Financial Condition of Beximco Pharmaceuticals LTD

FINANCIAL CONDITION OF BEXIMCO PHARMACEUTICALS LTD
1.1
Introduction
Beximco Group is the Bangladesh's largest private sector industrial enterprise which has targeted the industries that the country needs most for progress, improved living standards and Bangladesh's competitive advantages in the international market. Through its ongoing growth, it has created industrial and management capabilities that are serving the national market as well as the global market for generations. Beximco's industrial and non industrial sectors include Textile, Jute, Ceramics, ICT & Media, Synthetics, Travel Services, Investment & Financial Services, Trading, Real Estate & Construction and Pharmaceuticals. Among all its industries Beximco Pharmaceuticals Ltd. is the most profitable industry which has brought a revolutionary change in the pharmaceutical sector of Bangladesh. Now, Beximco Pharmaceuticals, mostly known as Beximco Pharma, is the leading in its field by manufacturing and capturing the market through a high quality and cost-effective formulations covering all major beneficial groups. Products of Beximco Pharma are made under license of Upjohn Incorporated, USA followed. After its initial years of struggle it broke ground with the launching of its own products in 1983. Today, it holds 15% shares in the national market after competing with such multinational giants as Glaxo Welcome, Novartis, Rorer, Fisons etc. and as well as with some big national ones like Square, ACI, INCEPTA, IBN SINA PHARMA etc. It uses the most modern equipment for quality control and strict quality assurance procedure and its manufacturing process conforms strictly to ensure to deliver clear health benefits and higher values to the patients. As it believes that being in the business which deals with human health makes it more responsible towards the society.
1.1.1
Company Profile:
Beximco Pharma is acclaimed for its outstanding product quality, world-class manufacturing facilities, product development capabilities and outstanding professional services. It is the pioneer in pharmaceutical export from Bangladesh and has received National Export Trophy (Gold) for three times. In 2008 the company has added some more excellence in its journey as it is the only Bangladeshi company which received GMP Certification from Gulf Central Committee for Drug Registration, received GMP Clearance from Therapeutic Goods Administration (TGA), registered 45 new products in 10 countries & entered into 7 new countries and many more. The company manufactures and markets its own branded generics for almost all diseases and also undertakes contract manufacturing for multinational pharmaceutical companies all over the world. Key Facts of Beximco Pharma Year of Establishment- 1976 Commercial Production- 1980 Status- Public Limited Company Business Lines- Manufacturing and marketing of Pharmaceutical Finished Formulation Products, Large Volume Parenterals, Small Volume Parenterals, Ophthalmic Preparations, Nebulizer Solutions and Active Pharmaceutical Ingredients (APIs). Overseas Offices & Associates- Australia, Bhutan, Cambodia, Chile, Ghana, Hong Kong, Indonesia, Jordan, Kenya, Kuwait, Malaysia, Myanmar, Nepal, Pakistan, Philippines, Saudi Arabia, Singapore, Sri Lanka, Vietnam and Yemen. Authorized Capital (Taka) - 2,000 million Paid-up Capital (Taka) - 1,259.57 million Number of Shareholders- Around 66,000
Stock Exchange Listings- Dhaka Stock Exchange, Chittagong Stock Exchange and AIM of London Stock Exchange. Number of Employees- 2,310 1.1.2 Companys Mission:
Each of Beximco Pharmas activities must benefit and add value to the common wealth of our society. It firmly believes that, in the final analysis it is accountable to each of the constituents with whom it interacts, namely: its employees, its customers, its business associates, its fellow citizens and its shareholders. 1.1.3 Companys Vision:
We are building a healthier tomorrow. 1.1.4 Purpose of this Study:
This study has been designed in such a way that finance students are going to learn the in-depth knowledge about a companys financial condition. They will be able to judge the difference between conservative and leveraged, flexible and restrictive firms. The main purpose of this report is to reinforce the concept of financial policy of Beximco Pharma along with its all financial ratios, working capital management, short-term financing and long-term financing.etc. Overall, this study will make a finance student more enriched with concepts that is more likely to use in real life scenario. 1.1.5 Limitation:
This report is limited by number of factors. Firstly, the report is limited to the data that are available in the website related to Beximco Pharma. Secondly, we had limited resources to deal with because we had limited access to the corporate office as in finance department of Beximco
Pharma where high security has been followed. Finally, we have used our own judgments in many ways from our Business Finance1 course in order to simplify the research, evaluate, calculation and advising. 2.1 2.1.1 Interpretation of Financial Information and Ratio Profitability Ratios:
Profitability Ratios focus on how well a firm is performing. Profit margins measure performance with relation to sales. 2.1.1.1 Gross Profit Margin:
Gross margin is simply the amount of each dollar of sales that a company keeps in the form of gross profit, and it is usually stated in % terms. The higher the gross margin, the more of a premium a company charges for its goods or services. Gross Profit Margin = Gross Profit / Sales Table 1: Illustrating the values of the variables required for Gross Profit Margin (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Sales Gross Profit Gross Profit Margin 3,702,317,159 1,731,085,826 46.76% 3,597,024,812 1,629,514,837 45.30% 4,010,167,059 2,007,295,878 50.06%
P atternsofGrossP rofitMarg in
0.51 0.50 0.49 0.48 0.47 0.46 0.45 0.44 0.43 0.42
50.06%
46.76% 45.30%
Gross profit Ma in rg
e u l a V
2006
2007 Yea r
2008
Figure 1: Patterns of Gross Profit Margin From the above information we can see that the gross profit margin of Beximco Pharma has increased from year 2006 to year 2008 with 0.4676 to 0.5006, which is good for the company as it results in the increase of gross profit. 2.1.1.2 Return on Assets:
Return on Assets (ROA) is a measure of the return on total investment in the enterprise. Total assets are financed by creditors as well as by stockholders. Return on Assets (net) = Net Income / Total Assets Table 2: Illustrating the values of the variables required for Return on Assets (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Net Income 470,658,563 353,067,878 545,341,273 Total Asset 11,912,512,487 11,953,418,940 14,819,665,441 ROA 0.0395 times 0.0295 times 0.0368 times
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P atternsofReturnonAs set
0.05 0.04 0.04 0.03 0.03 0.02 0.02 0.01 0.01 0.00
0.0395 0.0295
0.0368
e u l a V
R eturn on A sset
2006
2007 Yea r
2008
Figure 2: Patterns of Return on Assets The return on total asset ratio has decreased to 0.0295 times in 2007 but increased to 0.0368 times in 2008 but still lower than 2006 which was 0.0395 times. This is risky for Beximco Pharma because it shows that Beximco Pharma has not generated supplementary income utilizing less amount of asset. 2.1.1.3 Return on Equity:
Return on equity is a ratio that measures a company's return on its investment by shareholders. It is usually stated in % terms and higher are better. Return on Equity = Net Income / Shareholders Equity Table 3: Illustrating the values of the variables required for Return on Equity (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Net Income 470,658,563 353,067,878 545,341,273 Shareholders Equity 7,949,920,425 8,250,939,647 10,450,202,145 ROE 5.92% 4.28% 5.22%
P attern of Return on Eq s uity
0.07 0.06 0.05 5.92% 5.22% 4.28%

