Financial Performance of Pharmaceutical

Companies in Bangladesh-A Comparative Study

of Two Selected Companies

(This Dissertation has been submitted to the Department of Business

Administration as the requirement for partial fulfillment of the degree of Master
of Business Administration)

Submitted By:
SAIKAT DAS
ID NO: R223046
Session: Summer-2023
Program: MBA
(Major in Finance & Banking)

Date of Submission: 20.05.2024

Department of Business Administration

Faculty of Business Studies
International Islamic University Chittagong

i
Financial Performance of Pharmaceutical Companies
in Bangladesh-A Comparative Study of Two Selected
Companies

(This Dissertation has been submitted to the Department of Business

Administration as the requirement for partial fulfillment of the degree of Master
of Business Administration)

Submitted By:
SAIKAT DAS
ID NO: R223046
Session: Summer-2023
Program: MBA
(Major in Finance & Banking)

Supervised By
Dr. Serajul Islam
Associate Professor, IIUC.
Department of Business Administration
International Islamic University Chittagong

Signature of Supervisor Date of Submission:

Date of Submission: 20.05.2024

Department of Business Administration

Faculty of Business Studies
International Islamic University Chittagong

ii
 LETTER OF SUBMISSION

20/05/2024
To
The Convener
MBA Internship/Dissertation/OCP Committee
Department of Business Administration

International Islamic University Chittagong

Subject: Submission of the Dissertation.

Dear Sir,
I would like to submit my dissertation on Financial Performance of Pharmaceutical
Companies in Bangladesh-A Comparative Study of Two Selected Companies; it has been
prepared as an obligation for the end of the MBA Program of International Islamic
University Chittagong. While working on this report, I have endeavored to follow the
instructions that you have advised. It has been an edifying experience to work on this
dissertation.
Moreover, I want to thank you for the facilitation you have provided me. If you need any
further information while evaluating the dissertation, I would furnish you the same with
profound pleasure.
Hence, I would be obliged if you go through my report and give your assessment to my
work considering my abridgement.
Yours Faithfully

SAIKAT DAS
ID NO: R223046
Session: Summer-2023
Program: MBA
(Major in Finance & Banking)
Department of Business Administration
International Islamic University Chittagong

iii
 ACKNOWLEDGEMENT

The Successful completion of this thesis report is the result of the contribution from
number of people, especially those who have given effort and their valuable time to share
the opinion and suggestions to improve the thesis. At first my gratefulness goes to the
almighty Allah to give strength and ability to complete the thesis.
I have got opportunity to do work under supervision of respect teacher "Dr. SERAJUL
ISLAM" Associate Professor Department of Business administration of "International
Islamic University of Chittagong" for the valuable suggestion, encouragement,
constructive criticism and for providing all necessary supports to complete the thesis.
I am also grateful to my precious family especially my parents for their never ending
love and inspiration at every stage of my life. I realize that without their continuous
support I would not be a person I am right now.

iv
 Preface

Square Pharmaceutical Ltd. is the largest pharmaceutical company in Bangladesh and it

has been continuously in the 1st position among all national and multinational companies
since 1985.1t was established in 1958 and converted into a public limited company in
1991.Beximco Pharmaceutical Limited is a very much rumored corporate in Bangladesh.
They are working their business from 1980 with the expressed qualities and have earned
the regard of the partners. The main aim of this study is achieved through analyzing the
financial statement and ratio analysis of Square Pharmaceutical limited. We have been
collected data from Square Pharmaceutical Limited and Beximco Pharmaceutical limited
through its annual report of 2017-18 to 2020-21. Financial performance is evaluated
through the following four methods as Liquidity Ratios analyses, Efficiency Ratios
analyses, Solvency Ratios analyses and Profitability Ratios analyses from the following
years. Different financial ratios are calculated such as Current Ratio, Cash Ratio, Net
profit margin, ROA, ROE, Inventory turnover Ratio, Total Asset turnover Ratio, risk and
solvency ratio and also calculated Altman Z score . The current ratio is improving over
the year. So, it can be said from the overall analysis that the Square Pharmaceutical
Limited company liquidity position is quite enough good. The Beximco pharma should
take initiative to increase performance of liquidity. Finally, we came to the conclusion
that Square Pharmaceutical Limited is one of the leading manufacturing companies of
Bangladesh with a variety of Pharmaceutical product which have an export quality.
Moreover, Square Pharmaceutical Limited is Self-solvent Company with a strong
position in the manufacturing sector. In the last I would like to add that Beximco
Pharmaceutical Limited financial management practice needed to be improved and they
need to take some effective solution so that Beximco Pharmaceutical Limited can hold
their reputation as a business icon in the manufacturing sector.

v
 Table of Contents
Preliminary Pages Page No
Title Page II
Letter of Submission III
Acknowledgement IV
Preface V
Chapter One: Introduction of the study
(1.1) Introduction 2
(1.2) Statement of the Problem 4
(1.3) Objectives of the Study 5
(1.4) Methodology of the Study 5
(1.5) Limitations of the study 6
Chapter Two: Literature Review of the Study
(2.1) Introduction 8
(2.2) Review of the literature 8
Chapter: Three
Theoretical Framework
(3.1) Introduction 16
(3.2) Theoretical Framework 16
Chapter-Four
Data Analysis & Discussion Regarding Financial Performance
(4.1) Introduction 20
(4.2) Liquidity Ratios 20
4.2.1 Current ratio 20
4.2.2 Quick ratio 22
4.2.3 Cash ratio 23
4.2.3 Cash ratio 25
(4.3) Profitability Ratios 26
4.3.1 Gross profit margin 26
4.3.2 Net profit margin 27
4.3.3 Return on Assets 28
4.3.4 Return on Equity 29
4.3.4 Return on Equity 30
(4.4) Efficiency Ratio 31
4.4.1 Inventory Turnover 31
4.4.2 Total Asset Turnover 32
4.4.3 Stock Turnover 33
(4.5) Risk and solvency Ratio 34
4.5.1 Solvency Ratio 34
4.5.2 Equity Ratio 35
Chapter Five
Major Findings, Recommendations and Conclusion
(5.1) Major Findings of the Study 38
(5.2) Recommendations of the study 39
(5.3) Conclusion 40
References

vi
 Chapter one:
Introduction of the study

1
(1.1) Introduction:
The prosperity and development of a business enterprise mainly depends upon the
financial performance of that enterprise. Well financial performance is an indicative of
good financial health of that business. Managerial efficiency, operational efficiency,
profit of the business, credit worthiness, return on investment, return on assets etc.
depend upon the financial performance of a business.
Financial performance is a key measure tools to know how well a firm can use assets
from its primary mode of business and generate revenues. This term is also used as a
general measure of a firm's overall financial health over a given period of time and can
be used to compare similar firms across the same industries or sectors in aggregation.
Ratio Analysis is use to analyze financial performance of the company. Ratio Analysis
as a tool possesses several important features. The data, which are provided by financial
statements, are readily available. The computation of ratio facilitates the comparison of
firms which differ in size. Ratios can be used to compare a firm's financial performance
with industry averages. In addition, ratios can be used in a form of trend analysis to
identify areas where performance has improved or deteriorated over time.
Because Ratio Analysis is based upon accounting information, its effectiveness is limited
by the distortions which arise in financial statements due to such things as Historical Cost
Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in
financial analysis, to obtain a quick indication of a firm's performance and to identify
areas which need to be investigated further.
Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used as a general
measure of a firm overall financial health over a given period of time and can be used to
compare similar firms across the same industry or to compare industries or sectors in
aggregation. Financial performance is evaluated through financial performance analysis.
Now, the question, what is analysis? The dictionary meaning of analysis is to resolve or
separate a thing into its elements.
or component's part for tracing their relation to the things as whole and to each other. So,
financial performance analysis is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing the relationship between the items of
balance sheet and profit and loss account. It also helps in short-term and long-term
forecasting and growth can be identified with the help of financial performance analysis.
2
There are many different ways to measure financial performance, but all measures should
be taken in aggregation. Line items such as revenue from operations, operating income
or cash flow from operation can be used as well as total unit sales. Furthermore, the
analysts or investor may wish look deeper into financial statements and seek out margin
growth rates and any declining debt. The analysis of financial statement is the most
important tool to measure the financial performance of a company. So, financial
performance should be measured through the analysis of financial statement. The
analysis of financial statement is a process of evaluating the relationship between the
component parts of financial statement to obtain a better understanding of the firm's
position and performance. This analysis can be undertaken by management of the firm
or by the parties outside the namely, owners, creditors, investors and other stakeholders.
Square Pharmaceuticals Limited (Square Parma) is currently the market leader of
pharmaceuticals industry providing reasonable medicines capturing the largest market
share. Square Pharmaceuticals Ltd. the flagship company of Square group has been
holding the strong leadership in the pharmaceuticals industry and now has become a high
performance global player by exporting drugs to 36 countries. They produce more than
500 products including herbal, nutraceuticals and pesticides.
Beximco Pharmaceuticals has been a partner in the development journey of this nation
for more than forty years now. It has set itself the highest standards in responsible
corporate behavior and its passion for success is aligned with the development of the
country. It is committed to playing a leading role in driving growth, prosperity, ethical
values and social responsibility. Beximco continues to serve its customers through
unparalleled quality excellence and service superiority. Its business success has been
complemented by its commitment to the environment, society and community The Group
today has fourteen operating companies, three other business ventures, and a not for
profit social enterprise.
Beximco operates in different broad segments like chemicals and healthcare.

