Introduction

Financial Analysis applies analytical tools to financial data to

assess a companys performance & trends in that performance.
The purpose of analysis is to convert data into financial metrics
that assist in decision making to answer such question as: How
successfully has the company performed relative to its past
performance & relative to its competitors? How is the company
like to perform in the future? Based on expectations of Future
performance, what is the value of this company or the
securities it issues? A primary source of data is companys
financial reports, including the financial statements, footnotes
and management discussion & analysis. Although financial
statements do contain data about the past performance of a
company as well as its current financial position, such
statements may not provide some important information nor do
they forecast future results. But utilizing financial statements in
conjunction with other information helps to reach valid
conclusions & make projections.
Cash Flow statement analysis is also a part of financial
analysis. Although income is an important measure of the
results of a companys activities, cash flow is also essential. A
company with High profitability but zero liquidity cannot
survive long. The analysis of a companys cash flow can
provide useful information for understanding companys
business & earnings & for predicting its future cash flows.

Techniques to analyze financial statements & cash flows

Techniques are those by which means we can analyze the
statements. There are some techniques to analyze the financial
statement & Cash flow statements. These are:
1) For financial statements:
a) Common-size analysis
b) Use of Graphical tools
c) Ratio analysis
2) For Cash Flow analysis:
a) Evaluation of the sources & uses of cash
b) Common-size analysis
c) Free cash flow to the firm & free cash flow to Equity
d) Cash flow ratios
First, we will do the cash flow analysis & then the financial
statement analysis.

Cash Flow statement analysis

1) Evaluation of the sources & uses of cash
The major categories of cash flow are summarized as
follows:
2011
Net Cash Generated from Operating
Activities
Net Cash Used in Investing Activities
Net Cash Generated from Financing
Activities
Increase / (Decrease) in Cash and Cash
Equivalents

1,576,521,73
1

2010
1,352,206,649

(2,534,118,036)

(991,114,714)

4,916,165

51,922,927

(952,680,140)

413,014,862

The primary source of companys cash is from operating

activities & secondary source is from financing activities.
Most of the cash flows is being spent on investing activities
of the firm. The fact that primary source of cash from
operations is a good sign. Additionally, operating cash flow
exceeds comprehensive net income in both years-It is also a
good sign. In 2011, operating cash flow is much higher than
capital expenditures-So in this situation the company has the
ability to easily fund its capital expenditures from the
operating cash flow. Short term investment is high in 2011
but in 2010, there was a huge income from Short term
investment.

In current year, it has earned investment income from

Disposal of PPE & Investment in shares. Borrowings are too
little so we can easily predict that company has made a
large amount of investments from its own resources. In the
Financing category, The Companys only expense is to pay
dividend. But there is no item to repay debts that the
company has borrowed in the last financial year as well as
2010. If this continues then the company may have been
identified as a loan defaulter. However, the company has a
huge investment in capital items as well as Short term
investment which may bring it a huge profitability.

2) Common size analysis

Inflows

Taka

Cash Receipts from Customers and

Others
Interest Received
Investment in Shares
Disposal of Property, Plant and
Equipment
Net Increase / (Decrease) in Long Term
Borrowings
Net Increase / (Decrease) in Short Term
Borrowings

Total
Outflows
Cash Paid to Suppliers
and Employees

Taka
5,773,745,087

Percent
age

7,741,749,367
330,494,566
2,847,250

95.75%
4.09%
0.04%

5,178,814

0.06%

2,807,656

0.03%

2,254,956
8,085,332,609

0.03%
100%

Percentage
63.88290487%

Interest paid
Income tax paid
Acquisition of PPE
Intangibles Asset
Short Term Investment

567,645,757
154,331,358
1,112,175,207
95,949,037
1,334,019,856

6.28064789%
1.707580663%
12.30552819%
1.061616526%
14.76010151%

Ordinary Share Dividend

146,447

Total

9,038,012,749

0.001620345%
100%

From the common size analysis, we find that, 95% of cash

inflows have come from customers that means from selling
goods. Then 4% has come from Interest. It is a good sign
because the company can easily manage its major
expenditures from its operations. Also inflows from Loans are
too much low in 2011. That means, the company didnt rely too
much on external financing. This is also a good indication. On
the side of Cash outflow, we see that majority of cash was
being spent on the payment of suppliers & the Salaries of the
employees & then secondarily, the outflow was incurred for
acquisition of PPE & Short term investment. So, we can easily
understand that the company is successful to operate its
business & besides it has created some investment
opportunities which will give them profitability in future. But
there is no outflow for debt repayment. Though the amount of
debt is low; if the debt is unpaid for a long time, it would be a
disastrous situation in future.

