Introduction
Beximco Pharmaceutical Ltd. is a leading edge pharmaceutical company based in Dhaka, Bangladesh and is a memb...
Block Buster product:
Napa Highest selling drug in Bangladesh pharmaceutical market in
terms of unit.
Neoceptin-R Highest ...
The current expansion of this overseas portfolio includes prioritizing and directing marketing operations to focus more on...
Purchase and Cash Disbursement :
The purchasing starts with need recognition. The respective department identifies its nee...
Current ratio is a financial ratio that measures whether or not a company has enough resources to pay its debt over
the ne...
inventories didn`t change much but the other factors changed like cash, short term investment. So the results were similar...
Net working capital indicates how well company manages its short-term debts and uses current assets. Normally the higher t...
since this ratio can uncover the percentage of remaining liquid assets (with Total Current Liabilities subtracted out) com...
Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales reve...
In accounting, the Inventory turnover is a measure of the number of times inventory is sold or used in a time period
such ...
The accounts payable turnover ratio indicates how many times a company pays off its suppliers during an accounting
period....
Days sales in inventory is a financial measure of company's performance that gives investors an idea of how long it
takes ...
Days payable outstanding means the activity ratio that measures how well a business is managing its accounts
payable. The ...
The operating cycle is the amount of time it takes for a company to turn cash used to purchase inventory into cash
once ag...
A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate
ne...
It works almost as same as the previous ratio. But here the company faced a different situation. The company
experienced a...
The ratio of before-tax income to total revenue as an indicator of how many taka of revenue survive after operating expens...
It is seen that during 2007 and 2008 the NLB was negative because at that time sales were not expanding at a higher rate s...
It indicates the firm’s ability to finance additional sales without incurring additional debts. To find the approximate am...
This ratio represents the portion of current assets that are held as account recievables.The account receivables are less ...
The ratio was very high in 2007 and 2008 almost half of the current asset was occupied by inventory but it fell down heavi...
The ratio shows the amount of NWC that is generated from the company’s cash holdings. The observed pattern is not stable ....
This ratio measures the proportion of creditors in the net working capital. The higher the ratio it is bad because then a
...
because at that time Beximco NWC fell down heavily because of large short term borrowing but inventory was constant. But i...
The creditors as a percentage of sales show the sales we are generating are from credit
purchases up to what extent. If mo...
Net profit margin is a key financial indicator used to asses the profitability of a company. It is an indicator of how eff...
The ROE is increasing constantly for the last 5 years this is a very good sign because the net income is constantly increa...
Gross profit margin measures company's manufacturing and distribution efficiency during the production process.
This ratio...
company has been doing a great job to keep their debt to asset ratio as lower as possible and it didn’t went higher than 0...
and 2011 the company consistently kept this ratio low. But in 2009 it went high because total assets increased a lot from ...
The Times Interest Earned Ratio is used to measure a company’s ability to meet interest payments on its debt. The ratio
pr...
Cash interest coverage ratio
This ratio measures the company's ability to pay of its interest from cash flow generated in ...
This ratio measures company`s ability to repay its current and future debt from the operating cash flow, the higher the ra...
The Cash Return on Assets measures the Cash Flow from Operations in relation to Total Assets. Cash Return on Assets basica...
PE Ratio
The price to earnings ratio (PE Ratio) is the measure of the share price relative to the annual net income earned...
The price-to-book ratio indicates whether or not a company's asset value is comparable to the market price of its stock. F...
As Z* of the firm is increasing means the financial condition of the firm is increasing It was constant in 2008 means it w...
The profitability condition of beximco is quite moderate although its net profit margin ratio is quite high but is only sl...
The cashconversion peroiod also gives similar results like operating cycle that the ratio is decreasing but still well bel...
They should stretch their DPO without hampering their image this will help them to reduce their cash conversion
period and...
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Fin340 report

  1. 1. Introduction Beximco Pharmaceutical Ltd. is a leading edge pharmaceutical company based in Dhaka, Bangladesh and is a member of the Beximco Group. The history of pharmaceutical business of the company dates back to the early 70s, when it started to import market and distribute medicines from world renowned companies like Upjohn Inc. of USA and Bayer AG of Germany. Since the very beginning, the company was highly successful in generating increased demand for its products which eventually justified local production. It completed its registration in 1976 and started its operation in 1980 by manufacturing and marketing licensee products of Bayer AG of Germany and Upjohn Inc. of USA. After its initial years of struggle it broke ground with the launching of its own products in 1983. In 1985 BPL was listed in Dhaka Stock Exchange (DSE) as a Public Limited Company. The journey continued and barrier after barrier were crossed, challenges were faced and overcome to transform BPL into what it is at present. Now it has grown to become nation's one of the leading pharmaceutical companies, supplying more than 10% of the country's total medicine need. In the process, it was enlisted in Chittagong and London Stock Exchange. Today Beximco manufactures and markets its own `branded generics' for almost all diseases from AIDS to cancer, from infection to asthma, from hypertension to diabetes for both national and international markets. It manufactures a range of dosage forms including tablets, capsules, dry syrup, powder, cream, ointment, suppositories, large volume intravenous fluids, metered dose inhalers etc. in several world-class manufacturing plants, ensuring high quality standards complying with the World Health Organization (WHO) approved current Good Manufacturing Practices (cGMP). Beximco also contract manufactures for major international brands of leading multinational companies. Beximco has a strong market focus and is anticipating continued future growth by leveraging business capabilities and developing superior product brands and markets. In particular it is very interested in developing a strong export market in USA and Europe. To meet the future demand it has invested over US 50 million dollar to build a new state-of-the-art manufacturing plant, confirming to USFDA and UK MHRA standards. This new plant will also offer contract-manufacturing facility to leading pharmaceutical companies, especially from Europe and US. 2.1.2 Vision: “If there is one characteristic that has typified the BEXIMCO approach, it is the Vision to be the best of our nature and human resource; a vision to establish our group and country as a respected and valued regional presence.” 2.1.3 Mission: “Each of our activities must benefit and add value to the common wealth of our society. We firmly believe that, in the final analysis we are accountable to each of the constituents with whom we interact, namely: our employees, our customers, our business associates, our fellow citizens and our shareholders. 