Group Project

Report ON
Ratio Analysis of Walmart & Valuation of Beximco Pharmaceuticals
Course Title: Financial Statement Analysis (FIN410)
Section- 5
Submitted to:
Mr. Taskin Shakib (TKS)
Lecturer, Department of Finance & Accounting
North south University
Submitted By:

Name ID
S. M. Moinuddin Ifty 1721203030
Golam Sarwar Kabir 1711694030
Md. Abdullah Al Mahmud 1712349030
Arif Hossen 1621785030
Mushfikur Rahman Alvy 1631610030

Date of submission: 26th January,2021.

 Letter of Transmittal
January 26, 2021

Mr. Taskin Shakib

Department of Finance and Accounting

School of Business and Economics

North South University.

Subject: Report on ratio analysis of Walmart and valuation of Beximco Pharmaceuticals.

Dear Sir,

It is a great pleasure and privilege for us to present you with the report on ratio analysis of Walmart
and valuation of Beximco Pharmaceuticals. Throughout the assignment we had to research a lot
which helped us to gain an in-depth knowledge on Ratio analysis, forecasted income statement,
Balance sheet, Intrinsic valuation and Enterprise valuation etc. We have tried our best to
accommodate as much as information and facts as possible following the guidelines you have
provided for us. We have tried to make this report as relevant as we could.

We are grateful to you for your kind cooperation at every step of our journey in making this report.
We hope you find this report useful and find our hard work and dedication while evaluating the
report.

Sincerely,

S. M. Moinuddin Ifty

Golam Sarwar Kabir

Md. Abdullah Al Mahmud

Arif Hossen

Mushfikur Rahman Alvy

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 Acknowledgment
First and foremost, we would like to thank the Almighty for giving us the moral integrity, devotion,
patience, and the ability to carry out this project. We are greatly indebted to our course instructor
Mr. Taskin Shakib, for giving us the opportunity to work on this Term Project, which is the most
important group project of the course FIN-410. His direction, encouragement, guidance, in
particular has been invaluable for the improvement of this assignment. This report has enabled us
to apply all that we have learned in class. And In our course, our instructor has given us practical
experience on Ratio Analysis, forecasting, CFFA, WACC and Valuation. We have done the project
on Walmart and Beximco Pharma with the help of their financial statements and annual reports.
We are also genuinely thankful to all our friends and class mates, who have been co-operative in
every aspect. Our each and every group member has given almost equal dedication to this project.

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 Executive summary
In this report we have analyzed the financial ratios of Walmart Inc. for the year 2017 to 2019. We
have also calculated the valuation of Beximco Pharma Ltd. in in this report. For this, we have
analyzed the financial statement of these two companies in which one is a foreign company and
the other is a local company. We reviewed the financial statements and calculated various ratios
for Walmart Inc. And those ratios show whether or not this organization is in a strong position.
Not all businesses are of the same scale, or not even of the same sector. Ratio analysis is prepared
on the basis of the facts found in the company's financial statements on the line items of the above-
mentioned statement, such as the income sheet, the balance sheet and the cash flow statement;
using them as an equation component, the ratios are calculated. For Beximco Pharma Industries
Ltd., we have also analyzed their financial information and calculated the Terminal value and
Enterprise Value. This helped us to decide whether their stock is undervalued or overvalued. In
addition, this also provides information whether to invest in Beximco Pharma and is it profitable
or not. Therefore, we tried our best to provide the actual performance, analyzing the ratios and
calculate valuation perfectly. We believe that, this report will give clear knowledge about the
financial ratios and valuation.

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Table of Contents
Introduction ............................................................................................................................................ 6

Ratio Analysis of Walmart ...................................................................................................................... 7

LIQUIDITY RATIO ................................................................................................................................. 7

Efficiency Ratio ................................................................................................................................. 10

Asset Management Ratios ............................................................................................................... 16

Profitability Ratios ............................................................................................................................ 17

Leverage Ratio .................................................................................................................................. 22

MARKET RATIO ................................................................................................................................. 24

Valuation of Beximco Pharmaceuticals Ltd. ...................................................................................... 28

Pro-forma Income Statement .......................................................................................................... 28

Pro-forma Balance Sheet ................................................................................................................. 30

Calculation and Interpretation of Beta ........................................................................................... 31

WACC.............................................................................................................................................. 31

Valuation Scenario .......................................................................................................................... 32

Appendix.............................................................................................................................................. 34

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 Introduction
This paper is divided into two sections relating to two companies, one of which is international
while the other is a local Bangladeshi corporation. The first section of the report aims to give us a
clear understanding of the liquidity, profitability, asset management, debt management and market
position of the International Corporation named Walmart. What started small, with a simple
discount store and a basic concept of offering more for less, has grown to become the largest
retailer in the world over the last 50 years. Every week, more than 265 million consumers and
affiliates visit nearly 11,400 stores under 55 banners in 26 countries and eCommerce websites. A
sale of $524 billion for the 2020 fiscal year, Walmart has more than 2.2 million associates
worldwide. Walmart aims to be a pioneer in innovation, corporate social responsibility and job
opportunities. It is all part of their unwavering dedication to building jobs and adding benefit to
consumers and communities around the world. The Walmart Financial Statement Study was done
for three consecutive years (FY 2017, 2018, 2019) with the aid of ratios. The ratios measured
provide us an insight into the success of the organization in the categories for a span of three years
and also allow us to track the improvements and dynamics of the changes that have taken place.