3) Free cash flow to the firm & free cash flow to Equity
The excess of operating cash flow over the capital
expenditures is known as free cash flow. For the purposes of
valuing a company or its equity securities, a precise cash
flow measure is required to determine such as free cash flow
to the firm & free cash flow to equity.
FCFF= CFO+Int(1-Tax rate)-FCInv

CFO

1,576,521,731
Plus: Interest Paid times (1-Income Tax rate)

(567645757* 0.714322422)
405482092.2
Less: Net Investment in Fixed Capital
(1112175207-5178814)
(1,106,996,393)
FCFF
875,007,430.2

FCFE =CFO-FCInv+Net Borrowing-Net Debt payment

CFO

1,576,521,731
Less: Net Investment in Fixed Capital
(1112175207-5178814)
(1,106,996,393)
FCFE
469,525,338

As FCFF & FCFE are both positive, so we can say that there is
available free cash flow to the suppliers of debt capital & equity
after all the operating expenses have been paid & necessary
investments in fixed capital have been made. And also the
company has an excess operating cash flow over amounts needed
for investments for the future & repayment of debt.

4) Cash Flow ratios:

Cash flow ratios are effectively used to compare the
performance &
Prospects of different companies in the industry. There
are several
Ratio based on cash flow from operating activities that
are useful in this
analysis.

a) Cash flow to revenue = 1,576,521,731 / 1,198,525,342

=1.315384561
It means that 1.31 taka cash is earned on every value of net
revenue
b) Cash
return
on
=1,576,521,731/22,202,870,021=0.071005313

asset

It means that there is 7.10% rate of cash return on every

value of asset.
c) Cash
return
on
equity
=1,576,521,731/16,551,107,314=0.095251738
It means that there is 9.52% rate of cash return on every
value of equity.
d) Cash
to
income
1,576,521,731/1,988,479,698=0.792827673

It implies that .79 taka cash has been earned on every value
of operating
revenue
e) Cash
Flow
per
share
1,576,521,731/251,767,810=6.261808176

It shows that per share operating cash flow is 6.26 taka.

f) Cash Flow Adequacy ratio
3 years sum of Cash from operating Activities
=
3 years sum of Capital expenditures, Inventory & Cash
dividend
1,576,521,731 + 1,352,206,649 + 520,928,894

=
3,824,419,928
(146,447+153,750,000+219,825+127,399,591)

786,556,538

0.705092015

It implies that internal cash sources are insufficient to maintain dividends &
current operating Growth sources. So for a few portions of investment &
capital expenditure, The Company has to rely on the external financing.

g) Debt Coverage = 1,576,521,731/5,905,212,356(Total in

Balance Sheet)
=0.266971217
Debt covrage (For only 2011) =
1,576,521,731/506,899,298(Additional Debt increase in 2011)
=3.110128061
It implies that The companys CFO is not sufficient to
cover all debts in a
year. But it is sufficient to cover the debt of 2011

h) Interest coverage =
(1,576,521,731+567,645,757+154,331,358)/
567,645,757=4.049178238

i)

Cash reinvestment ratio

=
CFO-Dividends

Gross Investment in PPE & Intangibles +Working

Capital
1,576,521,731146,447

=
17,435,468,327 +
147,075,891+4,500,300,765

= 0.07138461

As the ratio is within 7% to 11% so, it is satisfactory

j)

Debt payment ratio =As the company had not paid any debt

in cash in 2011, so the ratio cannot be calculated.

k) Dividend payment
ratio=1,576,521,731/146,447=10765.13504
It means that the company is able to cover dividend so many
times by its operating cash flow

l) Investing & Financing

ratio=1,576,521,731/2,542,290,547=0.62011863
It means that the company is not able to cover all the financing &
investing cash outflows by its Operating cash inflow