R eturn on E quity
e u l a V
0.04 0.03 0.02 0.01 0.00 20 06
2007 Y ear
2008
Figure 3: Patterns of Return on Equity The amount of money invested by the investors has increased from the previous years but the net income amount has decreased in 2007. This shows the performance of Beximco Pharma can increase the income amount as the investment increases. But the trend of net income should be upward. 2.1.2 Efficiency Ratios:
Efficiency ratios measure how effectively the company utilizes these assets, as well as how well it manages its liabilities. 2.1.2.1 Sales to Inventory Ratio:
Sales to inventory ratio provide a measurement for comparing stock-to-sales ratios of a business with others in the same industry. Sales to Inventory Ratio = Annual Net Sales / Inventory Table 4: Illustrating the values of the variables required for Sales to Inventory Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Sales 3,702,317,159 3,597,024,812 4,010,167,059 Inventory 1,754,440,288 1,652,480,291 1,505,288,093 Sales to Inventory Ratio 2.11 2.18 2.66
Pa tternsof S lesto InventoryR tio a a

3.00 2.50 2.66 2.11 2.18
S alesto Inven tory Ratio
e u l a V
2.00 1.50 1.00 0.50 0.00
2006
2007 Y ear
2008
Figure 4: Patterns of Sales to Inventory Ratio The sales to inventory ratio for Beximco Pharma has increased in 2007 due to the balance in the value of the annual net sales. The inventory value has decreased in 2008 but due to the increase in the annual net sales there is a higher sale to inventory ratio. This shows that it is able to sell a considerable amount of inventory and maintains a low inventory figure relative to the annual net sales. 2.1.2.2 Assets to Sales Ratio:
An Asset to Sales ratio is a measure of a firm's efficiency in managing its assets in relation to the revenue generated. Higher this ratio, the smaller the investment required to generate sales revenue and, therefore, higher profitability of the firm. Assets to Sales Ratio = Total Assets / Net Sales Table 5: Illustrating the values of the variables required for Assets to Sales Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Total Assets 11,912,512,487 11,953,418,940 14,819,665,441 Sales 3,702,317,159 3,597,024,812 4,010,167,059 Assets to Sales Ratio 3.22 3.32 3.70
P tternsof Ass to sa R tio a ets les a

3 .80 3 .70 3 .60 3 .50 3 .40 3 .30 3 .20 3 .10 3 .00 2 .90 3.7
As setstoS ales Ratio
e u l a V
3 .32 3.2 2
2006
200 7 Y ear
2 008
Figure 5: Patterns of Assets to Sales Ratio The asset to sales ratio has increased from the year 2006 to 2008. This shows that Beximco Pharma needs smaller investment to generate sales revenue. This can be said due to the fact that the total asset has increased and its net sales have also increased in 2008 but decreased in 2007. 2.1.2.3 Sales to Net Working Capital Ratio:
This ratio shows the amount of cash required to maintain a certain level of sales. It is most effective when tracked on a trend line, so that management can see if there is a long-term change in the amount of cash required by the business in order to generate the same amount of sales. Sales to Net Working Capital Ratio = Sales / Net working Capital Table 6: Illustrating the values of the variables required for Sales to Net Working Capital Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Sales 3,702,317,159 3,597,024,812 4,010,167,059 Net Working Capital 829,972,468 1,295,802,522 259,859,387 Sales to NMC Ratio 4.46 times 2.78 times 15.43 times
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P tterns of S les to NWCR tio a a a 2 .0 0 0 1 .0 5 0
1 .4 5 3
S alesto NW C Ratio
e u l a V
1 .0 0 0 5 0 .0 0 0 .0
20 06 20 07 Y ear 20 08 4 6 .4 2 8 .7
Figure 6: Patterns of Sales to Net Working Capital Ratio The sales to net working capital ratio of Beximco Pharma has highly increased in 2008 but decreased in 2007. This increase in the value is caused by the increase in the sales, which shows that it relies heavily on credit and they require fewer amounts of cash maintain the level of sales. 2.1.3 Liquidity Ratios:
Liquidity Ratios measures the company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. 2.1.3.1 Current Ratio:
The current ratio is the most basic liquidity test which signifies a company's ability to meet its short-term liabilities with its short-term assets. A current ratio greater than or equal to one indicates that current assets should be able to satisfy near-term obligations. Current Ratio = Current Assets / Current Liabilities Table 7: Illustrating the values of the variables required for Current Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Current Assets 3,357,393,266 2,923,775,458 2,861,891,654 Current Liabilities 2,527,420,798 1,627,972,936 2,602,032,267 Current Ratio 1.33 times 1.80 times 1.10 times
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P tterns of C a urrent R tio a 2 0 .0 1 0 .5
1.33 1.1
C rrent Ratio u
1.8
e u l a V
1 0 .0 0 0 .5 0 0 .0
200 6 2007 Y ear
200 8
Figure 7: Patterns of Current Ratio The current ratio of Beximco Pharma has increased in 2007 but decreased in 2008 from the year 2006. However As the ratio value is more than 1; it shows that the amount of current asset is greater than the current liabilities. But the current liabilities of it are increasing and it is not a good indication. 2.1.3.2 Quick Ratio:
The quick ratio is a tougher test of liquidity than the current ratio. It eliminates inventories and prepaid expenses that may be more difficult to convert to cash. Like the current ratio, the higher the ratio, the more liquid it is, and the better able the company will be to ride out any downturn in its business. Quick Ratio = (Current Assets Inventory) / Current Liabilities Table 8: Illustrating the values of the variables required for Quick Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Current Assets 3,357,393,266 2,923,775,458 2,861,891,654 Inventory 1,754,440,288 1,652,480,291 1,505,288,093 Current Liabilities 2,527,420,798 1,627,972,936 2,602,032,267 Quick Ratio 0.98 times 0.78 times 0.52 times
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P tterns of Quick R tio a a 1 0 .2 1 0 .0
0.98 0.78
Qu Ratio ick
e u l a V
0 0 .8 0 0 .6 0 0 .4 0 0 .2 0 0 .0
20 06
0.52
20 07 Y ear
20 08
Figure 8: Patterns of Quick Ratio The quick ratio value is decreasing year by year from 2006 to 2008, showing the financial weakness of Beximco Pharma is increasing. This is because the quick ratio compares the current liabilities with the current asset without the value of the inventories. It also shows that the firm is not so liquid at this time. 2.1.4 Solvency Ratios:
Solvency Ratios is one of many ratios used to measure a company's ability to meet long-term obligations. Generally, the lower a company's solvency ratio, the greater the probability that the company will default on its debt obligations. Solvency Ratios = (After Tax Net Profit + Depreciation) / (Long Term + Short Term liabilities) Table 9: Illustrating the values of the variables required for Solvency Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) After Tax Net Profit 470,658,563 353,067,878 545,341,273 Depreciation 161,371,022 157,375,803 147,183,829 Long Term Liabilities 1,435,171,264 2,074,506,357 1,767,431,029 Short Term Liabilities 2,527,420,798 1,627,972,936 2,602,032,267 Solvency Ratio 0.16 0.14 0.16
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Pa tterns of S olvency R tio a 0 7 .1 0 6 .1 0 6 .1 0 5 .1 0 5 .1 0 4 .1 0 4 .1 0 3 .1
0.16
0.16
e u l a V
S olven Ratio cy
0.14
2006
2007 Y ear
2008
Figure 9: Patterns of Solvency Ratio The solvency ratio of Beximco Pharma has decreased in 2007 showing that it is getting less solvent gradually to meet its long term obligations. But it is same in the year 2008. The value of the ratio is rather constant but the long term obligation is also increasing. 2.1.5 2.1.5.1 Investment Ratios: Earnings per Share:
It shows the earning for each share of common stock outstanding. The trend should be upward, and the bigger the annual percentage gains, the better. EPS = Net Income / Outstanding Shares Table 10: Illustrating the values of the variables required for Earnings per Share (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Net Income 470,658,563 353,067,878 545,341,273 Current Outstanding Shares 100,737,415 114,507,043 125,957,747 EPS 4.67 3.08 4.33
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P atternsofEP S
5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
4.67
4.33 3.08
E PS
e u l a V
2006
2007 Yea r
2008
Figure 10: Patterns of Earnings per Share The EPS of Beximco Pharma has highly decreased in 2007 and slightly decreased in 2008. This drastic decrease has been caused by the decrease in the net income figure. This decrease in the EPS is highly unconvincing to the investors for additional and new investment. 2.1.5.2 Price Earnings Ratio:
P/E ratios above 20 indicate strong investor confidence in a firms outlook and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12. Price Earnings Ratio = Current Market Price per Share / Earnings per Share Table 11: Illustrating the values of the variables required for Price Earnings Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Market Price per Share 53.7 58.9 167.7 EPS 4.67 3.08 4.33 P/E Ratio 11.50 times 19.12 times 38.73 times
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P tterns of P a rice E rning R tio a a 4 .0 5 0 4 .0 0 0 3 .0 5 0 3 .0 0 0 2 .0 5 0 2 .0 0 0 1 .0 5 0 1 .0 0 0 5 0 .0 0 0 .0
3 8.73
P rice Earn g in Ratio
e u l a V
19.12 11.5
2006
20 07 Y ear
2008
Figure 11: Patterns of Price Earnings Ratio The P/E Ratio of Beximco Pharma has highly increased in 2008 from the year 2006. This increase has been caused by the large increase in the market price of per share. The market price increased largely due to the financial stability. Therefore despite of the considerable decrease in the EPS value the market price per share increased largely causing the high increase in the Price Earnings Ratio. 2.1.5.3 Dividend Payout Ratio (DPR):
It indicates the % of After-Tax Profits paid out as dividends. Dividend Payout Ratio = Dividend Paid / Net income Table 12: Illustrating the values of the variables required for Dividend Payout Ratio (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Dividend Paid 70,598,784.45 52,960,181.70 163,602,381.90 Net Income 470,658,563 353,067,878 545,341,273 DPR 15% 15% 30%
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P tterns of D a ividend P y a out R tio a 0 5 .3 0 0 .3 0 5 .2 0 0 .2 0 5 .1 0 0 .1 0 5 .0 0 0 .0
3 0%
D en ivid d P ayou Ratio t
e u l a V
1% 5
1% 5
20 06
2 7 00 Y ear
2 08 0
Figure 12: Patterns of Dividend Payout Ratio The Dividend Payout Ratio of Beximco Pharma has been 15% and recently they increased it to 30% in 2008. This is a good sign for the investors to invest more in the company. The other percentage of earnings is not paid to the investors is kept by itself as Retained Earnings and to be used as working capital. 2.1.5.4 Dividend per Share (DPS):
Dividend per Share is the sum of declared dividends for every ordinary share issued. Dividend per Share (DPS) is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. Dividend per share = Dividend Paid / Outstanding Shares Table 13: Illustrating the values of the variables required for Dividend per Share (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Dividend Paid 70,598,784.45 52,960,181.70 163,602,381.90 Current Outstanding Shares 100,737,415 114,507,043 125,957,747 DPS 0.701 0.462 1.30
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Pa tterns of D ividend per S re ha 1 0 .4 1 0 .2 1 0 .0 0 0 .8 0 0 .6 0 0 .4 0 0 .2 0 0 .0
1.3
e u l a V
0.701 0.462
D en per ivid d Sh are
2006
2007 Year
2008
Figure 13: Patterns of Dividend per Share The DPS of Beximco Pharma has decreased in 2007 but highly increased in 2008. This shows that the investors are receiving a good amount of return on their investment. 2.1.5.5 Dividend Yield:
It is a measure of the return that shareholders receive in the form of dividends. A typical dividend yield is 2-3%. The dividend yield for fast-growth companies is often below 1% (may be even 0); the dividend yield for slow-growth companies can run 4-5%. Dividend Yield = Dividend per Share / Current Market Price per Share Table 14: Illustrating the values of the variables required for Dividend Yield (Appendix 7) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Market Price per Share 53.7 58.9 167.7 Dividend per Share 0.701 0.462 1.30 Dividend Yield 1.31% 0.78% 0.78%
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P atternsofDividendY ield
0.01 0.01 0.01
1.31%
e u l a V
0.01 0.01 0.00 0.00 0.00