2.1.5 Board and Management Beximco Pharmaceuticals Ltd. is managed by the Board of Directors, an Executive Committee and a Management Committee. Board of Directors is responsible for the corporate governance. It consists of eleven members including the Chairman, A S F Rahman and the Vice Chairman, Salman F Rahman. The five-member Executive Committee is headed by Mr. Osman Kaiser Chowdhury who is also a member of the Board of Directors. The Executive Committee is accountable for both operational and financial performance of the company. This committee is also responsible for budget approval, policy adoption or changes, new project review, compliance audit etc. The Management Committee comprises of ten eleven-notch professionals who are one of the bests in Bangladesh in their own fields. This committee is leaded by Mr. Nazmul Hasan, Chief Executive Officer (CEO) who is responsible for the overall management of the business. This committee reviews and manages day-to-day business operation and recommends strategy options to the Executive Committee. Products: The company’s diverse product portfolio encompasses a wide variety of therapeutic categories, including antibiotics, analgesics, respiratory, cardiovascular, central nervous system, dermatology, gastrointestinal etc. BPL currently produces 235 generics in 426 strengths and dosage forms and many of the company’s brands are consistently occupying leading positions in their respective therapeutic categories. In 2010 Beximco Pharma introduced 27 new generics in a total of 34 presentations, which include seven ophthalmic drops, three HFA asthma inhalers and also drugs in categories such as, three cardiovascular, two multivitamins, two musculoskeletal, two anti-infective, and one anti-diabetic, among others. The three HFA-based inhalers which were launched for the first time in Bangladesh in 2010. Also introduce for first time into the market was a formulation of Paracetamol 665 mg. Napa Extend. Baximco Pharma’s Growth prospects remain excellent with key blockbuster products such as Napa and Neoceptin-R in its portfolio. In 2010 Napa and Neoceptin R ranked 2nd and 4th respectively on the national “Top Five” list. More over ten of BPL’s brands have annual sales in excess of BDT 100 million each. 9Management Accounting Practice At Beximco Pharmaceuticals Ltd: A Review Of Costing Function
  2. 2. Block Buster product: Napa Highest selling drug in Bangladesh pharmaceutical market in terms of unit. Neoceptin-R Highest selling drug in Bangladesh pharmaceutical market in terms of value. Bextrum/Bextrum Gold Emerged as the most admired and highest selling nutritional supplement in Bangladesh Market in just one year. Amdocal Highest selling cardiovascular drug in BD in terms of value. Tofen Highest selling oral anti-asthma drug in BD in terms of value. Azmasol Highest selling mastered dose inhaler in Bangladesh in terms of value. .1.7 International Market: Beximco Pharma continues to explore export opportunities and to reinforce its footprint on a global scale, which currently covers five different continents. Alongside the continuous endeavour to strengthen the position in existing markets, BPL attempts to achieve dynamic growth worldwide. Beximco Pharma commenced its international operations with the export of API to Hong Kong in 1992 and formulation products to Russia in 1993. The company has received the ‘National Export Trophy’ (Gold) for an impressive three times. Since then, BPL has taken greater strides over the years to increase its footprints in international markets. In 2010, BPL successfully ventured into several new countries including South Africa (via contract manufacturing) and Netherlands Antilles, and registered 45 products in overseas markets. The company achieved export revenues of Tk 330.54 million, up 21.47% over 2009.
  3. 3. The current expansion of this overseas portfolio includes prioritizing and directing marketing operations to focus more on highly regulated markets such as the European Union (EU), USA, Australia and GCC member countries for value added generics. As of 2010 Beximco Pharma has 322 products registered in Asia, 91 in Africa, five in Central and Latin America, and 22 in Middle East, while we are actively taking measures to register our products in attractive branded generic markets such as the CIS states and the EU countries. BPL’s products are highly trusted for their quality by physicians and consumers at home and abroad. With this acclamation BPL is supplying different formulations from its portfolio to renowned hospitals and institutions including Raffles Hospital, Healthway Medical Group & K. K. Women and Children Hospital in Singapore; Asthma Drug Facility (ADF) in France; CENABAST in Chile; and MEDS and Kenyatta National Hospital in Kenya. BPL is constantly investing in its state-of-the-art manufacturing facilities to significantly expand its capabilities to meet the regulatory requirements of developed countries. BPL has pursued approvals from different drug regulatory authorities, e.g. TGA (Australia), GCC (Gulf Council), ANVISA (Brazil) and INVIMA (Colombia), which highlights BPL’s credentials as it explores new opportunities in the export arena. In brief, BPL is now involved in the following national markets: Iran South Korea Cambodia Malaysia Taiwan Philippines Hong Kong Russia Somalia Ukraine Georgia Sri Lanka Pakistan Myanmar Kenya Singapore Nepal Mozambique Yemen Vietnam
  4. 4. Purchase and Cash Disbursement : The purchasing starts with need recognition. The respective department identifies its need and send to purchase department and the quantity and timing of raw materials are decided by the planning department. Then the goods and services are received by the user department who has issued the purchase requisition or in some cases by the authorized department. Then the purchase department compares the invoice/bill. If everything has been complied, the amount payable to supplier is approved by the purchase department. After a certain period of time when the date becomes matured for the liability the payment is made by BPL. The matured date has been calculated in the aged payable report for each vendor. The mode of payment is usually per numbered check. In most cases the payment is made by A/C payee only check. In some cases the payment may be made by cash or by bearer check or paid in advance fully or partly. Normally on average the payment term is 30days n30 policy in order to verify the quality of the supply and if they see that cash discounts are given they usually try to grab those opportunities Sales and Cash Collection System : Most of the Sales in Beximco pharmaceuticals are conducted on cash basis normally they don`t allow credit to customers. But sometimes for their old and loyal customers they extend the payment terms normally on average 10-12 days to maintain good relationship with them. Normally they receive orders through telephone, online and retail stores. Normally after getting an order they send the delivery to the customer, then customer mails them the cheque, after getting the cheque they deposit it and it take sometime to transfer the amount in their account. The collection float is not that high as they conduct business on cash basis and they follow decentralized system hence the mail float and availability float is lower but as they follow decentralized system in different districts the processing float is much higher. The field officer collects the cash and then transfer it in 1 single central area. They have around 20-25 collection system in all over Bangladesh and finally the balance is transferred at their central system. Credit Management As they purchase goods on credit from their supplier to verify the product which is described above in the purchase and cash disbursement section it indicates that they use trade credit but along with that they also take bank credit means they borrow from bank to run their operations they borrow money from several banks but Janata Bank is their primary customer. Liquidity Ratio : Current ratio
