Thesis Paper on Financial Statement Analysis of Beximcon Pharma
Subject: Pharmacy | Topics:

Executive Summary:

Beximcon pharma is a Leading pharmaceutical company base is Dhaka, Bangladesh. It is a member of the “Beximco group” the largest private section industrial conglomerate in Bangladesh. Their strategic strengths include strong recognition of their brands. They stated their operation in 1980. manufacturing product under the licenses of Bayer Ag of Germany and Upjohn Inc of USA and now have grown to be come nation, some of the heading pharmaceutical companies. Supplying more than 10% of county’s total medicine need today “Beximco pharma” manufactures and markets its own branded gene ricers for almost all deceases from AIDS to cancer. They market their bonds though their own professional sales and marketing terms in African, South Asian, and other markets. They also supply their products to owned hospitals and institution in many countries.

Introduction:

Financial Statement Analyses is a special art of going in depth to the financial Statement by the people who have expertise to do so. Without this it helps investors and creditors to improve their economic decisions. We will examine the impact of the differential application of accounting methods and estimates on financial statements with particular emphasis on the effect of accounting choices on reported earning, stockholder equity, cash flow and various measures of corporate performance (including but not limited to financial ratios). We will also stress the use of cash flows analysis to evaluate the financial health of an enterprise.

Background of the repot:

Beximco pharma is a leading company based in Dhaka, and is acclaimed for its outstanding product quality, world class manufacturing facility product development capabilities and outstanding professional service. Without this Beximco pharma has long enjoyed the equation of being a leader in setting the trends in Bangladesh pharmaceutical industry. 25 years have passes since we started out own operation. In the last 25 years they lead the domestic pharmaceutical market in several dimensions.

In 25 years of operating in healthcare business, the true and reliability on their products has emerged as one of our core competencies. Today, the mane “Baximco pharma” has become synonymous with true and reliability. Quality is their relentless passion.

Objective:

  1. To know the financial condition.
  2. To know the financial position the pharmaceutical section.
  3. To guess its future condition.

Financial statement:

Analysis

Different types of Ratios and there objectives :

Short-term liquidity Ratios:

Short- term liquidity ratios are the measurement of a firm’s ability to meet its short-term obligation. Two ratios are typically used to measure short-term liquidity 1) current ratio and 2) quick ratio. Both focus on the relationship between current assets and current liabilities. The quick ratio is the moiré conservative measure of liquidity.

Current Ratio:

Current ratio is an assessment of a firm’s short-term liquidity. It is computed by dividing current assets by current liabilities.

 Quick Ratio:

Quick ratio is a conservative assessment of a firm’s short-term liquidity.

It is computed by dividing quick assets (cash, receivables, and marketable securities) by current liabilities.

Debt- Management Ratios:

Debt- management ratios are the measurements of a firm’s ability to meet obligations involving debt. In general debt management’s ratio measures either (1) the excess of earnings over interest or (2) the proportion of debt in the business liabilities and equity.

Times-Interest-earned Ratio:

It is the measurements of the excess of income available for interest payment over the amount of interest payments. The equation used to calculate this ratio is: (net income+ interest+ taxes)/ interest.

Debt to Equity Ratio:

This is the measurements of the proportion of capital provided by creditors relative to that provided by stock holders. It is computed by dividing total debt by total equity.

Operating Ratios:

Operating ratio (efficiency ratio) are measures of how intensely a business uses its assets. The principal operating ratio is measure of turnover, the average length of time required for assets to be consumed or replaced.

Accounts Receivable turnover Ratio:

It is the measurement of the number of times account receivable is turned over each year. It is computed by dividing net credit sales by average account receivable.

 Inventory turnover Ratio:

Inventory turnover ratio is the measurement of the number of times inventory is turned over each year. The equation used for computation is cost of good sold/ average inventory.

Assets turnover Ratio:

The ratio is used to measure the intensity with which business assets arused to produce sales revenue. It is computed by dividing net sales by the average total assets.