2006
0.78%
0.78%
Div idend Yield
2007 Yea r
2008
Figure 14: Patterns of Dividend Yield The dividend yield of Beximco Pharma has decreased due to the increase in the market price of its share. It is very positive in incrementing the market price of its share, which would cause the capital gain of its investors and will attract more investors. 3.1 3.1.1 Operating leverage Degree of Operating Leverage (DOL):
This is a measure of how much money is expending in fixed assets. DOL may be defined as the % change in operating income that occurs as a result of a % change in units sold. However, the closer the DOL is computed to the company break-even point, the higher the number will be due to a large % increase in the operating income. DOL = (% change in EBIT) / (% change in Sales) DOL = (Sales Total variable cost) / (Sales Total variable cost Fixed cost) Table 15: Illustrating the values of the variables required for Degree of Operating Leverage (Appendix 8) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) Sales 3,702,317,159 3,597,024,812 4,010,167,059
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Variable Cost (Appendix 11) Fixed Cost (Appendix 11) EBIT DOL 3.1.2
2,718,174,679 1,115,720,848 746,523,494 0.06
2,548,059,451 1,124,294,362 654,778,147 0.87
2,800,232,456 1,246,166,739 998,794,848 0.83
Degree of Financial Leverage (DFL):
It means that how much is the financial risk as the capital structure consists more debt. If the economic conditions are favorable and EBIT is increasing, a higher financial leverage has a positive impact on the EPS. The DFL captures this relationship between EBIT and EPS. It may be defined as the % change in EPS that occurs as a result of a % change in EBIT. DFL = (% change in EPS) / (% change in EBIT) DFL = (EBIT) / (EBIT - Interest) Table 16: Illustrating the values of the variables required for Degree of Financial Leverage (Appendix 8) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) EPS 4.67 3.08 4.33 EBIT 746,523,494 654,778,147 998,794,848 Interest 253,318,784 254,742,392 249,654,298 ROA (gross) (Appendix 11) 6.27% 5.48% 6.74% DFL 1.51 1.64 1.33
C parison of DOL & DF om L
1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.51
1.64 1.33
DO L
e u l a V
0.87
0.83
DF L
0.06 200 6 200 7 Y ear 200 8
Figure 15: Comparison of DOL & DFL
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3.1.3
Degree of Combine Leverage (DCL):
A leverage ratio that summarizes the combined effect of DOL and DFL has on EPS, given a particular change in sales. This ratio can be used to help determine the most optimal level of financial and operating leverage to use in any firm. It is worth noting that a firm with a relatively high level of combined leverage is seen as riskier than a firm with less combined leverage, as the high leverage means more fixed costs to the firm. DCL = (% change in EPS) / (% change in Sales) DCL = DOL*DFL DCL = (Sales Total variable cost) / (Sales Total variable cost Fixed cost - Interest) Table 17: Illustrating the values of the variables required for Degree of Combine Leverage (Appendix 8) 2006 (in Taka) 2007 (in Taka) 2008 (in Taka) EPS 4.67 3.08 4.33 Sales 3,702,317,159 3,597,024,812 4,010,167,059 Variable Cost (Appendix 11) 2,718,174,679 2,548,059,451 2,800,232,456 Fixed Cost (Appendix 11) 1,115,720,848 1,124,294,362 1,246,166,739 Interest 253,318,784 254,742,392 249,654,298 DCL 0.09 1.43 1.10
Patternsof D CL
1 0 .6 1 0 .4 1 0 .2 1 0 .0 0 0 .8 0 0 .6 0 0 .4 0 0 .2 0 0 .0
1.43 1.1
DC L
e u l a V
0.09 2006 2007 Yea r 2008
Figure 16: Patterns of DCL
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3.1.4
Interpretation of all Leverages:
DOL: By analyzing the Beximco Pharmas DOL, we can see that in 2007 its DOL was 0.87, which is the highest that means 1% increase in amount of sales would produce a 0.87% change in EBIT. But in 2006, its DOL was only 0.06 which was really poor than 2007 but in 2008 its DOL was 0.83 which indicates the general pattern has been changed from 2007. As we know the greater the operating leverage the more its profit will vary with a given % change in sales. So in 2007 the business risk was slight bit higher for this company than in 2008 which shows it was quite conservative in nature in 2006 and its operating income has been increasing slowly but steadily whereas its long term liability has been decreasing. But from 2007 the nature has been changed to very aggressive. This is because it relies heavily on debt and has been successful to finance the money needed from the debtor in both the year 2007 & 2008. DFL: Here, Beximco Pharmas DFL in 2007 was 1.64 whereas in 2008 it decreased to 1.33. This is because EPS & EBIT has increased largely over the period 2007 to 2008. The large change in EPS relative to the EBIT was caused by the decrease in the long term liability. As a result the interest expense did not increase in relation to increase of EBIT. Therefore the higher financial leverage of the company has a positive impact on the EPS, meaning investors will be getting good return on their investment, which can be easily figure out from the increasing value of ROA. In 2008, EBIT was higher than in 2007 also the EPS because of being aggressive. So in 2007 1% increase in earnings would produce a 1.64% increase in EPS and in 2008 1% increase in earnings would produce a 1.33% increase in EPS. DCL: By analyzing the Beximco Pharmas DCL, we can say that in 2007 1% change in sales will be reflected in a 1.43% change in EPS and in 2008 reflected with 1.10%. The main reason for the decrease in the DCL value in 2008 is the decrease in the DFL value caused by the small increase
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in the EPS. Therefore the company with increase in EPS despite having very good amount of debt can be marked as risky. As it has shifted from being a conservative to being an aggressive, poor DCL in 2006 has also been recovered and a steady position can be seen in 2007 & 2008 though the DCL of 2008 is much lower than the DCL of 2007. 4.1 Working Capital Management Policy of the Company
The Working Capital Management Policy of a company basically brings into focus level of current assets a company has and how it finances them. Managing the Working Capital is vital for a company and managing basically are the decisions regarding the level of inventories to be kept, time period for which Accounts Receivables should be kept outstanding and also the period of time for payments of Accounts Payables. Two major components of managing Working Capital are the estimations of the Operating Cycle and the Cash Cycle. For the estimation of Operating Cycle and Cash Cycle the estimations of Accounts Receivables Period, Accounts Payable Period and Inventory Period are required. Table 18: Illustrating the values of the variables required for Working Capital Management (Appendix 9) 2006 (in Days) 2007 (in Days) 2008 (in Days) Inventory Period Account Receivables Period Operating Cycle Account Payables Period Cash Cycle 317.39 days 59.64 days 377.03 days 53.91 days 323.12 days 314.66 days 47.16 days 361.82 days 59.06 days 302.76 days 270.37 days 45.68 days 316.05 days 48.73 days 267.32 days
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Figure 17: Operating Cycle and Cash Cycle of 2006
Figure 18: Operating Cycle and Cash Cycle of 2007
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Figure 19: Operating Cycle and Cash Cycle of 2008 4.1.1 Inventory Period:
It starts from the time stock of goods purchased arrives at the factory and ends at the point where finished goods are sold. According to the information provided in the annual reports of Beximco Pharma, their Inventory period has decreased every year from 2006. It is a good sign for the company as it means they are getting efficient at producing the finished goods and not keeping ideal stock. 4.1.2 Account Receivables Period:
It begins with the sales of the finished goods and ends when customer makes payment. This period is vital for every company as it determines the time by which company gets back money from its credit customers. In the case of Beximco Pharma, it can be seen that the Account Receivables Period has decreased gradually in the last three years. This is promising because it
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suggests that Beximco Pharma has collected their receivables faster which would lead to strengthening of their financial position. 4.1.3 Account Payables Period:
This represents the number of days Beximco Pharma takes to pay off their dues to suppliers. As we can see compared to 2006 in 2007 the value of Account Payables Period increased but it dropped again in 2008. The decrease is a good sign as it means that the company is financially strong enough to pay off their dues fast. However, extending may also result to high cash balance for momentarily but not for long. 4.1.4 Operating Cycle:
It begins with the raw material arrives and ends with the cash received. The shorter the operating cycle the better the firm is financially because the firm receives the cash faster. For Beximco Pharma, it is a good sign that from 2006 through 2007 & 2008 their operating cycle has decreased, meaning that they have been successful enough to reduce the time gap between the stock arrival and receiving payments from the customers. 4.1.5 Cash Cycle:
It begins with the payment to suppliers and ends with the collection from suppliers. The shorter the Cash Cycle the better the firm is financially. For Beximco Pharma it is a good sign that from 2006 through 2007 and 2008 their Cash Cycle has decreased, meaning that they have been successful enough to reduce the time gap between paying of suppliers and receiving payments from the customers. 4.1.6 Advice on Working Capital Management Policy:
26
Judging from the numerical figures it has to be said that Beximco Pharma is heading towards the right direction. From 2006-2008 its Operating Cycle and Cash Cycle has decreased, to look more into the calculations its Account Receivables Period, Inventory Period and Accounts Payables has decreased. All these figures are positive signs as they show improvement in Beximco Pharmas Working Capital Management. However, these figures look good when compared to each other but in reality they are very high. Beximco Pharma must continue decreasing Account Receivables Period by employing strategies to collect money faster. Also Inventory Period needs to be decreased further. So, they must try to speed up their production process if possible but this might not be possible as it is a pharmaceutical firm and production of medicine & drugs might require some time compared to other goods. Now Accounts payables period if increased it will mean that they will have more cash balance and will thus increase their financial strength. These changes will eventually affect the Operating Cycle and Cash Cycle. 5.1 Financing Policy of the Company
Financing policy of a company mainly represents how the company finances its investments, how it allocates the investments; in terms of assets and how it is generating its revenues based on these previous terms. Financing policy of the Beximco Pharma can be analyzed in the following ways: 5.1.1 Size of the Firms Investment in Current Assets:
In order to find out the firms investment in current assets, we can focus on Current Asset to Sales ratio, amount of the cash the company is having, amount of inventory, accounts receivables and investment in fixed assets. Based on this information, we can find out what is then nature of the firm; restrictive or flexible. Table 19: Illustrating the values of the variables required for Analyzing the Financing Policy 1 (Appendix 10)
27
2006 (in Taka) Current Asset to Sales Cash Inventories Accounts Receivable Fixed Asset to Total Asset Current Asset to Total Asset Nature of the Firm 0.91 581,098,945 1,754,440,288 430,240,095 71.82% 28.18% Flexible
2007 (in Taka) 0.81 85,698,910 1,652,480,291 499,680,792 75.54% 24.46%
2008 (in Taka) 0.71 73,647,728 1,505,288,093 503,916,401 80.69% 19.31% Restrictive
From the above information of the table, it is very much clear about the nature of the firm. The firm which has high current asset to sales ratio, high cash & inventories and high investment in fixed asset is a flexible firm. Here, we can say that Beximco Pharma was a very flexible firm in 2006 because it has higher cash, inventories and current asset to sales ratio compare to 2007 and 2008. Then it also had least investment in fixed asset compare to current asset in 2006. But in 2007 and 2008, gradually this firm has become more restrictive in nature.
F ixed&C urrent AssetsC pa om rison

