This document provides an analysis of the annual reports of Square Pharmaceuticals Ltd. for fiscal years 2015-16 and 2016-17. Key findings from the analysis include: - Revenue declined compared to 2014-15, while gross profit increased in 2015-16 and remained steady in 2016-17. Current assets increased significantly in both years, while current liabilities grew at a lower rate. - Profits after tax grew 15% and 19% respectively in the two years despite stagnant revenue, showing strong operational capacity. Shareholders' equity also grew steadily. - Ratios show return on assets declined in 2016-17 due to stagnant revenue despite asset growth. Gross profit ratio remained steady at 42%.

1. Assignment # 2
FINANCIAL ANALYSIS OF ANNUAL REPORT
OF
SQUARE PHARMACEUTICALS LTD.
Prepared for:
Dr. Md. Mohiuddin
Associate Professor, IBA
Course Instructor: Financial Theory and Practices
Prepared by:
Md. Tanveer Hussein (ID: ZR1701023)
Md. Abrar Mahir Khan (ID: ZR1701007)
EMBA (Batch-27)
DHAKA, IBA, DU
03 February 2018

2. Page ii of 15
Contents
Contents ....................................................................................ii
Executive Summary ........................................................................3-4
Introduction ....................................................................................5
Presentation of Ratio………………………………………………6
Objective of Financial Statement Analysis.......................................6
Data Used for the Analysis...............................................................6
Method Used for the Analysis...........................................................6
Company Profile........................................................................................7-8
Corporate Operational Result………………………………………………9
Financial Analysis.......................................................................................10
Horizontal Analysis……………………………………………10-11
Vertical Analysis………………………………………………11-12
Ratio Analysis (Profitability) ……………………………….…….12
Liquidity Ratio…………………………………………………….13
Efficiency Ratio……………………………………………......13-14
Solvency Ratio…………………………………………………….14
Other Ratio………………………………………………………...14
Conclusion………………………………………………………………….15

3. Page 3 of 15
EXECUTIVE SUMMARY
This report provides an analysis and evaluation of the current profitability, liquidity and financial
stability of Square Pharmaceuticals Ltd.
Methods of analysis includes Horizontal and Vertical analysis as well as ratios such as
Profitability, Efficiency, Liquidity, Solvency and others. We have taken two years financials
statements (Annual report 2015-16 & 2016-17) to analyze those.
During the analysis of those financial statements, we have got some observations which have
been discussed throughout the entire report.
From Horizontal Analysis data, we have seen that, there is a decrasing trend in the turn over
comparing to the year 2014-15. The gross profit increased in 2015-16 and remained the same in
2016-17. Current Assets inreased significantly in 2015-2016 (75%) and continued to grow more
in 2016-17 (129%) compared to 2015-16. Current Liability increased at very low rate (8%) and
continued to grow at lower rate (5%) in 2016-17.
The insignificant increase in liabilities compared to Current Assets tremendous growth tells us
that the financing was not done by debt financing. Inspite of huge growth in Current Assets the
turn over did not increase, it indicates the investment on new plants or higher production
capacity is yet to be functional. We can anticipate huge growth in turn over in next years when
new facilities becomes fully functional and starts manufacturing.
Despite of stagnant turn over, the company was able to achieve significant growth in profits
after tax (15% & 19% respectively) in following years. Shareholders equity continued to grow
(27% & 47% respectively) in the following years after 2014-2015. It shows strong operational
capacity of the management.
During Vertical Analysis of, it can be interpreted as, Cost of Goods sold is almost same for both
the years. The Gross Profit is almost same and around 55%, due to absence of data for industry

