FINANCIAL STATEMENT ANALYSIS

Of
The ACME Laboratories Ltd. (ACMELAB)
Submission Date: October 20, 2021

Submitted to:
DR. MOHAMMED KAMRUL HASAN
Associate Professor, Dept. of Finance
Faculty of Business Administration, AIUB

Submitted by: MD. AL-AMIN KHAN

ID: 20-91832-3
 Introduction:
In Bangladesh, ACME Laboratories Ltd. is a renowned manufacturer of world-class and high-
quality pharmaceutical products. They presently manufacture approximately 500 medications in
various dosage forms for a variety of therapeutic categories, including anti-infectives,
cardiovascular, antidiabetics, gastrointestinal, CNS, respiratory disease, and many more. Because
of Their success in the local market, they decided to expand into the international market. Over
the years, they have established a strong presence in Southeast Asia, Africa, and Central
America, and They are constantly exploring new horizons to improve the quality of life for
patients, to help Their customers succeed, and to help meet global challenges. They are
constantly expanding Their facilities, capabilities, and portfolio to meet the growing health care
needs, thanks to the great knowledge, professionalism, and commitment of over 7000 people.

Their purpose is to assure everyone's health, vitality, and happiness unites, inspires, and fuels
them. They have been committed to giving solutions to Their most important health care
requirements since Their founding in 1954 by Mr. Hamidur Rahman Sinha, an entrepreneur, and
philanthropist in this region of the then British divided Indian subcontinent.

Ratios:
Current Ratio
An indication of a company's ability to meet short-term debt obligations, the higher the ratio,
the more liquid the company is. The current ratio is calculated by dividing the firm’s current
asset by current liability.

Current Ratio = Current Asset ÷ Current Liability

Particulars 2016 2017 2018 2019 2020
Current 11,603,359,057 11,671,330,040 11,462,209,428 12,135,978,847 14,705,522,689
Asset(a)
Current 8,566,790,380 9,315,041,707 10,363,696,868 13,000,187,421 13,981,796,643
Liability(b)
Current 1.354458 1.252955 1.105996 0.933523 1.051762
ratio (a÷b)
Table: Current ratios of The ACME Laboratories Ltd in different years.
 Current Ratio
1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of Current ratio.

The above graph shows that in 2016 the current ratio of The ACME Laboratories Ltd was
1.354458; it means The ACME Laboratories Ltd has 1 taka of current liabilities against 1.354458
takas of current assets. It indicates The ACME Laboratories Ltd has the ability to pay off its
current liabilities with its current assets.
 Net Profit Margin Ratio
Net Profit Margin tells you the net profit that the business is earning per taka of sales. Net Profit
Margin is the ratio that measures net income per taka of sales and is calculated as net income
divided by revenues, or net profits divided by sales. It measures how much out of every taka of
sales a company keeps in earnings. Profit margin is very useful when comparing companies in
similar industries. s

Net Profit after Tax

Net Profit Margin=
Sales

Particulars 2016 2017 2018 2019 2020

Net Profit 1,101,267,794 1,397,849,938 1,426,570,996 1,440,378,843 1,450,497,730

Sales 12,644,913,144 13,576,322,298 14,813,914,266 16,308,627,037 19,003,659,657

Ratio 0.087091 0.102962 0.096299 0.08832 0.076327

Table: Net Profit Margin (NPM) ratios of The ACME Laboratories Ltd in different years.
 Net Profit Margin (NPM) Ratio
0.12

0.1

0.08

0.06

0.04

0.02

0
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of Net Profit Margin (NPM) Ratio.

The profit margin ratio in the year 2016 was 0.087091. The profit margin was increasing steadily
and then went down in 2019 and 2020. For example, the profit margin of 0.087091 means the
firm has a net income of Tk. 0.087091 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 and also
does possess some brand value. The main reason that the profit margin declined is the high cost.
High cost, in turn, generally occurs due to inefficient operations.
 Asset Turnover Ratio
The asset turnover ratio measures the value of a company's sales or revenues relative to the value
of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a
company is using its assets to generate revenue. The higher the asset turnover ratio, the more
efficient a company is at generating revenue from its assets. Conversely, if a company has a low
asset turnover ratio, it indicates it is not efficiently using its assets to generate sales.

