A Term Paper on Financial Statement Analysis of Square Pharmaceuticals Ltd

1. A Term Paper on Financial Statement Analysis of Square Pharmaceuticals Ltd
1. Horizontal Analysis
2. Vertical Analysis
3. Ratio Analysis
Submitted to: Mohammed Moin Uddin Reza
Assistant Professor
&
Program Co-ordinator
Masters of Business Administration (MBA)
Bangladesh University of Professionals (BUP)
Submitted by: Mohammad Mydul Islam
Roll: 2023031053
Batch: 23rd
Section: A
MBA Professionals
Bangladesh University of Professionals
Date of Submission: 2nd
September 2020
Accounting for Managers (ACC 7201)

2. Letter of Transmittal
September 2, 2020
Mohammad Moin Uddin Reza
Assistant Professor
Faculty of Business Studies
Bangladesh University of Professionals
Subject: Financial Statement Analysis on Square Pharmaceuticals Ltd.
Dear Sir,
Greetings, it is a matter of great pleasure as well as learning to prepare a term paper on “Square
Pharmaceuticals Ltd.” under the course of Accounting for Managers. So, I would highly
oblige if the content of the term paper has been acceptable to you.
Though I have put my best efforts, yet it is very likely that the term paper may have some
mistakes and omissions that are unintentional. So, I hope that the term paper will be worthy of
your consideration.
Sincerely yours,
Mohamad Mydul Islam
Batch: 23rd
Section: A
Roll: 2023031053

3. Declaration Statement
I would like to start by expressing our deep sense of gratitude to Almighty Allah for his infinite
grace that allowed me to complete this assignment successfully. I want to express our sincere
appreciation to our honorable course teacher Assistant Professor Mohammad Moin Uddin Reza
Sir for his consistent guidance and encouragement for making this work possible. The
completion of this study would not have been possible without the expertise of my dear
Supervisor. I feel honored and privileged to work under his guidance and expertise.
A debt of gratitude is also owed to the entire people who prepared those informative and
ingenious places which really helped me in all steps of our study.
Last but not the least I would like to thank Bangladesh University of Professionals for giving all
the help and support whenever we needed.
I feel that we perceive this opportunity as a big milestone in our career development. I will strive
to use gained skill and knowledge in the best possible way in order to attain desired career
objective.
Sincerely,
Mohamad Mydul Islam
Batch: 23rd
Section: A
Roll: 2023031053

4. Table of Content
Serial
Chapter
Name
Content
Page
Number
1 One Financial Statement of Square Pharmaceuticals
Ltd
1-3
2 Two Horizontal Analysis of Square Pharmaceuticals
Ltd for the FY 2017-18 and 2018-19
4-9
3 Three Vertical Analysis of Square Pharmaceuticals Ltd
for the FY 2017-18 and 2018-19
10-15
4 Four Ratio Analysis for the FY-2017-18 and 2018-19 16-25
Recommendation and Conclusion 26

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CHAPTER 01
Financial Statement of Square Pharmaceuticals Ltd