4. Page 4 of 15
average we cannot compare the efficiency to others. There is an increase in Operating Expenses
in the year 2016-17.
The Asset composition changed in 2016-17, Current Assets increased and Non-Current Assets
decreased significantly. The Shareholders have a very strong claim over the assets (90%), it
shows the dominance of equity funding. The Liabilties are low (10%) and changed a little, it
shows less reliance of on debt financing.
Likewise, from Ratio Analysis data, it is seen that, Return on Assets decreased in 2016-17. It is
consistent with the findings in Horizontal analysis, where we found stagnant turnover despite
significant growth in Assets. Gross Profit ratio remaned almost the same, 42%. The Earning
per share increased by 3.74%.
The liquidity position is very strong for the company as the current ratio remained steady
during the observed period despite of huge investment activities. The quick ratio also remained
almost same, around 5%. The high quick ratio shows strong ability to pay off the short debts. It
also indicates that the company has high amount cash sitting in its reserves.
It is observed the Total Assets Turn Over Ratio decreased significantly in 2016-17, from 0.95
to 0.78. It is consistent with the findings in horizontal analysis where we found huge increase in
current assets despite sales remained almost same. The Inventory Turn Over Ratio remained
same (5%) over the observed period. The Days Holding Inventory Ratio remained almost
same. It required 71 days to converts its inventory to sales in the year 2015-16 and 72 days in
2016-17.
Debt-Equity Ratio has increased slightly in the year 2016-17. Debt is significantly low
compared to equity.
Pay out ratio increased significantly (45.5%) in 2016-17. Price earning ratio remained almost
same.

5. Page 5 of 15
INTRODUCTION
Financial statement analysis the process of analyzing financial statements of a company so as to
obtain meaningful information about its survival, stability, profitability, solvency and growth
prospect. The financial statement analysis can be performed by using a number of techniques such
as comparative statements, common size statements and ratio analysis.
Ratio analysis is the most popularly and widely used technique of financial statement analysis.
In a simple word, ratio is a quotient of two numerical variables, which shows the relationship
between the two figures. Accordingly, accounting ratio is a relationship between two numerical
variables obtained from financial statements such as income statements and balance sheet. The
income statement or profit and loss account shows the operating results in terms of net profit or
loss of a company for a specific period. The balance sheet, on the other hand, shows the financial
position of the company at the end of that period. Accounting ratios are used as an important tool
of analyzing the financial performance of the company over the years and its comparative position
among other companies in the industry.
Ratio analysis is the process of determining and interpreting numerical relationship between
figures of financial statements. Since an absolute accounting figure often does not provide much
meaning by itself, it has to be analyzed in relation to other figures so that significant information
about the company's financial performance can be derived.
Ratio analysis is a process of determining and presenting the quantitative relationship between two
accounting figures to evaluate the strengths and weakness of a business. It is important from the
point of view of investors, creditors and management for analysis and interpretation of a firm's
financial health.

6. Page 6 of 15
Presentation of Ratio
Ratio can be expressed in the following terms:
1. Ratio method
Ratio method shows the relationship between two figures in ratio or proportion. It is expressed by
simple division of one item by another e.g. 2.5:1, 0.5:1 and so on.
2. Rate method
This method shows relationship in rate or times, like 2 times or 4 times and so on.
3. Percentage method
The relationship between two figures can be presented in percentage like 20%, 30% and so on.
Objective of Financial Statement Analysis:
Individual investors or firms that are interested in investing in small businesses use financial
analysis techniques in evaluating target companies' financial information. By examining past and
current financial statements -- balance sheets, income statements and cash flow statements --
potential investors can form opinions about investment value and expectations of future
performance.
Data Used for the Analysis:
We have considered the Financial Statements of Bangladesh Building Systems for the year ended
2014-15, 2015-16 and 2016-17.
Method Used for Financial Analysis:
i) Horizontal Analysis
ii) Vertical Analysis
iii) Ratio Analysis

7. Page 7 of 15
COMPANY PROFILE
SQUARE PHARMACEUTICALS LTD.
Milestone of excellence
Square Pharmaceuticals Ltd. (Square) is a leading pharmaceutical public limited company in
Bangladesh. It’s been market leader since 1985 in pharmaceuticals industry of Bangladesh.
It started its operation in 1958 as partnership. Square Pharmaceuticals Ltd. is the pioneer in
pharmaceuticals export from Bangladesh started on 1987. In 1991, this company converted into
Public Limited Company. In 1994, Square initials Public Offer (IPO) of ordinary shares and listed
in Dhaka and Chittagong Stock exchange in 1995.
In 2015, Square awarded “AAA” rating in the long term and “ST-1” rating in short term by CRISL.
Corporate Profile
Founder: Samson H Chowdhury (1926-2012)
Board of Directors:
 Mr. Samuel S Chowdhury (Chairman)
 Mrs. Ratna Patra (Vice Chairman)
 Mr. Tapan Chowdhury (Managing Director)
 Mr. Anjan Chowdhury (Director)
 Mr. Kazi Iqbal Harun (Director)
 Mr. M Sekander Ali (Independent director)
 Mrs. Nihad Kabir (Independent director)
Mission
Our Mission is to produce and provide quality & innovative healthcare relief for people,
maintain stringently ethical standard in business operation also ensuring benefit to the
shareholders, stakeholders and the society at large