The second part of the report involves the valuation of the assigned local company “Beximco
Pharmaceuticals”. Beximco Pharmaceuticals Ltd (Beximco Pharma) is the largest producer and
exporter of medicinal drugs in Bangladesh. Introduced at the end of the 1970s, Beximco Pharma
started as a distributor, sourcing products from multinational MNCs such as Bayer, Germany and
Upjohn, USA, and distributing them on the local market, which were later produced and sold under
licensing agreements. Since then, the journey has continued, and today Beximco Pharma is one of
the largest exporters of medicinal products in Bangladesh, capturing the National Export Trophy
(Gold) record five times. Over the last three decades, Beximco Pharma has evolved from strength
to strength, but the basic concept on which it was based remains the same: manufacturing high-
quality generics and making them affordable. Ensuring access to safe drugs is a powerful aspiration
that encourages more than 4,700 employees of the company, and each of them is motivated by the
same spiritual and social responsibilities that the company values most. Therefore, with the aid of
the various forecasting methods that we have studied in class, we have estimated projected cash
flows over a span of 5 years and have made a variety of other estimates that have enabled us to
value Beximco Pharmaceuticals.

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 Ratio Analysis of Walmart
LIQUIDITY RATIO
Liquidity ratios are one of the key ratios as it indicates whether an institution will be able to meet
its short-term liabilities with its short-term assets without having to take debt capital. There are a
number of ratios to figure out the liquidity of any company. They key ratios that we will be using
among them are Current ratio, Quick Ratio and Cash Ratio. These ratios are indicators of the
liquidity and the current liquid position of the bank.

Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations
or those due within one year. It tells investors and analysts how a company can maximize the
current assets on its balance sheet to satisfy its current debt and other payables.

Current ratio = Current assets / Current liabilities

Current Ratio
$0.88
$0.86
$0.84
$0.82
$0.80
$0.78
$0.76
$0.74
$0.72
$0.70
1 2 3

Time series analysis: Current ratio measures the ability of a company to pay its shot term
liabilities due within one year of time. Form the graph above we can see that current ratio of
Walmart decreased in 2018 compared to its performance in 2017. But the company little improved
its performance reach the current ratio as to 0.80 which is better than the year 2018 but not better
than the year 2017.

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 Quick Ratio

The quick ratio is an indicator of a company's short-term liquidity position and measures a
company's ability to meet its short-term obligations with its most liquid assets. An acid test is a
quick test designed to produce instant results hence, the name.

Quick ratio = (Cash+ AR) / Current liabilities

Quick Ratio
$0.23

$0.23

$0.22

$0.22

$0.21

$0.21

$0.20

$0.20

$0.19

$0.19
1 2 3

Time series analysis: Form the graph above, we can see that, the Walmart Company In 2017 the
quick ratio was 0.22. In 2018 the ratio was decrease from 0.22 to 0.20. But in 2019 the ratio
increases from 2018 and 2017. So, the company is doing well in terms of managing cash and other
short-term liquid assets.

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 Cash Ratio

The cash ratio is a measure of the liquidity of a firm, namely the ratio of the total assets and cash
equivalents of a firm to its current liabilities.

Cash ratio = Cash / Current liabilities

Cash Ratio

0.105

0.1

0.095

0.09

0.085

0.08

0.075
1 2 3

Time series analysis: The cash ratio is an indicator of a firm's value under the worst-case scenario
like where the company is about to go out of business. It measures the company’s ability to pay
short term bills with cash only. From the graph above, we can see that in recent years The Walmart
could decrease its cash ratio. In 2017 the cash ratio was 0.10 in 2018 the ratio was 0.08 and the
ratio in 2019 was 0.09 which is less than 2017.

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 Efficiency Ratio
Inventory Turnover
Inventory turnover is a ratio that shows how many times a corporation has sold and replaced
inventory over a given timeframe. The calculation for inventory turnover is determined by dividing
the cost of products sold (COGS) by the average inventory. Calculating inventory turnover will
help companies make smarter choices on pricing, production, marketing and buying new
inventories. Low turnover means poor sales and likely over-inventories, while a higher number
means either great sales or inadequate inventory

Inventory Turnover
8.75 8.7
8.7
8.65
8.6
8.55 8.53
8.5
8.45
8.39
8.4
8.35
8.3
8.25
8.2
2017 2018 2019
Inventory Turnover 8.39 8.53 8.7

Time Series Analysis: In Walmart's analysis, we can see that their inventory turnover ratio was
8.39 In 2017. That demonstrates that they were not overspending by purchasing too much and
losing money on storage costs. It also shows that they were successfully selling the inventory they
purchase and replenishing cash easily. In the years that followed, their inventory turnover only
started to keep growing at 8.53 and 8.7 in 2018&2019, which is a positive indicator. However, a
high inventory turnover may also mean very few sales, but since Walmart is a retailing corporation,
its high turnover ratio suggests that the company is apparently making strong inventory
acquisitions without overstocking.

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 Inventory Days
Inventory days is a financial measure that calculates the time duration a business takes to convert
its inventory, including products that are in progress, into revenue. Signifying the liquidity of the
inventory, this ratio reflects how many days the existing inventory stock of the company will last.
High inventory days may mean that an organization is not handling its inventory appropriately or
that it has an inventory that is tough to trade

Inventory Days
44
43.5
43.5

43 42.79

42.5
41.95
42

41.5

41
2017 2018 2019
Inventory Days 43.5 42.79 41.95

Time Series Analysis: In 2017, Walmart's inventory days is 43.5, which means that Walmart has
enough inventories to last 43.5 days or that Walmart will convert its inventory into cash within
43.5 days. However, this is a higher figure, which implies that the company is not in a position to
easily convert its inventory into revenue. This could be attributed to bad sales results or the
acquisition of too much product. Getting too much surplus inventory is harmful to the organization,
as the inventory can ultimately become outdated and unsellable. However, this statistic has
improved over the years with a lower amount of 42.79 and 41.95 in 2018&2019, which is a positive
indicator for the company, provided that the company is able to convert its inventory into
sales more rapidly

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 Receivable Turnover
The turnover ratio of receivables is an analytical method used to calculate the performance of the
organization in recovering its receivables or the money owed by its customers. The ratio shows
how effectively a business uses and handles the credit it provides to its clients and how easily it
receives or pays short-term debt. A high turnover ratio of receivables can mean that the
accumulation of accounts receivable by the firm is profitable and that the company has a high
percentage of high-quality consumers who settle their debts rapidly. On the other hand, a low
receivable turnover ratio may be attributed to a business that has a poor collection process, poor
lending practices, or consumers that are not financially sustainable or creditworthy.