6. SQUARE PHARMACEUTICALS LTD.
AND ITS SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Particulars Notes Amount in Taka
30 June 2019 30 June 2018
ASSETS:
Non-Current Assets: 33,734,410,538 32,831,465,294
Property, Plant and Equipment-Carrying Value 2 20,853,956,270 20,545,437,633
Investment - Long Term (at Cost) 3 655,408,674 940,754,391
Investment - Associates Undertaking 4 9,211,605,860 8,454,064,733
Investment in Marketable Securities (Fair Value) 5 3,013,439,734 2,891,208,537
Current Assets: 38,411,642,036 28,441,536,241
Inventories 6 4,596,512,673 4,432,935,118
Trade Debtors 7 1,561,818,167 1,615,544,248
Advances, Deposits and Prepayments 8 2,312,201,184 2,280,668,747
Short Term Loan 9 2,937,071,066 3,131,975,363
Cash and Cash Equivalents 10 27,004,038,946 16,980,412,765
TOTAL ASSETS 72,146,052,574 61,273,001,535
SHAREHOLDERS' EQUITY AND LIABILITIES:
Shareholders' Equity: 67,880,617,172 57,816,566,831
Share Capital 11 7,890,084,660 7,373,910,900
Share Premium 12 2,035,465,000 2,035,465,000
General Reserve 105,878,200 105,878,200
Tax Exemption Reserve 13 2,211,743,936 1,949,557,722
Gain on Marketable Securities (Unrealized) 145,585,283 192,272,252
Cumulative Translation Adjustment (939,072) -
Retained Earnings 55,492,799,165 46,159,482,757
Non Controlling Interest 14 - 24,901,060
Non-Current Liabilities: 1,294,346,873 1,231,133,152
Deferred Tax Liability 15 1,294,346,873 1,231,133,152
Current Liabilities: 2,971,088,529 2,200,400,492
Trade Creditors 16 716,988,428 524,676,136
Liabilities for Expenses 17 239,913,331 89,665,092
Liabilities for Other Finance 18 2,014,186,770 1,586,059,264
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 72,146,052,574 61,273,001,535
Net Assets Value per Share (NAV) 31 86.03 73.28
Number of Shares used to compute NAV 789,008,466 789,008,466
Consolidated
The annexed notes (1-33 ) form an integral part of these financial statements. Signed as per our annexed report on even date.
Tapan Chowdhury
Managing Director
Khandaker Habibuzzaman
Company Secretary
Samuel S Chowdhury
Chairman
Dhaka, 27 October, 2019
Mahfel Huq & Co.
Chartered Accountants
64 SPL Annual Report 2018-19
2| Page
Square Pharmaceuticals Ltd

7. The annexed notes (1-33 ) form an integral part of these financial statements. Signed as per our annexed report on even date.
Tapan Chowdhury
Managing Director
Khandaker Habibuzzaman
Company Secretary
Samuel S Chowdhury
Chairman
Dhaka, 27 October, 2019
Mahfel Huq & Co.
Chartered Accountants
SQUARE PHARMACEUTICALS LTD.
AND ITS SUBSIDIARY
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Particulars Notes Amount in Taka
2018-2019 2017-2018
GROSS REVENUE 19 50,866,867,352 45,886,959,303
Value Added Tax (6,833,233,083) (6,233,127,665)
NET REVENUE 44,033,634,269 39,653,831,638
Cost of Goods Sold 20 (22,091,384,351) (20,089,819,913)
GROSS PROFIT 21,942,249,918 19,564,011,725
OPERATING EXPENSES: (7,799,800,561) (6,783,069,126)
Selling & Distribution Expenses 21 (6,603,747,456) (5,751,408,276)
Administrative Expenses 22 (1,195,957,909) (1,031,567,251)
Finance Cost 23 (95,196) (93,599)
PROFIT FROM OPERATIONS 14,142,449,357 12,780,942,599
Other Income 24 2,310,360,094 1,768,094,011
PROFIT BEFORE WPPF 16,452,809,451 14,549,036,610
Allocation for WPPF 25 (791,921,561) (701,097,850)
PROFIT BEFORE TAX 15,660,887,890 13,847,938,760
Income Tax Expenses-Current 26 (3,876,979,330) (3,255,148,172)
Income Tax Expenses-Deferred (63,213,721) (101,899,306)
PROFIT AFTER TAX 11,720,694,839 10,490,891,282
Profit/(Loss) from Associate Undertakings 27 931,706,302 1,115,299,919
PROFIT AFTER TAX 12,652,401,141 11,606,191,201
Other Comprehensive Income:
Gain/(Loss) on Marketable Securities (Unrealized) 28 (46,686,969) (404,289,461)
Cumulative Translation Adjustment (939,072) -
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 12,604,775,100 11,201,901,740
Profit Attributable to:
Owners of the Company 12,645,724,268 11,593,964,282
Non Controlling Interest 6,676,873 12,226,919
12,652,401,141 11,606,191,201
Total Comprehensive Income Attibutable to:
Owners of the Company 12,598,199,525 11,189,674,821
Non Controlling Interest 6,575,575 12,226,919
12,604,775,100 11,201,901,740
Earnings Per Share (EPS) 29 16.03 14.69
Number of Shares used to compute EPS 789,008,466 789,008,466
Consolidated
65SPL Annual Report 2018-19
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Square Pharmaceuticals Ltd

8. Square Pharmaceuticals Ltd
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CHAPTER 02
Horizontal Analysis of Square Pharmaceuticals Ltd for the FY 2017-18 and
2018-19