8. Page 8 of 15
Vision
We view business as a means to the material and social wellbeing of the investors, employees
and the society at large, leading to accretion of wealth through financial and moral gains as a part
of the process of the human civilization.
Objective
Square Pharmaceuticals Companies’ objectives are to conduct transparent business operation
based on market mechanism within the legal & social framework with aims to attain the mission
reflected by our vision.
Sister Concern
Square Formulations Ltd., Square Herbal & Nutraceuticals Ltd, Chemical Division, Agrovet
Division, PET Bottle Division.
Export to: 42 countries
Authorized Capital : BDT 10,000 million
Paid-up Capital : BDT 6,859.45 million
Face Value of Share : BDT 10.00 each
Members (Shareholders) : Around 52,600
Employees : 7,390
Subsidiary Company : Square Formulations Limited,
Square Pharmaceuticals Kenya EPZ Ltd.
Corporate Headquarter &
Registered Address
: Square Centre, 48 Mohakhali C.A.
Dhaka, Bangladesh
Investors' Relation Department
Email, Phone & Fax
: Email : cs@squaregroup.com
Phone : 880-2-8833047 Ex-229, 585
Fax : 880-2-8828768

9. Page 9 of 15
CORPORATE OPERATIONAL RESULT
Square Pharmaceuticals Ltd., during last 5 years, has attained an average growth rate of 20.06%
as against national average growth rate of 16.37%. The outer highlights includes gross margin,
net margin, earning per share also continue to show positive trend.
Sales BDT 33.30
Billion
Consists 677 pharma, 77
agrovet, 28 pesticide, 14
pellet and 8 API.
Local BDT 31.91
Billion
Market Share
21.45%
Export BDT 1.39
Billion
Market covers
42 countries
Figures in ‘000

10. Page 10 of 15
FINANCIAL ANALYSIS
Horizontal Analysis of Square Pharmaceuticals Ltd.
Description
Year
2014-15 2015-16 2016-17
Net Turn Over 100% 93% 92%
Gross Profit 100% 102% 102%
Profit after Tax 100% 115% 119%
Current Assets 100% 175% 229%
Total Assets 100% 125% 146%
Current Liabilities 100% 108% 105%
Shareholder's Equity 100% 127% 147%
Comments:
1. There is a decrasing trend in the turn over comparing to the year 2014-15
2. The gross profit increased in 2015-16 and remained the same in 2016-17
3. Current Assets inreased significantly in 2015-2016 and (75%) continued to grow more in
2016-17 (129%) compared to 2015-16
4. Current Liability increased at very low rate (8%) and continued to grow at lower rate
(5%) in 2016-17
5. The insignificant increase in liabilities compared to Current Assets tremendous growth
tells us that the financing was not done by debt financing.
6. Inspite of huge growth in Current Assets the turn over did not increase, it indicates the
investment on new plants or higher production capacity is yet to be functional. We can
anticipate huge growth in turn over in next years when new facilities becomes fully
functional and starts manufacturing.

11. Page 11 of 15
7. Despite of stagnant turn over, the company was able to achieve significant growth in
profits after tax (15% & 19% respectively) in following years.
8. Shareholders equity continued to grow (27% & 47% respectively) in the following years
after 2014-2015. It shows strong operational capacity of the management.
Vertical Analysis of Square Pharmaceuticals Ltd.
Vertical Income Statement
Description
Year
2015-16 2016-17
Net Turn Over 100% 100%
Cost of Goods Sold 44.63% 44.52%
Gross Profit 55.37% 55.48%
Operating Expenses 15.31% 17.69%
Profit from Operation 26.51% 24.53%
Profit after Tax 22.34% 23.40%
Comments:
1. Cost of Goods sold is almost same for both the years
2. The Gross Profit is almost same and around 55%, due to absence of data for industry
average we cannot compare the efficiency to others.
3. There is an increase in Operating Expenses in the year 2016-17
Vertical Balance Sheet
Description
Year
2015-16 2016-17
Current Assets 43.53% 48.66%
Non-Current Assets 56.47% 51.34%
Total Assets 100% 100%
Current Liabilities 6.59% 7.66%
Non-Current Liabilities 2.54% 2.31%
Share Holder's Equity 90.87% 90.03%

