American International University, Bangladesh

Assignment
Submitted to: DR. MOHAMMED KAMRUL HASAN

Program: MBA
Course Title: Financial Management
Section: B
Topic Name: Financial Statement Analysis of Square
Pharmaceuticals
Submission Date: 03-12-2019
Submitted By:
Afsana Hossain
ID: 19-91092-1
Contents
SQUARE PHARMACEUTICALS LIMITED.........................................................................1
FINANCIAL STATEMENT ANALYISIS...............................................................................2
LIQUIDITY RATIOS:............................................................................................................3
Current Ratio:....................................................................................................................3
Quick Ratio:.......................................................................................................................4
ASSET MANAGEMENT RATIO:..........................................................................................5
Inventory Turnover Ratio:................................................................................................5
Fixed Asset Turnover Ratio...............................................................................................6
Total Asset Turnover Ratio...............................................................................................7
The Day’s Sales outstanding (DSO):.................................................................................8
DEBT MANAGEMENT RATIOS:.........................................................................................9
Debt ratio:..........................................................................................................................9
Total Debt to Equity Ratio...............................................................................................10
Equity Multiplier..............................................................................................................12
Times interest earned (TIE)............................................................................................13
PROFITABILITY RATIOS...................................................................................................14
Gross Profit Margin:........................................................................................................14
Net Profit Margin of Square Pharmaceuticals:...............................................................15
Return on Assets (ROA)..................................................................................................16
Return on Equity (ROE)Return on Equity=Net IncomeShareholders ' Equity.....................17
Operating Profit Margin..................................................................................................18
Basic Earning Power Ratio..............................................................................................19
MARKET VALUE RATIO...................................................................................................20
Earnings per Share (EPS)...............................................................................................20
Price/Earning (P/E) Ratio:.............................................................................................21
Book Value per Share......................................................................................................22
Market/Book (M/B) Ratio:.............................................................................................23
Receivables Turnover:.....................................................................................................24
Average Receivable Collection Period:...........................................................................25
Average Annual Turnover...............................................................................................26
Average Inventory Processing Period.............................................................................26
Payable Turnover Ratio:..................................................................................................27
 Payable Payment Period.................................................................................................28
DUPONT ANALYSIS..........................................................................................................29
Reference:............................................................................................................................31
SQUARE PHARMACEUTICALS LIMITED

SQUARE Pharmaceuticals Limited is the largest pharmaceutical company in

Bangladesh and it has been continuously in the 1st position among all national and
multinational companies since 1985. It was established in 1958, converted into a public
limited company in 1991 and listed with stock exchanges in 1995. The turnover of
Square Pharma was BDT 50.87 Billion (US$ 609.18 million) with about 16.95% market
share having a growth rate of about 10.85% (July 2018– June 2019). SQUARE
Pharmaceuticals Limited has extended its range of services towards the highway of
global market. It pioneered exports of medicines from Bangladesh in 1987 and has been
exporting antibiotics and other pharmaceutical products. Present export market covers
42 countries.
FINANCIAL STATEMENT ANALYISIS

Definition:
Financial statement analysis involves gaining an understanding of an
organization's financial situation by reviewing its financial reports. The results can be
used to make investment and lending decisions.
Advantages of Financial Statement Analysis:
Various advantages of financial statements analysis, the major benefit is that the
investors get enough idea to decide about the investments of their funds in the specific
company. Secondly, regulatory authorities like Bangladesh Security Exchange
Commission (BSEC) and Bangladesh Bank can ensure whether the company is following
accounting standards or not. Thirdly, financial statements analysis can help the
government agencies like National Board of Revenue (NBR) to analyze the taxation due
to the company. Moreover, company can analyze its own performance over the period of
time through financial statements analysis.
Ratio Analysis:
A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical
values taken from an enterprise's financial statements. Financial ratios are useful
indicators of a firm's performance and financial situation. Ratios are calculated from
current year numbers and are then compared to previous years, other companies, the
industry, or even the economy to judge the performance of the company.
Ratio’s Classification:
Financial ratios can be classified according to the information they provide. The
following types of ratio frequently are used:

 Liquidity ratios
 Asset management ratios
 Debt management ratios
 Profitability ratios
 Market value ratios.
LIQUIDITY RATIOS:

Liquidity ratios measure the availability of cash to pay debt.

