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Financial Statement Analysis of Beximco Pharmaceuticals Limited
Course Title: Principles of Accounting

Course Code:EMIS-504

Semester: Spring 2020

Department: Management Information System

Submitted by

Md.Ehsanul Islam Biswas

Id:6194235027

Maisha Anzum

Id:6194235053

Samsunnahar Eti

Id:6194235038

Submitted to

Mohammad Tariqul Islam, Assistant Prof.

Management Information System

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Financial Statement Analysis

Financial statement analysis is the process of reviewing and analyzing a company's financial
statements to make better economic decisions to earn income in future. These statements
include the income statement, balance sheet, statement of cash flows, notes to accounts and a
statement of changes in equity. Real World Example of Financial Statement is, the balance
sheet's underlying equation is

Assets = Liabilities + Shareholders' Equity. In other words, a company raises money through
debt (liabilities) and/or contributions from owners (equity) and uses it to buy assets.

We use three basic tools in financial statement analysis to highlight the significance of financial
statement data:

1. Horizontal analysis 2. Vertical analysis 3. Ratio analysis

Horizontal Analysis : Horizontal analysis, also known as trend analysis, is a technique for
evaluating a series of financial statement data over a period of time. Its purpose is to determine
the increase or decrease that has taken place, expressed as either an amount or a percentage.

Vertical analysis: Vertical analysis, also called common-size analysis, is a technique for
evaluating financial statement data that expresses each item in a financial statement as a
percentage of a base amount. For example, on a balance sheet we might express current assets
as 22% of total assets (total assets being the base amount). Or, on an income statement we
might express selling expenses as 16% of net sales (net sales being the base amount).

Ratio analysis: Ratio analysis expresses the relationship among selected items of financial
statement data. A ratio expresses the mathematical relationship between one quantity and
another. The relationship is expressed in terms of either a percentage, a rate, or a simple
proportion.

Financial ratio classifications are:

Liquidity Ratios

Liquidity ratios measure the short-term ability of the company to pay its maturing obligations
and to meet unexpected needs for cash. Short-term creditors such as bankers and suppliers are
particularly interested in assessing liquidity. The measures used to determine the company’s
short-term debt-paying ability are the current ratio, the accounts receivable turnover, the
average collection period, the inventory turnover, and days in inventory.

1.Current ratio: The current ratio expresses the relationship of current assets to current
liabilities, computed by dividing current assets by current liabilities. It is widely used for
evaluating a company’s liquidity and short-term debt-paying ability.

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒆𝒔

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2.Acid-test ratio :In finance, the quick ratio, also known as the acid-test ratio is a type of
liquidity ratio, which measures the ability of a company to use its near cash or quick assets to
extinguish or retire its current liabilities immediately.

𝑨𝒄𝒊𝒅 − 𝑻𝒆𝒔𝒕 𝑹𝒂𝒕𝒊𝒐

𝑪𝒂𝒔𝒉 + 𝑺𝒉𝒐𝒓𝒕 − 𝑻𝒆𝒓𝒎 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 + 𝑨𝒄𝒄𝒐𝒖𝒏𝒕 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆(𝑵𝒆𝒕)
=
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

3. Accounts receivable turnover: Analysts can measure liquidity by how quickly a company
converts certain assets to cash. A low value for the current ratio can sometimes be compensated
for if some of the company’s current assets are highly liquid.
𝑵𝒆𝒕 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆
𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑵𝒆𝒕 𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆

4.Inventory turnover: The inventory turnover measures the number of times average
inventory was sold during the period. Its purpose is to measure the liquidity of the inventory.
A high measure indicates that inventory is being sold and replenished frequently. The inventory
turnover is computed by dividing the cost of goods sold by the average inventory during the
period.
𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅
𝑰𝒏𝒆𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

Profitability Ratios

Profitability ratios measure the income or operating success of a company for a given period
of time. A company’s income, or lack of it, affects its ability to obtain debt and equity financing,
its liquidity position, and its ability to grow. As a consequence, creditors and investors alike
are interested in evaluating profitability. Profitability is frequently used as the ultimate test of
management’s operating effectiveness.