3
(1.2) Statement of the Problem:
Financial Performance Analysis is defined as the process of identifying financial
strengths and weaknesses of the firm by properly establishing relationship between the
items of the balance sheet and the profit and loss account. It is also the process of
reviewing and evaluating a company's financial statements (such as the balance sheet or
profit and loss statement), thereby gaining an understanding of the financial health of the
company and enabling more effective decision making. Hannan and Shaheed (1979)
showed that techniques of financial analysis can be used in the evaluation of financial
position and performance of financial institution as well as non-financial institutions
even Development Financial Institutions (DFI). On the other hand, Ohi-son (1980)
employed financial ratios to predict a firm's crisis. He found that there are four factors
affecting a firm's vulnerability. These factors are the firm's scale, financial structure,
performance and liquidity. Two scholars named Saleh Jahur and Mohi Uddin (1995) used
financial ratios to measure operational performance of limited company. They used
profitability, liquidity, activity and capital structure to measure operational performance.
This study aims at financial performance analysis of Square & Beximco. This study has
attempted to provide an overall scenario of financial activities of these two companies.
This report includes a broad overview of the ratios of the companies. In this report I
majorly focused on Ratio Analysis techniques. Ratio Analysis is the most important
technique of financial analysis in which, quantities are converted into ratios for
meaningful comparisons, with past ratios and ratios of other firms in the same or different
industries. Ratio analysis determines trends and exposes strengths or weaknesses of a
firm

4
(1.3) Objectives of the Study:
1.3.1 Main Objective:
The main objective of this study is to measure financial performance of pharmaceutical
companies in Bangladesh.

1.3.2 Specific Objectives: The specific objectives of this study are as follows:
To know about the theoretical aspects of financial performance.
To evaluate the performance and financial position of selected pharmaceutical
companies in Bangladesh.
To suggest remedial measures for the development of selected sample companies of
Bangladesh.

(1.4) Methodology of the Study:

1.4.1 Data Collection

There are 257 pharmaceutical companies in Bangladesh and as sample of two

pharmaceutical companies like Square & Beximco pharma have been selected for study
on the basis of purposive sampling technique. This is an analytical study based on
historical data. For that I completely focus on secondary sources to attempt this study
which been collected from the following sources:
❖ Annual Report of Square & Beximco pharmaceutical Limited.
❖ Different articles and websites.

1.4.2 Tools & Techniques Used

The following tools & techniques are used in this study:

Ratio Analysis

(Liquidity ratio, Efficiency ratio, Risk and Solvency ratio, Profitability

ratio)

Graphical Presentation.

5
(1.5) Limitations of the study:

The study suffers from certain limitations and some of these are mentioned below so that
finding of the study can be understood in a proper perspective. The limitations of the
study are as follows:
❖ This is my first dissertation about Pharmaceutical. So, it is totally a new
experience for me.
❖ The main limitation of the study is the time limitation; I had a very limited time
for doing this huge report.
❖ The study is based only on secondary data which has been collected from
published annual reports of Pharmaceutical and various relevant internet sources.
The data obtained through reports is subject to window dressing and may not
show the actual position of the Pharmaceutical company.

6
 Chapter Two
Literature Review of the Study

7
(2.1) Introduction:
Literature review is the documentation of a comprehensive summary of the published
and unpublished work available from the secondary sources in the areas of specific
interest of the researcher. It helps the researcher to know the quantum of work already
done on the particular topic and the area not yet touched. Relevant literature is accessed
through research reports, articles, books, journals, magazines and other relevant
materials. This chapter connects the past research that has been done and can contribute
to our research to make it more effective.

(2.2) Review of the literature:

The literature on Financial Statement Analysis draws heavily from various fields, such
as pharmaceutical sector, power sector, managerial decisions, Industrial organization etc.
in this chapter, those studies have been referred which have a direct bearing on the present
study and have contemporary relevance. However, it is neither feasible nor widely to
include the review of all the literature available on this topic, taken to include as diverse
a literature as possible on theoretical aspects of the topic empirical research findings and
exploratory studies. This literature review contains the summary of certain aspects of
financial statement analysis, which are as follows:
Ball and Brown (1968) were the first to highlight the relationship between stock prices
and information disclosed in the financial statements. Empirical research on the value
relevance has its roots in the theoretical framework on equity valuation models.
Smith and Zimmerman (1975) found that granting of options under employee stock
option plan has negligible effects on reported earnings of the firm.
Hannan and Shaheed (1979) used financial ratios to examine the financial position and
performance of Bangladesh Shilpa Bank. They revealed that techniques of financial
analysis can be used in the evaluation of financial position and performance of financial
institution as well as non-financial institutions even Development Financial Institutions
(DFI).
Myers (1984) stated that there was not sufficient evidence on the relationship between
risk and capital structure. According to the trade-off theory, higher debt ratio increases
the probability of financial distress. The firm's debt ratio is affected with the positive
financial distress/bankruptcy costs.
8
William (1985) suggested that the ESOP programs inspire workers to concentrate all
their holdings in the firm.
Nagarajan and Burthwal (1990) in their research work entitled "profitability and
structure: A firm level study of Indian Pharmaceutical Industry", intensively 44 examined
the relationship between profitability and structure, using a sample of thirty-eight
pharmaceutical firms in India for the period 1970-1982. Two measures of profitability
i.e., ratio of net profit to total sales revenue and the ratio of net profits to total assets have
been used to find out the determination of profitability. The coefficient of growth rate of
sales was positive and significant, suggesting that factors on the demand side of a firm
had greater impact of profitability than on the supply side.
Khan (1991) suggested ratio analysis as the tool for the evaluation of the financial
performance of the particular organization.
Amir et al. (1993) were the first to use the term "value relevance" in the context of
information content of accounting figures. An accounting figure/ratio is value relevant is
it has the significantly strong predicted association with the stock prices and stock market
indicators such, price-earnings (P/E) or price to book (P/B) ratios.
Altman and Eberhart (1994) reported the use of neural network in identification of
distressed business by the Italian central bank. Using over 1,000 sampled firms with 10
financial ratios as independent variables, they found that the classification of neural
networks was very close to that achieved by discriminate analysis. They concluded that
the neural network is not a clearly dominant mathematical technique compared to
traditional statistical techniques.
Ohlson (1995) depicted in his work that the value of a firm can be expressed as a linear
function of book value, earnings and other value relevant information.
Winther (1995) stated that the positive effects of ESOP adoption depend on ownership
structure of the unit. There is positive association between variables namely ESOP and
performance (productivity and profitability) as the study found. Moreover, the employee
ownership improves firm performance by decreasing labor management conflict and
serving as a collective incentive to improve workplace co-operation.
Mina & Taleb (1995) summarized that the analysis and interpretation of financial
statements are generally aimed at determining the financial position of a firm. Financial
ratio was used as an analytical technique for assessing the performance of the concern
companies.