  5. 5. Current ratio is a financial ratio that measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12 months) by comparing firm's current assets to its current liabilities. It gives an idea of company's operating efficiency. A high ratio indicates "safe" liquidity, but also it can be a signal that the company has problems getting paid on its receivable or have long inventory turnover. After analyzing the current ratio from the time period of 2007 to 2011 we found in 2008 it fell down heavily because current liability rose due to increase in short term borrowings from bank but current asset remained fairly constant. In 2009 it increased dramatically because they had huge cash in hand and they invested substantial amount in short term investment. In 2010 it fell down slightly because they reduced their short term investment. In 2011 it again rose because they increased their investment in short term asset. From our analysis we found that beximco ratio is very high so they are becoming financially stable but they are also keeping huge amount of idle cash. Quick ratio : Quick Ratio is an indicator of company's short-term liquidity. It measures the ability to use its quick assets (cash and cash equivalents, marketable securities and accounts receivable) to pay its current liabilities. It specifies whether the assets that can be quickly converted into cash are sufficient to cover current liabilities. Many lenders are interested in this ratio because it does not include inventory, which is the most illiquid asset and it may or may not be easily converted into cash. After analyzing quick ratio for the last 5 years it gives similar results like current ratio means it fell down heavily in 2008 again rose sharply in 2009 and then decrease slightly in 2010 and again rose slightly in 2011. The results were similar because 0 0.5 1 1.5 2 2.5 3 3.5 2007 2008 2009 2010 2011 Current Ratio Current Ratio 0.0000000 0.5000000 1.0000000 1.5000000 2.0000000 2.5000000 2007 2008 2009 2010 2011 Quick Ratio Quick Ratio
  6. 6. inventories didn`t change much but the other factors changed like cash, short term investment. So the results were similar to current ratio. Its a good sign that this ratio is high but again they are keeping a lot of idle cash. Cash Ratio Cash Ratio is an indicator of company's short-term liquidity. It measures the ability to use its cash and cash equivalents to pay its current financial obligations. The higher the ratio it is good but it normally below 1 because company doesn't want to keep huge amount of cash as idle. In 2007 and 2008 the cash ratio was extremely lower in 2009 it increased significantly because current liability were constant but they came large amount as FDR. In 2010 it increased slightly but in 2011 it fell down heavily because they reduced their FDR account by large amount. Net working Capital 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 2007 2008 2009 2010 2011 Cash Ratio Cash Ratio
  7. 7. Net working capital indicates how well company manages its short-term debts and uses current assets. Normally the higher the NWC it is better if it is less than 1 it implies company is facing serious liquidity problem. After analyzing we found in 2008 the NWC decreases because they took lot of borrowing in 2009 the NWC rose heavily because they kept lot of cash in their FDR account and made lot of short term investment in 2010 it fell down slightly because they reduced their short term investment in 2011 it rose slightly despite the fact they reduced their FDR account but at the same time they increased their investment in short term asset and reduced their current liability. Beximco is always maintaining a good NWC it experienced a bad time in 2008 but the other remaining years it has done a good job. Net working capital to total asset The Working Capital to Total Assets ratio measures a company's ability to cover its short term financial obligations) by comparing its Total Current Assets to its Total Assets. This ratio can provide some insight as to the liquidity of the company, 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 2,500,000,000 3,000,000,000 3,500,000,000 4,000,000,000 4,500,000,000 5,000,000,000 2007 2008 2009 2010 2011 Net Working Capital Net Working Capital - 0.0500000 0.1000000 0.1500000 0.2000000 0.2500000 2007 2008 2009 2010 2011 NWC to TA NWC to TA
  8. 8. since this ratio can uncover the percentage of remaining liquid assets (with Total Current Liabilities subtracted out) compared to the company's Total Assets. After analyzing we found out that in 2008 this ratio fell down because company took a lot of short term borrowing in 2009 it increased significantly as NWC increased due to increase in cash and short term investment in 2010 it reduced slightly and in 2011 it again increased slightly. Net Working Capital Turnover Ratio The higher your working capital turnover ratio is, the more efficient you are in using working capital to generate sales, but a very high working capital turnover ratio can show that a company does not have enough capital to support its sales growth. The ratio increased dramatically in 2008 but the main reason was not of better efficiency in utilizing working capital management but because they had lack of current asset it fell down heavily in 2009 because this was their transition period hence they had huge amount of capital as cash and marketable securities and till 2011 it remained fairly constant. Although this ratio is very low but it is a not a bad sign because they have huge amount of cash and liquid asset. Efficiency Ratios 1. Total Asset Turnover Ratio 0 2 4 6 8 10 12 14 16 18 2007 2008 2009 2010 2011 NET WORKING CAPITAL TURNOVER RATIO NWC Turnover
  9. 9. Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. High asset turnover ratio is considered desirable. The ratio was dropping in the year 2008 and 2009 in 2008 they purchased lot of fixed asset and in 2009 they invested a lot in marketable securities hence total assets increased more than net revenue so ratio fell down. But it started increasing from 2010 and 2011 in 2010 there sale increased heavily and they were able to control their interest expense and in 2011 there sales increased more than their asset which shows that now beximco is better utilizing their asset to generate more revenue. 2. Inventory Turnover - 0.050000 0.100000 0.150000 0.200000 0.250000 0.300000 0.350000 0.400000 2007 2008 2009 2010 2011 Total Asset Turnover Ratio Total Asset Turnover Ratio 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 2007 2008 2009 2010 2011 Inventory Turnover Inventory Turnover
  10. 10. In accounting, the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. A high inventory turnover ratio implies either strong sales or ineffective buying .A high inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels The company’s inventory turnover ratio has been increasing in a consistent way over the past 5 years. It is indicating they are selling their inventory at faster rate. They are increasing their sales at a much faster rate than they are holding inventory reason is quite simple they have reduced a lot of their holding cost means after getting certain big orders they start buying raw materials and sometimes they try to take advantage of cash discount. This is a sign of good inventory management. 3. Receivable Turnover Receivable turnover ratio is an accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. A high receivables turnover ratio implies either that the company operates on a cash basis or that its extension of credit and collection of accounts receivable are efficient. Also, a high ratio reflects a short lapse of time between sales and the collection of cash, while a low number means collection takes longer The ratio kept increasing for the last 5 years except 2009 because now they changed their credit policy now they operate only on cash basis and they allow credit to only certain special customers and foreign companies. Hence now they are collecting their receivable at a faster rate. Means converting their sales to cash at a faster rate. So it is a good sign for them. 4. Payable turnover 6.4 6.6 6.8 7 7.2 7.4 7.6 7.8 8 8.2 2007 2008 2009 2010 2011 Receivable Turnover Receivable Turnover
  11. 11. The accounts payable turnover ratio indicates how many times a company pays off its suppliers during an accounting period. It measures how a company manages paying its own bills. A higher ratio is generally more favorable as payables are being paid more quickly. Means we have less liability. The ratio was within 7 for the trend years except 2009 because at that time their business expanded heavily hence they had to take some short term financing which increased their liability and hence the ratio fell down to 6 but again in 2010 they increased this ratio as their business revenue increased and the expansion became more stable and it also increased slightly which was very close to 8. This is a good sign for them. 5. Days Sales in Inventory - 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 2007 2008 2009 2010 2011 Payable Turnover Payable Turnover 0 50 100 150 200 250 300 350 2007 2008 2009 2010 2011 DIH DIH