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Theoretical Overview of Horizontal Analysis
Horizontal analysis refers to the inter-year deviations or fluctuations of the financial and accounting
information of any financial or industrial organization. The analysis is mainly done to show the following very
important information:
1. Trend analysis
2. Future estimation
3. Growth analysis
4. Controlling
5. Idea generation
6. Cost minimization
7. Proper utilization of wealth
8. Future policy formulation
9. Making idea about the company
10. Providing information to the stakeholders.
Figure: Significance of Horizontal Analysis at a Glance
Trend
analysis
Future
estimation
Growth
analysis
Controlling
Idea
generation
Cost
minimization
Proper
utilization of
wealth
Future policy
formulation
Making idea
about the
company
Providing
information
to the
stakeholders.

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Horizontal Analysis of Statement of Financial Performance for Square Pharmaceuticals
Ltd
Increase or decrease during 2018-2019
Particulars 2018-2019 2017-2018 Amount Percentage
Gross Revenue 50866867352 45886959303 4979908049 10.9%
Less: Value Added Tax -6833233083 -6233127665 -600105418 9.6%
Net Revenue 44033634269 39653831638 4379802631 11.0%
Less: Cost of Goods sold -22091384351 -20089819913 -2001564438 10.0%
Gross Profit 21942249918 19564011725 2378238193 12.2%
Less: Operating expenses -7799800561 -6783069126 -1016731435 15.0%
Selling & Distribution expenses -6603747456 -5751408276 -852339180 14.8%
Administrative expenses -1195957909 -1031567251 -164390658 15.9%
Finance cost -95196 -93599 -1597 1.7%
Profit from operations 14142449357 12780942599 1361506758 10.7%
Add: Other income 2310360094 1768094011 542266083 30.7%
Profit before WPPF 16452809451 14549036610 1903772841 13.1%
Less: Allocation for WPPF -791921561 -701097850 -90823711 13.0%
Profit before Tax 15660887890 13847938760 1812949130 13.1%
Less: Income tax expenses-current -3876979330 -3255148172 -621831158 19.1%
Less: Income tax expenses-deferred -63213721 -101899306 38685585 -38.0%
Profit after tax 11720694839 10490891282 1229803557 11.7%
Add: Profit/(Loss) from associate
undertakings
931706302 1115299919 -183593617 -16.5%
Profit after tax 12652401141 11606191201 1046209940 9.0%
Less: Other comprehensive income
Gain/(Loss) on Marketable securities
(Unrealized)
-46686969 -404289461 357602492 -88.5%
Cumulative translation adjustment -939072 -939072
Total comprehensive income for the
year
12604775100 11201901740 1402873360 12.5%
This is the calculation of horizontal analysis for Square Pharmaceuticals Ltd. For better and sophisticated
analysis, two years have been considered for making a good analysis.

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Horizontal Analysis
Horizontal Analysis of Gross profit
The chart represents that there have been positive 12.2% changes in gross profit over FY 2018-19 comparing
to the FY 2017-18 that is surely a good sign.
Horizontal Analysis of Operating Profit
The chart represents that there have been positive 10.7% changes in operating profit over FY 2018-19
comparing to the FY 2017-18 that is surely a good sign of profitability.
Horizontal Analysis of Profit after Tax
The chart represents that there have been positive 9.0% changes in profit after tax over FY 2018-19 comparing
to the FY 2017-18 that is surely a good sign of profitability.