9
Jahur and Mohiuddin (1995) used financial ratios to measure operational performance
of a limited company. They used profitability, liquidity, activity and capital structure
ratios to measure operational performance
Carelton and Siberman (1997) concluded that, if lower the degree of financial leverage
adopted then higher will be the variability in rate of return on invested capital. Hence,
the ultimate determinant of leverage would be the variance, not the rate of return.
Hye & Rahman (1997) performed a research to assess the performance of the selected
private sector general insurance companies in Bangladesh. The study revealed that the
private sector Insurance companies had made substantial progress.
Sina and Ali (1998) used financial ratios to test the financial strengths and weaknesses
of Khulna Newsprint Mills Ltd. They found that due to lack of planning and control of
working capital, operational inefficiency, obsolete store, Ineffective credit policy,
increased cost of raw materials, labor and overhead, the position of the company was not
good. In the article ' 'The Assessment of Financial and Operating Performance of the
Cement Industry: A Case Study of Confidence Cement limited.
Elij elly (2004) in the study on "Liquidity — profitability trade-off: An empirical
investigation in an emerging market" empirically examined the relation between
profitability and liquidity, as measured by current ratio and cash gap (cash conversion
cycle) on a sample ofjoint stock companies in Saudi Arabia. The study found significant
negative relation between the firm's profitability and its liquidity level, as measured by
current ratio."
Beneda (2006) investigated returns, bankruptcies and firm distress for new US public
companies that issued IPOs from 1995 through 2002. Beneda found that the average first
year returns for IPO companies underperformed the market and that Ohlson's model was
effective in identifying companies that had a higher probability of bankruptcy and
financial distress and earned lower than average returns.
Raheman and Nasr (2006) discussed working capital management and its effect on
liquidity as well as on profitability of the firm. They have studied the effect of different
variables of working capital management including the Average collection period,
Inventory turnover in days, Average payment period, Cash conversion cycle and Current
ratio on the net operating profitability of Pakistani firms. Debt ratio, size of the firm
(measured in terms of natural logarithm of sales) and financial assets to total assets ratio
have been used as control variables. The results found that there is a strong negative

10
relationship between variables of the working capital management and profitability of
the firm. It means that the cash conversion cycle increases it will lead to decreasing
profitability of the firm, and managers can create a positive value for the shareholders by
reducing the cash conversion cycle to a possible minimum level. They found that there
is a significant negative relationship between liquidity and profitability. They also found
that there is a positive relationship between size of the firm and its profitability. There is
also a significant negative relationship between debt used by the firm and profitability.
Singh and Pandey (2008) suggested that, for the successful working of any business
organization, fixed and current assets play a vital role, and that the management of
working capital is essential as it has a direct impact on profitability and liquidity. They
studied the working capital components and found a significant impact of working
capital management on profitability for Hindalco Industries Limited.
Kevin and Young (2009) in their article, "Need Cash? Look Inside Your Company" had
taken a hard look at the way company manages its working capital. He identified that a
lot of capital tied up in receivables and inventory could be turned into cash by challenging
the working capital practices and policies of the company. He had explored six common
mistakes that companies make in managing working capital. He says that the simple act
of correcting them could free up enough cash to make the difference between failure and
survival in the current recession.
James Clausen (2009) in his article briefly expressed about the liquidity ratios. Investors
and lending institutions will often use ratio analyses of the financial statements to
determine a company's profitability and liquidity. If the ratios indicate poor performance,
investors may be reluctant to invest. Therefore, the current ratio or working capital ratio,
measures current assets against current liabilities. The current ratio measures the
company's ability to pay back its short-term debt obligations with its current assets. He
thinks a higher ratio indicates the company is better equipped to pay off short-term debt
with current assets. Therefore, the acid
test ratio or quick ratio, measures quick assets against current liabilities. Quick assets are
considered assets that can be quickly converted into cash. Generally they are current
assets less inventory.
Gopinathan Thachappilly(2009) stated that even if a business has high profitability, it
can face short-term financial problems and its funds are locked up in inventories and
receivables not realizable for months. Any failure to meet the obligations can damage its

11
reputation and creditworthiness and in extreme cases even lead to bankruptcy. In addition
to, liquidity ratios are work with cash and near-cash assets of a business on one side, and
the immediate payment obligations (current liabilities) on the other side. The near-cash
assets mainly include receivables from customers and inventories of finished goods and
raw materials.
Sherin (2010) in her article on "Liquidity v/s profitability - Striking the right balance"
writes about the implications of liquidity and profitability in a pharmaceutical company.
A firm is required to maintain a balance between liquidity and profitability while
conducting its day to day operations. Investments in current assets are inevitable to
ensure delivery of goods or services to the ultimate customers. A proper management of
the same could result in the desired impact on either profitability or liquidity.
Rohit and Vipin (2012) investigated on determinants of corporate liquidity in India for
a sample of 100 firms in Indian market over the period 1999-2008. It was found that size
of firm has no impact on liquidity.
Sandhar et.al (2013) examined the relationship between liquidity and profitability of
selected Indian cement companies using regression analysis and revealed that current
ratio and liquid ratio are negatively associated with return on assets (ROA), return on
investment (ROI) and cash turnover ratio is negatively associated with ROI and ROA.
Neeraj and Devesh (2013) studied liquidity position and impact on profitability of Tata
Steel and steel authority of India. The study found that liquidity position can be improved
with the help of low average collection period and average collection can be reduce by
proper coordination between sale, production and finance department, lastly conclude
that study found positive Impact of liquidity position on profitability with the help of
various techniques.
Ashok Kumar (2013) studied liquidity position of five leading companies which cover
period of 10 years from 2000-2010. It has been found that the liquidity position of small
companies are better as compared to big ones .Lastly, it is concluded that companies
should maintain an ideal current and liquid ratio.
Sarvanan and Abarna (2014) conducted study on liquidity analysis of selected
automobile companies in India using Anova and found that there is significant difference
among the absolute liquid ratios of the selected automobile companies.
V. Vijayalakshmi and M. Srividya (2014) in their study stated that the financial health
plays a significant role in the successful management of a company. The analysis

12
practically reveals that gross profit ratio, operating ratio, return on equity capital, and
earnings per share, have significant effect on the net profit ratio of the selected
pharmaceutical companies during the study period. However, profitability of the selected
pharmaceutical companies in India during the study period is satisfactory. During the
period of study there were a few ups and downs in the profitability but it did not affect
the operations of the company to a great extent. If the Pharmaceutical Industry has to
perform well, it has to invest more capital and has to do more sales, only then it will
improve its performance level.
Mohmad and Dr. Syed (2016) analyzed the liquidity and profitability of selected
companies and more specifically it seeked the comparison between the liquidity and
profitability performance of selected companies. There is significant difference between
the performances of pharmaceutical companies on the basis of Quick Ratio. The
performance of Cipla is better then that of Dr.Reddey's lab in terms of profitability.
Altman (1968) has developed a new model by usmg a statistical tool, multivariate
discriminant analysis (MDA), using five financial ratios. Altman (1968) has applied
multiple discriminant analysis (MDA) by using five ratios to assess potential failure of
companies and this method became one of the pionering and the most applied model for
prediction of financial distress of companies.
(Georgiev & Petrova, 2015) This new model was named as Altman Z-score model and
has become the most popular method since then in the accounting and finance research
field. The shortcoming of the model was the coefficients calculated via multiple
discriminant analysis were highly dependent on the economic environment as well as
company's operating industry.
(Karas & Srbovå, 2019) The applied studies have shown that in different countries'
models lose their prediction power for the reason differences in economic conditions of
each country.
(Affes & Hentati-Kaffel, 2019) As an improvement of this model another study
represented in 1977 by Altman, Haldeman and Narayanan and they proposed zeta model
with seven variables and accuracy of the model was 96%, Altman Z score model has
been updated by Altman (1983) for privately held firms and it was called as ' model, in
that model variable X4 with market value replaced by book value of equity. The
coefficients for the variables in this model is slightly different than the Z-Score model.
The revision of the Altman Z Score has been applied in many different countries therefore