Asset Turnover ratio = Total Sales ÷ Total Assets

Particulars 2016 2017 2018 2019 2020

Total sales 12,644,913,144 13,576,322,298 14,813,914,266 16,308,627,037 19,003,659,657

Total 28,889,710,630 29,947,231,509 32,624,246,240 35,921,599,389 39,418,263,182

Assets
Ratio 0.437696 0.453341 0.454076 0.454006 0.482102

Table: Asset Turnover ratios of The ACME Laboratories Ltd in different years.

Asset Turnover Ratio

0.49

0.48

0.47

0.46

0.45

0.44

0.43

0.42

0.41
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of Asset Turnover Ratio.

The higher the asset turnover ratio, the more efficient a company is at generating revenue from
its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently
using its assets to generate sales. We can see that the asset turnover ratio jumped from 0.454006
in 2019 to 0.482102 in 2020.
Debt to Asset Ratio
 The debt to asset ratio measures how efficiently a firm manages its debt. It shows the
percentage of the claim of the creditor on the asset of the company.
Total Debt to Asset Ratio = Total Debts ÷ Total Assets

Particulars 2016 2017 2018 2019 2020

Total Debts 12,525,238,649 12,990,954,38 14,979,211,413 17,578,207,54 20,374,083,017
3 3
Total Assets 28,889,710,630 29,947,231,50 32,624,246,240 35,921,599,389 39,418,263,182
9
Debt to Asset 0.433553 0.433794 0.459143 0.489349 0.516869
Ratio

Table: The Debt to Asset ratios of ACME Laboratories Ltd in different years.

Debt to Asset Ratio

0.54

0.52

0.5

0.48

0.46

0.44

0.42

0.4

0.38
2016 2017 2018 2019 2020

Column1

The above graph shows that from the year 2016 to 2018 the ratios were 0.433553, 0.433794,
0.459143 which have increased year after year considerably which is not a good sign for the
company, The lower debt ratio may decrease the financial risk of ACME Laboratories Ltd. Debt
ratio of 0.433553 in 2016 means that this amount of the company's assets are financed through
debts
 Debt to Equity Ratio
The debt to asset ratio measures how efficiently a firm manages its debt. It shows the
percentage of the claim of the creditor on the asset of the company.
Total Debt to Equity Ratio = Total Debts ÷ Total Equity

Particulars 2016 2017 2018 2019 2020

Total Debt  12,525,238,64 12,990,954,383 14,979,211,41 17,578,207,54 20,374,083,017
9 3 3
Total Equity 16,364,471,98 16,956,277,126 17,645,034,82 18,343,391,846 19,044,180,165
1 7
Debt to equity 0.765392 0.766144 0.848919 0.958285 1.069832
Ratio

Table: The Debt-to-Equity ratios of The ACME Laboratories Ltd in different years.

Debt to Equity Ratio

1.2

0.8

0.6

0.4

0.2

0
2016 2017 2018 2019 2020

Column1

The above graph shows that from the year 2016 to 2018 the ratios were 0.765392 0.766144 and
0.848919. The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and
is calculated by dividing a company’s total liabilities by its shareholder equity.
 Return on Asset
Return on assets is the ratio of annual net income to average total assets of a business during a
financial year. It measures the efficiency of the business in using its assets to generate net
income. It is a profitability ratio. Return on Asset (ROA) is an indicator of a company that deals
with profit relative to its total assets. It gives an idea as to how efficient management is at using
its assets to generate earnings. It is calculated by dividing a company's annual earnings by its
total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on
investment". 
Return on Asset = Net Income ÷ Total Assets

Particulars 2016 2017 2018 2019 2020

Net Income After 1,101,267,794 1,397,849,938 1,426,570,996 1,440,378,843 1,450,497,730
Tax
Total asset 28,889,710,630 29,947,231,50 32,624,246,240 35,921,599,389 39,418,263,182
9
Return on Asset 0.038119 0.046677 0.043727 0.040097 0.036797

Table: The Return on Total Assets of The ACME Laboratories Ltd in different years.