100.0 0% 80.00 % 60.00 % 40.00 % 20.00 % 0 .00%
C urrentAss ets F ixedAs sets
28.18%
24 .46%
19.31%
7 1.82%
7 5.54%
80.6 9%
2006
2007 Y ear
2008
Figure 20: Fixed and Current Assets Comparison 5.1.2 Financing Process of the Assets:
28
Based on the investment in the assets, a firm can be either flexible or restrictive. The firm which has a low proportion of short term debt relative to long term financing is a flexible firm and vice versa for restrictive firms. Table 20: Illustrating the values of the variables required for Analyzing the Financing Policy 2 (Appendix 10) 2006 2007 2008 Short Term Debt to Long Term Debt Nature of the Firm 1.76 Restrictive 0.78 Flexible 1.47 Restrictive
From the above information, we can see that the firm was very much restrictive in 2006 which means the firm was very much dependent on the short term financing. On the other hand, in 2007 the firm was very much flexible because it was heavily dependent on the long term debt. Again, in 2008, the firm became very much restrictive.
L ongT erm&S hort T ermD C pa ebt om rison 100.00% 80.00% 60.00% 40.00% 20.00% 0.00%
S hortT ermD ebt L T ong ermD ebt
63.78% 43.97% 36.22% 56.03% 2006 2007 Y r ea
59.55% 40.45% 2008
Figure 21: Long Term and Short Term Debt Comparison 5.1.3 Capital Structure:
29
It represents the debt and equity proportion of a company which indicates how much the company is dependent on its debt and equity to finance its assets and expenses.
Capital Structure of 2006
Equity 6 .74 6 %
D ebt 33 .26 %
E quity 6 .0 9 3 %
D ebt 3 .9 0 7 %
Equity 70 .52 %
D ebt 2 8 9.4 %
Figure 22: Capital Structure The charts above clearly show that Beximco Pharma is very much dependent on its equity and less dependent on debt. The firm has become more and more dependent on its equity from 2006 to 2008. So, the firm is very much conservative because of their greater dependency on equity. 5.1.4 Advice on Financing Policy of the Company:
30
Beximco Pharma has become more and more restrictive firm from 2006 to 2008 as it invested a huge amount in its fixed assets which is the main reason for being restrictive. As a result, the investment in current assets is too low. But the company should be a little more flexible in the near future. The firm is very much dependent on short term debt though they invested huge amount in fixed asset. That represents the company has less cash in 2008 compare to the previous years. So it can face financial distresses due to having lowered cash balance in every year. On the other hand, depending too much in short term debt increases the financial risk of the firm because the interest rate is very much volatile in short term debt. Though in 2007, the short term debt to long term debt ratio is very much low which indicates that the company became flexible but in 2008, the ratio again increased and the firm became restrictive.
Earnings Per Share

