Pentagon

Team - One

Group Members
Kawsar Ahmad , ZR-50 Omaer Ahmad , ZR-09 Rafaat Wasik Ahmad , ZR- 53 Nasim Ul Haque , ZR- 54 Rashed Al Ahmad Tarique , ZR-61

Which one is more efficient in terms of financial performance ?

Beximco Pharmaceuticals Or Square Pharmaceuticals?

Financial Ratios
Activity Ratio Profitability Ratios Ownership Ratios Liquidity Ratios

Account Receivable Turnover

It measures the efficiency of a firm with which its managers utilize its assets

A/C Receivable Turnover= Sales / Accounts receivable

Account Receivable Turnover

Acceptable A/C receivable turnover is 5:1 for

pharmaceuticals industry. For Square Pharmaceuticals LTD it is 26:1 Beximco Pharmaceuticals LTD it is approximately 8:1

Account receivable turnover

Implication: Low ratio The firm is having difficulty in collecting money High ratio The firms maintains strict credit policy or aggressive collection procedure

Average Collection Period

Average collection period is indicative of the marketing strategy of the firm. When compared to the terms offered on the invoice of the firm, it indicates the efficiency of the collections department.

Average collection period = 365 days/ Account receivable turnover.

Average Collection Period

Average collection period for Square Pharmaceuticals LTD is around 14 days

Average collection period for Beximco Pharmaceuticals LTD is around 45 days

Average Collection Period

Implication: Longer average collection period

Either the company is failing in its collection enforcement or events are out of line with the planned strategy

Total Asset Turnover

Total Asset Turnover measures the capability of a firm utilizing its asset.

Total Asset Turnover =Sales / Total asset

Total Asset Turnover

Total asset turnover ratio for Square Pharmaceuticals LTD - .67 Beximco Pharmaceuticals LTD - 0.27

Total Asset Turnover

If industry average is higher than the firm The firm does not generate a sufficient volume of business (sales) given its total asset investment If industry average lower than the firm The firm generates a sufficient volume of business (sales) given its total asset investment.

Inventory Turnover

A ratio showing how many times a company's inventory is sold and replaced over a period Inventory turnover = Cost of goods sold / Average inventory

Inventory Turnover

Inventory turnover ratio for Square Pharmaceuticals LTD is 2.71

Inventory turnover ratio for Beximco Pharmaceuticals LTD is 1.34

Inventory Turnover
Low inventory turnover Overstocking, obsolescence, or deficiencies in the product line or marketing effort. High inventory turnover inadequate inventory levels, which may lead to a loss in business.

Fixed Asset Turnover

Fixed asset turnover is the ratio of sales to the value of fixed asset. It indicates how well the business is using its fixed assets to generate sales. Fixed asset turnover = Sales / Average fixed asset

Fixed Asset Turnover

Fixed asset turnover ratio for Square Pharmaceuticals LTD is 0.99

Fixed asset turnover ratio for Beximco Pharmaceuticals LTD is 0.33

Fixed Asset Turnover

A higher fixed-asset turnover ratio

The company has been more effective in using the investment in fixed assets to generate revenues.

Earning Per Share

Earnings per share (E.P.S.)= Net Income Outstanding Shares It is the number of Takas the company earns on each share outstanding Major influence on share price Can be modified by changing of debt equity ratio

Beximco Pharmaceuticals LTD 4.330 Square Pharmaceutical LTD 154.53

Price Earnings Ratio

Price Earnings Ratio= Market Price E.P.S. It is the number of years needed for the investor to recover market price On average it should be between 15 and 20 Extraordinarily high in Bangladesh

Beximco Pharmaceuticals LTD 2.310 Square Pharmaceuticals LTD 26.60

Market to Book Ratio

Market Price per share

Market to Book Ratio =

Book Value per share

Comparison of market valuation to book value Sign of overvaluation

Beximco Pharmaceuticals LTD 2.021311538 Square Pharmaceuticals LTD 12.54503918 More advanced Tobbins Q