Return on Asset Ratio

0.05
0.05
0.04
0.04
0.03
0.03
0.02
0.02
0.01
0.01
0
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of Return on Asset ratio.

Return on total assets indicates the number of paisas 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. Return on asset ratio went up in 2017 and then gradually
ROA asset went down, from 2018-2020

Return on Equity
Return on Equity (ROE) measures the rate of return on common stockholders’ equity. It
measures a company's profitability by revealing how much profit a company generates with the
money shareholders have invested. Return on Equity measures the amount of Net Income earned
by utilizing each taka of Total common equity. It is the most important of the “Bottom line”
ratio. By this, you can find out how much the shareholders are going to get for their
shares. Return on Equity (ROE) is equal to net income divided by common equity. Stockholders
invest to get a return on their money, and this ratio tells how well they are doing in an accounting
sense.
Return on Equity = Net Income ÷ Total Equity

Particulars 2016 2017 2018 2019 2020

Net Income After 1,101,267,794 1,397,849,938 1,426,570,996 1,440,378,843 1,450,497,730
Tax
Total Equity 16,364,471,981 16,956,277,12 17,645,034,827 18,343,391,846 19,044,180,165
6
Return on Equity 0.067296 0.082438 0.080848 0.078523 0.076164
Table: The Return on Total Equity of The ACME Laboratories Ltd years.
 Return on Equity Ratio
0.09

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of Return on Equity (ROE) ratio.

Return on equity (ROE) is a financial ratio that shows how well a company is managing the
capital that shareholders have invested in it. In 2017,2018 the value of ROE went up but went
down in 2019-2020. The higher the ROE, the more efficient a company's management is at
generating income and growth from its equity financing. When utilizing ROE to compare
companies, it is important to compare companies within the same industry, as with all financial
ratios.

Earnings per share (EPS)

Earnings per Share (EPS) are the portion of a company's profit allocated to each outstanding
share of common stock. It serves as an indicator of a company's profitability. It is generally
considered to be the single most important variable in determining a share's price. It is also a
major component used to calculate the price-to-earnings valuation ratio. 
Earnings per share = Net Income ÷ Total number of shares

Particulars 2016 2017 2018 2019 2020

Net Income 1,101,267,794 1,397,849,938 1,426,570,996 1,440,378,843 1,450,497,730

Number of 21,16,01,700 21,16,01,700 21,16,01,700 21,16,01,700 21,16,01,700

shares
EPS 6.55 6.61 6.74 6.81 6.85
 Earnings Per Share
6.9
6.85
6.8
6.75
6.7
6.65
6.6
6.55
6.5
6.45
6.4
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of EPS.

In the graph above, we can see that the EPS gradually increased from 6.55 in 2016 to 6.85 in
2021. Net income increased each year but the number of shares remained the same. Earnings
earned per share were 6.55 in 2016 and in 2021 it stands at 6.85 per share.

Price-earnings (P/E) ratio

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current
share price relative to its earnings per share (EPS). The price-to-earnings ratio is also sometimes
known as the price multiple or the earnings multiple/E ratios are used by investors and analysts
to determine the relative value of a company's shares in an apples-to-apples comparison. It can
also be used to compare a company against its historical record or to compare aggregate markets
against one another or over time.

P/E ratio = Share price ÷ Earnings per share

Particulars 2016 2017 2018 2019 2020

Share price 10 10 10 10 10

EPS 6.55 6.61 6.74 6.81 6.85

P/E Ratio 1.526717 1.512859 1.483679 1.468428 1.459854
Table: The P/E ratio of The ACME Laboratories Ltd in different years.
 P/E Ratio
1.54

1.52

1.5

1.48

1.46

1.44

1.42
2016 2017 2018 2019 2020

Column1

Figure: Graph shows the change of P/E ratio.

Even though the price of the share remained unchanged, the EPS changed every year and
gradually increased. Because EPS increased and the price of the share remained the same, the
P/E ratio went down each year. P/E ratio went from 1.526717 in 2016 to 1.459854 in 2021.

Reference:

 https://www.investopedia.com/
 https://www.wikipedia.org/
 https://lankabd.com/Company/Search
 https://www.dsebd.org/