Table of Contents

1.0.Introduction..............................................................................................1
2.0.Company Profile........................................................................................2
3.0. Contents of Beximco Pharmaceuticals Financial Reports.....................................5
4.0. Financial Analysis.....................................................................................6
4.1. Horizontal Analysis...........................................................................6
4.2. Vertical Analysis.............................................................................11
4.3. Ratio Analysis................................................................................15
5.0. Conclusion............................................................................................22

1.0.Introduction
In this report we have analyzed the financial state of Beximco Pharmaceuticals Ltd. (BPL) by
various accounting tools. The post analysis results are presented and elaborated to provide an

overall and meaningful picture of the financial state of the company. The tools used are- 1) Ratio
analysis, 2) Vertical Analysis and 3) Horizontal Analysis
Ratio analysis
We used Ratio analysis to evaluate relationships among financial statement items. The ratios
were used to identify trends over time. We focused on four key aspects of the business: liquidity,
efficiency, profitability, and solvency
Liquidity ratios are used to measure the ability of Beximco Pharmaceuticals Ltd. to repay its
shortterm debts and meet unexpected cash needs. Efficiency ratios are used to measure the
quality of the Beximcos receivables and how efficiently it uses its other assets.
Profitability ratios are used to measure Beximcos operating efficiency, including its ability to
generate income and therefore, cash flow. Cash flow affects the company's ability to obtain debt
and equity financing. Solvency ratios are used to measure longterm risk and are of interest to
longterm creditors and stockholders of Beximco Pharmaceuticals Ltd.
Vertical analysis
Vertical analysis of financial statements is a technique in which the relationship between items in
the same financial statement is identified by expressing all amounts as a percentage a total
amount. We used this method to compare different items to a single item in the same accounting
period.
Horizontal analysis
Horizontal analysis focuses on trends and changes in financial statement items over time. Along
with the monitory amounts presented in the financial statements, horizontal analysis can help a
financial statement user to see relative changes over time. The Horizontal analysis of Beximco
was done to examine the change in financial statement over the last five years.

2.0.Company Profile
Beximco Pharmaceuticals Ltd (BPL) is a leading manufacturer of pharmaceutical formulations
and Active Pharmaceutical Ingredients (APIs) in Bangladesh. The company is one of the largest

exporter of pharmaceuticals in the country and its state-of-the-art manufacturing facilities are
certified by global regulatory bodies of Australia, European Union, Gulf nations, Brazil, among
others. The company is consistently building upon its portfolio and currently producing more
than 500 products in different dosage forms covering broader therapeutic categories which
include antibiotics, antihypertensives, antidiabetics, antiretrovirals, anti asthma inhalers etc,
among many others. With decades of contract manufacturing experience with global MNCs,
skilled manpower and proven formulation capabilities, the company has been building a visible
and growing presence across the continents offering high quality generics at the most affordable
cost. Ensuring access to quality medicines is the powerful aspiration that motivates more than
2,800 employees of the organization, and each of them is guided by the same moral and social
responsibilities the company values most.
Corporate Governance & Committees
The Company has a three-tier management structure, comprising the Board of Directors, the
Executive Committee and the Management Committee. There is also an Audit Committee,
constituted in 2006.The Board is the highest level of authority within the Company comprising
mainly non-executive directors, none of whom receive directors' remuneration from it. The
Board meets with the Executive Committee, comprising six executive directors, twice a year to
conduct a full review of the Company's operations.
Executive Committee
The Executive Committee meets on a quarterly basis and its scope of work includes: business
review; budget approval; and senior management appraisal. Executive committee comprises of
five members: Mr. O.K. Chowdhury, Nazmul Hassan, Rabbur Reza, Ali Nawaz and Afsar Uddin
Ahmed. Mr. O.K. Chowdhury, who are members of the board, are also members of the Executive
Committee.

Management Committee
The Management Committee comprises operational heads and representatives of the Board and
Executive Committee and is chaired by the Managing Director. The Management Committee
2