5 4
Value 3
2 1 0
4.67 3.08
4.33 EPS
2006
2007
2008
Year
Figure 23: Earnings per Share In order to perform better, the company should come to a common situation between short-term debt and long term debt. Lastly, the company finances its expenditures from its equity as it is heavily dependent on its equity and in 2006 the earnings per share was higher than 2007 as there
31
were more long term debt in 2007 than equity. On the other hand in 2008 earnings per share is increasing again due to higher equity than debt. So, the company should maintain this condition. 6.1 Conclusion
In conclusion, we came to this decision that the company is in the right direction. Starting from its sales to working capital policy and financing policy, everything is going according to the plan. The company had a tough year in 2007 because it had less sales, high DOL and huge investment in fixed assets. As a result, it has very poor net income and the performance fell down but it has overcome the situation and now performing better day by day. The company should consider about its accounts payable period and dependency on short term debt. The pharmaceutical industry of Bangladesh is flourishing day by day and Beximco Pharma will have a tough competition from its competitors. Though the company is having a better performance but if they overcome the two factors, then they have the potential to be the leading firm of this sector in Bangladesh. 7.1 Recommendations
Based on our assessment, we have come out with some recommendation which can help in the better performance of Beximco Pharma: First, the company is too much dependent on the short term financing. The interest rate of short term financing is very much volatile and it also has higher financial risk. So, the company should have more long term debt. Though it has higher interest rate but the financial risk is much lower.
Judging on the above calculation, we have found that the accounts payables period of Beximco Pharma is decreasing year to year. It can be said that the company has enough capital so it hardly have an effect on the company or because of the shorter payable period
32
the company has less cash on their hand which can result financial distress. So, the company should have a policy to increase the accounts payables period.
List of References
33
Arthur C. Banks Jr. Library. (Feb 2007). A Guide for Writing Research Papers based on Styles Recommended by The American Psychological Association. http://www.ccc.commnet.edu/apa/index.htm#contents2 Beximco Pharmaceuticals Ltd. (2008). Annual Report 2008, 1, 33-56. Beximco Pharmaceuticals Ltd. (2007). Annual Report 2007, 1, 25-48. Beximco Pharmaceuticals Ltd. (2006). Annual Report 2006, 1, 41-64. In Business Finance I at Independent University on October 5, 2009, Lecturer Sylvana M. Ahmed described Short-Term Finance and Planning (Sylvana M. Ahmed, FIN 301 lecture, October 5, 2009). In Business Finance I at Independent University on September 30, 2009, Lecturer Sylvana M. Ahmed described Operating and Financial Leverage (Sylvana M. Ahmed, FIN 301 lecture, September 30, 2009). Ross, S. A, Westerfield, R. W & Jaffe, J. (2005). Corporate Finance 7th Edition. New Delhi: McGraw Hill Publishing Company Limited. Unknown. (September 8, 2009). Beximco. Beximco Pharma. http://www.beximco-pharma.com/ Unknown. (n.d). Financial Performance. Dhaka Stock Exchange Ltd. http://dsebd.org/displayCompany.php?name=BEXIMCO
9.1
Appendices
34
9.1.1
Appendix 1: Balance Sheet as at Dec31 2006 BEXIMCO PHARMACEUTICALS LIMITED Balance Sheet As at 31 December 2006
Notes 2006 8,555,119,221 8,513,136,381 41,982,840 3,357,393,266 1,754,440,288 430,240,095 591,613,938 581,098,945 Tk. 11,912,512,487 2005 7,449,630,817 7,412,474,567 37,156,250 3,495,849,163 1,683,722,059 779,798,943 603,764,931 428,563,230 Tk. 10,945,479,980
ASSETS Non-Current Assets Property, Plant and Equipment- Carrying Value Investment in Shares Current Assets Inventories Accounts Receivable Loans, Advances and Deposits Cash and Cash Equivalents TOTAL ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' Equity Issued Share Capital Share Premium Excess of Issue Price over Face Value of GDRs Capital Reserve Tax-Holiday Reserve Retained Earnings Non-Current Liabilities Long Term Borrowing-Net off Current Maturity (Secured) Liability for Gratuity & WPPF Deferred Tax Liability Current Liabilities and Provisions Short Term Borrowings Long Term Borrowing-Current Maturity Creditors and Other Payables Accrued Expenses Dividend Payable Income Tax Payable TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 26 27 28 29 30 7,949,920,425 1,040,973,120 1,489,750,000 1,689,636,958 294,950,950 394,834,828 3,039,774,569 1,435,171,264 1,159,409,947 213,357,859 62,403,458 2,527,420,798 1,302,816,980 712,122,930 365,255,938 117,936,620 13,012,146 16,276,184 Tk. 11,912,512,487 6,820,925,052 959,215,620 1,489,750,000 969,175,305 294,950,950 414,548,999 2,693,284,178 1,622,730,360 1,387,455,909 190,053,550 45,220,901 2,501,824,568 1,062,011,192 1,066,030,957 216,660,743 101,859,834 830,440 54,431,402 Tk. 10,945,479,980 20 21 22 23 24 25
31 32 19.5 & 33 34 35 36 37 38
35
9.1.2
Notes 2007 9,029,643,482 8,992,942,392 36,701,090 2,923,775,458 1,652,480,291 499,680,792 685,915,465 85,698,910 Tk. 11,953,418,940 2006 8,555,119,221 8,513,136,381 41,982,840 3,357,393,266 1,754,440,288 430,240,095 591,613,938 581,098,945 Tk. 11,912,512,487
ASSETS Non-Current Assets Property, Plant and Equipment- Carrying Value Investment in Shares Current Assets Inventories Accounts Receivable Loans, Advances and Deposits Cash and Cash Equivalents TOTAL ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' Equity Issued Share Capital Share Premium Excess of Issue Price over Face Value of GDRs Capital Reserve on Merger Tax-Holiday Reserve Retained Earnings Non-Current Liabilities Long Term Borrowing-Net off Current Maturity (Secured) Liability for Gratuity & WPPF Deferred Tax Liability Current Liabilities and Provisions Short Term Borrowings Long Term Borrowing-Current Maturity Creditors and Other Payables Accrued Expenses Dividend Payable Income Tax Payable TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 26 8,250,939,647 1,145,070,430 1,489,750,000 1,689,636,958 294,950,950 442,354,953 3,189,176,356 2,074,506,357 1,776,449,778 246,704,610 51,351,969 1,627,972,936 907,582,327 343,604,498 271,814,118 60,052,739 3,285,324 41,633,930 Tk. 11,953,418,940 7,949,920,425 1,040,973,120 1,489,750,000 1,689,636,958 294,950,950 394,834,828 3,039,774,569 1,435,171,264 1,159,409,947 213,357,859 62,403,458 2,527,420,798 1,302,816,980 712,122,930 365,255,938 117,936,620 13,012,146 16,276,184 Tk. 11,912,512,487 20 21 22 23 24 25
27
28 29 30 31 32 33 34 35
36
9.1.3
Notes 2008 11,957,773,787 11,921,072,697 36,701,090 2,861,891,654 1,505,288,093 234,530,326 503,916,401 544,509,106 73,647,728 Tk. 14,819,665,441 2007 9,029,643,482 8,992,942,392 36,701,090 2,923,775,458 1,470,152,242 182,328,049 499,680,792 685,915,465 85,698,910 Tk. 11,953,418,940
ASSETS Non-Current Assets Property, Plant and Equipment- Carrying Value Investment in Shares Current Assets Inventories Spares & Supplies Accounts Receivable Loans, Advances and Deposits Cash and Cash Equivalents TOTAL ASSETS SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' Equity Issued Share Capital Share Premium Excess of Issue Price over Face Value of GDRs Capital Reserve on Merger Revaluation Surplus Tax-Holiday Reserve Retained Earnings Non-Current Liabilities Long Term Borrowing-Net off Current Maturity (Secured) Liability for Gratuity & WPPF Deferred Tax Liability Current Liabilities and Provisions Short Term Borrowings Long Term Borrowing-Current Maturity Creditors and Other Payables Accrued Expenses Dividend Payable Income Tax Payable 27 28 20 (b) 29 10,450,202,145 1,259,577,470 1,489,750,000 1,689,636,958 294,950,950 1,711,174,747 4,005,112,020 1,767,431,029 1,446,600,500 274,419,253 46,411,276 2,602,032,267 1,461,666,227 648,165,841 263,176,822 81,776,450 3,169,568 144,077,359 8,250,939,647 1,145,070,430 1,489,750,000 1,689,636,958 294,950,950 442,354,953 3,189,176,356 2,074,506,357 1,776,449,778 246,704,610 51,351,969 1,627,972,936 907,582,327 343,604,498 271,814,118 60,052,739 3,285,324 41,633,930 20 (a) 21 22 23 24 25 26