Receivable Turnover
90 89.05

88

86

84 83.14
81.87
82

80

78
2017 2018 2019
Receivable Turnover 83.14 89.05 81.87

Time Series Analysis: Walmart's receivable turnover ratio of 83.14 in 2017 means that the
Company received the receivables 83.14 times on average that year. In other words, the company
turned the receivables into cash 83.14 times that year. This is ok for Walmart, given its large
customer base. The figure continued to improve to 89.05 from 83.14 in 2018, suggesting that the
company's accumulation of accounts receivable is effective and that the company has a high
percentage of high-quality clients who settle their debts quickly. Unfortunately, in 2019, Walmart's
receivable turnover ratio was the lowest of all the years indicated, which is a negative indication,
and thus the business should reassess its lending policy in order to secure timely collection of its
receivables.

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 Receivable Days
The receivable turnover in days represents the total amount of days that the buyer is expected to
pay the firm for credit transactions. The aim of the assessment is to assess the efficacy of the
company's credit and collection activities in facilitating credit to trustworthy consumers, as well
as its ability to obtain cash from them in a timely manner. The calculation is generally applied to
the full collection of purchase orders that the organization has issued at any time, rather than to a
particular payable. When measured at the actual consumer level, the calculation will show when
the customer has issues with the cash flow, since it may try to prolong the period of time until it
pays invoices.

Receivable Days
4.5 4.46
4.39
4.4

4.3

4.2
4.09
4.1

3.9
2017 2018 2019
Receivable Days 4.39 4.09 4.46

Time Series Analysis: In 2017, Walmart's receivable days was 4.39 days, which means that the
average buyer needs about 4.39 days to settle their debt to the company. However, Walmart's
receivable days fell to 4.09 in 2018 which represents quicker collection period and rose again to
4.46 in 2019 which a bit slower than previous year. This is a positive thing for the company
because they are very efficient in collecting cash quickly, but it also means that the company's
credit policy is too strict. In this scenario, the corporation is possibly passing up revenue and
revenues by refusing payment to consumers who are more likely or not to be willing to repay the
company.

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 Payable Turnover
Accounts payable are short-term loans owed by a corporation to its customers and creditors. The
turnover ratio of the accounts payable is a short-term liquidity metric used to calculate the rate at
which the company pays off its suppliers. The turnover ratio of the accounts payable indicates how
effective a business is in paying its suppliers and its short-term debts. Ideally, a company needs to
raise enough income to pay off its accounts easily, but not as quickly as possible, so it might use
the money to spend in other ventures. A high ratio implies that a timely payment is made to vendors
for transactions on credit. A low ratio suggests a sluggish payment of credit transactions to
vendors. This may be due to attractive lending conditions or may indicate difficulties with cash
flow and, thus, a deterioration of the financial situation.

Payable Turnover
8.8
8.68
8.7
8.6
8.5
8.4
8.3 8.2
8.2 8.12
8.1
8
7.9
7.8
2017 2018 2019
Payable Turnover 8.68 8.12 8.2

Time Series Analysis: Walmart's payable turnover ratio of 8.68 in 2017 reveals that, over the
fiscal year, the company's payables have been turned over nearly 8.68 times during the year. This
is a positive indicator of the overall solid financial position of the company. However, in 2018 and
2019, Walmart's payable turnover fell to 8.12 and 8.2 and this is a warning sign for the company
as it needs extra time to pay the credits. A diminishing ratio could mean that the company is in
financial trouble, which might not really be the case with Walmart. It may be that the company
was successful in securing better terms of payment that would allow it to make payments less
often, without any extra charge

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 Payable Days
The Days turnover of the accounts payable indicates the total amount of days that the payable is
owed to its commercial creditors, who may include retailers, distributors or financiers. A business
with a greater value of payable days can take longer to settle the bills, which ensures that it will
keep the funds available for a longer period of time, allowing the company to make better use of
those funds to increase the benefits. However, high payable days can also be a warning sign
signaling the failure to pay bills on schedule.

Payable Days
45.5
44.95
45
44.51
44.5
44
43.5
43
42.5
42.05
42
41.5
41
40.5
2017 2018 2019
Payable Days 42.05 44.95 44.51

Time Series Analysis: Walmart's payable days of 42.05 in 2017 show that the company requires
a total of 42.05 days to settle its accounts payable. Which is very low, this means that the company
is not making good use of the credit time offered by the creditors. Alternatively, the company can
only have short-term lending agreements for its creditors. However, the situation improved in
2018&2019 with a figure of 44.95 and 44.51, which is higher than in previous years. This indicates
that they postponed paying payments in those years and used the surplus cash for short-term
acquisitions and boosted their working capital and free cash flow. However, requiring excessively
long to pay creditors can result in dissatisfied creditors refusing to lend more credit or providing
favorable credit terms. It can also mean that the company is unable to raise the funds to pay its
creditors.

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 Asset Management Ratios
Cash Conversion Cycle
The cash conversion cycle is a measurement that describes the amount of time a business takes to
turn its investment in inventory and other capital into cash flows from sales. The cash
conversion cycle is determined by attaching the days of inventory outstanding to the days of sales
outstanding and subtracting the days payable outstanding. This measure takes into account how
much time the organization requires to sell its products, how much time it takes to recover its
loans, and how much time it needs to pay its bills without incurring fines. A short cycle helps a
company to easily accumulate cash that can be used for new acquisitions or loan repayments. The
shorter the cash exchange time, the better the business is usually.