  12. 12. Days sales in inventory is a financial measure of company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower (shorter) the DSI the better, but it is important to note that the average DSI varies from one industry to another. This ratio is constantly falling for the last 5 years it is a good sign because now they are easily converting their inventory into sales at a much quicker rate. Another observation was that they are constantly increasing their sales at a much higher rate than they are increasing their inventory, after taking the interview we came to know that after getting certain big orders they start producing which is why there DIH has reduced and they have introduced lot of new products which has high demand and so sales are much quicker. 6. Days Sales in Receivable Days Sales in receivables is a measure of the average number of days that a company takes to collect revenue after a sale has been made. A low DSO number means that it takes a company fewer days to collect its accounts receivable. A high DSO number shows that a company is selling its product to customers on credit and taking longer to collect money. This ratio is constantly falling for the last 5 years except 2009 means it fell down heavily in 2008 but all of a sudden it again jumped up in 2009 and from 2010 it is constantly falling down from 2010 and 2011. In 2009 it dramatically increased because their export sales all of a sudden increased largely and they got many new foreign customers as it was first time they had to offer some credit hence account receivable increased and in 2010 beximco undestood the overseas market and started collecting their receivable at a faster rate. As now they offer only on cash basis and offer credit to only certain loyal customers hence their DSO is falling which is a good sign for them. 7. Days Payable Outstanding 40 42 44 46 48 50 52 54 2007 2008 2009 2010 2011 DSO DSO
  13. 13. Days payable outstanding means the activity ratio that measures how well a business is managing its accounts payable. The lower the ratio, the quicker the business pays its liabilities. It also shows the average payment terms granted to a company by its suppliers. The higher the ratio, the better credit terms a company gets from its suppliers. From a company’s prospective, an increase in DPO is an improvement and a decrease is deterioration. The ratio fell down in 2008 but suddenly jumped up in 2009 but again fell down heavily in 2010 and in 2011 it decreased but the amount was very low. As this ratio is falling it is a good sign because they are extending credit terms from their supplier which is enhancing their liquidity position. The good part is that they are reducing the DPO very slowly and they don`t have much short term borrowing . 8. Operating Cycle - 10.00 20.00 30.00 40.00 50.00 60.00 70.00 2007 2008 2009 2010 2011 DPO DPO 0 50 100 150 200 250 300 350 400 2007 2008 2009 2010 2011 OC OC
  14. 14. The operating cycle is the amount of time it takes for a company to turn cash used to purchase inventory into cash once again. This number is calculated by adding the age of inventory (the number of days that inventory is held prior to sale) with the collection period (the number of days required to collect receivables). A company with a short operating cycle is able to quickly recover its investment. A company with a long operating cycle will have less cash available to meet any short-term needs, which can result in increased borrowing and interest expense. Over the past 5 years from 2007-2011, the company kept getting better with their operating cycle and managed to keep it low. The reason was that they have reduced their DIH and DSO to a larger extent by better inventory management and collecting their receivable at a faster rate by changing their credit policy . 9. Cash Conversion Period A metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows. The cash conversion cycle attempts to measure the amount of time each net input dollar is tied up in the production and sales process before it is converted into cash through sales to customers. This metric looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties. The ratio is falling for the last 5 years it is a good sign because they are converting their resources to cash at a much faster rate. They have done this by reducing their operating cycle through better credit policy and better inventory management at the same time they have stretched its account payable at a slower rate hence they have better working capital and less cash tied in inventory and receivable. 10. Fixed Asset Turnover Ratio - 50.00 100.00 150.00 200.00 250.00 300.00 350.00 2007 2008 2009 2010 2011 CCP CCP
  15. 15. A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. The higher the ratio, the better it is for the company. In 2008, company faced a bad time in case of generating net sales using their fixed assets because at that time they bought lot of new plant and equipment hence fixed asset increased at a higher rate than sales.. But from 2009 it started to rise in a remarkable way as their sales were increasing at a very higher rate due to expanding the business. 11. Current Asset Turnover Ratio Current asset turnover ratio is a ratio that indicates how efficiently a firm is using its current assets to generate revenue. 0 0.1 0.2 0.3 0.4 0.5 0.6 2007 2008 2009 2010 2011 Fixed Assets Turnover Fixed Assets Turnover - 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 2007 2008 2009 2010 2011 Current Assets Turnover
  16. 16. It works almost as same as the previous ratio. But here the company faced a different situation. The company experienced a peak in 2008, dropped in 2009 and then again struggled getting better in 2010 and 2011. It had a peak in 2008 because at that time their current asset fell down slightly but their sales incresed but it jumped up in 2009 because at that time they invested heavily on marketable securities and kept lot of cash in FDR account. Tax Management Efficiency The tax management efficiency ratio of a fund measures what percentages of a fund’s earnings are lost to taxation. It focuses on how efficiently management is controlling the effect of tax and reducing the tax. Tax management efficiency ratio reflecting the use of security gains or losses and other management tools to minimize tax exposure. This ratio is decreasing for the last 5 years except in 2010. The ratio is decreasing because for the past few years they have reduced their reliance on debt financing hence EBT increasing at a higher rate so tax expense is increasing in 2010 all of a sudden their interest expense rose quite high compare to previous years hence EBT was reduce than the expected one. The ratio range is quite constant between 0.7-0.8 so they are managing their tax in a moderate way. 12. Expense Control Efficiency 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 2007 2008 2009 2010 2011 TME Ratio TME Ratio
  17. 17. The ratio of before-tax income to total revenue as an indicator of how many taka of revenue survive after operating expenses are removed. It indicates how the operating expenses are being controlled in order to generate more revenue. It also depends on the effectiveness of the management and the staff of the firm. This ratio is increasing for the last 5 years it is a very good sign because it shows that they are now able to control their expenses in a better and efficient way. One reason for this efficiency is that they have reduced debt financing compare to asset and sales hence interest expense was reduced and their overhead, administrative and marketing expense didn`t increase at that rate s their revenue rose, hence they are efficiently controlling their expense and this is one of the key reason for thier phenomenal growth in net income. Working Capital Ratios NLB NLB is the difference between current financial assets(cash, marketable securities) and current financial liability(notes payable, current maturity of long term debt).This items are not directly related to company`s operating cycle. It only consider those assets that are primary source of liquidity. The greater the NLB the grater the financial flexibility to meet its WCR. If NLB is negative means company is completely depended on external financing to meet its working capital requirement. - 0.05 0.10 0.15 0.20 0.25 2007 2008 2009 2010 2011 ECE Ratio ECE Ratio (3,000,000,000.00) (2,000,000,000.00) (1,000,000,000.00) - 1,000,000,000.00 2,000,000,000.00 2007 2008 2009 2010 2011 NLB NLB
