Answer to the question 1

Profitability

Every firm is most concerned with its profitability. Beximco pharmaceuticals & Reneta
pharmaceuticals are the largest leading pharmaceuticals companies in Bangladesh. These two
companies are no exception. One of the most frequently used tools of financial ratio analysis is
profitability ratios. They are used to determine the company's bottom line for its managers and
its return on equity to its investors. On the other hand, profitability Measure the income or
operating success of a company for a given period of time. Management has to have a measure
of profitability in order to steer the business in the right direction. 

Gross Profit Margin

Gross profit margin = Gross profit / sales

For reneta company

For 2019-20 , Gross profit 11,531,114,720 , For 2018-19 Gross profit 22,220,887,119

Sales 12,632,907,753 sales 11,065,965,907

So for 19-20 , 0.91% gross profit margin has been emerged & 2.008 % . The gross profit
margin, which is the amount of sales revenue that can be devoted to utilities, inventory,
and manufacturing costs is consecutively 0.91% , 2.008% of sales. This indicates the
profit distorted than the previous year. So, It has been sold more than last year. The larger
the gross profit margin, the better for the company.

For beximco

2019-20 Gross profit 11,899,100,146 18-19 Gross profit 10,620,343,025

Sales 13,712,847,509 sales 12,196,286,770

So for 19-20 , 0.86% gross profit margin has been emerged & . The gross profit margin, which
is the amount of sales revenue that can be devoted to utilities, inventory, and manufacturing costs
is consecutively.for beximco , the gross profit margin is gradually increased from the previouis
year . The larger the gross profit margin, the better for the company and beximco financial year
stood at Tk370.60 crore, a 41.28% increase from Tk262.31 crore for the same period of
the last year . Growth 12.3%. from the previous year.

Return on Equity (ROE): Net income / stockholders equity

Return on Asset (ROA): Net income/ average total asset

Baximco

Net Income = 3544483000(20), 3040403000(19)

Average Shareholder Equity=

47729612000(20) , 28608080500(19)

ROE= 0.1081(20) ,0.1063(19)

10.81% & 10.63%.

ROE: Sustainable growth rates and dividend growth rates can be estimated using ROE.
Although there may be some challenges for baximco. ROE can be a good starting place for
developing future estimates of a stock’s growth rate and the growth rate of its dividends. In
2020 , return on equity is 10.18% which is moderate growth than the previous year 10.63%.
people often use risk free interest rate i.e one year fixed deposit rate as benchmark for ROE. On
the other hand, reneta pharmaceuticals ROE for the current year is 19.2% which is not consistent
with the previous year ROE which is 20.9%.and here, the previous year ROE is best for the
company

ROA: Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings. ROA is displayed as a percentage; the
higher the ROA the better. For baximco , in2020, 16.79 % return on asset this is weak than
previous and its good thing for the company. Besides, 2019, 11.75% that’s higher . I think , the
management of the compay is very efficient to get maximum return on profit,

Reneta is struggling with the ROA. In2020 , 10 % and 2019 11.10 % which is higher .The ROA
figure gives investors an idea of how effective the company is in converting the money it invests
into net income. The higher the ROA number, the better, Reneta pharmauciticals management
looks fragile because the company is notearning more money on less investment.

When we compare between two companies , beximco pharmaceuticals . ROE & ROA shows
how well the company uses investment funds to generate earnings growth .

Net profit margin : Net profit / sales