Financial Statement Analysis

1) Common-size analysis
This can be divided in four parts:
a) Common size analysis of Balance sheet
b) Common-size analysis of the income statement
c) Cross sectional analysis
d) Trend analysis
a) Commonsize analysis of Balance sheet
2011
Non-Current Assets
Property, Plant and
Equipment- Carrying
Value

15,745,492,
625

Intangible Assets
Investment in Shares

135,933,879
3,451,276

Percentag
e of Total
Assets

68.359570
35
0.5901613
74
0.0149838

2010

15,123,306,2
98
51,126,854
6,298,526

Percentag
e of Total
Assets

70.760918
97
0.2392190
64
0.0294703

27

74

Current Assets
Inventories

2,291,844,6
31

Spares & Supplies

325,881,244

Accounts Receivable
Loans, Advances and
Deposits

978,224,317

Short Term Investment

Cash and Cash
Equivalents

TOTAL ASSETS

840,320,705
2,193,423,5
60
518,768,296
23,033,340
,533

9.9501182
98
1.4148240
61
4.2469928
13
3.6482797
79
9.5228200
05
2.2522494
96

100

1,983,809,44
4
276,520,188
821,356,439
779,129,620
859,403,704
1,471,448,43
6
21,372,399,
509

9.2821091
2
1.2938191
05
3.8430707
73
3.6454943
66
4.0210913
32
6.8848069

100

Here we see that, in 2011 Property, plant & equipment weights

68% of Total assets, where in 2010, it was 70% of total assets. But
the amount in 2011 is greater than 2010. This means that besides
addition, there has been some disposal of PPE. Investment in
shares has been lower than 2010. Inventories have been
increased. The company may have taken some opportunities of
discount or they may forecast the higher price of Inventory in the
future. Accounts receivables have been increased. It may have
been due to the increment of credit sales. The company has
invested much on Short term investment & also borrowed some
loans during 2011. Also the amount of intangibles asset has been
grown up. As we see in the cas flow statements that most of the
internal cash has been spent in the acquisition of PPE & making
short term investment so, the Amount of cash has been lower
than previous year.
b) Common-size analysis of the income statement

Revenue Source:

2011

Percentag
es of
sales

2010

Percentag
es of
sales

Local Sales
Export Sales US $
5,255,965 (in 2010 US $
4,817,829)

Total revenue

7,499,926,
523

0.9505318
94

6,160,306,
406

0.9490758
4

390,315,32
0

0.0494681
06
0

330,540,94
7

0.0509241
6
0

7,890,241,
843

6,490,847,
353

275,201,84
6
1,522,851,
278
1,988,479
,698
340,907,77
4
567,645,75
7
1,761,741
,715

(0.0348787
59)
(0.1930043
85)
0.2520175
85
0.0432062
52
(0.0719427
58)
0.2232810
79

233,413,98
0
1,304,012,
927
1,635,780
,192
456,011,13
4
662,182,38
4
1,429,608
,942

(0.0359604
79)
(0.2009002
61)
0.2520133
51
0.0702544
84
(0.1020178
64)
0.2202499
71

Operating Expenses :

Administrative Expenses
Selling, Marketing and
Distribution Expenses
Profit from Operations
(+) Other Income
Finance Cost
Profit Before
Contribution to WPPF
Contribution to Workers'
Profit Participation/Welfare
Funds

Income Tax Expenses

83,892,463
1,677,849
,252
479,323,91
0

Profit after Tax for the Year

1,198,525
,342

Profit Before Tax

(0.0106324
32)
0.2126486
47
(0.0607489
5)
0
0
0.1518996
97

68,076,616
1,361,532
,326
309,883,51
8
1,051,648
,808

0.0104880
94
0.2097618
77
(0.0477416
12)
0
0
0.1620202
65

From these analyses we see that, approximately 95 % of the

revenue comes from the local sources. The rest 5%revenue comes
from the export sales. In both years the amount of percentage is
same. The rate of expenditure on sales & the rate of profit on