30 31 32 33 34 35 36 37
37 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY Tk. 14,819,665,441 Tk. 11,953,418,940
9.1.4
Appendix 4: Profit & Loss Account for the year ended Dec31 2006 BEXIMCO PHARMACEUTICALS LIMITED Profit and Loss Account For the year ended 31 December 2006
Notes 2006 3,702,317,159 (1,971,231,333) 1,731,085,826 43 44 (984,562,332) (150,285,977) (834,276,355) 746,523,494 45 46 56,201,142 (253,318,784) 549,405,852 47 (26,162,183) 523,243,669 19.5, 33 & 48 (52,585,106) (35,402,549) (17,182,557) Tk. 470,658,563 49 Tk. 4.67 100,737,415 2005 3,327,022,574 (1,768,522,363) 1,558,500,211 (834,148,493) (119,006,535) (715,141,958) 724,351,718 7,232,609 (221,949,324) 509,635,003 (24,268,333) 485,366,670 3,895,094 (46,169,026) 50,064,120 Tk. 489,261,764 Tk. 6.36 76,878,446
Net Sales Revenue Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Administrative Expenses Selling, Marketing and Distribution Expenses Profit from Operations Add: Other Income Less: Finance Cost Net Profit Before Contribution to WPPF Less: Contribution to Workers' Profit Participation/ Welfare Funds Net Profit Before Tax Less: Income Tax Income/(Expense) Current Tax Deferred Tax Income/(Expense) Net Profit After Tax Transferred to Statement of Changes in Equity Earnings Per Share (of Tk. 10 /- each) Number of shares used to compute EPS
39 40
9.1.5
Appendix 5: Profit & Loss Account for the year ended Dec31 2007
38
BEXIMCO PHARMACEUTICALS LIMITED Profit and Loss Account For the year ended 31 December 2007
Notes Net Sales Revenue Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Administrative Expenses Selling, Marketing and Distribution Expenses Profit from Operations Add: Other Income Less: Finance Cost Net Profit Before Contribution to WPPF Less: Contribution to Workers' Profit Participation/ Welfare Funds Net Profit Before Tax Less: Income Tax Income/(Expense) Current Tax Deferred Tax Income/(Expense) Net Profit After Tax Transferred to Statement of Changes in Equity Earnings Per Share (of Tk. 10 /- each) Number of shares used to compute EPS 46 19.5 & 45 44 42 43 40 41 36 37 2007 3,597,024,812 (1,967,509,975) 1,629,514,837 (974,736,690) (145,544,701) (829,191,989) 654,778,147 19,625,795 (254,742,392) 419,661,550 (19,983,883) 399,677,667 (46,609,789) (57,661,278) 11,051,489 Tk. 353,067,878 Tk. 3.08 114,507,043 2006 3,702,317,159 (1,971,231,333) 1,731,085,826 (984,562,332) (150,285,977) (834,276,355) 746,523,494 56,201,142 (253,318,784) 549,405,852 (26,162,183) 523,243,669 (52,585,106) (35,402,549) (17,182,557) Tk. 470,658,563 Tk. 4.11 114,507,043
9.1.6
Appendix 6: Profit & Loss Account for the year ended Dec31 2008
39
BEXIMCO PHARMACEUTICALS LIMITED Profit and Loss Account For the year ended 31 December 2008
Notes Net Sales Revenue Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Administrative Expenses Selling, Marketing and Distribution Expenses Profit from Operations Add: Other Income Less: Finance Cost Net Profit Before Contribution to WPPF Less: Contribution to Workers' Profit Participation/ Welfare Funds Net Profit Before Tax Less: Income Tax Income/(Expense) Current Tax Deferred Tax Income/(Expense) Net Profit After Tax Transferred to Statement of Changes in Equity Earnings Per Share (of Tk. 10 /- each) Number of shares used to compute EPS 48 19.5 & 47 46 44 45 42 43 38 39 2008 4,010,167,059 (2,002,871,181) 2,007,295,878 (1,008,501,030) (153,464,243) (855,036,787) 998,794,848 686,510 (249,654,298) 749,827,060 (35,706,050) 714,121,010 (168,779,737) (173,720,430) 4,940,693 Tk. 545,341,273 Tk. 4.33 125,957,747 2007 3,597,024,812 (1,967,509,975) 1,629,514,837 (974,736,690) (145,544,701) (829,191,989) 654,778,147 19,625,795 (254,742,392) 419,661,550 (19,983,883) 399,677,667 (46,609,789) (57,661,278) 11,051,489 Tk. 353,067,878 Tk. 2.80 125,957,747
9.1.7
Appendix 7: Financial Calculation on Ratios
Profitability Ratios:
1. Gross Profit Margin= Gross Profit / Sales 2. Return on Assets= Net Income / Total Assets 2006 = 1,731,085,826 / 3,702,317,159 = 0.4676 = 46.76% = 470,658,563 / 11,912,512,487 2007 = 1,629,514,837 / 3,597,024,812 = 0.4530 = 45.30% = 353,067,878 / 11,953,418,940 2008 = 2,007,295,878 / 4,010,167,059 = 0.5006 = 50.06% = 545,341,273 / 14,819,665,441
40 3. Return on Equity= Net Income / Shareholders Equity = 0.0395 times = 470,658,563 / 7,949,920,425 = 0.0592 = 5.92% = 0.0295 times = 353,067,878 / 8,250,939,647 = 0.0428 = 4.28% = 0.0368 times = 545,341,273 / 10,450,202,145 = 0.0522 = 5.22%
Efficiency Ratios:
2006 1. Sales to Inventory Ratio= Annual Net Sales / Inventory 2. Assets to Sales Ratio= Total Assets / Net Sales 3. Sales to Net working Capital Ratio= Sales / Net Working Capital = 3,702,317,159 / 1,754,440,288 = 2.11 = 11,912,512,487 / 3,702,317,159 = 3.22 Here, Net working Capital= Current Assets Current Liabilities = 3,357,393,266 2,527,420,798 = 829,972,468 So, Sales / Net working Capital= 3,702,317,159 / 829,972,468 = 4.46 times 2007 = 3,597,024,812/ 1,652,480,291 = 2.18 = 11,953,418,940 / 3,597,024,812 = 3.32 Here, Net working Capital= Current Assets Current Liabilities = 2,923,775,458 1,627,972,936 = 1,295,802,522 So, Sales / Net working Capital= 3,597,024,812/ 1,295,802,522 = 2.78 times 2008 = 4,010,167,059 / 1,505,288,093 = 2.66 = 14,819,665,441 / 4,010,167,059 = 3.70 Here, Net working Capital= Current Assets Current Liabilities = 2,861,891,654 2,602,032,267 = 259,859,387 So, Sales / Net working Capital= 4,010,167,059 / 259,859,387 = 15.43 times
Liquidity Ratios:
2006 1. Current Ratio= Current Assets / Current Liabilities 2. Quick Ratio= (Current Assets Inventory) / Current Liabilities = 3,357,393,266 / 2,527,420,798 = 1.33 times = (3,357,393,266 1,754,440,288) / 1,627,972,936 = 1,602,952,978 / 1,627,972,936 = 0.98 times 2007 = 2,923,775,458 / 1,627,972,936 = 1.80 times = (2,923,775,458 1,652,480,291) / 1,627,972,936 = 1,271,295,167 / 1,627,972,936 = 0.78 times 2008 = 2,861,891,654 / 2,602,032,267 = 1.10 times = (2,861,891,654 1,505,288,093) / 2,602,032,267 = 1,356,603,561 / 2,602,032,267 = 0.52 times
Solvency Ratios:
1. Solvency Ratios= (After Tax Net Profit + Depreciation) / (Long 2006 = (470,658,563 + 161,371,022) / (1,435,171,264 + 2007 = (353,067,878 + 157,375,803) / (2,074,506,357 + 2008 = (545,341,273 + 147,183,829) / (1,767,431,029 +
41 Term + Short Term Liabilities) 2,527,420,798) = 632,029,585 / 3,962,592,062 = 0.16 1,627,972,936) = 510,443,681 / 3,702,479,293 = 0.14 2,602,032,267) = 692,525,102 / 4,369,463,296 = 0.16
Investment Ratios:
1. Earnings Per Share= Net Income / Outstanding Shares 2. Price Earnings Ratio= Current Market Price per Share / Earnings per Share 3. Dividend Payout Ratio= Dividend Paid / Net Income 2006 = 470,658,563 / 100,737,415 = 4.67 = 53.70 / 4.67 = 11.50 times 2007 = 353,067,878 / 114,507,043 = 3.08 = 58.90 / 3.08 = 19.12 times 2008 = 545,341,273 / 125,957,747 = 4.33 = 167.70 / 4.33 = 38.73 times
4. Dividend Per Share= Dividend paid / outstanding shares 5. Dividend Yield= Dividend per Share / Current Market Price per Share
Here, Dividend Paid = Net Income * 15% = 470,658,563 * 15% = 70,598,784.45 So, DPR= 70,598,784.45 / 470,658,563 = 0.15 = 15% = 70,598,784.45 / 100,737,415 = 0.701 = 0.701/ 53.70 = 0.0131 = 1.31%
Here, Dividend Paid = Net Income * 15% = 353,067,878 * 15% = 52,960,181.70 So, DPR= 52,960,181.70 / 353,067,878 = 0.15 = 15% = 52,960,181.70 / 114,507,043 = 0.462 = 0.462 / 58.90 = 0.0078 = 0.78%
Here, Dividend Paid = Net Income * 30% = 545,341,273 * 30% = 163,602,381.90 So, DPR = 163,602,381.90 / 545,341,273 = 0.30 = 30% = 163,602,381.90 / 125,957,747 = 1.30 = 1.30 / 167.70 = 0.0078 = 0.78%
9.1.8
Appendix 8: Financial Calculation on DOL, DFL and DCL