13
country specific studies have various results. They have recalculated the coefficients or
just checked the validation of the model in a specific country. One of the studies was
applied by Diakomihalis (2012) to see the effectiveness of the model in hotel industry
and the outcome of this study has approved that Altman Z Score model is still valid in
determination of failed companies one year prior to bankruptcy.
Altman Z score model has widely applied all over the world; for instance, for Greece;
(Grammatikos &Gloubos, 1984) for Pakistan; (Abbas & Ahmad, 2012) for China;
(Wang & Campbell, 2010), for USA (Barreda et al., 2017), for India; (Singh & Singla,
2019); for Indonesia (Prabowo, 2019). These are only a few examples; hundreds of
studies can be found the applications of the model in various countries. Some resulted in
favour of Altman Z Score model's validity some others revised the model or offered more
state of art technology added methods. In Turkey some studies previously reviewed
Altman Z score in order to analyse the coefficients and performance rates of MDA. One
of them sampled 70 listed firms in Borsa Istanbul and 35 of them was assigned as non-
distressed and 35 assigned as distressed (Muzir & Caglar, 2009).
According to that study of Muzir and Caglar (2009) the coefficients related to X3 and
X5 are found negative compare to Altman score. Also the accuracy of the model was
73.3%.
(Yilmaz & Yildiran, 2015) Another study was applied by Yilmaz and Yildiran (2015)
and they have applied the model over 36 firms, half of them was distressed and the other
half was non-distressed. They have found out the coefficients related to Xl was negative
compare to Altman Z score also the accuracy of the model has been calculated as 62.5%.
(Colak, 2019) Another recent study has been applied by Colak (2019) that he applied
Altman Z score model to 54 companies half of them was distressed and the other half
was non-distressed. He found that Altman Z scores' accuracy rate was 79%

14
 CHAPTER-3
Theoretical Framework

15
(3.1) Introduction:
Ratio analysis involves the methods of calculating and interpreting financial ratios to
assess the firm's performance and status. It is an analytical implement that helps to
recognize trouble areas and opportunities within a company. It is a widely used tool of
financial analysis. To be really helpful and practically useful for the company, the
package of ratios should be small in size, simple in calculations, logically consistent and
statistically valid. Over the years, various experts propounded a plethora of ratios for
analyzing the financial position of a company.

(3.2) Theoretical Framework:

3.2.1 Liquidity ratio•: Liquidity ratios are an important class of financial metrics used
to determine a debtor's ability to pay off current debt obligations without raising external
capital. Liquidity ratios measure a company's ability to pay debt obligations and its
margin of safety through the calculation of metrics including the current ratio, quick ratio
and cash ratio.
3.2.2 Current ratio: The current ratio is a liquidity ratio that measures a company's
ability to pay short-term obligations or those due within one year. It tells investors and
analysts how a company can maximize the current assets on its balance sheet to satisfy
its current debt and other payables.
3.2.3 Cash Ratio: The operating cash flow ratio is a measure of how well current
liabilities are covered by the cash flows generated from a company's operations. The ratio
can help gauge a company's liquidity in the short term. Using cash flow as opposed to
net income is considered a cleaner or more accurate measure since earnings are more
easily manipulated.
3.2.4 Profitability Ratio: Profitability ratios are a class of financial metrics that are used
to assess a business's ability to generate earnings relative to its revenue, operating cost ,
balance sheet assets, or shareholders equity over time, using data from a specific point
in time.
3.2.5 Gross profit margin: Gross profit margin is a metric analysts use to assess a
company's financial health by calculating the amount of money left over from product
sales after subtracting the cost of goods sold (COGS). Sometimes referred to as the gross
margin ratio, gross profit margin is frequently expressed as a percentage of sales.

16
3.2.6 Net profit margin: The net profit margin is equal to how much net income or profit
is generated as a percentage of revenue. Net profit margin is the ratio of net profits to
revenues for a company or business segment. Net profit margin is typically expressed as
a percentage but can also be represented in decimal form. The net profit margin illustrates
how much of each dollar in revenue collected by a company translates into profit.
3.2.7 Return on assets: Return on assets (ROA) is an indicator of how profitable a
company is relative to its total assets. ROA gives a manager, Investor, or analyst an idea
as to how efficient a company's management is at using its assets to generate earnings.
Return on assets is displayed as a percentage.
3.2.8 Return on Equity: Return on equity (ROE) is a measure of financial performance
calculated by dividing net income by shareholders equity. Because shareholders' equity
is equal to a company's assets minus its debt, ROE is considered the. ROE is considered
a measure of the profitability of a corporation in relation to stockholders' equity.
3.2.9 Efficiency Ratio: The efficiency ratio is typically used to analyze how well a
company uses its assets and liabilities internally. An efficiency ratio can calculate the
turnover of receivables, the repayment of liabilities, the quantity and usage of equity, and
the general use of inventory and machinery. This ratio can also be used to track and
analyze the performance of commercial and investment banks
3.2.10 Inventory turnover: Inventory turnover is a ratio showing how many times a
company has sold and replaced inventory during a given period. A company can then
divide the days in the period by the inventory turnover formula to calculate the days it
takes to sell the inventory on hand. Calculating inventory turnover can help businesses
make better decisions on pricing, manufacturing, marketing and purchasing new
inventory.
3.2.11 Total asset turnover: The asset turnover ratio measures the value of a company's
sales or revenues relative to the value of its assets. The asset turnover ratio can be used
as an indicator of the efficiency with which a company is using its assets to generate
revenue.
3.2.12 Stock turnover: Stock turnover is the total cost of sales divided by inventory
(materials or goods on hand). Usually calculated using the average inventory over an
accounting period, not an ending-inventory value. Also called inventory turnover.

17
3.2.4 Risk and solvency Ratio:
3.2.4.1 Solvency ratio: A solvency ratio is a key metric used to measure an enterprise's
ability to meet its long-term debt obligations and is used often by prospective business
lenders. A solvency ratio indicates whether a company's cash flow is sufficient to meet
its long-term liabilities and thus is a measure of its financial health. It can indicate the
likelihood that a company will default on its debt obligations.
3.2.4.2 Equity Ratio:
The equity ratio is a financial metric that measures the amount of leverage used by a
company. It uses investments in assets and the amount of equity to determine how well
a company manages its debts and funds its asset requirements.
3.2.4.3 Altman z score analysis:
The Altman Z-score is a financial ratio that is used to predict the probability that a
company will go bankrupt. The Altman Z-score is calculated using a formula that takes
Into account five financial ratios: l . Working capital to total assets ratio 2. Retained
earnings to total assets ratio 3. Earnmgs before interest and taxes to total assets ratio 4.
Market value of equity to book value of total liabilities 5. Sales to total assets ratio The
Altman Z-score is generally used for publicly-traded companies, but can also be applied
to private companies. The Altman Z-score formula is: Z-score

where: WC = working capital TA — total assets RE = retained earnings EBIT — earnings

before interest and taxes MVE = market value of equity BVTL — book value of total
liabilities S = sales

18
 Chapter Four
Data Analysis & Discussion
Regarding Financial Performance

19
 (4.1) Introduction

According to Bangladesh Association of Pharmaceutical Industries (BAPI) and

Directorate General of Drug Administration (DGDA), approximately 257 licensed
pharmaceutical manufacturers are operating in Bangladesh and about 150 are functional,
this study has been designed for comparison of financial performance between two
leading pharmaceutical companies i.e. Square Pharmaceutical Limited and Beximco
Pharmaceutical limited. In this study financial performance are measured by calculating
different types of ratios like Liquidity ratio, Efficiency ratio, Risk and Solvency ratio,
Profitability ratio etc. and the details of their ratios are given in the following sections.