sales are approximately same in both years in some elements

such as administrative expenses, Selling expenses, Profit from
Operations, profit before contribution to WPPF, Profit before tax
etc. Profit rate after tax is 15% in 2011 & 16% in 2010 The
company has incurred more administrative expenses in 2011 than
in 2010. Probably number of employees has been increased
rather than previous year. The company has incurred much more
expenses in selling, marketing & distribution of product. As a
result, Sales are higher in 2011than 2010. Income tax expenses in
2011 are higher than 2010 as there is increment of profit before
tax. Also, due to High gross profit there is an increase of Workers
welfare fund.
c) Cross sectional analysis
Cross sectional analysis compares a specific metric for one
company with the same metric of other company. For this, we
have to select another pharmaceuticals company. So, we have
selected the financial statements of Square Pharmaceuticals ltd.
of the same year for the purpose of this analysis.
Beximco Pharma
NonCurrent
Assets
Property,
Plant and
EquipmentCarrying
Value
Intangible
Assets
Investment
in Shares

Current

Square Pharma
Non-Current
Assets:

15,745,492,
625
135,933,879

68.35957
035
0.590161
374

3,451,276

0.014983
827

Property, Plant
and
EquipmentCarrying Value
Capital Workin-Progress
Investment Long Term (at
Cost)
Investment in
Marketable
Securities (Fair
Value)
Current

8,767,827,0
62
1,274,390,5
72

40.8684
39
5.94016
66

3,971,022,7
23

18.5096
60

695,037,39
7

3.23969
59

Assets
Inventories
Spares &
Supplies
Accounts
Receivable
Loans,
Advances
and Deposits
Short Term
Investment
Cash and
Cash
Equivalents
TOTAL
ASSETS

Assets:
2,291,844,6
31
325,881,244

9.950118
298
1.414824
061

978,224,317

4.246992
813

Trade Debtors
Advances,
Deposits and
Prepayments

840,320,705
2,193,423,5
60

3.648279
779
9.522820
005

Short Term
Loan
Cash and Cash
Equivalents

2,085,300,1
10
586,920,26
7

9.71996
37
2.73574
23

TOTAL
ASSETS

21,453,784
,762

100

518,768,296
23,033,340
,533

Inventories

2,687,818,4
72
808,311,71
4

12.5284
11
3.76768
81

577,156,44
5

2.69023
13

2.252249
496
100

If we compare the Financial statement of Beximco pharma with

Square Pharma, We see that, Beximco has more investment in
PPE & more short term investment rather than Square. But
Squares percentages of accounts receivable are lower than
Beximco. It means that Square is comparatively more efficient in
cash collection rather than Beximco. So, we can say that, Square
is also highly liquid rather than Beximco. Squares Cash
percentage to the total assets is also higher than Beximco.
However, including Short term & long term investment, Beximco
has higher percentage investment rather than Square.
d) Trend Analysis
Trend analysis provides important information regarding historical
performance & growth & given a sufficiently long history of
accurate seasonal information, can be of great assistance as a
planning & forecasting tool for management & analysis
As a part of analysis, Now we are presenting balance sheets of
Beximco over 5 years:

2007
NonCurrent
Assets
Property,
Plant and
Equipment
- Carrying
Value
Intangible
Assets
Investmen
t in Shares

8,992,942,3
92

2008

11,921,072,
697

2009

12,966,587,
178

2010

2011

15,123,306,
298

5,726,525

51,126,854

15,745,492,
625
135,933,87
9

36,701,090

36,701,090

2,881,826

6,298,526

3,451,276

1,470,152,2
42
182,328,04
9
499,680,79
2

1,505,288,0
93
234,530,32
6
503,916,40
1

1,722,953,2
84
242,034,85
5
694,111,73
0

1,983,809,4
44

821,356,439

2,291,844,6
31
325,881,24
4
978,224,31
7

685,915,46
5

544,509,10
6

699,204,45
0

779,129,620

840,320,70
5

2,500,000,0
00

859,403,704

2,193,423,5
60

1,471,448,4
36

518,768,29
6

21,372,399
,509

23,033,340
,533

Current
Assets
Inventories
Spares &
Supplies
Accounts
Receivable
Loans,
Advances
and
Deposits
Short Term
Investmen
t
Cash and
Cash
Equivalent
s
TOTAL
ASSETS

85,698,910

73,647,728

1,058,433,5
74

11,953,418
,94

14,819,665
,44

19,891,933
,422

276,520,188

Considering 2007 as a base year, we have calculated the

growth/decline rate of each & every asset and also the growth
rate total asset.