Different types of liquidity ratios are discussed below:
 Current ratio
 Quick/ Acid Test

Current Ratio:

Current Ratio = Current Assets / Current Liabilities.

Current ratios of Current Ratio in different years
YEAR Current Asset Current Liabilities Ratio

2018
27,196,589,272 5,539,791,081 4.909316773
2017
22,268,597,918 3,505,604,271 6.35228514
2016
17,053,294,946 2,581,821,574 6.605140773
2015
16,591,216,771 3,762,877,346 4.409183517

Chart:
Interpretation of Current ratio of Square Pharmaceuticals:
The above graph shows that, in 2018 the current ratio of Square pharmaceuticals limited
was 4.90; it means Square pharmaceuticals limited has 4.90 taka of current assets
against 1 taka of current liabilities, just same as 2018 other 2017 to 2015 year it may also
repay its current liabilities. In this graphical representation it is quite apparent that their
current ratio was capable of paying its obligations. The company was in good financial
health and it was definitely a good sign. The company had used its current assets or its
short-term financing facilities with efficiently.

Quick Ratio:

Current Assets−Inventories
Quick ratio=
Current Liabilities

Quick/ acid test ratios of Square Pharmaceuticals in different years:

Years Current Assets Inventories Current Ratio

Liabilities
2018 27,196,589,272 3,642,090,783 5,539,791,081 4.251874871
2017 22,268,597,918 2,988,121,604 3,505,604,271 5.499900965
 2016 17,053,294,946 2,947,663,942 2,581,821,574 5.46344145
2015 16,591,216,771 2,717,734,814 3,762,877,346 3.686934407

Chart:

Interpretation of Quick ratio of Square Pharmaceuticals:

A higher quick ratio is preferable because it means greater liquidity. Quick ratio more
than 1 indicates that the company has more liquid assets which exceed its current debt.
If a firm having a high liquidity ratio may not have a satisfactory liquidity position if it
has slow-paying debtors. While both ratios suggest that the firm is more liquid, the
current ratio appears to suggest more liquidity than the acid-test ratio, which means
that the inventory is a larger component of the current ratio than for other firms.

ASSET MANAGEMENT RATIO:

Asset management ratio is a set of ratios that measure how effectively a firm manages its
assets compared to its sales.
There are Four types of asset management ratios are discussed below:
 Inventory turnover ratio;
 Fixed asset turnover ratio;
 Total asset turnover ratio;
 The Day’s sales outstanding (DSO).

Inventory Turnover Ratio:

Cost of goods sold

Inventory turnover =
Inventory
The Inventory Turnover ratio of Square Pharmaceuticals in different years:
YEAR Cost of goods sold Inventory Ratio

2018
15,598,608,803 3,642,090,783 4.282872046
2017
14,824,352,515 2,988,121,604 4.961094119
2016
15,001,867,421 2,947,663,942 5.089409009
2015
14,898,344,299 2,717,734,814 5.481897727

Chart:

Interpretation of Inventory turnover ratio of Square Pharmaceuticals:

It is an activity / efficiency ratio and it measures how many times per period, a business
sells and replaces its inventory again. Inventory turnover ratio is used to measure the
inventory management efficiency of a business In general, a higher value indicates
better performance and lower value means inefficiency in controlling inventory levels. A
lower inventory turnover ratio may be an indication of overstocking which may pose risk
of obsolescence and increased inventory holding costs. However, a very high turnover
may result in loss of sales due to inventory shortage.

