low inventory turnover indicates a weak sell.
Renata limited has different values in the inventory turnover rate every year. The company sold
2.07 times its inventory in 2016, which means the company can sell its inventory 2.07times in
2016. It increased to 2.45times in 2017,2.46 times in 2018, again increased the highest to 2.65 in
2019 during these four years. It means Renata Limited holding their inventory for a little more
time, and the time is decreasing because their sales are increasing slowly.The inventory turnover
of Renata is increasing every year, and higher than its previous year, which means the company
is doing good in terms of time series analysis. So, over the four years, the performance was
satisfying since there was an increase and the high value of the ratio reflects efficient
management of inventory, as well as strong sales.

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04. Average Collection period:
Average Collection Period = Accounts receivable/Average sales per day

Year 2016 2017 2018 2019

52.15 45.40 43.80 37.21

Analysis of the Ratios:

The average collection period defines the average number of days that the creditor usually makes
the payment to the company. Renata Limited has different values in the Average Collection
Period every year. The company’s Average Collection Period was 52.15 days in 2016. It
decreased to 45.40 days in 2017, 43.40 days in 2018. It also decreased to 37.21days in 2019,
which means the company can convert its account receivable into cash within 37.21 days in
2019.
It shows their collecting the money times is decreasing that indicates the good performance of
the collection. Renata’s collection period is decreasing every year and lower than the previous
year. In terms of time series analysis, the company is doing good, and the performance is
satisfying while a lower figure is more appealing.

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05.Average payment period:
Account Payable / (Annual purchase / 365)

Years 2016 2017 2018 2019

66.30 62.21 65.11 57.42

Analysis of the Ratios:

The average payment period is defined as the average number of days a company takes to pay
off its dues. Renata limited has different values of average payment ratio every year. The
company’s average payment period was 66.30 days in 2016; in 2017, it decreased to 62.21 days,
and in 2018 again increased to 65.11 days. But in 2019, Renata’s average number of days to pay
its dues again decreased to 57.22 days, which means the company could pay its due within 57.42
days in 2019. That means they can take advantage of credit purchase.
Usually, the lower rate is better, but a higher number of days is better for liquidity purposes.
Overall, there was a decrease in several years, which is good, though it affects liquidity. Again, it
decreased to 57.22 days in 2019, which is not better considering liquidity but lower than the
earlier years, so the company is doing well here in terms of time series analysis.

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06. Total Asset Turnover:
Total Asset Turnover= Sales/Total Assets

Year 2016 2017 2018 2018

0.84 0.88 0.89 0.91

Analysis of the Ratios:

Total asset turnover determines the company’s sales and revenue relative to its assets means how
efficiently the company use its assets to generate sales.Renata limited has different values of
total asset turnover. The company’s total assets turnover was 0.84 times in 2016, which means
for 1 taka of the company’s asset, the company can generate 0.84 paisa . It was slightly increased
in 2017, that was 0.89 times. And in the next two years, it was also increased to 0.89, 0.91
respectively. That means the company cannot use its assets efficiently to generate sales.

A higher total asset turnover ratio indicates that the company is using its assets efficiently to
generate sales. In terms of time series analysis, the good thing is that their total asset turnover
ratio is increasing each year from the previous year, so they are doing good but overall, not
efficiently.

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Debt Ratios:
Debt ratio measures the amount of leverage used by the company. In a word it shows the
company’s total liabilities/debt as a percentage of its total asset.

07. Debt Ratio:

Debt Ratio: Total liabilities/Total assets

Year 2016 2017 2018 2019

37.09 31.17 27.31 24.44

Analysis of the Ratios:

The debt ratio determines the amount of leverage used by the company. That means it represents
the company's total liabilities/debt as a percentage of its total asset.
Renata Limited has different values of debt ratio every year. In 2016 the debt ratio was 37.09 %,
which means 37.09% of the company assets are covered by the borrowed fund. Which decreased
to 31.27% in 2017, 27.31% in 2018, and finally decreased to 24.44% in 2019, which means
24.44% of Renata's asset was covered by borrowed asset rest are the equity. That means they
don't have many loans to pay.A higher debt ratio indicates the company has more debt, so
normally, a lower debt ratio is better. Renata Limited's debt ratio is decreasing each year and

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lower than the previous year. So that in terms of time series analysis Renata Limited is doing
well here.

08. Times interest earned ratio:

TIE Ratio: EBIT/Interest

Year 2016 2017 2018 2019

13.43 20.46 22.95 35.46

Analysis of the Ratios:

The time interest earned ratio determines the comparable amount of income that the company
can use to cover the contractual interest. It represents the company's capability to continue to
interest and debt service. For Renata Limited in 2016, the TIE ratio was 13.43times, which is
increased respectively every year. In 2017, it increased to 20.46 times, in 2018, also increased to
22.95 times. In 2019, that was increased enormously to 35.46 times, which means Renata
Limited could pay its contractual interest payment 35.46 times in 2019.
Usually the higher value of tie ratio is better because it's high earning can meet its interest
obligations’. In terms of time series analysis for the Renata Limited TIE ratio, it was increasing

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every year and higher than its previous year, so that the company is doing well here.