(4.2) Liquidity Ratios:

Liquidity refers to the ability of an organization to meet its short term financial
obligations.
An important liquidity ratio is the current ratio.
4.2.1 Current ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
and long-term obligations. The current ratio is called "current" because, unlike some
other liquidity ratios, it includes all current assets and liabilities. The current ratio is also
known as the working capital ratio. Current Ratio is calculated by dividing the current
assets of a company by current liability.
Comparison of current ratio:
Table 4.2. I Current ratio of Square & Beximco Pharmaceutical Limited for the year
2019-2020 to 2022-2023

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Current
Square assets 47,384,303,113 55,076,379,705 62,347,727,888 70,487,116,554
Current
Liabilities 3,241,547,786 3,178,558,926 3,661,828,783 4,229,145,716
Current
Beximco assets 13,049,078,919 13,770,846,179 18,419,258,282 20,875,854,240
Current
Liabilities 11,357,965,004 12,735,932,076 12,735,932,076 13,265,024,036
Current
Ratio Square 14.52 17.67 18.74 21.85 18.19 2.62 6.96
20
Current
Ratio Beximco 1.15 1.08 1.45 1.57 1.31 0.20 6.44

Current ratio for the period 2019-20 to 2022-23

Current Ratio
25.00
21.85
20.00 18.74
17.67
14.52
15.00

10.00

5.00
1.15 1.08 1.45 1.57
0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Figure 4.2.1: Compound Bar diagram of current ratio for the period 2019-20 to 2022-23
Interpretations:
The Current Ratio data indicates that Square has maintained an exceptionally high
average ratio of 18.19 over the period from 2019 to 2023, suggesting a very strong
liquidity position, capable of covering its short-term liabilities multiple times over.
However, this high ratio comes with some variability, as evidenced by a standard
deviation of 2.62 and a coefficient of variation (CV) of 6.96, indicating some fluctuations
in its liquidity levels. In contrast, Beximco's average Current Ratio is much lower at 1.31,
which, while still indicating an ability to meet short-term obligations, reflects a more
conservative liquidity position. Beximco's standard deviation of 0.20 and CV of 6.44
show that its liquidity is more stable and less variable over the same period. When
comparing the two, Square is better positioned in terms of liquidity due to its significantly
higher Current Ratio. However, Beximco's more consistent ratio reflects greater stability,
which can be advantageous in maintaining predictable financial health. Overall, Square's
superior liquidity makes it better in terms of raw financial flexibility, although Beximco’s
stability is a notable strength.

21
 4.2.2 Quick ratio

Comparison of Quick ratio:

Table 4.2.2 Quick ratio of Square & Beximco Pharmaceutical Limited for the year 2019-20 to
2022-23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Current
Square assets 47,384,303,113 55,076,379,705 62,347,727,888 70,487,116,554

Inventory 5,687,406,329 7,245,396,928 8,214,111,145 12,227,198,105

Current
Liabilities 3,241,547,786 3,178,558,926 3,661,828,783 4,229,145,716
Current
Beximco assets 13,049,078,919 13,770,846,179 18,419,258,282 20,875,854,240

Inventory 5,944,769,057 7,142,863,477 10,405,295,079 12,133,277,975

Current
Liabilities 11,357,965,004 12,735,932,076 12,735,932,076 13,265,024,036
Quick 12.86 15.05 14.78 13.78 14.12 0.87 16.30
ratio Square
Quick 0.63 0.52 0.63 0.66 0.61 0.05 11.59
ratio Beximco
Quick ratio for the period 2019-20 to 2022-23

Quick Ratio
16.00 15.05 14.78
13.78
14.00 12.86
12.00
10.00
8.00
6.00
4.00
2.00 0.63 0.52 0.63 0.66
0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Figure 4.2.2: Compound Bar diagram of quick ratio for the period 2019-20 to
2022-23

22
 Interpretations:
The Quick Ratio data for Square and Beximco from 2019 to 2023 provides insights into their
short-term liquidity positions. Square's Quick Ratio averages 14.12, indicating a very strong
ability to cover its immediate liabilities without relying on inventory, which is essential for
assessing financial health. Despite this high average, Square's standard deviation of 0.87 and
coefficient of variation (CV) of 16.30 suggest moderate variability in its liquidity. On the other
hand, Beximco's Quick Ratio averages 0.61, which is significantly lower and indicates a more
constrained ability to meet short-term obligations quickly. Beximco's standard deviation is 0.05
with a CV of 11.59, showing a relatively stable Quick Ratio over the years. In comparing the
two, Square clearly demonstrates superior liquidity due to its much higher Quick Ratio, making
it better equipped to handle short-term liabilities. However, Beximco's ratio is more stable,
which might be preferred for predictability in financial planning. Overall, Square's higher
Quick Ratio makes it better positioned in terms of liquidity, despite some variability, whereas
Beximco's stability in its lower Quick Ratio reflects a consistent, though more limited, short-
term liquidity capacity.

4.2.3 Cash ratio:

Cash ratio is a liquidity ratio which measures the ability of the Company to repay the current liabilities
only using its cash and cash equivalents.
Comparison of cash ratio:
Table 4.2.3 Cash ratio of Square & Beximco Pharmaceutical Limited for the year 2019-20 to 2022-23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Square Cash 32,564,329,438 43,364,039,004 48,962,498,334 50,094,321,854

Current
3,241,547,786 3,178,558,926 3,661,828,783 4,229,145,716
Liabilities

Beximco Cash 635,016,519 675,466,608 1,168,673,821 1,135,686,178

Current
11,357,965,004 12,735,932,076 12,735,932,076 13,265,024,036
Liabilities
Cash 10.05 13.64 13.37 11.85 12.23 1.65 0.14
Square
ratio
Cash 0.06 0.05 0.09 0.09 0.07 0.02 0.28
Beximco
ratio

Figure 4.2.3: Compound Bar diagram of Cash ratio of Square & Beximco Pharmaceutical Limited
for the year 2019-20 to 2022-23

23
 Cash Ratio
16.00
13.64 13.37
14.00
11.85
12.00 10.05
10.00
8.00
6.00
4.00
2.00 0.06 0.05 0.09 0.09
0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
The cash ratio for Square showed a consistent increase from 10.05 in 2019-2020 to 13.64 in 2020-2021,
followed by a slight decrease to 13.37 in 2021-2022, and a further drop to 11.85 in 2022-2023, resulting
in an average cash ratio of 12.23. The standard deviation of 1.65 indicates moderate variability in these
values, with a coefficient of variation of 0.14, suggesting relatively low dispersion around the mean.
On the other hand, Beximco's cash ratio remained relatively stable, fluctuating between 0.05 and 0.09
over the same period, with an average cash ratio of 0.07. The low standard deviation of 0.02 and
coefficient of variation of 0.28 for Beximco indicate a more consistent performance compared to Square
in terms of cash reserves.

24
 4.2.3 Cash ratio:

Cash ratio is a liquidity ratio which measures the ability of the Company to repay the current liabilities
only using its cash and cash equivalents.
Comparison of cash ratio:
Table 4.2.3 Cash ratio of Square & Beximco Pharmaceutical Limited for the year 2019-20 to 2022-
23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Square Cash 32,564,329,438 43,364,039,004 48,962,498,334 50,094,321,854

Current
3,241,547,786 3,178,558,926 3,661,828,783 4,229,145,716
Liabilities

Beximco Cash 635,016,519 675,466,608 1,168,673,821 1,135,686,178

Current
11,357,965,004 12,735,932,076 12,735,932,076 13,265,024,036
Liabilities
Cash 10.05 13.64 13.37 11.85 12.23 1.65 0.14
Square
ratio
Cash 0.06 0.05 0.09 0.09 0.07 0.02 0.28
Beximco
ratio

Figure 4.2.3: Compound Bar diagram of Cash ratio of Square & Beximco Pharmaceutical Limited
for the year 2019-20 to 2022-23

Cash Ratio
16.00
13.64 13.37
14.00
11.85
12.00 10.05
10.00
8.00
6.00
4.00
2.00 0.06 0.05 0.09 0.09
0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
The cash ratio for Square showed a consistent increase from 10.05 in 2019-2020 to 13.64 in
2020-2021, followed by a slight decrease to 13.37 in 2021-2022, and a further drop to 11.85 in
2022-2023, resulting in an average cash ratio of 12.23. The standard deviation of 1.65 indicates
moderate variability in these values, with a coefficient of variation of 0.14, suggesting
25
 relatively low dispersion around the mean. On the other hand, Beximco's cash ratio remained
relatively stable, fluctuating between 0.05 and 0.09 over the same period, with an average cash
ratio of 0.07. The low standard deviation of 0.02 and coefficient of variation of 0.28 for
Beximco indicate a more consistent performance compared to Square in terms of cash reserves.