Fixed Asset Turnover Ratio

Sales
¿ AssetsTurnover ratio=
¿ Assets
The FATO ratios of Square Pharmaceuticals in different years:
Year Sales Fixed Asset Ratio
2018 30,004,974,891 26,132,724,160 1.148176314
2017 28,885,939,051 23,494,648,133 1.229468894
2016 29,058,349,851 22,121,390,658 1.313586035
2015 28,640,677,879 21,774,375,722 1.315338646

Chart:

Interpretation of Fixed Asset Turnover Ratio of Square Pharmaceuticals:

The above graph shows upward trend of fixed asset turnover ratio for Square from 2015
to 2018 but a downward in 2018. The lower turnover in 2018 occurred because sales did
not keep pace with the increase of company’s fixed assets. This lower fixed-asset
turnover ratio shows that Square Pharmaceuticals limited had less effectiveness in using
the investment in fixed assets to generate its revenues.
Total Asset Turnover Ratio

Sales
Total Assets Turnover=
Total Assets
The TATO ratios of Square Pharmaceuticals in different years.
Year Sales Total Assets Ratio
2018 30,004,974,891 53,329,313,432 0.562635687
2017 28,885,939,051 45,763,246,051 0.631203893
2016 29,058,349,851 39,174,685,604 0.741763448
2015 28,640,677,879 38,365,592,493 0.74651989

Chart:

Interpretation of Total Asset Turnover of Square Pharmaceuticals:

The asset turnover ratio is increasing which indicate that Square Pharmaceuticals
limited was generating a sufficient volume of revenue given to its total asset investment.
But from 2018 to 2017 ratio is little lower than other three years. It may be an indicator
of company’s pricing strategy as company with high profit margins tends to have low
asset turnover. To increase this ratio Square Pharmaceuticals limited had to utilize its
sources of fund on those assets which have brought more revenue to the Company.
The Day’s Sales outstanding (DSO):

Trade Debtors x 365

Days Sales Outstanding ( DSO )=
Sales
The DSO Ratio (Days) of Square Pharmaceuticals in different years:
Year Trade Debtors × 365 Sales Ratio (Days)

2018 1,587,211,300× 365 30,004,974,891 19.307869

2017 2,188,447,720× 365 28,885,939,051 27.65301888
2016 1,329,754,444× 365 29,058,349,851 16.70295714
2015 837,885,610× 365 28,640,677,879 10.67810786

Chart:

Interpretation of Days Sales Outstanding of Square Pharmaceuticals:

The above graph shows that, DSO ratio of Square Pharmaceuticals limited has increased
in 2016 and 2017 rather than 2015 but then decreased consistently afterwards 2018; it
means Square Pharmaceuticals limited is doing excellent which reflects better credit
policy of the company and the customers were taking shorter times to pay their bills,
which is a good sign that customers were very satisfied with the company's product or
service, or that salespeople were making sales to customers who were credit-worthy, or
that salespeople have to offer shorter payment terms in order to seal the deal. So, the
DSO ratio decreasing means that a business is locking up less of its funds in accounts
receivable, and so can use the funds for other purposes.
DEBT MANAGEMENT RATIOS:

Debt management ratios measure the extent to which a firm is using debt financing, or
financial leverage, and the degree of safety afforded to creditors. Debt Management
ratios help to evaluate a company's long-term solvency measuring the extent to which
the company is using long-term debt.
Different types of Debt Management ratio are discussed below:

1. Debt ratio;
2. Total Debt to Equity Ratio;
3. Equity Multiplier;
4. Times interest earned (TIE).

Debt ratio:

Total Debt
Total Debt to Asset Ratio/Debt Ratio =
Total Assets
The Debt ratios of Square Pharmaceuticals in different years:
Year Total Debt Total Assets Ratio
2018 6,666,437,054 53,329,313,432 0.125005117
2017 4,561,283,740 45,763,246,051 0.099671333
2016 3,577,622,513 39,174,685,604 0.091324856
2015 4,729,064,906 38,365,592,493 0.123263179

Chart:
Interpretation of Debt ratio of Square Pharmaceuticals:
The above graph shows that from the year 2015 to 2018 the ratios were 0.1250, 0.0996,
0.0913 and 0.1232 which have decreased year after year considerably which is a good
sign for the company, because the lower debt ratio may decrease the financial risk of
Square Pharmaceuticals. But in 2018 this ratio increases 0.1250, which is not good for this
company.