  18. 18. It is seen that during 2007 and 2008 the NLB was negative because at that time sales were not expanding at a higher rate so to meet WCR financed were drawn from NLB, but from 2009 sales were expanding at a higher rate so permanent funding were required like equity and long term liability so NLB were increasing. In 2009 lot of cash were kept in FDR and made huge investment in marketable securities. In 2010 it fell down slightly becausethey removed their short term investment in 2011 it again increased because again they invested in marketable securities but they reduced their idle cash which was a good sign as they are not sacrificing profitabilty. The working capital requirement is the minimum amount of resources that a company requires to effectively cover the usual costs and expenses necessary to operate the business.WCR is the difference between spontaneous assets and spontaneous liabilities which are needed daily to run the operation. As the company expands its current operating assets such as account receivable, inventory increases which is counter balanced by increase in current operating liability such a accruals and accounts payable. In 2007 and 2008 the WCR remained fairly constant, FROM 2009 TO 2011 IT KEPT ON INCREASING at a constant rate. It shows that from 2009 the business is expanding a lot hence both current operating assets and current operating liabilities are increasing, but assets are increasing at a higher rate .In 2007 and 2008 large part of WCR were financed from NLB that`s why NLB was very low at that time expansion was not that much. But from 2009 it started expand at a higher rate hence permanent source of funding were required in 2009 they increased their long term liability through issuing preferred shares and in 2010and 2011 they increased their long term liability and issued more new shares. - 2,000,000,000.00 4,000,000,000.00 6,000,000,000.00 2007 2008 2009 2010 2011 WCR WCR 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 2007 2008 2009 2010 2011 WCR/Sales Ratio WCR/Sales Ratio
  19. 19. It indicates the firm’s ability to finance additional sales without incurring additional debts. To find the approximate amount of working capital a company should have, you should look at working capital per dollar of sales. It determines the changes in the overall usage of cash over time. The working capital requirements has been standardized by dividing it by sales, developing a working capital requirements to sales ratio, WCR/S. it is statistically different across industry categories, indicating that industries have significantly different working capital needs. All the other factors being constant, the greater this ratio, the greater the reliance a company will have on external funds given a change in sales. Thus, the larger the WCR/S ratio, the less financial flexibility and less liquidity the firm will have, because its operating cycle will require significant investments of funds. When WCR is negative, the firm’s cash cycle becomes a permanent source of financing and the positive impact on liquidity will be significant. As you can see from the graph the ratio is decreasing for the last 5 years which is a good sign means sales is increasing at a higher rate than working capital required, liquidity position of the company is very strong and has lot of financial flexibility. Hence for additional sales beximco doesn't need to take any new debt or external financing because their liquidity position is very strong means they have enough liquid asset. This indicates that there efficiency has increased means they are able to generate more sales in less amount of working capital. Cash to current asset ratio shows the portion of current asset held as cash.This ratio provides information about the liquidity position.As cash is the most liquid current asset,the greater this ratio the more liquid a company will be. In the above diagram we see that this ratio fluctuates over time. In the year 2008 and 2009 the ratio comes down.Though there is a increment in 2010 but in 2011 the ratio has fallen even more than the past years.This fluctuation is due to the change in cash holdings during the respective year.In the year 2008 Beximco’s cash holdings declined resulting in a decrease in cash to current asset ratio.In 2009 the amount of cash held by them inclined sharply.This pattern continued in 2010.But in 2011 the cash amount declined while the currernt assets continue to increase.This is because of the increased portion of assets in short term investments,inventories,supplies and account receivables.So this ratio indicates the lack of liquidity of Beximco pharmaceuticals in terms of cash holdings. 0 5 10 15 20 25 2007 2008 2009 2010 2011 cash/current asset cash/current asset
  20. 20. This ratio represents the portion of current assets that are held as account recievables.The account receivables are less liquid than cash as they cannot be converted into cash immediately. Yet it can be an indicator of a company’s financial flexibility and liquidity position. The ratio was very high in 2007 and 2008 but it fell down heavily in 2009 because from our analysis they invested huge amount in marketable securities and they had lot of cash so despite receivable increased but it was very low compare to increase in current asset and most of the receivable were from export sales because at that time they expanded their business in international market. Inventory to current asset ratio shows the portion of current asset held in inventory. Inventory is the least liquid of all other current assets because it requires a long time to convert them into cash. Thus the smaller the ratio the better liquidity position for the company. 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2 2007 2008 2009 2010 2011 receivables/current asset recievables/current asset 0 0.1 0.2 0.3 0.4 0.5 0.6 2007 2008 2009 2010 2011 inventory/current asset inventory/current asset
  21. 21. The ratio was very high in 2007 and 2008 almost half of the current asset was occupied by inventory but it fell down heavily in 2009 because in 2009 they invested a huge amount in marketable securities and had lot of cash in FDR account so their current asset increased heavily and inventory increased only a little margin this can be signified by seeing the change in quick ratio but in 2010 it increased slightly because took their investment out of marketable securities and their inventory increased slightly hence inventories proportion to current asset increased in 2011 it remained fairly constant because both their investment in marketable securities and inventory increased at the same rate. This ratio also provide information about liquidity. Observing the graph we find that there was a sharp decline in NWC to current asset ratio during 2008.The reason behind was that the because current liability rose due to increase in short term borrowings from bank but current asset remained fairly constant resulting net working capital to fall. The opposite occurred in 2009 when the current assets increased in large amount with a decline in current liabilities resulting net working capital to rise.Thus the ratio was also higher.In 2010 and 2011 though there was no remarkable change in current liabilities but higher current assets lead to a increase in this ration in 2011 which was smaller in 2010.The incremental current asset is associated with a large change in investments by Beximco Pharma. 0 10 20 30 40 50 60 70 2007 2008 2009 2010 2011 nwc/current asset nwc/current asset