Cash Conversion Cycle

7
5.84
6

3
1.93 1.9
2

0
2017 2018 2019
Cash Conversion Cycle 5.84 1.93 1.9

Time Series Analysis: Walmart's Cash Conversion Cycle, with a valuation of 5.84 demonstrates
it takes about 5.84 days to convert the initial capital investment back into cash. This is the highest
of all recorded years, as in 2018&2019, Walmart's cash conversion cycles were 1.93 and 1.9. This
improvement reflects the company's overall good financial position. They may have reduced the
cash transfer time by accelerating payments from consumers and slowing down payments to
vendors. This lower Cash Conversion time reflects that Walmart has made all the right adjustments
and successfully addresses the demands of the market and its consumers

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 Profitability Ratios
Gross Profit Margin

The gross profit margin is a measurement analysis to determine the financial health of a business
by determining the Volume of money left over from commodity revenue following subtraction of
the cost of products sold (COGS). The gross profit margin is also shown as the gross profit as a
percentage of net sales. Gross Margin is a measure of whether a corporation runs successfully and
whether its profits are high enough. The larger the profit margin, the more profitable the business
will be.

GPM
25.60%

25.50% 25.54%

25.40%

25.30%
25.30%
25.20%

25.10%
25.09%
25.00%

24.90%

24.80%
2017 2018 2019
GPM 25.54% 25.30% 25.09%

Time Series Analysis: In 2017, Walmart's gross profit margin was 25.54 per cent, which suggests
that with every dollar generated in revenue, the organization had 25.54 cents left over to fund basic
operating expenses and profit. This high gross profit margin means that the business makes more
profit on selling and is thus more effective in turning raw materials into profits. Unfortunately,
Walmart's gross profit margin fell by 25.30 percent and 25.09 percent over the years in 2018 and
2019. This is a worrying sign for the organization, since a lower profit margin typically means that
the company is less effective in turning raw materials into income and thus makes less profit on
its revenues.

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 Operating Profit Margin
Operating margin calculates how much profit a business earns from the dollar in revenue after
paying variable manufacturing expenses, such as labor and raw materials, but before paying debt
or taxes. It is determined by measuring the operating income of the company by its net sales. This
ratio is important for both creditors and investors, since it serves to demonstrate how solid and
profitable the company's activities are. A higher operating profit margin is beneficial, since it
means a greater capacity to generate profits and more resilience against any rise in competition or
costs.

OPM
4.55%
4.50% 4.50%
4.50%
4.45%
4.40%
4.35%
4.30%
4.24%
4.25%
4.20%
4.15%
4.10%
2017 2018 2019
OPM 4.50% 4.24% 4.50%

Time Series Analysis: Walmart's operating profit margin of 4.50 percent in 2017 means an
operating profit of $0.045 for every $1 of sales. This implies that the operating margin of the
company provides profitability for customers and a continuous lending operation for lenders.
However, Walmart's net profit margin fell to 4.24 in 2018. Having a lower ratio implies a lower
profit margin which is not ideal for the company. Fortunately, Walmart's net profit margin rose to
4.50 in 2019, this improvement in profit margin over time suggests that performance is improving.

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 Net Profit Margin
Net Profit Margin is the financial ratio used to determine the amount of profit generated by the
organization from its total revenue. It calculates the amount of net profit that a corporation receives
per dollar of sales. Net profit margin lets investors understand whether the company's management
earns enough profit from its revenue and whether fixed expenses and overhead costs are included.
Companies that earn more profit per dollar in revenue are more effective. The efficiency makes a
business more probable to succeed when a product line does not meet requirements, or when a
period of economic contraction reaches the larger economy.

NPM
3.00% 2.81%

2.50%
2.00%
2.00%

1.50% 1.29%

1.00%

0.50%

0.00%
2017 2018 2019
NPM 2.81% 2.00% 1.29%

Time Series Analysis: In 2017, Walmart's net profit margin was 2.81, which means that the
corporation kept $0.0281 as profit for every dollar generated by Walmart in sales. Walmart's net
profit margin tended to fall over the ensuing years, at 2% and 1.29 percent in 2018 and 2019. This
indicates that the organization did better to handle the expenditures in 2017 relative to other years.
This constant degradation suggests that the business uses an inefficient resource base or weak
pricing techniques. This may be due to Walmart's inefficiency in administration, inflated costs and
weak pricing strategies.

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 Return on Assets

Return on assets (ROA) is a form of return on investment (ROI) metric that calculates the
profitability of a company in comparison to its total assets. Return on assets (ROA) is a measure
of how profitable a business is due to its total assets. ROA provides the manager, customer, or
analyst an understanding of how effective the management of a business is to use its properties to
earn income. The higher the profit, the more effective and successful the management of economic
capital.

ROA
11.20%
11.08%

11.00%

10.80%

10.56%
10.60%

10.37%
10.40%

10.20%

10.00%
2017 2018 2019
ROA 11.08% 10.37% 10.56%

Time Series Analysis: In 2017, Walmart's return on investment amounted to 11.08 per cent, which
is equal to $0.1108 of net profits for every dollar that Walmart spent in investments over the year.
Unfortunately, Walmart's return on investment fell to 10.37 per cent in 2018 and rose again to
10.56 per cent in 2019. This low ROA is not a positive indication of the company's success, since
a low ROA means that the company is unable to make full use of its assets to make further money.

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 Return on Equity
Return on Equity (ROE) is the calculation of the annual return (net income) of a corporation
divided by the amount of the cumulative equity of its owners, calculated as a percentage. Return
on equity means how much the company is generating profits on the money it has obtained from
its owners. Sustainable and increasing ROE over time will mean that a corporation is good at
producing shareholder equity because it knows how to spend its earnings efficiently in order to
maximize productivity and profits. By comparison, declining ROE can mean that management
makes bad decisions about reinvesting resources in non-productive properties.