Profitability Ratios:

Profitability ratios are the measurement of (1) the contribution of the elements of operations of profit or (2) the relationship of profit to total investment and investment by stockholders.

Goss margin Ratios:

It is the measurement of the proportion of each sales taka that is available to pay other expenses and provide profit for owners. This ratio is computed by dividing gross margin by net sales.

 Operating income Ratio:

It is the measurement of the profitability of business operations in relation to its sales. It is compared by dividing operating income by net sales.

 Net income Ratio:

This ratio is the measurement of the proportion of each sales taka that is profit. The equation for computation the ratio is: net income / net sales.

 Returns on assets Ratio:

Return on assets ratio is the measurement of the profit earned by a firm through the use of all its capital, or the total investment by both creditor and owners. The equation for computation of this ratio is:( net income+ interest)/ average total assets.

Returns on Equity Ratio:

 This ratio is the measurement of the profit earned by a firm through the use of capital supplied by stockholders. The equation for computation is: net income/ average equity.

CURRENT RATIO:

CURRENT ASSETS

CURRENT RATIO= ………………………..

CURRENT Liabilities

2006

2005

2004

403164955

…………………..

2260755481

=1.78Times

3242502312

…………………….

1949949426

=1.66Times

2016056187

………………………

1250675506

=1.61Times

NOTE: Here the assets of 31December, 2006 are 1.78. so, we can say that the situation of assess and liabilities of 31 December 2006 is better than assts and      liabilities 31 December 2005 and 2004.in this ratio we see that the company has 1.78 in current assets to cover each 1.00 in current liabilities.

QUICK RATIOS:

CURRENT ASSETS-Inventories

QUICK Ratio= ……………………………………………

Current liabilities

4031684955-134236447

……………………………

2260755481

=1.19Times

3242502312-1144912356

……………………………..

1949949426

=1.07Times

2016056147-795856209

………………………….

1250675506

=0.97TIMES

NOTE: Here 31 December, 2006 quick ratio is 1.19.we can say that 31t December 2006 quick ratio is better than previous years. In this situation we can say that the company has 1.19 sales of inventory to pay the bills.

Cash flow liquidity:

Cash + market securities + CFO

Cash flow liquidity =…………………………………….

Current liabilities

200620052004
316,720,982+20,250,000+175217000………………………………………

2260755481,481

= 0.80 times

382,074,333+20,250,000+169502584……………………………………….

1949,949,426

= 0.5=65 times

52,080,250+20,250,000+15963522……………………………………

1250,675,506

= 0.50 times

Note: It explaining the improvement in the cash flow liquidity ratio and stronger short-term solvency.

 Leverage ratio: Debit financing and coverage:

Debt Ratio:

Total liabilities

Debt Ratio=…………………….

Total Assets

200620052004
8050645877…………….

9298987312

= 0.87

7055122440……………

7907932662

= 0.88

5247891358……………

5877361667

= 0.89

 

NOTE: The debt ratio indicates how borrowing has financed much of the firm’s assets lower the ratio means lower amounts of borrowing. In year 2006 the ratio is lower than previous years.

Debt to equity ratio:

Total liabilities

Debt to equity ratio=………………………………..

Share holders equity

200620052004
8050645877

……………………..

6402014772

= 1.30 times7055122440

…………………..

5568790156

= 1.32 times5247891358

……………………….

4590142003

= 1.15 times

NOTE: Debt to ratio is decreasing year 2006. But it is increases in 2005 not good for the company. Because the higher degree of debt the greater is the degree of risk. There have a chance bankruptcy

Times-Interest – Earned Ratio:

(Net income+ interest + taxes)

Times-Interest – Earned Ratio=…………………………………………

Interest expense

200620052004
1533042614+139863636

…………………………

139863636

=11.96 times1513018599+106451324

…………………………….