  22. 22. The ratio shows the amount of NWC that is generated from the company’s cash holdings. The observed pattern is not stable .It has two peaks in the year 2008 and 2010 respectively.With a lower ratio in 2007,the net working capital declined sharply in 2008 because increase in huge borrowing causing the ratio to rise during this time the cash holdings also declined as a result of decreased current assets .In contrast in2010 the cash amount increased largely which give a rise to cash to net working capital ratio. But in 2011 the cash holdings has fallen largely and so has the ratio has also fallen in 2011 but one thing we noticed was that in 2011 the cash was transferred to marketable securities although this ratio indicates that current situation Beximco Pharma’s cash holding is not sufficient to provide liquidity but they have enough liquid asset to meet its NWC. 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 2007 2008 2009 2010 2011 cash/nwc cash/nwc
  23. 23. This ratio measures the proportion of creditors in the net working capital. The higher the ratio it is bad because then a company relies heavily on debt for their operations. This ratio all of a sudden jumped heavily in 2008 because during that time they took lot short term borrowing on the other hnd their current asset fell down hence this ratio increased largely but in 2009 it fell down more heavily as they increasd their investment in current asset through investing in marketable securities and keeping cash in FDR account hence NWC increased highly but they didn`t increase their borrowing at that rate so the ratio fell down and in the last few years their ratio is quite constant. This ratio measures the NWC generated from the most illiquid asset which is inventory. The lower the ratio the better the liquidity position. This ratio was higher in 2007 but all of a sudden in 2008 it increased heavily means almost 5 times in 2008 0 20 40 60 80 100 120 2007 2008 2009 2010 2011 creaditors/nwc creaditors/nwc 0 2 4 6 8 2007 2008 2009 2010 2011 inventory/nwc inventory/nwc
  24. 24. because at that time Beximco NWC fell down heavily because of large short term borrowing but inventory was constant. But in 2009 it fell down heavily because their NWC rose due to large investment in marketable securities and large cash in FDR account and it remained fairly constant till 2011 this is a good sign which implies better liquidity position. From a lower percentage in 2007, receivables to net working capital ratio as well as inventory to net working capital ratio rose greately in 2008.These was due to the huge fall in net working capital resulting from the increase in current liabilities.During this time short time borrowings,long time borrowings,creditors borrowing and most importantly income tax paybles increased in large proportion. This ratio measures the NWC generated from account receivable, the lower the ratio the better the liquidity position because if higher receivable then it means more cash is tied up. The ratio similar to inventory by net working capital means it rose significantly in 2008 due to increase in huge current liability and dropped significantly in 2009 because of large invetmnet in marketable securities and FDR and the last 2 years it remained fairly constant. 0 0.5 1 1.5 2 2.5 2007 2008 2009 2010 2011 ar/nwc ar/nwc
  25. 25. The creditors as a percentage of sales show the sales we are generating are from credit purchases up to what extent. If more sales are there from credit then the working capital required will be less. This ratio is quite similar to days payable outstanding hence the analysis is described in the DPO interpretation This ratio is quite similar to days sales outstanding(DSO) if this ratio decreases liquidity position increases because if we collect our receivable faster then we receive more cash in our hand. The analysis is described in DSO interpretation Profitability Ratios 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 2007 2008 2009 2010 2011 creditors/sales creaditors/sales 0.11 0.115 0.12 0.125 0.13 0.135 0.14 0.145 2007 2008 2009 2010 2011 Debtors/Sales Debtors/Sales
  26. 26. Net profit margin is a key financial indicator used to asses the profitability of a company. It is an indicator of how efficient a company is and how well it controls its costs. The higher the margin is, the more effective the company is in converting revenue into actual profit. In increased in 2008 because their sales increased on the other hand they were able to control their expense but it fell down in 2009 despite their sales were increasing because at that time they incurred huge market and advertising expense but it rose heavily in 2010 because their sales increased heavily but it fell down slightly in 2011. . Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. Potential investors usually look into the ROE to know whether the accounting return on shareholders’ investment is attractive or not. 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 2007 2008 2009 2010 2011 Profit Margin Profit Margin 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 2007 2008 2009 2010 2011 Return On Equity Return On Equity
  27. 27. The ROE is increasing constantly for the last 5 years this is a very good sign because the net income is constantly increasing due to higher sales one important mention they are also increasing their equity in this following years specially in 2010 net income increased heavily but ROE didn`t increase at that rate because they increased their equity at that time by issuing more preferred shares. Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings This ratio increased in 2008 but fell down slightly in 2009 despite the fact that net income increased because during that tie their current asset increased heavily because of investing n marketable securities and higher idle cash. But it jumped highly in 2010 because their net income increase highly during that year because of sudden growth in sales and it increased slightly in 2011. 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 2007 2008 2009 2010 2011 Return on Assets (ROA) Return on Assets (ROA)
  28. 28. Gross profit margin measures company's manufacturing and distribution efficiency during the production process. This ratio increased highly in 2008 because their sales increased heavily and they were able to control their production expenses but it fell down in 2009 because they consumed more raw materials at that time hence production expense rose but jumped in 2010 because their sales increased heavily at that year but it fell down slightly in 2011 because of more raw materials were consumed. Leverage Ratios Debt to total asset ratio shows a measure of company’s assets financed by debt. The lower the ratio, generally the better off the company. From the graph we can see that in 2007 and in 2008 the ratio was considerably low, that is in those years the company didn’t take much debts against their assets. But again in 2009 it rose pretty high because in 2009 they issues fully convertible preference shares which were treated as financial liability according to the IAS32 law. It again came down in 2010 because the preference share were considered as equityand they managed to keep it low in 2011 too. For the past 5 years it is seen that the 42.00% 43.00% 44.00% 45.00% 46.00% 47.00% 48.00% 49.00% 50.00% 51.00% 2007 2008 2009 2010 2011 Gross Profit Margin Gross Profit Margin 0.00000 0.05000 0.10000 0.15000 0.20000 0.25000 0.30000 0.35000 0.40000 0.45000 0.50000 2007 2008 2009 2010 2011 Debt to Total Asset Ratio Debt to Total Asset Ratio
  29. 29. company has been doing a great job to keep their debt to asset ratio as lower as possible and it didn’t went higher than 0.45 which is good and they running less financial risks. The lower the debt to equity ratio, the better is the financial condition of the company. This ratio is mainly found out by dividing the long term debts by common shareholder’s equity. If the ratio is greater than 1 then it means the majority of the company’s assets are financed through debts and if lower than 1, it means the assets have mostly been financed through equity. Like the previous ratio, this ratio has also taken a rise in 2009 but the reason was not because they took higher amount of debt it was due to preference shares considered as liability and it was almost near to 1, but in other 4 years it was a lot lower than 1. The equity multiplier ratio is found out by dividing total assets with stockholder’s equity .The higher the equity multiplier the higher company depends on debts for financing. So, higher equity multiplier ratio is not good. In the years 2007, 2008, 2010 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 2007 2008 2009 2010 2011 Debt to Total equity Ratio Debt to Total equity Ratio 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 2007 2008 2009 2010 2011 Equity Multiplier Ratio Equity Multiplier Ratio