ROE
18.00% 17.00%
16.00%
14.00%
12.20%
12.00%
10.00% 8.38%
8.00%
6.00%
4.00%
2.00%
0.00%
2017 2018 2019
ROE 17.00% 12.20% 8.38%

Time Series Analysis: Walmart's return on equity in 2017 implies that the Corporation generated
$0.17 in profit for every $1 in total equity that year, giving the Corporation a 17 percent ROE. This
is a significant outcome, and indicates that the management team of the company is more effective
when it comes to using investment financing to improve their business and is more able to produce
decent returns for investors. Unfortunately, Walmart's return on equity declined over the years
with a valuation between 12.20 percent and 8.38 percent in 2018&2019. This is a troubling
indicator for the corporation since low ROE, though, suggests that the business might be under-
managed and might be re-investing profits in unproductive properties.

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 Leverage Ratio
Operating Leverage
Operating leverage is a cost-accounting formula that calculates the degree to which a business or
project can raise operating income by raising sales. This financial measure demonstrates how the
shift in the company's revenue would impact the company's operating income. Companies with
high operating leverage tend to cover a greater volume of fixed costs per month, regardless of
whether they deliver any commodity units. Low-leverage firms can have high expenses that are
directly separate from their revenues but have fewer fixed costs to pay each month.

Operating leverage
6.00
4.00 3.17
2.00
0.00
-2.00
-1.24
-4.00
-6.00
-8.00
-10.00
-12.00
-14.00
-13.63
-16.00
2017 2018 2019
Operating leverage -13.63 -1.24 3.17

Time Series Analysis: In 2017 and 2018, the organization had a negative operating leverage of
13.63 and 1.24, which indicates that the company's fixed expenses had a higher share of the overall
cost structure of the company and there was a reduction in revenue. It means that their operating
expenses were greater than the contribution margin, so the company was in a net loss situation.
However, the ratio increased in 2019 and had a good operating leverage of 3.17. This means that
the company's revenues grew without raising its operating costs, which, in essence, reduced its
total costs, resulting in increased net profit.

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 Financial Leverage
Financial leverage, also known as leverage or capital investment, refers to the use of debt to gain
new securities. Financial leverage Use capital resources to manage a bigger volume of funds by
investing capital that would increase the yield on the owner's cash investment. The rise in the value
of the assets will result in a greater gain in the cash of the owner, as the interest rate of the debt is
smaller than the rate of increase in the value of the asset and the decline in the value of the assets
will result in a greater loss in the cash of the owner.

Finance leverage
0.08 0.07

0.06

0.04

0.02 0.01
0.00

-0.02

-0.04
-0.04
-0.06
2017 2018 2019
Finance leverage 0.01 0.07 -0.04

Time Series Analysis: Walmart's financial leverage of 0.01 and 0.07 in 2017 and 2018 means that
the corporation exploits the debt issued. It incurs a much higher interest rate, resulting in higher
interest rates, which will adversely affect the company's bottom line and earnings per share. On
the other hand, Walmart's debt ratio of negative 0.04 in 2019 means that the corporation is issuing
too much equity, which is perceived to be less stable since the degree of risk in the equity markets
is too high.

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 MARKET RATIO
When the current share price of a public company stock is used to evaluate a company that is called
market value ratio. This indicates the company’s shares are overvalued or undervalued. It identifies
by taking the book values and divide it with the market value. The market value of a company
related to the actual worth.

Earnings per share

Earnings per share (EPS) is a figure describing a public company's profit per outstanding share of
stock, calculated on a quarterly or annual basis. EPS is arrived at by taking a company's quarterly
or annual net income and dividing by the number of its shares of stock outstanding. Earnings per
share (EPS) is an organization’s net profit after tax divided by the number of common shares
outstanding, which indicates how much profit an organization makes for each share of its common
stock. A higher EPS suggests higher profitability, which could influence an investor in invest more.

Earnings per share = Net profit / (CS + PS)

EPS

$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
1 2 3

Time Series Analysis: According to the given graph it is shadowing that earning per share of
Walmart has decreased year by year. In 2017 the EPS of Walmart was $4.38. In 2018 EPS
decreased from $4.38 to $3.28. Again in 2019 EPS decreased from $3.28 to $2.26. The main reason
of decreasing EPS rate is for their number of total stocks of outstanding. Shareholders of Walmart
are earning $2.26 per share, as the rate of earning is decreasing every year it was not helps Walmart
to gain the investor’s confidence for them.

Page | 24
 P/E Ratio
The p/e ratio is called the price earning ratio. This P/E ratio indicates that how uch a investor
should invest to get back one dollar of earnings. This shows that how much a investor willing to
pay. Always a higher P/E ratio indicates better position of company. Sometimes investors willing
to pay higher price of the share due to the higher expectation of the company’s growth. To
understand P/E ratio, a bench mark can be used. The S&P 500 ranged from 13 to 15. Which means
more then this can be a indicator of a overvalued stock. The more higher ratio means investors
expecting more return.

P/E Ratio= Price per Share / Earnings per share

P/E Ratio
$60.00

$50.00

$40.00

$30.00

$20.00

$10.00

$0.00
1 2 3

Time series analysis: Here, looking at the ratios, we can see that in 2017 the P/E ratio was 18.01
where in 2019 the P/E ratio was 47.86. This indicates that the investors are willing to more for the
stock then before. This also can be said that Walmart’s stocks are overvalued. The investors are
willing to pay more than before which means they have seen the potential to grow more in
Walmart.

Page | 25
 Book Value per share
Book value per share (BVPS) takes the ratio of a firm's common equity divided by its number of
shares outstanding. Book value of equity per share effectively indicates a firm's net asset value
(total assets - total liabilities) on a per-share basis.

Book Value per share = Shareholders Equity / Total Share Outstanding

Book Value per share

$26.00
$25.80
$25.60
$25.40
$25.20
$25.00
$24.80
$24.60
$24.40
$24.20
$24.00
$23.80
1 2 3

Time series analysis: According to the given graph it is shadowing that Book Value per share of
Walmart has decreased. In the year 2017 the Book Value per share of Walmart was $25.00. In
2018 the Book Value per share of Walmart slightly increase. But in 2019 the Book Value per share
of Walmart was $24.62. Which is less than 2017 and 2018.