Profit margin :The return on assets is affected by two factors, the first of which is the profit
margin. The profit margin, or rate of return on sales, is a measure of the percentage of each
dollar of sales that results in net income. It is computed by dividing net income by net sales for
the period.
𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆

Asset turnover: The other factor that affects the return on assets is the asset turnover. The asset
turnover measures how efficiently a company uses its assets to generate sales. It is determined

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by dividing net sales by average total assets for the period. The resulting number shows the
dollars of sales produced by each dollar invested in assets.

𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
𝑨𝒔𝒔𝒆𝒕 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔

Return on common stockholders’ equity (ROE): A widely used measure of profitability

from the common stockholder’s viewpoint is the return on common stockholders’ equity
(ROE). This ratio shows how many dollars of net income the company earned for each dollar
invested by the owners. It is computed by dividing net income minus any preferred dividends—
that is, income available to common stockholders—by average common stockholders’ equity.

𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑪𝒐𝒎𝒎𝒐𝒏 𝑺𝒕𝒐𝒄𝒌𝒉𝒐𝒍𝒅𝒆𝒓𝒔′ 𝑬𝒒𝒖𝒊𝒕𝒚

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒐𝒎𝒎𝒐𝒏 𝑺𝒕𝒐𝒄𝒌𝒉𝒐𝒍𝒅𝒆𝒓𝒔′ 𝑬𝒒𝒖𝒊𝒕𝒚

Return on assets: The return on common stockholders’ equity is affected by two factors: the
return on assets and the degree of leverage. The return on assets measures the overall
profitability of assets in terms of the income earned on each dollar invested in assets. It is
computed by dividing net income by average total assets.

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑨𝒔𝒔𝒆𝒕𝒔 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕

Earnings per share (EPS): Stockholders usually think in terms of the number of shares they
own or plan to buy or sell. Expressing net income earned on a per share basis provides a useful
perspective for determining profitability. Earnings per share is a measure of the net income
earned on each share of common stock. It is computed by dividing net income by the average
number of common shares outstanding during the year.

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 − 𝑷𝒓𝒆𝒇𝒆𝒓𝒓𝒆𝒅 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔

𝑬𝒂𝒓𝒏𝒊𝒏𝒈 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆 =
𝑾𝒆𝒊𝒈𝒉𝒕𝒆𝒅 𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒐𝒎𝒎𝒐𝒏 𝑺𝒉𝒂𝒓𝒆𝒔 𝑶𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈

Price-earnings ratio. The price-earnings ratio is an oft-quoted statistic that measures the ratio
of the market price of each share of common stock to the earnings per share. The price-earnings
(P-E) ratio reflects investors’ assessments of a company’s future earnings. It is computed by
dividing the market price per share of the stock by earnings per share.

𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆

𝑷𝒓𝒊𝒄𝒆 𝑬𝒂𝒓𝒏𝒊𝒏𝒈 𝑹𝒂𝒕𝒊𝒐 =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆

Payout ratio: The payout ratio measures the percentage of earnings distributed in the form of
cash dividends. It is computed by dividing cash dividends declared on common stock by net
income. Companies that have high growth rates are characterized by low payout ratios because
they reinvest most of their net income in the business.

𝑪𝒂𝒔𝒉 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝑫𝒆𝒄𝒍𝒂𝒓𝒆𝒅 𝒐𝒏 𝑪𝒐𝒎𝒎𝒐𝒏 𝑺𝒕𝒐𝒄𝒌

𝑷𝒂𝒚𝒐𝒖𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆

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Solvency Ratios Solvency ratios measure the ability of the company to survive over a long
period of time. Long-term creditors and stockholders are interested in a company’s long run
solvency, particularly its ability to pay interest as it comes due and to repay the balance of debt
at its maturity.

Debt to assets ratio. The debt to assets ratio measures the percentage of total financing
provided by creditors. It is computed by dividing total liabilities (both current and long term
debt) by total assets. This ratio indicates the degree of financial leveraging. It also provides
some indication of the company’s ability to withstand losses without impairing the interests of
its creditors.

𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑫𝒆𝒃𝒊𝒕 𝒕𝒐 𝑨𝒔𝒔𝒆𝒕𝒔 𝒓𝒂𝒕𝒊𝒐 =
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕
Times interest earned: The times interest earned (also called interest coverage) indicates the
company’s ability to meet interest payments as they come due. It is computed by dividing the
sum of net income, interest expense, and income tax expense by interest expense.