09. Fixed –Payment Coverage Ratio:

FPCR Ratio: EBIT+ Lease payments/Interest+ Lease payments + ((Principal payments + Preferred
stock dividends) * (1)/(1-T))

Year 2016 2017 2018 2019

14.88 21.89 24.33 36.84

Analysis of the Ratios:

Fixed-payment coverage ratio determines a company’s ability to manage its various fixed
payments like debt payments, interest charges and also the lease expenses. It basically shows a
company’s ability to cover or manage its fixed payments by its earnings. In the above graph, we
observed that the fixed-payment coverage of Renata has continuously increased from 2016-
2019 , and the amount is 14.88 times, 21.89 times, 24.33 times and 36.84 times.
Normally a higher value of fixed-payment coverage ratio is better, as the company is more able
to manage its fixed expenses. Financial institutions like banks always observe this ratio before

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lending their money to their customers. As this ratio has continuously increased, so their
financial condition is good.

Profitability Ratio:
The probability ratio represents the company’s capability to generate profit from its operations.

10.Gross Profit Margin:

Gross Profit Margin = Sales-Cost of Goods Sold/ Sales

Years 2016 2017 2018 2018

50.93 50.50 50.23 50.20

Analysis of the Ratios:

The gross profit margin represents the company’s financial health. It defines the profitability of
the company’s sales. Renata Limited has different values of gross profit margin every year. In
2016 the company had 50.93 % that slightly decreased to 50.50% in 2017,50.23% in 2018.
Finally, Reneta had a 50.20% gross profit in 2019. This means the company has 50.20% profit
after paying for its cost of goods sold and service.

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 Normally a higher gross profit margin is better. In terms of time series analysis, Renata’s gross
profit margin is constantly stable, just slightly decreased every year, lower than the previous
year, or overall decreasing rate the performance is not good here.

11.Operating Profit Margin:

Operating Profit Margin = Earing Before Interest and Tax/Sales

Year 2016 2017 2018 2019

25.58 25.40 25.56 24.07

Analysis of the Ratios:

Operating Profit represents the Profit the company makes after paying its various expenses. It is
essential for creditors and investors because it shows the Profit of a company’s operations.
Renata limited has different values of Operating Profit Margin each year. In 2016, the operating
profit margin was 25.58 % that slightly decreased to 25.40% in 2017, also increased to 25.56%
in 2018. But in 2019 it decreased to 24.07%, that means the company has 24.07% profit after
paying for all its expenses except interest and tax.

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 Normally a higher operating profit margin is better. In terms of time series analysis, Renata
Limited’s operating profit margin is stable, just slightly decreasing every year from the previous
year. So overall, the company is not doing well here.

12.Net profit margin:

Net Profit Margin= Earnings available for Common Stockholders/Sales

Year 2016 2017 2018 2019

15.61 16.28 17.18 17.20

Analysis of the Ratios:

The net profit margin ratio represents the percentage of net income from sales revenue that
remains after all expenses and costs.Renata Limited has different net profit margin values each
year. In 2016 Renata limited had a 15.67% net profit margin, which increased respectively to
16.28% in 2017, 17.18% in 2018. Finally, in 2019 net profit margin was 17.20%, which means
Renata Limited has 17.20% profit after paying its all-expense, including interest and taxes.

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Normally net profit margin higher is better. In terms of time series analysis, the net profit margin
is increasing every year and higher than its previous year, so that Renata Limited is doing well
here.

13. Earnings per share:

Earning Per Share = Earnings available for Common Stockholders/Number of share of common
stock outstanding

Year 2016 2017 2018 2019

36.42 42.89 45.65 47.47

Analysis of the Ratios:

Earning per share determines the amount of money the company makes per share.Renata Limited
has different EPS values for each year. In 2016, EPS was 36.42Taka, which increased to
42.89taka in 2017, and 45.65 in 2018. Finally, the highest value of EPS reached in the last four
years in 2019, which was 47. 47taka.This means for one share of Renata Limited; the earning
was 47.47 taka in 2019.

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 Normally a higher value of EPS is better because investors will pay more for the company with
higher profit. In terms of time series analysis, earnings per share is increasing every year and
higher than its previous year, so that Renata Limited is doing well here.

14. Return on total assets:

Return on total Asset = Earnings available for Common Stockholders/Total Assets

Year 2016 2017 2018 2019

13.23 14.41 15.36 15.79

Analysis of the Ratios:

The return on asset ratio determines how efficiently the company's assets generate profits.
Renata Limited has a different ROA for each year. In 2016, ROA was 13.23%, which increased to
14.41% in 2017 and to 15.36% in 2018, respectively. For Renata Limited, the highest value of
ROA reached in the last four years in 2019, which was a 15.79 % slight increase from 2018. This
means for 1taka investment in the company's total asset; the earning was 15.79% in 2019.
Normally higher ROA is better because it represents the investors how effectively the company
makes more money on less investment. In terms of time series analysis, Renata Limited's ROA is

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increasing every year and higher than its previous year, so that Renata Limited is doing well
here.