Page | 26
 M/B Ratio
The M/B ratio is usually call Market to Book Ratio. It is also called the Price to book value ratio.
It is used to evaluate one company in terms of financial aspects. The Current stock price of all
outstanding share is the market value. This shows that the market believes the company is worthy.
When any company shows that the book value is high then the market value it is consider to be
not worthy. When the market value is higher than book value it means the company is high value
company due to the expected earnings increases.

M/B Ratio= Market value per share/Book value per share

M/B Ratio
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
1 2 3

Time series Analysis: Here we can see that, in 2017 the ratio was 3.16 times where in 2019 the
ratio goes up to 4.40 times. It means that the company is doing well and comparing with the market
the book value is high. And investors are willing to pay more to buy Walmart’s share. It also
indicates that Walmart shares are favorable to the investors

Page | 27
 Valuation of Beximco Pharmaceuticals Ltd.
Pro-forma Income Statement
We have calculated pro-forma income statement of Beximco pharma for next 5 financial years
which is 2020-2024 based on 2019 financial data.

Proforma Income Statement of Beximco

Fiscal year is July-June. All values BDT Millions (Income Statement)
Particulars 2017 2018 2019 (Base) 2020 2021 2022 2023 2024 SGR Growth
Sales/Revenue 15,509 17,717 22,817 24,652 26,634 28,775 31,089 33,588 Yes
Sales Growth -22.59% 14.24% 28.79% 0 0 0 0 0 N/A
Cost of Goods Sold (COGS) incl. D&A 8330 9501 12279 13,266 14,333 15,485 16,730 18,076 Yes
COGS excluding D&A 7,548 8,655 11,336 12,247 13,232 14,296 15,446 16,687 Yes
Depreciation & Amortization Expense 782 846 943 1,019 1,101 1,189 1,285 1,388 Yes
Depreciation 756 802 868 938 1,013 1,095 1,183 1,278 Yes
Gross Income 7,179 8,215 10,538 11,385 12,301 13,290 14,358 15,513 Yes
SG&A Expense 3,875 4,358 5,672 6,128 6,621 7,153 7,728 8,350 Yes
Research & Development 236 223 284 307 332 358 387 418 Yes
Other SG&A 3,639 4,135 5,388 5,821 6,289 6,795 7,341 7,932 Yes
EBIT 3,304 3,858 4,865 5,256 5,679 6,135 6,629 7,162 Yes
Non Operating Income/Expense -134 -96 -25 -27 -29 -32 -34 -37 Yes
Non-Operating Interest Income 161 55 36 39 42 45 49 53 Yes
Interest Expense 449 455 555 555 555 555 555 555 No
Gross Interest Expense 449 455 555 555 555 555 555 555 No
Pretax Income 2,891 3,361 3,975 4,295 4,640 5,013 5,416 5,851 Yes
Income Tax 665 829 906 906 906 906 906 906 No
Income Tax - Current Domestic 592 793 804 804 804 804 804 804 No
Income Tax - Deferred Domestic 73 36 102 102 102 102 102 102 No
Equity in Affiliates 0 0 -29 -31 -34 -37 -40 -43 Yes
Consolidated Net Income 2,227 2,537 3,033 3,277 3,540 3,825 4,133 4,465 Yes
Minority Interest Expense 0 -4 7 7 7 7 7 7 No
Net Income 2,227 2,537 3,033 3,277 3,540 3,825 4,133 4,465 Yes
Dividend 63,183 68,263 73,752 79,682 86,088 93,010 Yes
Retained Earnings -60,150 -64,986 -70,211 -75,857 -81,956 -88,545 Yes
EPS (Basic) 4.99 5.68 6.8 N/A
Basic Shares Outstanding 446 446 446 N/A
EPS (Diluted) 4.99 5.69 6.8 N/A
Diluted Shares Outstanding 446 446 446 N/A
EBITDA 4,086 4,704 5,808 N/A
EBIT 3,304 3,858 4,865 N/A

Page | 28
 SGR calculation taking base FY 2019
Net Income 3,033
Total Equity 29,864
ROE 10.16%
Shareholders Dividend in 2018-2019 (FY) 631.84
Dividend Payout Ratio 20.83%
Retention Rate 79.17%
SGR (2019) 8%

In our report, 2019 was the base year for the estimation of beximco Pharma's sustainable growth
rate. Sustainable growth rate of Beximco Pharma suggests that it can take additional loan within
the optimal capabilities of the organization. The SGR includes optimizing profits and revenue
growth without rising financial leverage, which will help Beximco to avoid over-leveraging and
escape financial distress. For the measurement of the SGR, we calculated the ROE for the base
year 2019. Afterwards, we measured the retention rate for Beximco 2019. The figures were
roughly 8 percent. For forecasting, this constant rate is used at 8 per cent in the year (2020 to
2024). Taxation on the income statement and the liability on balance sheet was not changed by
SGR, only the accounts payable was increased by the use of the SGR. Rather than this, we raised
all assets and income statement elements via the SGR rate. Finally, we found in the forecast that
additional funding expected from 2020 to 2024 was in the growth model. The financing has
been rising every year because of SGR so, this is perfectly sensible.