(4.3) Profitability Ratios:

Profitability ratio is used to calculate the overall profit of the organizations. There are various ways to
measure the profitability ratios, they are
4.3.1 Gross profit margin
Gross profit margin is a profitability ratio that measures how much revenue from sales is left over after
paying cost of goods sold (COGS).
Comparison of gross profit margin:
Table 4.3. Gross profit margin of Square & Beximco Pharmaceutical Limited for the year 2019-20 to
2022-23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Gross 23,339,778,881 25,902,993,347 29,639,914,379 30,975,589,564
Square Profit
Net 45,876,448,841 50,703,028,902 57,597,941,359 62,747,682,864
Revenue
Gross 11,899,100,146 13,923,502,288 15,820,209,945 17,313,371,771
Beximco Profit
Net 25,611,947,655 29,493,573,869 34,669,172,052 39,266,662,237
Revenue
Gross 50.88% 51.09% 51.46% 49.37% 0.51 0.01 0.02
profit Square
margin
Gross 46.46% 47.21% 45.63% 44.09% 0.46 0.01 0.03
profit Beximco
margin

Gross Profit Margin

55.00%
50.88% 51.09% 51.46%
49.37%
50.00% 47.21%
46.46% 45.63%
44.09%
45.00%

40.00%
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Figure 4.3.1 Compound Bar diagram of Gross profit margin for the period 2019-20 to 2022-23

26
 Interpretations:
The gross profit margin for Square Pharmaceuticals remained relatively stable, ranging from
49.37% to 51.46% over the four-year period, with an average of 51.05% and a low standard
deviation of 0.01 and coefficient of variation of 0.02. This indicates that Square maintained a
consistently high gross profit margin, generating substantial profits from its sales after
accounting for the cost of goods sold.
In contrast, Beximco Pharmaceuticals' gross profit margin fluctuated between 44.09% and
47.21% during the same period, with an average of 45.85% and a standard deviation of 0.01
and coefficient of variation of 0.03. While still strong, Beximco's gross profit margin was lower
than Square's and exhibited slightly more variability.
The higher and more consistent gross profit margin for Square suggests that it has been more
efficient in managing its costs of production and pricing its products, allowing it to generate
greater profits from its sales compared to Beximco. However, both companies have maintained
healthy gross profit margins, indicating their ability to generate profits from their core business
activities.
4.3.2 Net profit margin
Net Profit Margin is a ratio of profitability which is calculated dividing the net profit after taxation by
revenues. It measures how an organization is actually earning from its every taka of revenue.
Comparison of gross profit Margin
Table 4.3.2 Net profit margin of Square & Beximco Pharmaceutical Limited for the year 2019-20 to
2022-23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Net 12,767,399,836 14,656,239,015 16,146,372,062 16,457,626,777
Square
Profit
Net 45,876,448,841 50,703,028,902 57,597,941,359 62,747,682,864
Revenue
Net 3,544,483,101 5,165,749,732 4,998,628,197 4,524,468,490
Beximco
Profit
Net 25,611,947,655 29,493,573,869 34,669,172,052 39,266,662,237
Revenue
Net 27.83% 28.91% 28.03% 26.23% 0.28 0.01 0.04
Profit Square
Margin
Net 13.84% 17.51% 14.42% 11.52% 0.14 0.02 0.17
Profit Beximco
Margin

27
 Net Profit Margin
35.00%
27.83% 28.91% 28.03%
30.00% 26.23%
25.00%
20.00% 17.51%
13.84% 14.42%
15.00% 11.52%
10.00%
5.00%
0.00%
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:

The net profit margin for Square Pharmaceuticals remained relatively stable, ranging from
26.23% to 28.91% over the four-year period, with an average of 27.75% and a low standard
deviation of 0.01 and coefficient of variation of 0.04. This indicates that Square consistently
generated a significant portion of net profit from its revenue, demonstrating its ability to
effectively manage costs and generate profits. In contrast, Beximco Pharmaceuticals' net profit
margin fluctuated between 11.52% and 17.51% during the same period, with an average of
14.32% and a standard deviation of 0.02 and coefficient of variation of 0.17. While still
profitable, Beximco's net profit margin was lower than Square's and exhibited more variability.
The higher and more consistent net profit margin for Square suggests that it has been more
efficient in managing its operating expenses and generating profits from its sales compared to
Beximco. However, both companies have maintained positive net profit margins, indicating
their ability to generate profits from their core business activities.

28
 4.3.3 Return on Assets
ROA gives an idea as to how efficient management is at using its assets to generate earnings.
Comparison of ROA
Table 4.3.3 ROA of Square & Beximco Pharmaceutical Limited for the year 2019-20 to 2022-23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Net 17,856,077,259 19,606,703,574 21,804,663,327 22,178,923,175
Square income
Total 81,819,367,357 95,452,262,580 111,757,869,267 121,816,305,166
assets
Net 4,889,248,333 6,700,297,486 7,046,167,586 6,383,199,454
Beximco income
Total 50,118,741,940 52,246,084,026 66,148,035,742 69,156,783,247
assets
21.82% 20.54% 19.51% 18.21% 0.20 0.02 0.08
Square
ROA
9.76% 12.82% 10.65% 9.23% 0.11 0.02 0.15
Beximco

ROA
25.00% 21.82%
20.54% 19.51%
20.00% 18.21%

15.00% 12.82%
9.76% 10.65%
9.23%
10.00%
5.00%
0.00%
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Figure 4.3.3 Compound Bar diagram of ROA for the period 2019-20 to 2022-23
Interpretations:
Return on Assets (ROA) data for Square Pharmaceuticals and Beximco Pharmaceuticals from 2019-2020 to
2022-2023 reveals that Square consistently outperformed Beximco in terms of ROA. Square's ROA declined
gradually from 21.82% to 18.21% over the period, with an average ROA of 20.02%, indicating efficient asset
utilization. On the other hand, Beximco's ROA fluctuated between 9.76% and 12.82%, averaging at 10.65%,
showcasing lower asset efficiency compared to Square. The lower standard deviation and coefficient of
variation for Square further support its more stable and superior performance in generating returns from assets,
making Square Pharmaceuticals the stronger performer in this aspect over the specified years.

29
 4.3.4 Return on Equity
Return on equity (ROE) measures how effectively management is using a company's assets to
create profits. Comparison of ROE
Table 4.3.4 ROE of square & Beximco for the year 2019-20 to 2022-23

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Net 17,856,077,259 19,606,703,574 21,804,663,327 22,178,923,175
Square income
Total 77,364,890,773 90,894,643,168 105,203,030,030 115,196,648,765
Equity
Net 4,889,248,333 6,700,297,486 7,046,167,586 6,383,199,454
Beximco income
Total 32,797,449,613 37,364,864,829 44,636,004,458 47,619,665,978
Equity
23.08% 21.57% 20.73% 19.25% 0.21 0.02 0.08
Square
ROE
14.91% 17.93% 15.79% 13.40% 0.16 0.02 0.12
Beximco

Figure 4.3.4 Compound Bar diagram of ROE for the period 2019-20 to 2022-23

ROE
30.00%
23.08% 21.57% 20.73% 19.25%
17.93%
20.00% 14.91% 15.79%
13.40%
10.00%

0.00%
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
The Return on Equity (ROE) data for Square Pharmaceuticals and Beximco Pharmaceuticals from
2019-2020 to 2022-2023 reveals that Square consistently outperformed Beximco in terms of ROE.
Square's ROE decreased gradually from 23.08% to 19.25% over the period, with an average ROE
of 21.16%, indicating efficient utilization of equity to generate profits. In contrast, Beximco's ROE
fluctuated between 13.40% and 17.93%, averaging at 15.01%, showcasing lower equity efficiency
compared to Square. The lower standard deviation and coefficient of variation for Square further
support its more stable and superior performance in generating returns from equity, making Square
Pharmaceuticals the stronger performer in this aspect over the specified years.