Total Debt to Equity Ratio

Total Debt
Total debt ¿ equity Ratio =
Total Equity

The Debt to Equity Ratio of Square Pharmaceuticals in different years.

Year Total Debt Total Shareholder’s Equity Ratio
2018 6,666,437,054 46,662,876,378 0.142863826
2017 4,561,283,740 41,201,962,311 0.110705498
2016 3,577,622,513 35,597,063,091 0.100503306
2015 4,729,064,906 33,636,527,587 0.140593136

Chart:
Interpretation of Debt to equity ratio of Square Pharmaceuticals:
A debt-to-equity ratio 1.00 means that half of the assets of a business are financed by
debts and half by shareholders' equity. A value higher than 1.00 means that more assets
are financed by debt that those financed by money of shareholders' and vice versa. It
also means that a company has been aggressive in financing its growth with debt. This
can result in volatile earnings as a result of the additional interest expense. Lower values
of debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is
unfavorable because it means that the business relies more on external lenders thus
exposing the firm at higher risk, especially at higher interest rates.

Equity Multiplier

Total Assets
Equity Multiplier=
Total Shareholder s' Equity
The Equity Multiplier Ratio of Square Pharmaceuticals in different years:
Year Total Assets Total Shareholder’s Equity Ratio
2018 53,329,313,432 46,662,876,378 1.142863826
2017 45,763,246,051 41,201,962,311 1.110705498
2016 39,174,685,604 35,597,063,091 1.100503306
2015 38,365,592,493 33,636,527,587 1.140593136

Chart:
Interpretation of Equity multipliers of Square Pharmaceuticals:
The higher the equity multiplier ratio the lower the financial leverage and the lower the
ratio the higher the financial leverage. A higher equity multiplier ratio indicates the
company is relying less on debt to finance its assets. Higher equity multiplier leads to a
higher return on equity. In 2017 and 2016 it falls down that indicates it has higher
leverage that is not good.

Times interest earned (TIE)

EBIT
Time-Interest-Earned Ratio =
Interest Charges
The Time-Interest-Earned of Square Pharmaceuticals in different years.
Year EBIT Interest Charges Ratio
2018 10,825,054,727 85,450 126682.9108
2017 10,366,856,810 148,392 69861.29178
2016 9,943,835,629 4,872,127 2040.963963
2015 9,604,875,517 10,583,643 907.520739

Chart:
Interpretation of Times Interest Earned of Square Pharmaceuticals:
Times Interest Earned or Interest Coverage is a great tool when measuring a company's
ability to meet its debt obligations. A lower times interest earned ratio means less
earnings are available to meet interest payments and that the business is more
vulnerable to increase in interest rates. Higher value of times interest earned ratio is
favorable meaning greater ability of a business to repay its interest and debt. Generally,
companies would aim to maintain interest coverage of at least 2 times. A very high
interest cover may suggest the fact that the company is not capitalizing on the relatively
cheaper source of finance (i.e. debt) and in such instances an increase in leveraging ratio
may actually add value to the enterprise.

PROFITABILITY RATIOS

Profitability ratios measure the company's use of its assets and control of its expenses to
generate an acceptable rate of return. Profitability is the net result of a number of
policies and decisions. Profitability ratios show the combined effects of liquidity, asset
management and debt on operating results.
Different types of Profitability ratios are discussed below:
 Gross Profit Margin;
 Net Profit Margin;
 Return on Asset;
 Return on Equity;
 Operating profit margin;
 Basic Earning Power Ratio.
Gross Profit Margin:

Gross Profit
Gross Profit Margin=
Sales
The Gross Profit Margin of Square Pharmaceuticals in different years:
Year Gross Profit Sales Ratio
2018 14,406,366,088 30,004,974,891 0.480132583
2017 14,061,586,536 28,885,939,051 0.486796933
2016 14,056,482,430 29,058,349,851 0.483732989
2015 13,742,333,580 28,640,677,879 0.479818726
Chart:

Interpretation of Gross profit margin ratio of Square pharmaceuticals:

Gross margin ratio measures profitability. The Gross Profit Margin has remained pretty
much stable throughout the whole three years. It increased very slowly each year. It
indicates that Square Pharmaceutical is managing its sales and gross profit very well. As
sales were increasing so were the gross profits.