106451324

=15.21 times1151636314+108673997

……………………………

108673997

=11.60 times

Note: Times –interest – earned ratio has increase in the year 2005 but it decreases in 2006. So the company is now in a stable position.

Activity ratios: assets liquidity, assets management efficiency:

average collection period:

Accounts receivable

Average collection period= …………………………….

Average daily sales

200620052004
85644000

……………

0689905396/365

=16 days78854600

…………….

5332046635/365

=20 days67892469

…………….

4721551742/365

=22 days

Note: This ratio determines how rapidly the firm’s credit accounts are being collected. In 2006 average collection period is 16 days. Which is less than 2005 & 2004. This means that in this years management was more efficient form previous years.

Accounts receivable turnover ratio:

Net sales

Accounts receivable turnover ratio: ………………………………

Accounts receivable

200620052004
6075711742

………………….

787604783

=7.715270874301

………………..

474055792

=11.114636514957

………………

79036484

=58.66

Note: This circumstances we see that, account receivable turnover is decrease than previous years. So we can say that is quite good for the company.

Inventory turnover ratios:

Cost of good sold

Inventory turnover ratio=………………………

Inventory

200620052004
3525402669

………………

134236447

=2.633159453706

………………..

1144912356

=2.7628154959729

…………………

795856209

=3.54

 

Note: this ratio show that how fast the inventory is converted into finished goods that are sold. In 2006 the ratio is lower than 2005.it is good for the company.

Total Asset turnovers Ratio:

Sales

Asset turnovers Ratio=………………………….

Total Asset

200620052004
6075711742

……………….

9298987312

=0.655270874301

…………………….

7907932662

0.674636514957

………………….

5877361667

=0.79

 

Note: In2006 TATO ratio is very poor through out the year 2005.since the ratio is showing decreased in 2006, it reveals the fact that the firm could not use its asset efficiently to generate sales. This is because a large portion of assets is involving the current assets, which are not productive.

Profitability ratios:

Gross margin ratios:

Gross margin

Gross margin ratio=…………………..

Net sales

200620052004
2564502727

………………

6075711742

=0.422172592929

………………

5270874301

=0.411906592013

……………………

4636514957

=0.41

 

Note: This ratio indicates the efficiency of operation of how products are priced. In 2006 gross margin ratio is increased than previous years. It is good for the company.

Operating income ratios:

Operating income

Operating income ratios=…………………………

Net sales

200620052004
1580204535

………………

6075711742

=0.261337725672

…………………

5270874301

=0.25551832995

……………….

4636514957

=0.12

 

Note: Operating income ratio is increasing in per year. So we can say that the company earned enough profit to cover operating cost. It is good for the company.

Net income ratios:

Net income

Net income ratio=…………………….

Net sales

200620052004
1533042614

……………….

6075711742

=0.251513018599

………………..

5270874301

=0.291151636314

…………………

4636514957

=0.25

 

Note: Net income ratio is decrease on the last year. In this ratio the company earned 0.25 profits from 1 dollar sales in 31 December, 2006. It is not good for the company. They have to improve the condition.

Return on assets ratio:

Net income

Return on assets ratio=……………………..

Total Asset

200620052004
1533042614

………………

9298987312

=0.16 1513018599

……………….

7907932662

=0.191151636314

………………….

5877361667

=0.20

 

 

Note: this ratio reflects the rate of return on firm’s total investment after interest and taxes. In year 2006 the percentage of ROA is lower than previous years. This mean year 2006 the return of firm’s total investment after interest and taxes is very insignificant.

Cash return on assets:

Cash flow operating activities

Cash return on assets ratio=…………………………………

            Total assets

200620052004
175217000

……………..

9298987312

=0.018169502584

…………………

7907932662

=0.021159638522

……………….