  30. 30. and 2011 the company consistently kept this ratio low. But in 2009 it went high because total assets increased a lot from the year 2008 to 2009 but stockholder’s equity didn’t increase, but the company didn`t took much debt the reason as mentioned above was due to treating preference shares as liability. The companies with more long term debt ratios are considered to be more risky as they happen to have more liabilities than equity. The lesser the ratio, the better it is. Beximco pharma, like their other leverage ratios maintained to keep this ratio low in 2007,2008,2010 and 2011. But in 2009, it went high because their long term borrowing and deferred tax liabilities went high because of the reason of preference shares being treated as liability rather than equity. 0.00000 0.05000 0.10000 0.15000 0.20000 0.25000 0.30000 0.35000 0.40000 2007 2008 2009 2010 2011 Long Term Debt Ratio Long Term Debt Ratio 0.00 1.00 2.00 3.00 4.00 5.00 6.00 2007 2008 2009 2010 2011 Times Interest Earned Ratio Times Interest Earned Ratio
  31. 31. The Times Interest Earned Ratio is used to measure a company’s ability to meet interest payments on its debt. The ratio provides an indication to lenders and investors as to whether the company is likely to run into any financial trouble. A high ratio means that the company’s earnings significantly exceed its interest obligations, so it continues to be able to meet these obligations. A low ratio puts the company’s ability to meet its debt obligations in question and can forewarn of the possibility of bankruptcy. From the graph we can see that the company was not doing that well in 2007, as its operating profits were not that remarkable. But it started to get better from 2008, rose pretty high in 2009 and faced a sudden fall in 2010 because company paid lot of their debt. But again managed to take a leap in 2011. Cash flow ratios These ratios will measure the ability of the company to operate its daily operations, pay maturing debts and make major purchases from out of the funds projected from cash flows . This is liquidity based on cash management in as much as major expenses are incurred only if they have been properly projected through the cash flow statement. Operating cash flow ratios A high cash flow solvency ratio indicates the company’s ability to generate funds from operations to settle due and maturing obligations on time. If this ratio is less than 1 it is bad means to meet its short term obligation company will have to sell their assets,issue new stock. The OCF ratio of beximco increased slightly in 2008 but it fell down slightly in 2009 but in 2010 it increased heavily because sales were increasing and in 2011 it also increased. Although the cash flow solvency ratio is not a good sign but they are improving day by day. 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 2007 2008 2009 2010 2011 CASH FLOW SOLVENCY RATIOS OCF Ratio
  32. 32. Cash interest coverage ratio This ratio measures the company's ability to pay of its interest from cash flow generated in the operations it also take interest and tax with the Net OCF because this amounts are available to pay the interest. The higher the ratio it is better. In 2008 the ratio increased significantly because their net cash flow increased because their sales increased and they were able to keep their expenses constant in 2009 there sales increased but expenses increased at a higher rate hence net cash flow fell down heavily. In 2010 it increased slightly although OCF increased almost 2.5 times because interest also became double in 2011it fell down slightly because expenses increased. This ratio indicates that beximco have enough cash to meet its short term obligation. Cash flow margin ratio It is a measure of the money a company generates from its core operations per dollar of sales. A high operating cash flow margin can indicate that a company is efficient at converting sales to cash, and may also be an indication of high earnings quality. In 2008 it increased significantly because sales were increased but expense remained fairly constant in 2009 it fell down because the expenses increased at a higher rate than sales in 2010 it increased and in 2011 it fell down slightly. Cash flow by Total debt ratio 0 1 2 3 4 5 6 2007 2008 2009 2010 2011 Cash Interest Coverage Ratio Cash Interest Coverage Ratio 0 0.1 0.2 0.3 0.4 2007 2008 2009 2010 2011 Cash Flow Margin Ratio Cash Flow Margin Ratio
  33. 33. This ratio measures company`s ability to repay its current and future debt from the operating cash flow, the higher the ratio it is better. In 2008 this ratio increased largely because sales increased but expenses and debt didn`t increased at that rate but in 2009 it fell down heavily because their debt increased due t issuance of preference shares and expense increased at a higher rate than sales but in 2010 it increased dramatically because debt were largely reduced because preferred shares were counted as equity and sales increased at a much higher rate than expense and in 2011 it increased slightly than the previous year. Cash current coverage ratio This ratio is similar to OCF ratio only here we see whether the company has enough cash to meet its current debt after paying the dividend the ratio also give similar results which is mentioned above in OCF ratio analysis. Cash Flow to ROA Ratio 0 0.1 0.2 0.3 2007 2008 2009 2010 2011 Cash Flow From Operations/ Total debt Cash Flow From Operations/ Total debt 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 2007 2008 2009 2010 2011 Cash Current Debt Coverage Ratio Cash Current Debt Coverage Ratio
  34. 34. The Cash Return on Assets measures the Cash Flow from Operations in relation to Total Assets. Cash Return on Assets basically shows how well (or how poorly) the company is generating cash from its asset investments. Similar to Return on Total Assets, the company hopes to generate as much revenue as possible from its assets. This ratio increased in 2008 but fell down heavily in 2009 again it rose highly in 2010 but fell down slightly in 2011. It increased when sales increased at a higher rate than expenses and decreased when the opposite happen. In all those years the assets were increasing. Market value ratios Earning per share or EPS is considered as an indicator for choosing the stocks for investment. On the basis of the EPS it is determined what is the earning of the company per share. Higher EPS indicates company is earning more per share. The Eps of beximco kept increasing from 2007 to 2010 but it fell down slightly in 2011. In 2008 the jump was higher because net income increase highly in 2010 the net income increased heavily but they issued more number of shares hence EPS didn`t rose that much in 2011 EPS fell down although net income increased but they again issued more shares. 0 0.02 0.04 0.06 0.08 0.1 0.12 2007 2008 2009 2010 2011 Cash Return on Assets Cash Flow to ROA Ratio 0 1 2 3 4 5 6 2007 2008 2009 2010 2011 Earnings Per Share Earnings Per Share
  35. 35. PE Ratio The price to earnings ratio (PE Ratio) is the measure of the share price relative to the annual net income earned by the firm per share. PE ratio shows current investor demand for a company share. A high PE ratio generally indicates increased demand because investors anticipate earnings growth in the future. We can see that PE ratio increased significantly in 2008 because market price increased heavily during that time but in 2009 it remained fairly constant because price and eps both remained fairly same. IT is falling from 2010 because market price is falling as general index i Bangladesh Capital market is falling heavily, so it is not now under their control. Book value per share This ratio calculates the the per share value of a company based on its equity available to shareholders. It increased in 2008 because they increased their equity it fell down in 2009 because they issued more number of shares it increased in 2010 and fell down in 2011 because again they issued more shares. Market to Book ratio BDT 0.00 BDT 10.00 BDT 20.00 BDT 30.00 BDT 40.00 BDT 50.00 2007 2008 2009 2010 2011 PE PE 0 20 40 60 80 100 2007 2008 2009 2010 2011 Book Value Per share Book Value Per share