Net Profit Margin of Square Pharmaceuticals:

Net Income
Net Profit Margin=
Sales
The Net Profit Margin of Square Pharmaceuticals in different years
Year Net Income Sales Ratio
2018 7,861,722,267 30,004,974,891 0.262013959
2017 8,099,245,404 28,885,939,051 0.280387125
2016 7,507,095,819 29,058,349,851 0.258345565
2015 7,267,532,936 28,640,677,879 0.253748636
Chart:

Interpretation of Net profit margin ratio of Square Pharmaceuticals:

Profit margin is displayed as a percentage; 26% profit margin, for example, means the
company has a net income of Tk.0.26 for Tk. 1 of sales. A higher profit margin indicates
a more profitable company that has better control over its costs compared to its
competitors.

Return on Assets (ROA)

Net Income
Returnon Asset=
Total Assets
The Return on Total Assets of Square Pharmaceuticals in different years:

Year Net Income Total Assets Ratio

2018 7,861,722,267 53,329,313,432 0.147418404
2017 8,099,245,404 45,763,246,051 0.176981445
2016 7,507,095,819 39,174,685,604 0.191631297
2015 7,267,532,936 38,365,592,493 0.189428404
Chart:

Interpretation of Return on total assets ratio of Square Pharmaceuticals:

Return on total assets indicates the number of paisa earned on each taka of assets. Thus,
higher values of return on assets show that business is more profitable. An increasing
trend of ROA indicates that the profitability of the company is improving. Conversely, a
decreasing trend means that profitability is deteriorating. This may have occurred in
2018 because it had used more debt financing in 2018 compared to 2015 which resulted
in more interest expenses and brought the net income down.

Net Income
Return on Equity (ROE) Return on Equity=
Shareholder s ' Equity

The Return on Equity of Square Pharmaceuticals in different years:

Year Net Income Total Shareholder’s Equity Ratio
2018 7,861,722,267 46,662,876,378 0.168479161
2017 8,099,245,404 41,201,962,311 0.196574264
2016 7,507,095,819 35,597,063,091 0.210890876
2015 7,267,532,936 33,636,527,587 0.216060737
Chart:

Interpretation of Return on equity ratio of Square Pharmaceuticals:

After doing the analysis from Square Pharmaceuticals limited financial statements it is
shows in the years 2015 to 2018, the return from 100 taka invested by the shareholders
was respectively 22%, 21%, 20% and 17.%. The higher the percentage is the better for the
company as well as for shareholders it also means that the company is efficient in
generating income on new investment. Square Pharmaceuticals limited had higher ROE
in 2015, after 2015 their ROE gradually decreased so it can be said that the rate of return
from equity is almost constant at around 18% which is quite good but investors may ask
for higher return.

Operating Profit Margin

Operting Income
Operating profit margin =
Sales
The Operating profit margin of Square Pharmaceuticals in different years.
Year Operating income Sales Ratio
2018 7,722,046,335 30,004,974,891 0.257358867
2017 8,169,344,686 28,885,939,051 0.282813886
2016 8,910,591,464 29,058,349,851 0.306644786
2015 8,700,335,458 28,640,677,879 0.303775473
Chart:

Interpretation of operating profit margin ratio of Square Pharmaceuticals:

A higher value of operating margin ratio is favorable which indicates that more
proportion of revenue is converted to operating income. An increase in operating
margin ratio overtime means that the profitability is improving.