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Horizontal Analysis of Statement of Financial Position for Square Pharmaceuticals Ltd
Increase or decrease during 2018-2019
Particulars Amount in Taka
Assets 30-Jun-19 30-Jun-18 Amount Percentage
Non-current assents 33734410538 32831465294 902945244 2.8%
Property, plant and equipment-
carrying value
20853956270 20545437633 308518637 1.5%
Investment-long term (at cost) 655408674 940754391 -285345717 -30.3%
Investment-associates undertaking 9211605860 8454064733 757541127 9.0%
Investment in marketable securities
(fair value)
3013439734 2891208537 122231197 4.2%
Current Assets 38411642036 28441536241 9970105795 35.1%
Inventories 4596512673 4432935118 163577555 3.7%
Trade Debtors 1561818167 1615544248 -53726081 -3.3%
Advances, deposits and prepayments 2312201184 2280668747 31532437 1.4%
Short term loan 2937071066 3131975363 -194904297 -6.2%
Cash and cash equivalents 27004038946 16980412765 10023626181 59.0%
Total assets 72146052574 61273001535 10873051039 17.7%
Shareholders' equity and liabilities
Shareholders' equity: 67880617172 57816566831 10064050341 17.4%
Share Capital 7890084660 7373910900 516173760 7.0%
Share premium 2035465000 2035465000 0 0.0%
General reserve 105878200 105878200 0 0.0%
Tax exemption reserve 2211743936 1949557722 262186214 13.4%
Gain on marketable securities
(Unrealized)
145585283 192272252 -46686969 -24.3%
Cumulative translation adjustment -939072 -939072
Retained earnings 55492799165 46159482757 9333316408 20.2%
Non-controlling interest 24901060 -24901060
Non-current liabilities 1294346873 1231133152 63213721 5.1%
Deferred tax liability 1294346873 1231133152 63213721 5.1%
Current liabilities 2971088529 2200400492 770688037 35.0%
Trade creditors 716988428 524676136 192312292 36.7%
Liabilities for expenses 239913331 89665092 150248239 167.6%
Liabilities for other finance 2014186770 1586059264 428127506 27.0%
Total shareholder equity and
liabilities
72146052574 61273001535 10873051039 17.7%

13. Square Pharmaceuticals Ltd
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Horizontal Analysis
Horizontal Analysis of Non-Current Assets
The chart represents that there have been positive 2.8% changes in NCA over FY 2018-19 comparing to the
FY 2017-18 that is surely a sign to invest more in NCA in FY 2018-19.
Horizontal Analysis of Current Assets
The chart represents that there have been positive 35.1% changes in CA over FY 2018-19 comparing to the
FY 2017-18 that is surely a sign to invest more in CA in FY 2018-19.
Horizontal Analysis of Total Assets
The chart represents that there have been positive 17.7% changes in Total Assets over FY 2018-19 comparing
to the FY 2017-18 that is surely a sign to invest more in Total Assets in FY 2018-19.
Horizontal Analysis of Total Equity
The chart represents that there have been positive 17.4% changes in Total Equities over FY 2018-19
comparing to the FY 2017-18 that is surely a sign to convert to Debt less in FY 2018-19.
Horizontal Analysis of Total Liabilities
The chart represents that there have been positive 17.7% changes in Total Liabilities over FY 2018-19
comparing to the FY 2017-18 that is surely a sign to mature current liabilities less in FY 2018-19.

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CHAPTER 03
Vertical Analysis of Square Pharmaceuticals Ltd for the FY 2017-18 and 2018-19

15. Square Pharmaceuticals Ltd
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Theoretical Overview of Vertical Analysis
Vertical analysis is a method of financial statement analysis in which each line item is listed as a percentage of
a base figure within the statement. Thus, line items on an income statement can be stated as a percentage of
gross sales, while line items on a balance sheet can be stated as a percentage of total assets or liabilities, and
vertical analysis of a cash flow statement shows each cash inflow or outflow as a percentage of the total cash
inflows.
Key Element:
1) Vertical analysis makes it easier to understand the correlation between single items on a balance sheet and
the bottom line, expressed in a percentage.
2) Vertical analysis can become a more potent tool when used in conjunction with horizontal analysis, which
considers the finances of a certain period of time.