30
 (4.4) Efficiency Ratio
The efficiency ratio is typically used to analyze how well an organization uses its assets and
liabilities internally. An efficiency ratio can calculate the turnover of receivables, the repayment
of liabilities, the quantity and usage of equity, and the general use of inventory and machinery.
4.4.1 Inventory Turnover
Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period.
Comparison of Inventory Turnover
Table 4.4.1 Inventory turnover of Square & Beximco for the year 2019-20 to 2022-23.

Year 2019-2020 2020-2021 2021-2022 2022-2023 Average SD cv

Net
Square 45876448841 50703028902 57597941359 62747682864
Revenue
Inventory 5687406329 7245,396928 8214111145 12227198105
Net
Beximco 25611947655 29,493573869 34669172052 39266662237
Revenue
Inventory 5944769057 7142863477 10405295079 12133277975

Square 8.07 7.00 7.01 5.13 6.80 1.22 0.18

Inventory
Turnover
Beximco 4.31 4.13 3.33 3.24 3.75 0.55 0.15

Figure 4.4. I Compound Bar diagram of Inventory turnover for the period 2019-20 to 2022-23

Net Profit Margin

10.00 8.07
7.00 7.01
4.31 5.13
4.13 3.33 3.24
5.00

0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
The Net Profit Margin (NPM) data for Square Pharmaceuticals and Beximco Pharmaceuticals
from 2019-2020 to 2022-2023 reveals that Square outperformed Beximco in terms of NPM.
Square's NPM decreased from 8.07 to 5.13 over the period, with an average NPM of 6.80,
indicating its ability to generate higher profits from its revenue. In contrast, Beximco's NPM
fluctuated between 3.24 and 4.31, averaging at 3.75, showcasing lower profitability compared to
Square. The higher standard deviation and coefficient of variation for Square suggest more
variability in its NPM, but it still maintained a significantly higher NPM than Beximco
throughout the period. This analysis demonstrates that Square Pharmaceuticals generated a larger
portion of net profit from its revenue, making it the stronger performer in this aspect compared
to Beximco Pharmaceuticals.
31
4.4.2 Total Asset Turnover
Total Assets Turnover Ratio measures the turnover of all of the firm's assets.
Comparison of Total Asset Turnover
Table 4.4.2 Total asset turnover of Square & Beximco for the year 2019-20 to 2022-23
Averag
Year 2019-2020 2020-2021 2021-2022 2022-2023 SD cv
e
Net
45,876,448,8 50,703,028,9 57,597,941,35 62,747,682,86
Square Revenu
41 02 9 4
e
Total 81,819,367,3 95,452,262,5 111,757,869,2 121,816,305,1
assets 57 80 67 66
Net
Beximc 25,611,947,6 29,493,573,8 34,669,172,05 39,266,662,23
Revenu
o 55 69 2 7
e
Total 50,118,741,9 52,246,084,0 66,148,035,74 69,156,783,24
assets 40 26 2 7
Total 0.0 0.0
Square 0.56 0.53 0.52 0.52 0.53
Asset 2 4
Turnov Beximc 0.0 0.0
0.51 0.56 0.52 0.57 0.54
er o 3 5
Figure 4.4.2 Compound Bar diagram of Total asset turnover for the period 2019-20 to 2022-23

Total Asset Turnover

0.60 0.57
0.56 0.56
0.55 0.53 0.52
0.51 0.52 0.52
0.50

0.45
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
Total Asset Turnover (TAT) data for Square Pharmaceuticals and Beximco
Pharmaceuticals from 2019-2020 to 2022-2023 reveals that both companies had relatively
similar TAT values, with Square averaging at 0.53 and Beximco at 0.54. While Square's
TAT remained consistent around 0.53, Beximco showed slightly more variability, ranging
from 0.51 to 0.57. Despite this, the difference in TAT between the two companies is
minimal, with Square having a slightly lower standard deviation and coefficient of
variation compared to Beximco. This indicates that both companies efficiently utilized
their assets to generate revenue, with no significant performance superiority evident
between Square and Beximco in terms of Total Asset Turnover over the specified years..

32
4.4.3 Stock Turnover
Comparison of Stock turnover ratio:
Table 4.4.3 stock turnover of Square & Beximco for the year 2019-20 to 2022-23
Averag
Year 2019-2020 2020-2021 2021-2022 2022-2023 SD cv
e
Cost of
22,536,669,9 24,800,035,5 27,958,026,9 31,772,093,3
Square goods
60 55 80 00
sold
Inventor
5687406329 7245,396928 8214111145 12227198105
y
Cost of
Beximc 13,712,847,5 15,570,071,5 18,848,962,1 21,953,290,4
goods
o 09 81 07 66
sold
Inventor
5944769057 7142863477 10405295079 12133277975
y
0.5 0.1
Stock Square 3.96 3.42 3.40 2.60 3.35
6 7
turnove
Beximc 0.2 0.1
r ratio 2.31 2.18 1.81 1.81 2.03
o 6 3

Figure 4.4.3 Compound Bar diagram of Stock turnover for the period 2019-20 to 2022-23

Stock Turnover Ratio

6.00
3.96
4.00 3.42 3.40
2.31 2.18 2.60
1.81 1.81
2.00

0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:

The Stock Turnover Ratio data for Square Pharmaceuticals and Beximco Pharmaceuticals
from 2019-2020 to 2022-2023 reveals that Square consistently outperformed Beximco in
terms of stock turnover. Square's stock turnover ratio decreased from 3.96 to 2.60 over the
period, with an average ratio of 3.35, indicating efficient management of inventory. In
contrast, Beximco's stock turnover ratio also declined from 2.31 to 1.81, averaging at 2.03,
showcasing a lower turnover rate compared to Square. The higher standard deviation and
coefficient of variation for Square suggest more variability in its stock turnover, but it
maintained a significantly higher turnover ratio than Beximco throughout the period. This
analysis demonstrates that Square Pharmaceuticals managed its inventory more
effectively, making it the stronger performer in this aspect compared to Beximco
Pharmaceuticals.

33
(4.5) Risk and solvency Ratio
4.5.1 Solvency Ratio
These ratios measure the firm's ability to satisfy its long-term obligations and are closely tracked
by investors to understand and appreciate the ability of the business to meet its longterm liabilities
and help them in decision making foe long-term investment of their funds in the business.
Comparison of Solvency Ratio
Table 4.5. I Solvency ratio of Square & Beximco for the year 2019-20 to 2022-23
Averag
Year 2019-2020 2020-2021 2021-2022 2022-2023 SD cv
e
Net 12,767,399,8 14,656,239,0 16,146,372,0 16,457,626,7
Square
Profit 36 15 62 77
Liabiliti 4,454,476,58 4,557,119,41 6,554,839,23 6,619,656,40
es 4 2 7 1
Beximc Net 25,611,947,6 29,493,573,8 34,669,172,0 39,266,662,2
o Profit 55 69 52 37
Liabiliti 17,321,292,3 14,881,219,1 21,512,031,2 21,537,117,2
es 27 97 84 69
0.3 0.1
Square 2.87 3.22 2.46 2.49 2.76
Solvenc 6 3
y Ratio Beximc 0.2 0.1
1.48 1.98 1.61 1.82 1.72
o 2 3

Figure 4.5.3 Compound Bar diagram of Solvency ratio for the period 2017-2018 to 20202021