12. Page 12 of 15
Total Equity and Liability 100% 100%
Comments:
1. The Asset composition changed in 2016-17, Current Assets increased and Non-Current
Assets decreased significantly.
2. The Shareholders have a very strong claim over the assets (90%), it shows the dominance
of equity funding.
3. The Liabilties are low (10%) and changed a little, it shows less reliance of on debt
financing.
Ratio Analysis Square Pharmaceuticals Ltd.
Profitability Ratio
Description
Year
2015-16 2016-17
Return on Assets=
(Net Income/Average Total
Assets)x100
13.69% 12.39%
Gross Profit Ratio=
(Gross Profit/Sales)x100
41.82% 42.23%
Earnings Per Share=
Income available to Share
Holders/No. of Shares
Outstanding
10.95 11.36
Comments:
1. Return on Assets decreased in 2016-17. It is consistent with the findings in Horizontal
analysis, where we found stagnant turnover despite significant growth in Assets.
2. Gross Profit ratio remaned almost the same, 42%
3. The earning per share increased by 3.74%.

13. Page 13 of 15
Liquidity Ratio
Description
Year
2015-16 2016-17
Current Ratio =
(Current Assets/Current Liabilities)
6.61 6.35
Quick Ratio=
(Current Assets-(Inventory +
Prepayments)/Current Liabilities)
5.06 5.11
Comments:
1. The liquidity position is very strong for the company as the current ratio remained steady
during the observed period despite of huge investment activities.
2. The quick ratio also remained almost same, around 5%. The high quick ratio shows
strong ability to pay off the short debts. It also indicates that the company has high
amount cash sitting in its reserves.
Efficiency Ratio
Description
Year
2015-16 2016-17
Total Assets Turn Over Ratio =
(Net sales/Average Total assets)
0.95 0.78
Inventory Turn Over Ratio=
(Costs of Goods Sold/Average Inventory)
5.09 4.99
Days Holding Inventory Ratio=
(360/Inventory Turn Over Ratio)
71 72
Comments:
1. It is observed the TATO Ratio decreased significantly in 2016-17, from 0.95 to 0.78. It is
consistent with the findings in horizontal analysis where we found huge increase in
current assets despite sales remained almost same.

14. Page 14 of 15
2. The ITO Ratio remained same (5%) over the observed period.
3. The DHI Ratio remained almost same. It required 71 days to converts its inventory to
sales in the year 2015-16 and 72 days in 2016-17.
Solvency Ratio
Description
Year
2015-16 2016-17
Debt-Equity Ratio =
(Total Debt/Total Equity)
0.10 0.11
Debt to Total Assets Ratio=
(Total Debt/Total Assets)
0.09 0.10
Comments:
1. Debt-Equity Ratio has increased slightly in the year 2016-17.
2. Debt is significantly low compared to equity.
Other Ratios
Description
Year
2015-16 2016-17
Pay Out Ratio =
(Cash Dividend Per Share/Earnings Per Share)
0.22 0.32
Price Earnings Ratio =
(Market Value Per Share/Earnings Per Share)
24.27 25.54
Comments:
1. Pay out ratio increased significantly (45.5%) in 2016-17
2. Price earning ratio remained almost same.

15. Page 15 of 15
CONCLUSION
Square Pharmaceutical is heavily financed by its shareholders, they relied very little to debt
financing. The Liquidity and Solvency position is also very strong. But Square Pharma has too
much cash sitting idle. The fact that Net Turn Over remained same despite significant in growth
in Assets, indicates the new facilities are yet to become functional, we can forecast high turn
over in next years. The efficeincy of operating activities could not compared with industry
average due to lack of data. This is the limitation of this assignment.