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Vertical Analysis of Statement of Financial Performance for Square Pharmaceuticals
Ltd
Percentage with Respect to Statement of financial Performance
2018-2019 2017-2018
Particulars Taka Percentage Taka Percentage
Gross Revenue 50866867352 100.0% 45886959303 100.0%
Less: Value Added Tax -6833233083 -13.4% -6233127665 -13.6%
Net Revenue 44033634269 86.6% 39653831638 86.4%
Less: Cost of Goods sold -22091384351 -43.4% -20089819913 -43.8%
Gross Profit 21942249918 43.1% 19564011725 42.6%
Less: Operating expenses -7799800561 -15.3% -6783069126 -14.8%
Selling & Distribution expenses -6603747456 -13.0% -5751408276 -12.5%
Administrative expenses -1195957909 -2.4% -1031567251 -2.2%
Finance cost -95196 0.0% -93599 0.0%
Profit from operations 14142449357 27.8% 12780942599 27.9%
Add: Other income 2310360094 4.5% 1768094011 3.9%
Profit before WPPF 16452809451 32.3% 14549036610 31.7%
Less: Allocation for WPPF -791921561 -1.6% -701097850 -1.5%
Profit before Tax 15660887890 30.8% 13847938760 30.2%
Less: Income tax expenses-current -3876979330 -7.6% -3255148172 -7.1%
Less: Income tax expenses-deferred -63213721 -0.1% -101899306 -0.2%
Profit after tax 11720694839 23.0% 10490891282 22.9%
Add: Profit/(Loss) from associate
undertakings
931706302 1.8% 1115299919 2.4%
Profit after tax 12652401141 24.9% 11606191201 25.3%
Less: Other comprehensive income
Gain/(Loss) on Marketable securities
(Unrealized)
-46686969 -0.1% -404289461 -0.9%
Cumulative translation adjustment -939072 0.0% 0.0%
Total comprehensive income for the
year
12604775100 24.8% 11201901740 24.4%

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Vertical Analysis
Gross Profit as Percentage of Revenue
The chart represents that there have been positive 42.6% changes in Gross Profit over FY 2018-19 comparing
to the FY 2017-18 that is surely a positive sign for Profitability.
Profit after Tax as Percentage of Revenue
The chart represents that there have been positive 25.3% changes in Profit after Tax over FY 2018-19
comparing to the FY 2017-18 that is surely a positive sign for Profitability.

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Vertical Analysis of Statement of Financial Position for Square Pharmaceuticals Ltd
Percentage with Respect to Statement of financial Position
2019 2018
Assets Taka Percentage Taka Percentage
Non-current assets 33734410538 46.8% 32831465294 53.6%
Property, plant and equipment-carrying
value
20853956270 28.9% 20545437633 33.5%
Investment-long term (at cost) 655408674 0.9% 940754391 1.5%
Investment-associates undertaking 9211605860 12.8% 8454064733 13.8%
Investment in marketable securities (fair
value)
3013439734 4.2% 2891208537 4.7%
Current Assets 38411642036 53.2% 28441536241 46.4%
Inventories 4596512673 6.4% 4432935118 7.2%
Trade Debtors 1561818167 2.2% 1615544248 2.6%
Advances, deposits and prepayments 2312201184 3.2% 2280668747 3.7%
Short term loan 2937071066 4.1% 3131975363 5.1%
Cash and cash equivalents 27004038946 37.4% 16980412765 27.7%
Total assets 72146052574 100.0% 61273001535 100.0%
Shareholders' equity and liabilities
Shareholders' equity: 67880617172 94.1% 57816566831 94.4%
Share Capital 7890084660 10.9% 7373910900 12.0%
Share premium 2035465000 2.8% 2035465000 3.3%
General reserve 105878200 0.1% 105878200 0.2%
Tax exemption reserve 2211743936 3.1% 1949557722 3.2%
Gain on marketable securities
(Unrealized)
145585283 0.2% 192272252 0.3%
Cumulative translation adjustment -939072 0.0% 0.0%
Retained earnings 55492799165 76.9% 46159482757 75.3%
Non-controlling interest 0.0% 24901060 0.0%
Non-current liabilities 1294346873 1.8% 1231133152 2.0%
Deferred tax liability 1294346873 1.8% 1231133152 2.0%
Current liabilities 2971088529 4.1% 2200400492 3.6%
Trade creditors 716988428 1.0% 524676136 0.9%
Liabilities for expenses 239913331 0.3% 89665092 0.1%
Liabilities for other finance 2014186770 2.8% 1586059264 2.6%
Total shareholder equity and
liabilities
72146052574 100.0% 61273001535 100.0%

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Vertical Analysis
Non-Current Asset as Percentage of Total Assets
The chart represents that there have been negative changes in NCA as a percentage of Total Assets over FY
2018-19 comparing to the FY 2017-18 that is surely a sign of maturing some NCA for FY 2018-19.
Current Asset as Percentage of Total Assets
The chart represents that there have been positive changes in CA as a percentage of Total Assets over FY
2018-19 comparing to the FY 2017-18 that is surely a sign of buying some CA for FY 2018-19.
Equity as Percentage of Total Equity and Liability
The chart represents that there have been negative changes in Total Equity as a percentage of Total Equity and
Liability over FY 2018-19 comparing to the FY 2017-18 that is surely a sign of reducing the value of equity
for FY 2018-19.
Total Liability as Percentage of Total Equity and Liability
The chart represents that there have been positive changes in Total Liability as a percentage of Total Equity
and Liability over FY 2018-19 comparing to the FY 2017-18 that is surely a sign of increasing Non-Current
Debt for FY 2018-19.

