Financial Performance, Consistency & Sustainability Analysis Featuring

DuPont Method: Square Pharmaceuticals Ltd.

Prepared for:
Dr. Mahmuda Akhter
Professor
Department of Accounting & Information Systems
University of Dhaka

Prepared by:
Shahin Mahmud
ID:11529015
Department of Accounting & Information Systems
University of Dhaka

Date: 16th March 2016

Abstract:
In bangladesh, pharmacy sector is one the most promising & growing industry. This study
attempts basically to measure the financial performance of a top company of the industry like
Square Pharmaceutical ltd., for the period 2011 to 2015. In order to achieve our goals in this
paper short term solvency ratio, long term solvency ratio, and profitability ratio are analyzed
through DuPont method.
Keywords: Profitability; Consistency; Sustainability.
Introduction:
The pharmaceutical industry in Bangladesh is one of the most developed technology sectors
within Bangladesh. This sector provides 97% of the total medicinal requirement of the local
market. Square Pharma is one of the biggest contributor holding the strong leadership position in
the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high
performance global player. The pharmaceutical sector attained a growth of 11.36% during the
year 2014 as against 8.12% during the previous year. Companys growth rate is very good
compared to industry performance having 25.36%.
Background:
Performance evaluation of a company is usually related to how well a company can use its
assets, shareholders equity and liability, revenue and expenses. Financial ratio analysis is one of
the best tools of performance evaluation of any company. In order to determine the financial
position of the pharmaceutical company and to make a judgment of how well the pharmaceutical
company efficiency, its operation and management and how well the company has been able to
utilize its assets and earn profit.
I will use ratio analysis for easily measurement of liquidity position, asset management
condition, profitability and market value and debt coverage situation of the Square Pharma for
performance evaluation. It analysis the company use of its assets and control of its expenses. It
determines the greater the coverage of liquid assets to short-term liabilities and it also compute
ability to pay long term payments from the cash generated. It will measure square

pharmaceuticals overall efficiency and performance. Analizing the consistency and its
sustainability in future trend of financial position is our main concern in this paper.

Literature Review:
Gopinathan Thachappilly (2011), in this articles he discusses about the Financial Ratio Analysis
for Performance evaluation. It analysis is typically done to make sense of the massive amount of
numbers presented in company financial statements. It helps evaluate the performance of a
company, so that investors can decide whether to invest in that company. Here we are looking at
the different ratio categories in separate articles on different aspects of performance such as
profitability ratios, liquidity ratios, debt ratios, performance ratios, investment evaluation ratios.
James Clausen (2009), He stated that the Profitability Ratio Analysis of Income Statement and
balance sheet are used to measure company profit performance. The income statement and
balance sheet are two important reports that show the profit and net worth of the company.
Aanalysis shows how the well the company is doing in terms of profits compared to sales. He
also shows how well the assets are performing in terms of generating revenue. He defines the
income statement shows the net profit of the company by subtracting expenses from gross profit
(sales cost of goods sold). Furthermore, the balance sheet lists the value of the assets, as well as
liabilities.
Jo Nelgadde (2010), in this article he briefly about the asset management ratio. It divided into
different types of categories. He stated that about the used to analyze accounts receivable and
other working capital figures to identify significant changes in the 12 companys operations and
financial accounts. He said that there are two categories about this ratio such as account
receivable turnover and average age of account receive.

Purpose and thesis questions:

The purpose of this study is to evaluate performance square pharmaceutical to know its
consistency and sustainabilty.
Research Questions:

What is the performance of the company related to Profit margin?

What is the performance of the company related to Asset Turnover?
What is the performance of the company related to Financial Leverage?
What is the performance of the company related to Tax Burden?
What is the performance of the company related to Interest Burden?
Are these performances consistent over the year?
Are these performances sustainable?

METHODOLOGY:
Data collection
Secondary data source will be used to this research. Main data for my research are the annual
financial reports on square pharma from 20011 to 2015. I will use the four main financial
statements for ratio analysis such as; balance sheets, an income statement, cash flow statement;
statement of shareholders equity.
Data Analysis:
In the First step I will use Financial Ratio Analysis to see the performance. Second step will
comprise of analysis consistency using statistical tools. Finaly Du Pont analysis will be used to to
see the sustainability of the growth.
Limitations of the study:
Dependeing only on the secondary data source is the important limitation of the study. Kinds of
data are not given directly in the financial statement like weight average outstanding of number
of share, market value of share, book value of share, interest charged etc. as result we have to
calculate by our own. Time constraint is another limitation of this study.

Research Time Planning:

Week

First

Second

Third

Forth

Fifth

Sixth

Seventh

Identify Research Area

Writing Reaserch Proposal

Negotiate Access
Literature Review
Data Collection
Data Analysis
Writing Draft
Writing Final Paper
Paper Submission

Reference
Faruk Hossan and Ahsan Habib entitled Performance evaluation and ratio analysis of
Pharmaceutical
Company
in
Bangladesh
university
west.
http://hv.divaportal.org/smash/get/diva2:323754/FULLTEXT01.pdf
Amalendu Bhunia (2010) Financial Performance of Indian Pharmaceutical Industry A Case
Study
Asian
Journal
of
Management
ResearchISSN
2229

3795.
http://ipublishing.co.in/ajmrvol1no1/EIJMRS1034.pdf
Christina Sheela.S, Karthikeyan.K (2012) Financial Performance of Pharmaceutical Industry
in India using DuPont Analysis- European Journal of Business and Management, ISSN 22221905 (Paper) ISSN 2222-2839 (Online) Vol 4, No.14, 2012 http://pakacademicsearch.com/pdffiles/ech/517/84-91%20Vol%204,%20No%2014%20(2012).pdf