15. Return on Equity:

Return on Equity= Earnings available for Common Stockholders/Common stock equity

Year 2016 2017 2018 2019

21.03 20.93 21.13 20.91

Analysis of the Ratios:

Return on equity determines the capability of the company to generate profit from equity capital.
Renata Limited has different ROE for each year. In 2016, ROE was 21.03%, which decreased to
20.93% in 2017. Again, increased to 21.13 % in 2018, decreased again to 20.91% in 2019, which
means for 1taka of the company’s equity, the return was 20.91%, the lowest value during the

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period of four years. Normally a higher value of ROE is better because it shows to the investors
how effectively the company generates profit from their investment. In terms of time series
analysis, Renata Limited’s ROE is not consistent with several ups and downs, so that Renata
Limited is not doing well here due to its inconsistent net income.

Market Ratios:
16. Price Earnings Ratio:
Price Earning Ratio= Market price per share/ Earning per share

Year 2016 2017 2018 2019

32.47 26.97 28.40 25.24

Analysis of the Ratios:

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The price earning ratio represents the relation between stock price and earnings of the company.
It determines what market is willing to pay for the company’s earnings. Renata Limited had the
highest 32.47 times P/E ratio in 2016 during the four years, which decreased to 26.97times in
2017 and again increased to 28.40% in 2018. After that, it decreased to 25.24 times in 2019,
which means the investor was willing to pay 25.24 times more than its earnings in 2019.
Normally higher P/E is better but not too high. In terms of time series analysis, Renata Limited’s
P/E ratio is not consistent with several ups and downs, so that Renata Limited is not doing so
well here.

17. Market/book (M/B) ratio:

Market book ratio= Market price per share/Book value per share

Year 2016 2017 2018 2019

6.831 5.648 6.002 5.278

Analysis of the Ratios:

Market/book (M/B) ratio is used to find a company’s current market value compared to its
book value. This ratio evaluates the market value of the company that is related with its real
worth value. In the following graph we observed that, market/book ratio of Renata
Pharmaceutical in 2016 was 6.83 times, which decreased in 2017 was 5.65 times and it also
decreased in the year of 2018 and 2019, which amounted to 6.00 times and 5.28 times.

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In terms of time series analysis higher value is better for market/book ratio. But in this ratio
their financial condition has decreased in the year of 2019. So the company’s financial position
is not good.

Recommendations

Although Reneta pharmaceuticals have a significant inventory turnover rate, they should again
try to get higher inventory turnover. They should focus on selling inventories, decreasing the
time of holding inventory, and getting a higher inventory turnover.

Also, they should focus on decreasing the average payment period of Renata Pharmaceuticals
than last year.Renata Pharmaceuticals's total asset turnover is good at all. They must have tried
to increase their total assets turnover strongly by efficiently using their assets and generating
more sales.

In Profitability Ratio segments, they should focus on the gross profit ratio and increase the
percentage rate, which is slightly constant over the years and decreasing slowly by focusing on
reducing the higher the cost of goods sold and service expenses.

After that, Renata should focus on increasing the operating profit margin by improving sales
and maintaining variable expenses more efficiently. They should also focus on their fluctuated
Net Profit Margin and try to improve there as well.Renata pharmaceuticals must have to be

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concerned about fluctuating ROE. They should care about net income and try to increase it for
better performance on ROE.

In the Market Ratio segment, Renata pharmaceuticals try to achieve a better price earning ratio
rate. Their P/E ratio is decreasing over the years By increasing market per share or decreasing
market share

Conclusion
In terms of investing issues, as a reasonable investor, we think, we should invest in the Renata
Pharmaceuticals stocks. In this report we have analyzed the financial performance of Renata
Pharmaceutical in terms of time series analysis. We have taken 4 years (2016-2019) financial
data and have analyzed the following ratios of this company. To analyze the following ratios we
observe that the financial position of this company is comparatively in a better position.
Their financial position condition is good in terms of liquidity ratios. This means that they are
more able to convert their current assets into liquid assets to operate their daily activities.
Their financial condition is good in terms of activity ratios. This means that they are more able
to efficiently use their assets that generally help to generate profits for their company.
The financial condition of Renata Pharmaceutical is also good in terms of debt ratios, which
means that they do not use more borrowed assets to finance their company, which is very
attractable to the investors, because it increases the earning power of the company. Though
some of their profitability ratios are not so good, this does not create more impact on the
company’s overall financial position.

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However, as a reasonable investor we should invest in Renata Pharmaceutical due to their
following financial conditions.

Appendix

https://renata-ltd.com/news-media/annual-report-archive/
https://renata-ltd.com/wp-content/uploads/2017/11/Annual-
Report-2016-2017.pdf

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https://renata-ltd.com/wp-content/uploads/2018/11/Annual-
Report-2017-18.pdf
https://renata-ltd.com/wp-content/uploads/2019/11/Annual-
Report-2018-19.pdf

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