𝑻𝒊𝒎𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑬𝒂𝒓𝒏𝒆𝒅

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 + 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑬𝒙𝒑𝒆𝒏𝒔𝒆 + 𝑰𝒏𝒄𝒐𝒎𝒆 𝑻𝒆𝒙𝒕 𝑬𝒙𝒑𝒆𝒏𝒔𝒆
=
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝑬𝒙𝒑𝒆𝒏𝒔𝒆

Financial Statement analysis of Beximco Pharmaceuticals Limited

This report is an analysis on financial statement of Beximco Pharmaceuticals Limited. The

main purpose of this report is to find out how well the company performs. We have collected
data from the annual financial reports on Beximco in 2017 to 2019. For analyzing the data we
have used financial ratios such as Liquidity Ratios, financial leverage ratios, coverage ratios,
activity ratios. We use graphical analysis for the measurement of all types of financial ratio
analysis. We hope this report will be helpful for the Beximco. The management of the company
can take decision and formulating plans for future on the basis of this report. It will also help
the creditors to take decision whether they should provide loan capital or not. We have tried to
give some advice based on their problems that we found from the analysis. So this report will
show a clear picture about Beximco’s performance in the year of 2019, 2018, and
2017.Beximco Pharmaceuticals Ltd (Beximco Pharma) is an emerging generic drug player
committed to providing access to affordable medicines. Company’s state-of-the-art
manufacturing facilities have been accredited by the regulatory authorities of USA, Australia,
European Union, Canada, and Brazil, among others, and it currently focuses on building
presence in many emerging and developed markets around the world. Beximco Pharma is
consistently building upon its portfolio and currently producing more than 500 products
encompassing broad therapeutic categories and the Company has created strong differentiation
by offering a range of high-tech, specialized products which are difficult to imitate.

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Current Ratio:

The Illustration shows the 2018,2019 Current Ratio for Beximco Pharma:

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒆𝒔
𝟐𝟎𝟏𝟗

12,793,492,489
= 1.07: 1
11,895,847,518

𝟐𝟎𝟏𝟖

10832521567
= 1.33: 1
8,096,861,126

Ratio of 1.07:1 means that for every amount of current liabilities, Beximco has 1.07 of current
assets. Beximco’s Current ratio has decreased in the current year.

Acid-Test Ratio:

The Illustration shows the 2018,2019 Acid-Test Ratio for Beximco Pharma:

𝑨𝒄𝒊𝒅 − 𝑻𝒆𝒔𝒕 𝑹𝒂𝒕𝒊𝒐

𝑪𝒂𝒔𝒉 + 𝑺𝒉𝒐𝒓𝒕 − 𝑻𝒆𝒓𝒎 𝑰𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 + 𝑨𝒄𝒄𝒐𝒖𝒏𝒕 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆(𝑵𝒆𝒕)
=
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝟐𝟎𝟏𝟗

582,306,048 + 323,364,536 + 3,325,890,597

= 0.3557 ∶ 1
11,895,847,518

𝟐𝟎𝟏𝟖

369,108,554 + 339,397,174 + 2,736,944,147

= 0.425 ∶ 1
8,096,861,126

The Acid-Test ratio has declined in 2019.

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Accounts receivable Turnover:

The Illustration shows the 2018,2019 Accounts receivable Turnover for Beximco Pharma:

𝑵𝒆𝒕 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆

𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑵𝒆𝒕 𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝑹𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆

𝟐𝟎𝟏𝟗

21,156,331,039
= 3.489 𝑡𝑖𝑚𝑒𝑠
3,325,890,597 + 2,736,944,147

𝟐𝟎𝟏𝟖

17,380,728,001
= 3.54 𝑡𝑖𝑚𝑒𝑠
2,736,944,147 + 2,167,339,867

In computing the rate, we assumed that all Beximco’s sales are credit sales. Its accounts
receivable turnover declined slightly in 2019 and slightly lower than 2018 turnover of 3.54
times.