  36. 36. The price-to-book ratio indicates whether or not a company's asset value is comparable to the market price of its stock. For this reason, it can be useful for finding value stocks. It is especially useful when valuing companies that are composed of mostly liquid assets, such as finance, investment, insurance, and banking firms. The market to book value kept on increasing till 2009 because during that time the stock market was a lucrative place to invest so prices were increasing at a higher rate than equity were increasing but in the last 2 years stock market collapsed hence price fell down so ratio is falling. Bankruptcy prediction This ratio is used to know the future financial condition of the company. It is used to predict the probability that whether a company can go bankrupt within 2 years. The Z-Score can be characterized as a linear combination of 4-5 common business ratios. These ratios are weighted by coefficients which are estimated to determine that whether a company can face any bankruptcy within years 0 0.5 1 1.5 2 2.5 2007 2008 2009 2010 2011 Market to Book Ratio Market to Book Ratio - 0.50 1.00 1.50 2.00 2.50 2007 2008 2009 2010 2011 Z* Z*
  37. 37. As Z* of the firm is increasing means the financial condition of the firm is increasing It was constant in 2008 means it was in grey zone but in 2009 it fell down heavily and was now in the distress zone because asset turnover ratio fell down hence they were not utilizing their asset properly to generate more revenue and their liability increased compare to equity but the condition was not that serious because they issued large number of preferred shares which were treated as liability. So the company financial condition which was not that bad as it seemed in the Z score(1.12) But in 2010 increased sharply because they increased the preferred shares were now treated as equity and their asset turnover ratio increased in 2011 it again increased slightly. This shows that company is improving its financial condition and trying to enter the safe zone. INDUSTRY COMPARISON To know how well beximco is performing in its respective industry and to calculate the industry average we have compared beximco`s liquidity, profitability and efficiency ratios with their main competitors Square Pharmaceuticals, Glaxo Smith Kline and Reneta Pharmaceuticals. The liquidity position of Beximco is better than other companies which is justified by their higher current ratio. Its liquidity position was always higher than square and reneta, but Glaxo liquidity position was better than them for the past 4 years but in 2011 it deterioted and beximco`s liquidity increased hence it now slightly edges glaxo in terms of liquidity. Its way higher than the industry average, hence liquidity position is quite good. Its working capital requirement is quite higher compare to the industry average the main reason is that they are always trying to expand their business so they needed more working capital to run their operations. It is always higher than glaxo and reneta but it was higher than square till 2009 but from 2010 square WCR became higher than beximco. 0 2 4 6 8 10 12 2006 2007 2008 2009 2010 2011 2012 Current Ratio Beximco Current Ratio Renata Current Ratio Glaxo Current Ratio Square Current Ratio - 1,000,000,000.00 2,000,000,000.00 3,000,000,000.00 4,000,000,000.00 5,000,000,000.00 6,000,000,000.00 7,000,000,000.00 2006.520072007.520082008.520092009.520102010.520112011.5 WCR Beximco WCR Renata WCR Glaxo WCR Square WCR Square WCR
  38. 38. The profitability condition of beximco is quite moderate although its net profit margin ratio is quite high but is only slightly better than the indusrty average. The justification we can give over here for the sake of liquidity they are sacrificing some part of their profitability to reduce their risk exposure.Glaxo profit margin is quite low compare to other companies,But in the last 5 years Reneta and suare profitability is better than Beximco. Square net income is much higher,but Reneta net income is lower than Beximco but they are controlling their expenses more efficiently,hence profitability is higher. ITs net profit margin is better than industry average but their competitors profitbility condition is slightly better than them. The operating cycle of Beximco is the highest in the industry and is also higher than the industry average, it indicates that their efficiency is the weakest aming all. For the last 5 years it is in a decreasing but still lacking behind others. The reason is that beximco is taking more time to convert their inventory into sales and collecting their receivable quite slower comapre to its peers. In the recent trend only reneta`s efficiency is deterioting is becoming closer to beximco`s condition , square and glaxo condition is much muc better than beximco. 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 2006 2007 2008 2009 2010 2011 2012 Net Profit Margin Beximco Net Profit Margin Renata Net Profit Margin Glaxo Net Profit Margin Square Net Profit Margin Square Net Profit Margin 0 50 100 150 200 250 300 350 400 450 0 1 2 3 4 5 6 7 OC Beximco Renata Glaxo Square
  39. 39. The cashconversion peroiod also gives similar results like operating cycle that the ratio is decreasing but still well below than the industry average It indicates beximco is taking more ime to convert their resource into cashflows One thing we noticed was that the DPO of all the companies are quite same hence OC and CCP gives almost similar chart. As beximcomis taking longer time to collet their receivables and convert their inventory into sales thna others. Hence its CCP is quite higher compare to its competitiors Square and Glaxo are way awy ahead than them only Reneta`s condition is quite similar to them in the recent time Performance Analysis Ratios Condition Reason Liquidity Good Current and other ratios are higher than industry average and most other companies Efficiency Bad Higher CCP and Higher DIH and DSO than the industry average so take more time to convert resources to cash Profitability Moderate Slightly higher than industry average but square and reneta net profit margin is slightly higher Leverage Good Less reliance on debt financing Market value ratios Moderate EPS and market to book ratios are not that high Working Capital Ratios Good They have more investment in liquid asset than illiquid asset Cash Flow ratios Bad Lower cash are generating from operations and less cash are converting from revenue Bankruptcy Moderate As its value lie in the grey zone Recommendations They should sell their inventory at a more faster rate this will reduce the DIH and as they are keeping the inventory for a longer period in their it is also increasing their holding cost. Although they have reduced the DIH they should try even more to reduce it because their competitors sell inventory at a faster and more number of times a year compare to them They should collect their receivable at a faster rate because their competitors collect it much more faster than them hence lot of their cash are blocked on receivable. - 50.00 100.00 150.00 200.00 250.00 300.00 350.00 2006.5 2007 2007.5 2008 2008.5 2009 2009.5 2010 2010.5 2011 2011.5 CCP Beximco CCP Renata CCP Glaxo CCP Square CCP
  40. 40. They should stretch their DPO without hampering their image this will help them to reduce their cash conversion period and they will be able to convert resource into cash flow at faster rate The higher current ratio than standard indicates they are blocking additional amount of money on current asset than required means they are sacrificing a lot of profitability The cash flows should be managed more efficiently so that they can generate more cash from the revenue They should manage their marketing expense more efficiently for better profit margin Z score should be improved to enter in safe zone this can be done by controlling or reducing the marketing and distribution expense this will increase the EBIT and also the net profit margin, this will help us to increase the Z score

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