meets on a monthly basis, is responsible for implementing the decisions of the Executive
Committee and supervising the day to day affairs of the Company and reports to the Executive
Committee at least on a quarterly basis. Mr. O.K. Chowdhury, Mr. N. Hassan, Mr. R. Reza, Mr.
A. Nawaz and Mr. A.U. Ahmed, are also members of the Management Committee.
Audit Committee
The Audit Committee consists of three non-executive directors. Mahbubul Alam is currently the
chairman of the audit committee while Osman Kaiser Chowdhury and Abdur Rahman Khan are
the members. The Committee assists the Board of Directors of the Company in ensuring that its
financial statements reflect true and fair view of its state of affairs and in ensuring a good
monitoring and internal control systems within the business. The Audit Committee shall be
responsible to the Board of Directors.
Shareholders' Meetings
In BPL Resolutions are to be proposed at shareholders' meetings which are classed as either
ordinary (requiring a bare majority in number of shares held by persons who attend and vote at
the meeting), or special or extraordinary (both requiring a 75 per cent. majority in number of
shares held by persons who attend and vote at the meeting). An Annual General Meeting of the
company is held once per calendar year and no more than fifteen months after the previous
Annual General Meeting.
Financial Disclosures
Under the Bangladesh Securities and Exchange Rules, 1987, Beximco Pharmaceuticals Ltd. as a
Bangladeshi listed company is obliged to prepare annual audited accounts, audited by a chartered
accountant, and to send such accounts to the Bangladesh SEC, the relevant stock exchanges and
all shareholders of BPL at least fourteen days prior to holding of its AGM. BPL is following this
regulation since its birth.
Enquiries into the Company's Affairs

The holders of not less than 5 per cent. of the issued share capital of Beximco Pharmaceuticals
Ltd. can appeal to the Bangladesh SEC to make enquirers into the affairs of the company in
which they hold shares, or its business and transactions.
Dividends
When a final or interim dividend is approved by the directors of a Beximco Pharmaceuticals Ltd.
the DSE, the CSE and the Bangladesh SEC require that decision to be notified to them within 30
minutes. The decision will be subject to shareholders' approval in the Annual General Meeting if
the dividend is a final dividend. The dividends are disbursed to the shareholders with 60 days of
such declaration.
Issue of Shares
The Articles of Association of Beximco Pharmaceuticals Ltd. provide that, subject to a
Shareholders' resolution to the contrary, any new shares to be issued must first be issued to the
existing Shareholders pro rata to their holdings.
Financial Assistance to Shareholders for Acquisition of Shares
Subject to certain very limited exceptions, Beximco Pharmaceuticals Ltd., being a public
company, does not give financial assistance to any person for the purposes of the acquisition of
any shares in the Company.
Loans to Directors
Beximco Pharmaceuticals Ltd. is not permitted to make any loans to directors or any person
connected with a director, unless the loan is for less than 50 per cent. of the value of the shares in
the Company held by the director; is approved by the Company in a general meeting; is approved
by the directors; and is specifically referred to in the annual report and accounts of the Company.
Constitution
The memorandum and articles of association are the constitutional documents of a Beximco
Pharmaceuticals Ltd.

3.0. Contents of Beximco Pharmaceuticals Financial Reports

Depreciation
BeximcoPharma has amortized the cost of its assets over their useful life following IAS 16:
Property, Plant and Equipment. Over the last five years, the company has used the same
depreciation method, which is reducing balance method. The rates used for the different types of
assets have somewhat changed over the course of time. The depreciation rate for Building and
other Construction changed from 2 10% (2009) to 5 10% from the year onwards. Plant and
Machinerys rate changed from 7.5 10% (2010) to 5 15% from the following year.
Inventory Valuation
Inventories at BeximcoPharma are valued at lower of cost and net realizable value according to
IAS 2: Inventories. Weighted average cost method is used to compute the costs. This same
process is used in inventory valuation over the last five years for this firm.
Disclosure
BeximcoPharmas financial statements are prepared in conformity with IFRS including IASs.
Financial Highlights
2009
Revenue

4,868,25

2011

2012

2013

6,490,847

7,890,242

9,289,115

10,490,699

3,173,207

3,786,533

4,389,401

4,838,800

867,467

1,361,532

1,677,849

1,909,829

2,093,594

624,740

1,051,649

1,198,525

1,319,389

1,404,763

3.50

4.18

3.93

3.77

4.01

5
Gross Profit

2010

2,302,04
8

Profit Before
Tax
Profit After Tax
Earnings per
Share (EPS)

4.0. Financial Analysis

4.1. Horizontal Analysis
Horizontal analysis is a procedure in fundamental analysis in which an analyst compares ratios or
line items in a company's financial statements over a certain period of time.
i)Income Statement:
Beximco Pharmaceuticals
Horizontal Analysis

Net Sales Revenue

Cost of Goods Sold
Gross Profit

Horizontal Analysis of Income Statement

2009
2010
2011
2012
2013
100
% 133.3% 162.1% 190.8% 215.5%
100% 129.3% 159.9% 190.9% 220.2%
100
% 137.8% 164.5% 190.7% 210.2%