2007
Non-

2008

2009

2010

2011

Current
Assets
Property,
Plant and
EquipmentCarrying
Value
Intangible
Assets
Investment
in Shares

1.32560314
3

1.44186258
7

1
0.07852153
7

1.02389946
4
1.28630963
4

1.17195568
9
1.32746912
1

1.00847663

1.38911029

0.79384287
7

1.01937408
6

1.68168610
9
8.92807662
6
0.17161686
5

1.75087217
7
23.7375858
8
0.09403742
5

Current
Assets
Inventories
Spares &
Supplies
Accounts
Receivable
Loans,
Advances
and
Deposits
Short Term
Investment
Cash and
Cash
Equivalents
TOTAL
ASSETS

1.34939048
3
1.51660805
6
1.64376228
2

1.55891653
1.78733467
4
1.95769846

1.13589743
9
0.34376148
2

1.22510826
5
0.87736942
4

0.85937765
1

12.3506071
9

17.1699784
3

6.05338266
3

1.23978466

1.66412082
8

1.78797376
9

1.92692489
5

Here, each & every item has been expressed relative to the same
item in 2007.
From this analysis we see that total asset of the company has
grown up 1.92times in five years. Most of the assets have been
increased but some of the asset are fluctuating nature such as,
short term investment, investment in shares, cash etc. The cash
items are the most fluctuating assets. In 2008 it had been
decreased, but in 2009 & 2010, it had had been risen up much

more, but in 2011, it had been decreased again. Companys

Accounts receivables have been grown 1.95 times in 5 years
indicating that company is getting weak in collecting the
receivables money. Moreover, as the cash balance has been
reduced so much, so we can say that the company is facing
liquidity problems rather than previous 2 years. But the company
has created some most investment opportunities in 5 years which
will bring it profitability.
2) The use of Graphics
We are using column graph & Line graph to show the trend
analysis of five years graphically
Column Graph
25,000,000,000

20,000,000,000

Cash and Cash Equivalents

Short Term Investment
Loans, Advances and
Deposits

15,000,000,000

Accounts Receivable
Spares & Supplies
Inventories

10,000,000,000
Investment in Shares
Intangible Assets
Property, Plant and
Equipment- Carrying Value

5,000,000,000

0
2007

2008

2009

2010

2011

Line Graph
18,000,000,000

16,000,000,000

14,000,000,000
Property, Plant and
Equipment- Carrying Value

12,000,000,000

Intangible Assets
Investment in Shares

10,000,000,000
Inventories
Spares & Supplies

8,000,000,000

Accounts Receivable
Loans, Advances and
Deposits

6,000,000,000

Short Term Investment

Cash and Cash Equivalents

4,000,000,000

2,000,000,000

0
2007

2008

2009

2010

2011

3) Ratio Analysis
This analysis can be divided in five parts:
a) Activity ratio

b) Liquidity ratio
c) Solvency ratio
d) Profitability ratio
e) Valuation ratio
a) Activity ratio
(i)

Inventory turnover ratio =Cost of Goods sold/Average

inventory
= 4,103,709,021/2,137,827,038
=1.919570175 times
(ii) Days of inventory on hand = Number of days in a
period/inventory turnover
=365/1.919570175
=190.1467343 days
It takes 190 days to convert materials into finished goods
(iii) Receivables turnover =Sales/Average Receivables
=7,890,241,843/899790378=8.768977793 times
(iv) Day of sales outstanding=Number of days in a
period/payables turnover
=365/8.768977793
=41.62400779 days
It takes 42 days after a sale to convert the receivables
into cash
(v) Payables turnover =Purchases/ Average trade payables
=3,411,226,597/184,265,758
=18.51253664
(vi) Number of days of payables =Number of days in a
priod/ Payables turnover
= 365/18.51253664
=19.71636881
It takes 19 days after purchase to pay out the creditors.