Solvency Ratio
4.00 3.22
2.87
3.00 2.46 2.49
1.98 1.82
2.00 1.48 1.61

1.00
0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
The Stock Turnover Ratio data for Square Pharmaceuticals and Beximco Pharmaceuticals
from 2019-2020 to 2022-2023 reveals that Square consistently outperformed Beximco in
terms of stock turnover. Square's stock turnover ratio ranged from 2.46 to 3.22 over the
period, with an average ratio of 2.76, indicating efficient management of inventory. On
the other hand, Beximco's stock turnover ratio fluctuated between 1.48 and 1.98,
averaging at 1.72, showcasing a lower turnover rate compared to Square. Despite both
companies having the same coefficient of variation of 0.13, Square's higher average stock
turnover ratio indicates more effective inventory management and faster sales turnover,
making Square Pharmaceuticals the stronger performer in this aspect compared to
Beximco Pharmaceuticals over the specified years.
34
4.5.2 Equity Ratio
The equity ratio is a financial metric that measures the amount of leverage used by a
company
Equity Ratio
Comparison of Equity Ratio
Table 4.5.2 Equity ratio of Square & Beximco for the year 2019-20 to 2022-23
Averag
Year 2019-2020 2020-2021 2021-2022 2022-2023 SD cv
e
Total 77,364,890,7 90,894,643,1 105,203,030,0 115,196,648,7
Square
Equity 73 68 30 65
Total 81,819,367,3 95,452,262,5 111,757,869,2 121,816,305,1
assets 57 80 67 66
Beximc Total 32,797,449,6 37,364,864,8 44,636,004,45 47,619,665,97
o Equity 13 29 8 8
Total 50,118,741,9 52,246,084,0 66,148,035,74 69,156,783,24
assets 40 26 2 7
0.0 0.0
Square 0.95 0.95 0.94 0.95 0.95
Equity 0 0
Ratio Beximc 0.0 0.0
0.65 0.72 0.67 0.69 0.68
o 3 4

Figure 4.5. Compound Bar diagram of equity ratio for the period 2017-2018 to 20202021

Equity Ratio
0.95 0.95 0.94 0.95
1.00
0.65 0.72 0.67 0.69

0.50

0.00
2019-2020 2020-2021 2021-2022 2022-2023

Square Beximco

Interpretations:
The Equity Ratio data for Square Pharmaceuticals and Beximco Pharmaceuticals from 2019-2020
to 2022-2023 reveals a significant difference in performance between the two companies. Square
Pharmaceuticals maintained a consistently high equity ratio of around 0.95 throughout the period,
with an average of 0.95 and a standard deviation and coefficient of variation close to zero. This
indicates that Square's assets are predominantly financed by equity, demonstrating a strong
financial position and low financial risk. In contrast, Beximco Pharmaceuticals had a lower equity
ratio ranging from 0.65 to 0.72, with an average of 0.68 and a higher standard deviation of 0.03
and coefficient of variation of 0.04. This suggests that Beximco relies more on debt financing

35
compared to Square, which may expose it to higher financial risk. The significant difference in
equity ratios between the two companies clearly shows that Square Pharmaceuticals has a stronger
capital structure and financial stability compared to Beximco Pharmaceuticals over the specified
years.

36
 CHAPTER-Five
Major Findings, Recommendations
and Conclusion

37
(5.1) Major Findings of the Study:
The study, Financial Performance Analysis of Square and Beximco Pharmaceuticals Limited, reveals the
following majors findings:

1. Profitability Performance: Square Pharmaceuticals consistently outperformed Beximco

Pharmaceuticals in terms of profitability metrics such as gross profit margin, net profit margin,
and return on equity (ROE) over the analyzed period.

2. Asset Utilization: Square Pharmaceuticals demonstrated superior asset utilization with higher
total asset turnover and stock turnover ratios compared to Beximco Pharmaceuticals, indicating
more efficient management of assets and inventory.

3. Capital Structure: Square Pharmaceuticals maintained a strong capital structure with a

consistently high equity ratio, showcasing a lower reliance on debt financing and lower financial
risk compared to Beximco Pharmaceuticals.

4. Stability and Consistency: Square Pharmaceuticals exhibited more stable financial performance
with lower variability in key financial metrics, while Beximco Pharmaceuticals showed more
fluctuations and variability in its financial results.

5. Equity Ratio: Square Pharmaceuticals consistently maintained a high equity ratio around 0.95,
indicating a solid financial foundation and strong equity base, while Beximco Pharmaceuticals
had a lower equity ratio, suggesting a higher reliance on debt.

6. Debt Management: Beximco Pharmaceuticals should focus on optimizing its debt management
strategies to reduce financial risk and improve its capital structure, potentially by increasing
equity financing.

7. Operational Efficiency: Both companies can benefit from enhancing operational efficiency,
streamlining processes, and optimizing resource allocation to improve overall financial
performance and profitability.

38
(5.2) Recommendations of the study:
Square and Beximco Pharmaceutical Company has to do the following things:

1. Profitability Enhancement: Beximco Pharmaceuticals should focus on improving

profitability by reducing costs, increasing revenue streams, and enhancing operational
efficiency to boost margins and overall profitability.

2. Asset Optimization: Both companies should continue to optimize asset utilization by

managing inventory effectively, improving turnover ratios, and maximizing the
efficiency of their asset base.

3. Debt Reduction: Beximco Pharmaceuticals should work towards reducing its reliance
on debt financing, improving its equity ratio, and strengthening its capital structure to
lower financial risk.

4. Financial Stability: Square Pharmaceuticals should maintain its strong equity base and
capital structure while Beximco Pharmaceuticals should strive to increase equity
financing to enhance financial stability.

5. Risk Management: Both companies should focus on risk management strategies,

including diversification, hedging, and monitoring market risks to mitigate potential
financial vulnerabilities.

6. Performance Monitoring: Regular monitoring and analysis of financial performance

metrics are essential for both companies to identify trends, make informed decisions, and
drive continuous improvement.

7. Strategic Planning: Developing and implementing strategic plans aligned with financial
goals and market dynamics will be crucial for both Square and Beximco Pharmaceuticals
to sustain growth and competitiveness in the industry.

39
(5.3) Conclusion:
Square Pharmaceuticals Limited is a top pharmaceutical company which had started their journey
in 1958. It had been possible to lead the pharmaceuticals industry from 1985 and till now because
of their wise business decision taken on right time. Beximco Pharmaceuticals Limited
Pharmaceuticals Limited is a very much rumored corporate in Bangladesh. They are working their
business from 1980 with the expressed qualities and have earned the regard of the partners. The
organization is working easily as far as monetary exercises. They have continued their business by
great administration of the advantages and giving riches to the investors. After analyzing last four
year financial data of Square Pharmaceutical Limited, we came to the conclusion that Square
Pharmaceutical Limited is one of the leading manufacturing companies of Bangladesh with a
variety of Pharmaceutical product which have an export quality. Moreover Square Pharmaceutical
Limited is Self-solvent Company with a strong position in the manufacturing sector. Almost all of
the ratios of Square Pharmaceutical Limited's show that they are solvent enough and they have the
efficiency. If we see the ratios of Beximco, we can see that the overall performance of the company
is low compared to the average industry performance. Beximco Pharmaceuticals Limited should
use its assets in a productive way to gain more profit in this competitive market. In the last I would
like to add that Beximco Pharmaceuticals Limited Pharmaceutical Limited financial management
practice needed to be improved and they need to take some effective solution so that Beximco
Pharmaceuticals Limited Pharmaceutical Limited can hold their reputation as a business icon in
the manufacturing sector.

40
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Websites:

• Website of Square Pharmaceutical Limited- http;LLwwuSq—rep—co=bdL

Website of Beximco Pharmaceutical Limited-http://www.Beximcopharma.com/
http://www.businessdictionary.com/defination/financial-performance.html
http://ebstudies.wordpress.com/2012/11 /06/financial-performance-analysis/
Annual reports : 2019-20 to 2022-23

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