Debt to Equity Ratio

Debt to Equity Ratio = Total Debt Total Equity This ratio indicates the capital structure of the firm

Leverage of firms Shows sustainable growth potential of the firm in combination with other ratios Connected with asset turnover, ROE and equity multiplier

Beximco Pharmaceuticals LTD 0.418 Square Pharmaceuticals LTD 0.509

Dividend Yield

Dividend Yield = Expected Dividend Market Price

It is the number of Takas earned for each Taka spent by the shareholder Indicates how fast the shareholder earns back his investment

Beximco Pharmaceuticals LTD 0.005963029 Square Pharmaceuticals LTD 0.00973236

Dividend Payout Ratio

Dividend Payoff Ratio = Cash dividend per share E.P.S. It is the proportion of net income paid out to shareholders as cash dividends Helpful in estimating future dividends payouts

Beximco Pharmaceuticals LTD 0.693 Square Pharmaceuticals LTD 0.234459147 Alternative measure : Dollar Dividend per share

Profitability Ratios

Profit Margin Gross Profit Margin Return on Investment Return on equity Earning Power Times Interest Earned

Profit Margin
Indicates what portion of sales contribute to the income of a company Profit Margin = Reflects company's pricing policies and its ability to control costs. Square Pharmaceuticals LTD is 14.45%

Beximco Pharmaceuticals LTD is 13.60%

Gross Profit Margin

Also known as "gross margin Calculation:
Gross Profit Margin = Revenue - COGS Revenue

Square Pharmaceuticals LTD is 41.19%

Beximco Pharmaceuticals LTD is 50.06%

Return on Investment (ROI)

A performance measure used to evaluate the efficiency of an investment. ROI is always expressed as a percentage or a ratio. Calculation: ROI = Income / Investment ROI = Income/Sales x Sales/Investment

Return on Equity (ROE)

ROE measures a company's profitability by revealing how much profit it generates with the money shareholders have invested. Calculation:
ROE = Net Income After Tax Shareholder Equity

Shareholder's equity does not include preferred shares Square Pharmaceuticals LTD is 16.42%

Beximco Pharmaceuticals LTD is 5.22%

Return on Equity (RoE)

DuPont Formula It breaks down RoE as a function of 3 ratios- profit margin, asset turnover, and equity multiplier
RoE = Net Income Sales x Sales Total Assets x Total Assets Average Stockholder Equity

Profit Margin

Asset Turnover

Equity Multiplier

Earning Power
It is the percentage of earnings relative to total assets Indication of how effectively assets are used to generate earnings. Earning Power = EBIT / Total Assets Square Pharmaceuticals LTD is 14.71%

Beximco Pharmaceuticals LTD is 4.82%

Times Interest Earned (TIE)

Also referred to as "interest coverage ratio" and "fixedcharged coverage". It is used to measure a company's ability to meet its debt obligations. EBIT
Times Interest Earned = Interest Charges

Interest Charges = total interest payable on bonds and other contractual debt

Liquidity Ratios

Two types of liquidity ratio: Current ratio Quick ratio

Current Ratio

Determines whether short-term assets cover shortterm liabilities

Current Ratio =

Current Ratio

The current ratio of Beximco Pharmaceuticals Ltd. is 1.1 The current ratio of Square Pharmaceuticals Ltd. is 1.26

Current Ratio
Low ratio There is a danger of insufficient resources to pay off debts if they fall due High ratio Indicates that too much money is tied up in stock or left as idle cash

Quick Ratio

Measures whether the business can meet its shortterm debts without selling its stock

Quick Ratio =

Quick Ratio

The quick ratio of Beximco Pharmaceuticals Limited is 0.22 The quick ratio of Square Pharmaceuticals Limited is 0.25

Quick Ratio
Low ratio It means that there is danger of insufficient cash to pay off debts as they fall due High ratio It means the firm has too much idle cash

Thank you