Basic Earning Power Ratio

EBIT
Basic Earning Power Ratio =
Total Assets
The Basic Earning Power Ratio of Square Pharmaceuticals in different years
Year EBIT Total Assets Ratio
2018 10,825,054,727 53,329,313,432 0.202985076
2017 10,366,856,810 45,763,246,051 0.226532375
2016 9,943,835,629 39,174,685,604 0.253833195
2015 9,604,875,517 38,365,592,493 0.250351289

Chart:
Interpretation of the change of basic earning power ratio:

The higher the BEP ratio, the more effective a company is at generating income from its
assets. BEP, like all profitability ratios, does not provide a complete picture of which
company is better or more attractive to investors.

MARKET VALUE RATIO

Market value ratios measure investor response to owning a company's stock and also the
cost of issuing stock. These are concerned with the return on investment for
shareholders, and with the relationship between return and the value of an investment
in company’s shares.
Different types of Market Value ratios are discussed below
1. Price/Earnings Ratio (P/E)
2. Market/Book Ratio (M/B)

Earnings per Share (EPS)

Net Earning
Earnings per share (EPS) =
Number of Shares

The Earnings per Share (EPS) of Square Pharmaceuticals in different years.

 Year EPS
2018 11.15
2017 10.57
2016 10.95
2015 12

Chart:

Interpretation of the change of earning per share ratio:

EPS of Square Pharmaceuticals limited has been decreasing rate over the years. This is
not good news because this will not help to attract the investors and thus the company
can collect more money from stock market.

Price/Earning (P/E) Ratio:

Market Price Per Share

P/E Ratio =
Earning per Share

The Price/Earning (P/E) Ratio of Square Pharmaceuticals in different years

Year Market Price Per Share (DSE) Earnings Per Share Ratio
2018 82.75 11.15 7.421524664
2017 79.85 10.57 7.554399243
2016 77.7 10.95 7.095890411
2015 77.8 12 6.683848797
Chart:

Interpretation of the change of P/E ratio:

From the above graph, the price/earnings ratio of Square Pharmaceuticals is
significantly decrease over the years which are an alarming signal for the potential
investors.

Book Value per Share

Equity
Book Value per Share =
Number of Shares Outstanding

The Book Value per Share of Square Pharmaceuticals in different years

Year Equity Numbers of Shares Book Value per Share
2018 46,662,876,378 1,000,000 63.28104178
2017 41,201,962,311 1,000,000 55.8753189
2016 35,597,063,091 1,000,000 51.89490806
2015 33,636,527,587 1,000,000 53.94043185
Chart:

Interpretation of the change of book value per share ratio:

The book value per share of Square Pharmaceuticals limited is increasing over the years
from 2015 to 2018 and increasing trend of Square Pharmaceuticals limited in book value
per share is a good indicator for the company.

Market/Book (M/B) Ratio:

Market Price Per Share

Market/Book (M/B) Ratio =
Book Value Per Share

The Market/Book (M/B) Ratio of Square Pharmaceuticals in different years.

Year Market Price Per Share Book Value per Share Ratio
2018 82.75 63.28104178 1.307658624
2017 79.85 55.8753189 1.429074618
2016 77.7 51.89490806 1.497256723
2015 77.8 53.94043185 1.442331797
Chart:

Interpretation of the change of market to book value ratio:

The above graph shows the market to book value per share of Square pharmaceuticals
limited from 2015 to 2018. The last three years Market/Book (M/B) ratio has increased
which means Investors are willing to pay more for the book value. The main reason
behind the decline of M/B ratio is the issuance of more shares as stock dividend. Price of
the share of Square Pharmaceuticals may fall for several reasons. Failing to meet market
expectations is one of the main reasons for the market to lose interest in a share and also
the whole share market crashes in 2018which still maintained its bear trend.