2006 = (746,523,494 724,351,718) / (3,702,317,159 3,327,022,574) = 22,171,776 / 375,294,585 = 0.06 = (746,523,494) / (746,523,494 253,318,784) 2007 = (654,778,147 746,523,494) / (3,597,024,812 3,702,317,159) = (-91,745,347) / (105,292,347) = 0.87 = (654,778,147) / (654,778,147 254,742,392) 2008 = (998,794,848 654,778,147) / (4,010,167,059 3,597,024,812) = 344,016,701 / 413,142,247 = 0.83 = (998,794,848) / (998,794,848 249,654,298)
1. DOL= (% change in EBIT) / (% change in Sales)
2. DFL= (EBIT) / (EBIT Interest)
42 = 746,523,494 / 493,204,710 = 1.51 = 0.06 * 1.51 = 0.09 = 654,778,147 / 400,035,755 = 1.64 = 0.87 * 1.64 = 1.43 = 998,794,848 / 749,140,550 = 1.33 = 0.83 * 1.33 = 1.10
3. DCL= DOL * DFL
9.1.9
Appendix 9: Financial Calculation on Working Capital Management
Inventory Period:
Average Inventory= (Opening Inventory + Closing Inventory) / 2 Inventory Turnover= Cost of Goods Sold / Average Inventory Inventory Period= 365 days / Inventory Turnover 2006 = (1,683,722,059 + 1,754,440,288) / 2 = 3,438,162,347 / 2 = 1,719,081,174 = 1,971,231,333 / 1,719,081,174 = 1.15 times = 365 / 1.15 = 317.39 days 2007 = (1,754,440,288 + 1,652,480,291) / 2 = 3,406,920,579 / 2 = 1,703,460,290 = 1,967,509,975 / 1,703,460,290 = 1.16 times = 365 / 1.16 = 314.66 days 2008 = (1,470,152,242 + 1,505,288,093) / 2 = 2,975,440,335 / 2 = 1,487,720,168 = 2,002,871,181 / 1,487,720,168 = 1.35 times = 365 / 1.35 = 270.37 days
Account Receivables Period:

Average Account Receivables= (Opening Account Receivables + Closing Account Receivables) / 2 Account Receivables Turnover= Credit Sales / Average Accounts Receivables Account Receivables Period= 365 days / Account Receivables Turnover 2006 = (779,798,943 + 430,240,095) / 2 = 1,210,039,038 / 2 = 605,019,519 = 3,702,317,159 / 605,019,519 = 6.12 times = 365 / 6.12 = 59.64 days 2007 = (430,240,095 + 499,680,792) / 2 = 929,920,887 / 2 = 464,960,443.5 = 3,597,024,812 / 464,960,443.5 = 7.74 times = 365 / 7.74 = 47.16 days 2008 = (499,680,792 + 503,916,401) / 2 = 1,003,597,193 / 2 = 501,798,596.5 = 4,010,167,059 / 501,798,596.5 = 7.99 times = 365 / 7.99 = 45.68 days
Account Payables Period:

Average Account Payables= (Opening Account Payables + Closing Account Payables) /2 Account Payables Turnover= Cost of Goods Sold / Average Account Payables 2006 = (216,660,743 + 365,255,938) / 2 = 581,916,681 / 2 = 290,958,340.5 = 1,971,231,333 / 290,958,340.5 = 6.77 times 2007 = (365,255,938 + 271,814,118) / 2 = 637,070,056 / 2 = 318,535,028 = 1,967,509,975 / 318,535,028 = 6.18 times 2008 = (271,814,118 + 263,176,822) / 2 =534,990,940 / 2 = 267,495,470 = 2,002,871,181 / 267,495,470 = 7.49 times
43 Account Payables Period= 365 days / Account Payables Turnover = 365 / 6.77 = 53.91 days = 365 / 6.18 = 59.06 days = 365 / 7.49 = 48.73 days
Operating Cycle and Cash Cycle:

1. Operating Cycle= Inventory Period + Account Receivables Period 2. Cash Cycle= Operating Cycle - Account Payables Period 2006 = 317.39 + 59.64 = 377.03 days = 377.03 - 53.91 = 323.12 days 2007 = 314.66 + 47.16 = 361.82 days = 361.82 - 59.06 = 302.76 days 2008 = 270.37 + 45.68 = 316.05 days = 316.05 - 48.73 = 267.32 days
9.1.10
Appendix 10: Financial Calculation on Financing Policy
Size of the Firms Investment in Current Assets:

1. zCurrent Assets to Sales= 2006 = 3,357,393,266 / 3,702,317,159 = 0.91 = 8,555,119,221 / 11,912,512,487 = 0.7182 = 71.82% = 3,357,393,266 / 11,912,512,487 = 0.2818 = 28.18% 2007 = 2,923,775,458 / 3,597,024,812 = 0.81 = 9,029,643,482 / 11,953,418,940 = 0.7554 = 75.54% = 2,923,775,458 / 11,953,418,940 = 0.2446 = 24.46% 2008 = 2,861,891,654 / 4,010,167,059 = 0.71 = 11,957,773,787 / 14,819,665,441 = 0.8069 = 80.69% = 2,861,891,654 / 14,819,665,441 = 0.1931 = 19.31%
Current Assets / Sales

2. Fixed Assets to Total
Assets= Fixed Assets / Total Assets

3. Current Asset to Total
Asset= Current Assets / Total Assets Financing Process of the Assets:

1. Short Term Debt to Long
Term Debt= Short Term Debt / Long Term Debt

2. Long Term Debt to Total Liabilities= Long Term Debt / Total Liabilities 3. Short Term Debt to Total Liabilities= Short Term Debt / Total Liabilities
2006 = 2,527,420,798 / 1,435,171,264 = 1.76 = 1,435,171,264 / 3,962,592,062 = 0.3622 = 36.22% = 2,527,420,798 / 3,962,592,062 = 0.6378 = 63.78%
2007 = 1,627,972,936 / 2,074,506,357 = 0.78 = 2,074,506,357 / 3,702,479,293 = 0.5603 = 56.03% = 1,627,972,936 / 3,702,479,293 = 0.4397 = 43.97%
2008 = 2,602,032,267 / 1,767,431,029 = 1.47 = 1,767,431,029 / 4,369,463,296 = 0.4045 = 40.45% = 2,602,032,267 / 4,369,463,296 = 0.5955 = 59.55%
Capital Structure:
44 1. Debt to Total Liabilities & Shareholders Equity= Debt / Total Liabilities & Shareholders Equity 2. Equity to Total Liabilities & Shareholders Equity= Equity / Total Liabilities & Shareholders Equity 2006 = 3,962,592,062 / 11,912,512,487 = 0.3326 = 33.26% = 7,949,920,425 / 11,912,512,487 = 0.6674 = 66.74% 2007 = 3,702,479,293 / 11,953,418,940 = 0.3097 = 30.97% = 8,250,939,647 / 11,953,418,940 = 0.6903 = 69.03% 2008 = 4,369,463,296 / 14,819,665,441 = 0.2948 = 29.48% = 10,450,202,145 / 14,819,665,441 = 0.7052 = 70.52%
9.1.11
Appendix 11: Special Notes
1) We are considering following costs items fall under Variable Costs of Beximco Pharma Variable Cost= Work-in-Process (Closing) + Material Consumed (Purchase) + Finished Goods (Closing) +Cost of Physician Sample + Salary & Allowances + Repairs & Maintenance + Travelling & Conveyance + Toll Charge + Sample Expenses + Export Freight, Insurance & C&F Expenses + Delivery Commission 2) We are considering following costs items fall under Fixed Costs of Beximco Pharma Fixed Cost= Insurance Premium + Municipal Tax & Land Revenue + Advertisement & Subscription + Entertainment + Research & Development + Printing & Stationary + Telephone & Postage + Electricity, Gas & Water + Other Expenses + Depreciation + Salary & Allowances + Rent Expenses + Donation & Subscription + Auditors Remuneration + Legal & Consultancy Fee + AGM, Company Secretarial Expenses & Regulatory Fees + Training + Market Research & New Products + Training & Conference + Promotional Expenses + Literature/Newsletter + Finance Cost + Income Tax Expenses 3) ROA calculation: ROA (gross)=EBIT/Total Assets 2006 2007 EBIT 746,523,494 654,778,147 Total Assets 11,912,512,487 11,953,418,940 ROA(gross) 6.27% 5.48% 4) We are considering that 100% sales of Beximco Pharma were credit sales. 2008 998,794,848 14,819,665,441 6.74%

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