5877361667

=0.25

 

Note: The cash return on assets of the decreasing respectively 2004, 2005, and 2006. It is negative activity of the company. Cash generating ability of assets decreases year after year. It is not good for future investment. Because, cash will be required for the future investment

 Beximco pharmaceuticals Limited:

BALANCE SHEET:

For the period ended 2006, 2005, 2004

                                                       2006               2005                     2004
Assets:
Non current assets:                   5267302357        4665430350       3861305480

Property, plant and equipment      2273761161             2317358471            2237138891

Carrying value

Capital work-in-progress           1077707832             687238515                402266589

Investment-Long term (at cost)    1915833364            1660833364              1221900000

Current assets:                          4031684955               3242502312              2016056187

Inventory                                 1342364478                1144912356               795856209

Trade debtors                         288732137                  267527741                  225115010

Advances, deposits and prepayments 166492706      146042777                  107177611

Investment in marketable securities (at cost) 20250000   20250000           20250000

Short term loan                                      1897124652           181695105           815577152

Cash and cash equivalents                  316720982                 382074333         52080205

TOTAL ASSETS                 9298987312                7907932662                5877361667

Shareholders’ Equity and liabilities:

Shareholder’ Equity          6402014772               5568790156                4590142003

Share capital                     496800000                 432000000                   360000000

Share premium                 2035465000              2035465000                  2035465000

General reserve              105878200                 105878200                      105878200

Tax Holiday reserve       947678690                  919636288                    853731206

Retained earning             2816192882            2075810668                   1235067597

Non-current liabilities     636217059               389193083                 36544158

Long term loans-secured 602349621            389193080                 36544158

Deferred tax liability         33867438             ………..                       ………

Current liabilities            2260755481            1949949426                 1250675506

Short-term bank loans          1471158187        1370262208            896145336

Long term loans- current portion 261416941   142875686           55921187

Trade creditors                                79390166     83848465             52646198

Liabilities for expense                      49771374     102395447          16928468

Liability for other finance                399018813   250567620          229034317

Total share holders                      9298987312      7907932662         5877361667

Equity and liabilities

Beximco pharmaceuticals Limited

BALANCE SHEET

Income statement

For the period ended 2006, 2005, 2004

                                                        2006              2005              2004
 
Sales:                                                       7085553149      6199134802        5482087920
Less: allowance for doubtful account   995647753        867088167          760536178
 
Net sales                                                  6089905396      5332046635         4721551742
Cost of good sold                                    3525402669       3159453706         2814959729
                                                                
Gross profit                                            2564502727        2172592929         1906592013
Operating expenses                               984298192           834867257           677379509
Selling and distribution expense          798131173           675241846           536102740
Administrative expenses                        186167019          159625411           141276769
 
Profit from operation                              1580204535        1337725672         551832995
Other income                                            169353845          357395181           88679623
Financial expenses                                    139863636         106451324           108673997
          
Net profit before WPPF                           1609694744        1588669529            1209218130
Allocation for WPPF                                 76652130            55650930               57581816
 
NET PROFIT BEFORE TAX                   1533042614        1513018599           1151636314
Provision for income tax                             333310560           257170446            181592771
Provision for deferred income tax             33867438                                           
 
NET PROFIT AFTER TAX                        1165864616         1255848153          970043543
(Transfer to the statement of changes in equity)
 
 
Earnings per share(EPS)                                   234.67               252.79                  224.55

Recommendation:

  1. To remove some positive side which can be affective for the organization?
  2. If the average collection period decreasing day by day. The sale of the firm may be decreases.
  3. The current ratio is increasing which is a positive side of the firm it means the firm is capable to face its all liabilities.

Conclusion:

The financial statement analyses of the beximco pharmaceutical ltd. The financial statement consists of the mixture of steps and prices that interrelate and affect each other. No one part of thee analysis should be interpreted in isolation. Short –term liquidity impacts profitability, profitability began with sale which relates to the liquidity of assets. The efficiency of assets management influences the cost and Availability of credit which shapes the capital structure. Every aspect of a cost Availability of a company’s financial statement condition performance and outlook affects the share price.

Beximcon Pharma

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