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CHAPTER 04
Ratio Analysis for the FY-2017-18 and 2018-19

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Ratio Analysis:
Ratio analysis is a very useful tool for comparing the companies with different size and use different unit of
currency. Financial ratios are mathematical comparisons of financial statement accounts or categories. These
relationships between the financial statement accounts help investors, creditors, and internal company
management understand how well a business is performing and areas of needing improvement.
Ratios allow us to compare companies across industries, big and small, to identify their strengths and
weaknesses. Financial ratios are often divided up into seven main categories: liquidity, solvency, efficiency,
profitability, market prospect, investment leverage, and coverage.
Summary of Square Pharmaceuticals Ltd Ratio Analysis:
Percentage
S.L Ration Formula 2018-2019 2017-2018
1 Current ratio Current assent/Current liability 12.9 12.9
2
Acid test ratio
Current asset-prepaid expense-
Inventory)/ Current liability
10.6 9.9
3
Inventory turnover
Cost of goods sold/Average
inventory
4.9 4.4
4 Net profit margin Net income/Net sales 20 30
5 Asset turnover Net sales/Average asset 7.6 6.9
6 Return on asset Net income/Average asset 1.9 1.7
7 Return on equity Net income/ Average equity 20.1 18.5
8 Debt to total asset Total Debt/ Total asset 5.9 5.6

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1. Current Ratio:
The current ratio is a liquidity and efficiency ratio that measures a firm’s ability to pay off its short-term
liabilities with its current assets. The current ratio is an important measure of liquidity because short-term
liabilities are due within the next year.
This means that a company has a limited amount of time in order to raise the funds to pay for these liabilities.
Current assets like cash, cash equivalents, and marketable securities can easily be converted into cash in the
short term. This means that companies with larger amounts of current assets will more easily be able to pay off
current liabilities when they become due without having to sell off long-term, revenue generating assets.
Formula: The current ratio is calculated by dividing current assets by current liabilities. This ratio is stated in
numeric format rather than in decimal format. Here is the calculation:
= =
=12.9:1 =12.9:1
Findings: The declining current ratio for Square Pharmaceuticals Ltd is a bad sign of liquidity for the
company though a good Current ratio lies near about 1.
38411642036
2971088529
2019 2018
28411536241
2200400490

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2. Acid Test ratio:
The acid-test ratio uses a firm's balance sheet data as an indicator of whether it has sufficient short-term assets
to cover its short-term liabilities. This metric is more useful in certain situations than the current ratio, also
known as the working capital ratio, since it ignores assets such as inventory, which may be difficult to quickly
liquidate.
The acid-test ratio is also commonly known as the quick ratio.
Formula:
= =
=10.6:1 =9.9:1
Findings: It is the ability of the company to cover up its Current Liabilities with its Quick Assets- which are
easily convertible to cash. A company should maintain Acid Test Ratio of 1:1. So, the company needs to
increase its Acid Test Ratio
38411642036-2312201184-4596512673
2971088529
2019 2018
28441536241-2280668747-4432935118
2200400492

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3. Inventory Turnover:
Inventory turnover is a ratio showing how many times a company has sold and replaced inventory during a
given period. A company can then divide the days in the period by the inventory turnover formula to calculate
the days it takes to sell the inventory on hand. Calculating inventory turnover can help businesses make better
decisions on pricing, manufacturing, marketing and purchasing new inventory.
Formula:
= =
=4.9 =4.4
Findings: This ratio helps us to determine how many times a year the inventory is used and filled up. The
higher the ratio is, the better it is for the company. So, the company needs to increase its Inventory Turnover
Ratio.
22091384351
4514723896
2019
20089819913
4514723896
2018