Page | 29
 Pro-forma Balance Sheet
Here we have shown the pro-forma balance sheet of Beximco Pharma and almost all the account
of total asset will change because of the changes in the growth rate of the company.
Proforma Balance sheet of Beximco
Fiscal year is July-June. All values BDT Millions (Balance Sheet)
Particulars 2017 2018 2019 2020 2021 2022 2023 2024 SGR Growth
Cash & Short Term Investments 1,188 760 972 1050 1135 1226 1324 1431 Yes
Cash Only 302 421 648 700 756 817 883 954 Yes
Short-Term Investments 887 339 323 349 377 407 440 475 Yes
Cash & Short Term Investments Growth 0.28 -0.36 0.02 0 0 0 0 0 No
Cash & ST Investments / Total Assets 0.02 0.02 0.03 0 0 0 0 0 No
Total Accounts Receivable 3,497 2,902 2,187 2363 2553 2758 2980 3219 Yes
Accounts Receivables, Net 2,167 2,762 3,335 3603 3893 4206 4544 4909 Yes
Accounts Receivables, Gross 2,167 2,762 3,335 3603 3893 4206 4544 4909 Yes
Other Receivables 19 140 162 175 189 204 221 238 Yes
Accounts Receivable Growth 0.29 0.33 0.21 0 0 0 0 0 Yes
Accounts Receivable Turnover 7.09 6.11 6.52 7 8 8 9 10 Yes
Inventories 4,574 6,459 7242 7824 8453 9133 9867 10661 Yes
Finished Goods 649 1,531 1255 1356 1465 1583 1710 1847 Yes
Work in Progress 110 263 456 493 532 575 621 671 Yes
Raw Materials 2,615 3,183 4,071 4398 4752 5134 5547 5993 Yes
Progress Payments & Other 1,199 1,482 1,460 1577 1704 1841 1989 2149 Yes
Other Current Assets 1,183 1,224 1,553 1678 1813 1959 2116 2286 Yes
Prepaid Expenses 672 468 797 861 930 1005 1086 1173 Yes
Miscellaneous Current Assets 511 756 756 817 882 953 1030 1113 Yes
Total Current Assets 9,131 11,344 13,264 14330 15483 16728 18072 19526 Yes
Net Property, Plant & Equipment 24,472 30,525 34,057 36795 39754 42950 46403 50134 Yes
Property, Plant & Equipment - Gross 31,693 39,082 43,454 46948 50723 54801 59207 63967 Yes
Buildings 6,791 7,109 7,820 8449 9128 9862 10655 11512 Yes
Land & Improvements 3,344 4,068 3,344 3613 3903 4217 4556 4923 Yes
Machinery & Equipment 12,032 13,362 15,759 17026 18395 19874 21472 23198 Yes
Construction in Progress 8,012 12,614 13,753 14859 16053 17344 18739 20245 Yes
Intangible Assets 463 1,827 1882 2033 2197 2373 2564 2770 Yes
Net Goodwill 0 547 547 591 638 690 745 805 Yes
Transportation Equipment 774 1,071 1145 1237 1337 1444 1560 1686 Yes
Other Property, Plant & Equipment 740 859 909 982 1061 1146 1239 1338 Yes
Accumulated Depreciation 7,220 8,557 9,397 10153 10969 11851 12804 13833 Yes
Buildings 1,620 1,827 1,989 2149 2322 2508 2710 2928 Yes
Machinery & Equipment 4,767 5,667 6,206 6705 7244 7827 8456 9136 Yes
Leases - - 111 120 130 140 151 163 Yes
Computer Software and Equipment 209 257 172 186 201 217 234 253 Yes
Leased Property - - 111 120 130 140 151 163 Yes
Transportation Equipment 439 586 674 728 787 850 918 992 Yes
Other Property, Plant & Equipment 394 477 529 572 617 667 721 779 Yes
Total Investments and Advances 18 37 5 5 6 6 7 7 Yes
LT Investment - Affiliate Companies 11 31 0 0 0 0 0 0 Yes
Other Long-Term Investments 7 6 5 5 6 6 7 7 Yes
Net Other Intangibles 463 1,281 1335 1442 1558 1684 1819 1965 Yes
Total Assets 34,084 43,739 49,214 53171 57446 62065 67055 72447 Yes

Liabilities & Shareholders' Equity

Accounts Payable 387 621 573 619 669 723 781 843 Yes
Income Tax Payable 421 433 167 558 558 558 558 558 No
ST Debt & Current Portion LT Debt 1,956 7,170 10,889 1696 1696 1696 1696 1696 No
Short Term Debt 1,240 5,601 9,273 109 109 109 109 109 No
Current Portion of Long Term Debt 716 1,569 1617 1588 1588 1588 1588 1588 No
Other Current Liabilities 643 794 1116 1116 1116 1116 1116 1116 Yes
Dividends Payable 0 5 7 7 7 7 7 7 No
Accrued Payroll 276 188 605 605 605 605 605 605 No
Miscellaneous Current Liabilities 367 601 504 504 504 504 504 504 N/A
Total Current Liabilities 3,406 9,018 12,746 6802 6852 6906 6964 7026 N/A
Long-Term Debt 2,636 4,017 2,596 0 0 0 0 0 No
Long-Term Debt excl. Capitalized Leases 2,286 3,737 2,348 0 0 0 0 0 No
Extra Finance Nedded 20787 25012 29577 34509 39838
Capitalized Lease Obligations 350 281 247 0 0 0 0 0 No
Provision for Risks & Charges 1,117 1,324 1,040 1040 1040 1040 1040 1040 NO
Non-Convertible Debt 2,286 3,737 2,348 0 0 0 0 0 NO
Deferred Taxes 1,853 2,027 2,147 2147 2147 2147 2147 2147 No
Other Liabilities 0 0 821 821 821 821 821 821 No
Deferred Taxes - Credit 1,853 2,027 2,147 2212 2212 2212 2212 2212 No
Total Liabilities 9,012 16,387 19,350 13022 13072 13126 13184 13246 No
Common Stock Par/Carry Value 406 406 406 406 406 406 406 406 No
Retained Earnings 12,864 14,904 17,439 17439 17439 17439 17439 17439 No
Cumulative Translation Adjustment/Unrealized For. Exch.106
Gain 106 106 106 106 106 106 106 No
Unrealized Gain/Loss Marketable Securities 4 4 3 3 3 3 3 3 N/A
Unappropriated Reserves 1,190 1,159 1,132 1132 1132 1132 1132 1132 No
Accumulated Minority Interest 0 270 276 276 276 276 276 276 N/A
Total Equity 25,072 27,352 29,588 19362 19362 19362 19362 19362 Yes

Liabilities & Shareholders' Equity 34,084 43,739 49,214 53171 57446 62065 67055 72447 Yes

Page | 30
 Calculation and Interpretation of Beta

Company Beta
Beximco 0.91000
The beta of Beximco was calculated by using slope and through regression analysis which valued
0.91 this means Beximco’s stock is 0.09% less volatile than the market changes. As this value is
under one, we can say that beximco’s stocks poses less risk.