Inventory Turnover:

The Illustration shows the 2018,2019 Inventory Turnover for Beximco Pharma:

𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅

𝑰𝒏𝒆𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

𝟐𝟎𝟏𝟗

11,365,929,686
= 1.12 𝑡𝑖𝑚𝑒𝑠
5,573,549,171 + 4,665,449,461

𝟐𝟎𝟏𝟖

9,255,504,681
= 1.138 𝑡𝑖𝑚𝑒𝑠
4,665,449,461 + 3,468,089,061

Beximco’s inventory turnover decreased slightly in 2019. The turnover of 1.12 times is higher
than similar to 2018,Generally, the faster the inventory turnover, the less cash is tied up in
inventory and the less the chance of inventory becoming obsolete. Of course, a downside of
high inventory turnover is that it sometimes results in lost sales because if a company keeps
less inventory on hand, it is more likely to run out of inventory when it is needed.

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Profit Margin:

The Illustration shows the 2018,2019 Profit Margin for Beximco Pharma:

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆
𝟐𝟎𝟏𝟗

3,021,648,415
= 14.8%
21,156,331,039

𝟐𝟎𝟏𝟖

2,559,452,960
= 14.5%
17,380,728,001

Beximco experienced a slight increase in its profit margin from 2018 to 2019 of 14.5% to
14.8%. Its profi t margin was higher than the average and that of 2018.

Asset Turnover:

The Illustration shows the 2018,2019 Asset Turnover for Beximco Pharma:

𝑵𝒆𝒕 𝒔𝒂𝒍𝒆𝒔
𝑨𝒔𝒔𝒆𝒕 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔

𝟐𝟎𝟏𝟗

21,156,331,039
= 0.235 𝑡𝑖𝑚𝑒𝑠
47,792,895,230 + 42,165,015,439

𝟐𝟎𝟏𝟖

17,380,728,001
= 0.22 𝑡𝑖𝑚𝑒𝑠
42,165,015,439 + 34,084,132,870

The asset turnover shows that in 2019, Beximco generated sales of 0.235 for each it had
invested in assets. The ratio quite rise from 2018 to 2019.

Return on Asset:

The Illustration shows the 2018,2019 Return on Asset for Beximco Pharma:

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝑨𝒔𝒔𝒆𝒕𝒔 =
𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝑻𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕

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 𝟐𝟎𝟏𝟗

3,021,648,415
= 33.5%
47,792,895,230 + 42,165,015,439

𝟐𝟎𝟏𝟖

2,559,452,960
= 32.5%
42,165,015,439 + 34,084,132,870

Beximco’s return on asset improved from 2018 to 2019 .It returns on sale 33.5% is quite high.

Price Earning Ratio:

The Illustration shows the 2018,2019 Price Earning Ratio for Beximco Pharma:

𝑴𝒂𝒓𝒌𝒆𝒕 𝒑𝒓𝒊𝒄𝒆 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆

𝑷𝒓𝒊𝒄𝒆 𝑬𝒂𝒓𝒏𝒊𝒏𝒈 𝑹𝒂𝒕𝒊𝒐 =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒑𝒆𝒓 𝑺𝒉𝒂𝒓𝒆

𝟐𝟎𝟏𝟗
107.80
=14.45 times
7.46

𝟐𝟎𝟏𝟖
104.80
=16.60 times
6.31

In 2019, each share of Beximco’s stock sold for 14.5 times the amount that the company earned
on share.

Debit to Asset Ratio:

The Illustration shows the 2018,2019 Debit to Asset Ratio for Beximco Pharma:

𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑫𝒆𝒃𝒊𝒕 𝒕𝒐 𝑨𝒔𝒔𝒆𝒕𝒔 𝒓𝒂𝒕𝒊𝒐 =
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕
𝟐𝟎𝟏𝟗

6,296,204,472 + 11,895,847,518
= 37%
47,792,895,230

𝟐𝟎𝟏𝟖

6,963,764,382 + 8,096,861,126
= 38.3%
42,165,015,439

A ratio of 37% means that creditors have provided 37% of Beximco’s total asset. The lower
the ratio the more equity .Thus from the creditors point of view ,a low ratio of debit to asset is
usually desirable.

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Recommendation

On the basis of above analysis the performance of Beximco was better in 2017-19, than that
of 2019. The overall ratio of Beximco can further be well if they can decrease accrued expenses,
inventory, debt or long-term debt, interest charges. Decreasing those amounts Beximco can
raise up/down which they actually need for ratio analysis. Beximco should regularly make use
of ratio analysis and measure should be taken to improve undesirable ratios.

http://beximco-pharma.com/investor/audited-annual-accounts-fo\r-2018-2019.pdf

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