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4. Net Profit Margin:
Net profit margin (or profit margin, net margin, return on revenue) is a ratio of profitability calculated as after-
tax net income (net profits) divided by sales (revenue). Net profit margin is displayed as a percentage. It shows
the amount of each sales dollar left over after all expenses have been paid.
Formula:
= =
=20 =30
Findings:
The declining NPM ratio for Square Pharmaceuticals Ltd is a good sign of profitability for the company
though a good NPM ratio lies near about 10%. So, it is very good for the company.
2019
12652401141
50866867352
11606191201
45886959303
2018

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5. Total Asset Turnover
The asset turnover ratio, also known as the total asset turnover ratio, measures the efficiency with which a
company uses its assets to produce sales. The asset turnover ratio formula is equal to net sales divided by the
total or average assets of a company. A company with a high asset turnover ratio operates more efficiently as
compared to competitors with a lower ratio.
= =
=7.6 =6.9
Findings:
This Ratio helps us to determine how efficiently a company uses its assets to generate sales. The company
needs to employ more assets in generating sales and thus do better on this aspect.
2019 2018
50866867352
667095270545
45886959303
667095270545

27. Square Pharmaceuticals Ltd
23 | P a g e
6. Return on Assets Ratio (ROA)
The return on assets ratio, often called the return on total assets, is a profitability ratio that measures the net
income produced by total assets during a period by comparing net income to the average total assets. In other
words, the return on assets ratio or ROA measures how efficiently a company can manage its assets to produce
profits during a period.
Since company assets' sole purpose is to generate revenues and produce profits, this ratio helps both
management and investors see how well the company can convert its investments in assets into profits. You
can look at ROA as a return on investment for the company since capital assets are often the biggest
investment for most companies. In this case, the company invests money into capital assets and the return is
measured in profits. In short, this ratio measures how profitable a company's assets are.
Formula: The return on assets ratio formula is calculated by dividing net income by average total assets.
= =
=1.9 =1.7
Findings:
The declining ROA ratio for Square Pharmaceuticals Ltd is a bad sign of liquidity for the company though a
good ROA ratio lies near about 5% to 10%. So, it is very vulnerable for the company.
2019
12652401141
667095270545
2018
11606191201
667095270545

28. Square Pharmaceuticals Ltd
24 | P a g e
7. Return on Equity Ratio
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate profits
from its shareholders investments in the company. In other words, the return on equity ratio shows how much
profit each dollar of common stockholders' equity generates.
ROE is also an indicator of how effective management is at using equity financing to fund operations and
grow the company.
Formula: The return on equity ratio formula is calculated by dividing net income by shareholder's equity.
= =
=20.1 =18.5
Findings:
The declining ROE ratio for Square Pharmaceuticals Ltd is a good sign of profitability for the company
though a good ROE ratio lies near about 15% to 20%. So, it is very good position for the company.
2019
12652401141
62848592002
2018
11606191201
62848592002

29. Square Pharmaceuticals Ltd
25 | P a g e
8. Debt to Total Asset Ratio
Studying the financial position of Square Pharmaceuticals Ltd, the following The Debt to Total Asset Ratio
has been detected for the years of 2017-18 and 208-19:
Formula:
= =
=5.9 =5.6
Findings:
This ratio is very crucial in determining the solvency of the company. It helps us to measure the percentage of
the total assets the creditors provide. Up to 40% of this ratio seems good for an organization. Once it exceeds
50%, we can say that, the company is going towards bankruptcy. For this company, Debt to Assets Ratio is
way above the general ones. So, the company must take immediate actions to reduce the ratio. Otherwise, they
may proceed towards bankruptcy.
4265435402
2018
3431533644
61273001535
72146052574
2019

30. Square Pharmaceuticals Ltd
26 | P a g e
Recommendation and Conclusion:
The findings retrieved from the Horizontal Analysis, Vertical Analysis and Ratio Analysis show that Square
Pharmaceuticals Ltd has a increasing performance slope for the FY-2018-19 with respect to the FY-2017-18.
This is supposed to be linked to economic policy changes and financial and market news outbreaks in political
fields. The analysis has found the company has a good strength of financial position and other financial
factors, the company could perform better in FY 2018-19. It is recommended that Square Pharmaceuticals Ltd
should check the debt portion of its capital structure for a more solvent financial position.