WACC
Given Assumtions
Perpetual growth rate 5%
Market Return (Rm) 10.59%
Risk Free rate (Rf) 5.69%

Base Year 2019

Total Equity 29,588
Total Debt 13,485
Liabilities & Shareholders'
Equity (V) 49,214
Beta 0.91000

Cost of Equity/Re (CAPM) 10.15%

Tax rate 22.79%

Interest Expense 555
Total Longterm debt 29588.00

Pre-tax cost of Debt (Rd) 1.88%

After tax cost of debt ((Rd)*(1-Tc)) 1.45%

E/V 60.12%
D/V 27.40%

Page | 31
 WACC 6.50%

From 2019 income statements of Beximco, current debt and long-term liabilities are
reported, totaling BDT 19,350 million. Total equity is BDT 29588 million. The company's debt
and equity were 60.12 percent and 27.40percent, respectively. The cost of equity using the CAPM
formula is 10.15 per cent. Here, equity costs are measured using a market return and a risk-free
rate of 10.59 per cent and 5.69 per cent respectively. The cost of debt is 1.45 per cent, attained by
adjusting tax and the tax rate was 22.79 per cent, which was collected from Beximco Ltd.’s
financial statements.

Thus the Weighted Average Cost of Capital (WACC) is 6.50% which is calculated using the
above formula. This means Beximco spends 6.50% on an average for its financial resources

Valuation Scenario
Year 2020 2021 2022 2023 2024
EBIT 5,256 5,679 6,135 6,629 7,162
Dep Exp 938 1,013 1,095 1,183 1,278
Tax 906 906 906 906 906
OCF 5,288 5,786 6,324 6,905 7,533

Year 2020 2021 2022 2023 2024

Ending Fixed asset 38,840 41,963 45,337 48,983 52,921
Begging Fixed Asset 35,950 38,840 41,963 45,337 48,983
Depreciation 39 42 45 49 53
NCS 2,929 3,165 3,419 3,694 3,991

Year 2020 2021 2022 2023 2024

Ending NWC 13,214 14,367 15,612 16,956 18,410
Beginnig NWC 12,148 13,214 14,367 15,612 16,956
Change in NWC 1,066 1,152 1,245 1,345 1,453

Year 2020 2021 2022 2023 2024

OCF 5,288 5,786 6,324 6,905 7,533
NCS 2,929 3,165 3,419 3,694 3,991
Change in NWC 1,066 1,152 1,245 1,345 1,453
FCF 1,292 1,469 1,660 1,866 2,089

Page | 32
Year 2020 2021 2022 2023 2024 Terminal Value
FCF 1,292 1,469 1,660 1,866 2,089 146371
PV of FCF 1213 1295 1374 1451 1525 106841

Enterprise Value 113699

Total Longterm Debt 29588.00
Fair VALUE 84111
Common Stock Outstanding 406
Fair VALUE per stock 207.17
Current Market Price 210.12 Source: DSE as per 24 Jan

Stock is Overvalued FV<MV

Investment Decision: From the valuation analysis, it can be said that Beximco's stock is
marginally overvalued since its intrinsic value is a bit higher than the actual share price. Although
the stock price is overvalued, investors holding beximco's stock would not gain much from selling
the stock now as the gap is quite negligible. For now, they can retain the share on the basis of the
pro-forma statement, it is seen that sales will increase, which will further raise the stock price.
Again, the customer who wishes to purchase the stock will not be much affected by this marginally
overvalued stock price. They should buy the share now as the stock price is projected to rise
further.

Page | 33
 Appendix
Ratio Calculation of Walmart:

Page | 34
Page | 35
Page | 36
Page | 37
1. BEXIMCO PHARMACEUTICALS LIMITED (BXP.L) Stock Price, News, Quote &
History. (2021, January 26). Retrieved January 26, 2021, from
https://finance.yahoo.com/quote/BXP.L?p=BXP.L&.tsrc=fin-
srch&guccounter=1&guce_referrer=aHR0cHM6Ly9sLmZhY2Vib29rLmNvbS8&guce_r
eferrer_sig=AQAAAJ2GiJtfSfWWGuQ5yQ1gXcpDVXlxrg29QnGmCMQiiJv1WVKuX
ZnJxANNhbUbGYkVMhi9v8DzCbtu8G3QCY-
i1gnDm6gdNJBLa7DFSrWKxaC2vip59RCRqTWpJ-
LmbshSfEuZjS7v6qw8RQ4PsiDpWJ6E-eCm5_WRR3FLOzuWnQyQ
2. The Wall Street Journal. (n.d.). BXPHARMA | Beximco Pharmaceuticals Ltd. Stock
Price & News - WSJ. Retrieved January 26, 2021, from https://www.wsj.com/market-
data/quotes/BD/XDHA/BXPHARMA?fbclid=IwAR2bUq4TvdIyTxmz-
IUUGtfXVpyN2jZWlIcdadFnd4SLkiAwdMwYgWTZrLQ
3. The Wall Street Journal. (n.d.). WMT | Walmart Inc. Stock Price & News - WSJ.
Retrieved January 26, 2021, from https://www.wsj.com/market-
data/quotes/WMT?mod=searchresults_companyquotes&fbclid=IwAR17jRQlZeoW_c0U
JjFERT37sT41gmDFG2n2w_ixP4D7ztEwliQ_hw0NDFM
4. Walmart Inc. (WMT) Stock Price, News, Quote & History. (2021, January 25). Retrieved
January 26, 2021, from https://finance.yahoo.com/quote/WMT?p=WMT&.tsrc=fin-srch

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