(vii) Working Capital turnover = Revenue / Average working

capital

=7,890,241,843/4,089,405,
682
=1.929434851

(viii) Fixed asset turnover= Revenue / Average Fixed asset

= 7,890,241,843/15,434,399,462
=0.511211457 times

(ix) Total asset turnover=Revenue/Average total assets

=7,890,241,843 /22,202,870,021
=0.355370357 times
b) Liquidity ratio
(i) Current ratio = Current assets/ Current liabilities
=7,148,462,753/2,648,161,988
= 2.699405393
It means that companys current liabilities are fulfilled
through current
assets
(ii) Quick ratio = (Current assets-Inventory)/Current
liabilities
= (7,148,462,753-2,291,844,631)/
2,648,161,988
=1.833958098

It means that the current liabilities are fulfilled by all other

current assets
Without inventory
(iii) Cash Ratio= (Short term investment + cash)/ Current
liabilities
= (2,193,423,560+ 518,768,296)/
2,648,161,988
=1.024178985
It means that It is also possible to meet the current
liabilities by cash &
short term liquid assets.
(iv) Defensive interval ratio=(Short term investment +
cash+ Accounts
receivables)/ Current liabilities
=3,690,416,173/2,648,161,988
=1.393576447

(v) Cash
19.71636881

conversion

cycle=190.1467343+41.62400779=212.0543733 days

It takes 212.05 days to convert raw materials into cash.

(c) Solvency Ratio

(i) Debt to asset Ratio=(Total Debt / Total
(3,896,034,840/ 23,033,340,533)= 0.169147625

Assets)

Here, Total Debt= Long Term Borrowings-Net off Current Maturity

(Secured) + Short Term Borrowings + Long Term BorrowingsCurrent Maturity
(ii) Debt to Capital ratio=Total Debt/(Total Debt + Total Equity)
= 3,896,034,840/(17,128,128,177+3,896,034,840)
= 0.185312245
(iii)
Debt
to
ratio=3,896,034,840/17,128,128,177=0.227464134

Equity

(iv)
Financial leverage ratio= Average total assets/Average
total equity
=22,202,870,021/16551107314=1.341
473389

d) Profitability ratio
(i)
Gross
profit
margin
Revenue=3,786,532,822/7,890,241,843

Gross

profit/

=0.47990073
(ii) Operating Profit margin=(Profit from operations/ Revenue)
=1,988,479,698/7,890,241,843
=0.252017585
(iii) Pretax margin=EBT/Revenue=1,677,849,252/7,890,241,843

=0.212648647
(iv) Net profit Margin=Net profit / Revenue
=1,198,525,342/7,890,241,843
=0.151899697
(v) ROA=Net income / Average total assets
=1,198,525,342/ 22,202,870,021
=0.053980649
(vi) ROE= Net profit/Average total equity
=1,198,525,342/16551107314
=0.072413605

e) Other measures & ratio

(i) Earnings
outstanding

per

share=

Net

earnings/Number

of

shares

=1,198,525,342/251,767,810
=4.76

(ii) Price to earnings = Market price per share/EPS

=56.6/4.76
=11.8907563
The market value of share is according to the last transaction on
18 April,2013.
(iii) Dividend payout ratio = annual dividends per share/EPS

=(Cash dividend/share + Stock

Dividend/share)/EPS
=1.667248315/4.76
=0.350262251

Sources of Financial data:

1) Annual Statements of Beximco pharma 2011( As 2012 has not
published yet)
2)Also used: Annual statements of Beximco Pharma 2007,
2008,2009,2010(For common size analysis)
3) Annual statement of Square pharma 2011( For cross sectional
analysis)

Conclusions

Here is the financial analysis of Beximco Pharmaceuticals. Though

there may be some limitations, I think that this analysis would
help any investor or external authorities to know about the
company. Financial analysis is necessary to know the direction of
the company & also to know about the profitability of a company.
Financial statement provides a complete difference between two

or more hypothetical company in relation to profitability ,

solvency , Liquidity , activity & so on. Two companys profit may
be same also total assets may be same but they cannot be same
if considered other factors .So, financial analysis is used as a
diagnosis tool to understand the symptoms of the company.