Receivables Turnover:

Net Annual Sales

Receivable Turnover =
Average Receivables
The Receivable Turnover of Square Pharmaceuticals in different years:
Year Net Annual Sales Average Receivable RT
2018 30,004,974,891 348196777 86.1724659
2017 28,885,939,051 34092566799 0.847279679
2016 29,058,349,851 33958742254 0.855695704
2015 28,640,677,879 17,182,652,595 1.666836812
Chart:

Average Receivable Collection Period:

365
Average Receivable Collection Period =
Receivable Turnover
The Receivable Collection Period of Square Pharmaceuticals in different years
Year Receivable Collection Period RCP
2018 365/86.1724659 4.235691717
2017 365/0.847279679 430.7904569
2016 365/0.855695704 426.5535031
2015 365/1.666836812 218.9776451
Chart:
Interpretation
These results indicate that square pharmaceuticals collected its accounts receivables in
days on average and collection period had increased slightly over the recent years. To
determine whether these receivables collection numbers are good or bad, it is essential
that they be related to the company’s credit policy and to comparable collection figures
for other companies in the industry.

Average Annual Turnover

Cost of Goods Sold

Average Annual Turnover =
Average Inventory
The Average Annual Turnover of Square Pharmaceuticals in different years:
Year Cost of goods Sold Average Inventory Ratio
2018 15,598,608,803 766765487 20.3433893
2017 14,824,352,515 2967892773 4.994908391
2016 15,001,867,421 2,852,928,209 5.25841042
2015 14,898,344,299 2,531,562,151 5.885039912
.
Chart:

 Average Inventory Processing Period

365
 Average Inventory Processing Period =
Average Annual Turnover
The Inventory Processing Period of Square Pharmaceuticals in different years:
 Year Average Inventory Processing Period IPP
2018 365/20.3433893 17.94194638
2017 365/4.994908391 73.07441327
2016 365/5.25841042 69.41261158
2015 365/5.885039912 62.02166943

Chart:

Interpretation

This seems like a good turnover figure but it is essential to examine this figure relative to
an industry norm and/or the company’s prime competition. An abnormally high
Average Annual Turnover could mean inadequate inventory that could lead to outages,
backorders, and slow delivery to customers. On the other hand, low Average Annual
Turnover value and processing time indicate that capital is being tied up in inventory
and could signal obsolete inventory.

Payable Turnover Ratio:

Cost of Good Sold

Payable Turnover Ratio =
Average Trade Payable
The Payable Turnover Ratio of Square Pharmaceuticals in different years:
Year Cost of goods Sold Average Trade Payable Ratio
2018 15,598,608,803 3417780171 4.563959068
 2017 14,824,352,515 684348360.5 21.66199756
2016 15,001,867,421 737920558 20.32992205
2015 14,898,344,299 426,453,189 34.93547401

Chart:

Payable Payment Period

365
Payable Payment Period =
Payable Turnover
The Payable Payment Period of Square Pharmaceuticals in different years:
Year Payable Payment Period
2018 9.55056E-06
2017 1.01345E-05
2016 1.01296E-05
2015 1.16618E-05
Chart:

Interpretation
A higher value indicates that the business was able to repay its suppliers quickly. Thus,
higher value of accounts payable turnover is favorable. This ratio can be of great
importance to suppliers since they are interested in getting paid early for their supplies.
Other things equal, a supplier should prefer to sell to a company with higher payable
turnover ratio.

DUPONT ANALYSIS

A method of performance measurement that was started by the DuPont Corporation in

the 1920s. With this method, assets are measured at their gross book value rather than
at net book value in order to produce a higher return on equity (ROE). It is also known
as “DuPont identity”.
DuPont analysis tells us that ROE is affected by three things:
 Operating efficiency, which is measured by profit margin
 Asset use efficiency, which is measured by total asset turnover
 Financial leverage, which is measured by the equity multiplier.

ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity

Multiplier (Assets/Equity)
DUPONT ANALYSIS of Square Pharmaceuticals in different years:
Year Profit Margin Total Asset Turnover Equity Multiplier Ratio
2018 0.262013959 0.562635687 1.142863826 0.168479161
2017 0.280387125 0.631203893 1.110705498 0.196574264
2016 0.258345565 0.741763448 1.100503306 0.210890876
2015 0.253748636 0.74651989 1.140593136 0.216060737

Chart:

Interpretation
In 2015, ROE=21.6%, in 2016 ROE=21.01%, and in 2017, ROE=19.7% means, by using
the shareholder’s equity. That means, the company gradually decreases its return on
equity.
Reference:

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