Profit from Operations

100
% 118.2% 138.2% 167.7% 193.3%
100% 108.5% 127.9% 154.4% 174.5%
100% 120.1% 140.3% 170.4% 197.0%
100
% 163.4% 198.6% 220.5% 232.1%

Other Income
Finance Cost
Profit Before Contribution to WPPF and Welfare
Funds

100% 229.2% 171.3% 222.6% 256.6%

100% 228.8% 196.1% 223.0% 219.9%
100
% 157.0% 193.4% 220.2% 241.3%

Contribution to WPFF & Welfare Funds

100%

Operating Expenses
Administrative Expenses
Selling, Marketing and Distribution Expenses

Profit Before Tax

Income Tax Expenses
Current Tax
Deferred Tax
Profit after Tax for the Year
Other Comprehensive Income

157.0%

193.4%

220.2%

241.3%

100
% 157.0% 193.4% 220.2% 241.3%
100
% 127.7% 197.5% 243.3% 283.8%
100%
100%
98.4% 112.0%
59.6% 150.1%
100
% 168.3% 191.8% 211.2% 224.9%
6

Fair Value Gain on Investment in Listed Shares

100
% 168.3% 191.8% 211.2% 225.1%

Total Comprehensive Income for the Year

Earnings per Share (EPS)/ Adjusted EPS (2012)

100%

119.4%

136.0%

107.7%

114.6%

Sales Revenue

2009

2010

2011

2012

2013

Sales Revenue

1. Sales Revenue- Beximco Pharma has been

able to grow over the last 5 years as seen in the horizontal analysis. From 2010 to 2013 the sales
volume has increased. In 2013 the sales revenue was 215.5% in proportion to sales revenue of
2009. The market has enough scope to support the sales growth of the company. Also the
company has been consistent in improving every year.

Gross Profit

2009

2010

2011

2012

2013

Gross Profit

2. Gross Profit- the gross profit was 137.8%,

164.5%, 190.7%, 210.2% in the respective years 2010, 2011, 2012 and 2013. The gross profit
growth was consistent in relation to the sales revenue growth.

Operating expenses

2009

2010

2011

2012

2013

Operating expenses

3. Operating expenses- the operating expense

growth in the years 2010, 2011, 2012 and 2013 were 118.2%, 138.2%, 167.7%, 193.3%. The
operating expenses growth was lower than sales revenue growth. This might be the result of
fixed administrative expenses. The fixed costs are not depended on the sales volume, thus the
increased sales volume did not associated with increase in operating expenses. This in return
means that the administrative expense did not grow along with sales revenue growth.

Profit After Tax

2009

2010

2011

2012

2013

Profit After Tax

4. Profit after Tax (PAT)- The PAT growth rate

was 168.3%, 191.8%, 211.2%, 224.9% in the years 2010, 2011, 2012 and 2013. The PAT growth
rate has been higher than the sales revenue growth rate. This might have been the result of the
companys efficiency in keeping lower cost growth in relation to the sales revenue growth.

ii)Balance Sheet:
Beximco Pharmaceuticals Ltd.
Horizontal Analysis
8

Horizontal Analysis of Balance Sheet

ASSETS
2009
2010
Non-current assets
100% 117.0%
Property, Plant and Equipment-Carrying Value
100% 116.6%
Intangible Assets
Investment in Shares

100%
100%

892.8%
218.6%

2011
2012
122.4% 126.3%
121.4% 125.0%
2373.8
% 3266.9%
119.8% 119.8%

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

100%
100%
100%
100%
100%
100%
100%

89.5%
115.1%
114.2%
118.3%
111.4%
34.4%
139.0%

103.4%
133.0%
134.6%
140.9%
120.2%
87.7%
49.0%

118.5%
141.3%
163.7%
167.5%
138.1%
107.5%
52.2%

128.7%
140.0%
179.0%
180.0%
169.7%
121.1%
56.3%

100%

107.4
%

115.8%

123.6%

138.1%

Shareholders' Equity
Issued Share Capital
Share Premium
Excess of Issue Price over Face Value of GDRs
Capital Reserve on Merger
Revaluation Surplus
Fair Value Gain on Investment
Retained Earnings

100%
100%
100%
100%
100%
100%

146.7
%
138.8%
353.7%
100.0%
100.0%
94.9%

157.3%
166.6%
353.7%
100.0%
100.0%
90.7%

169.1%
201.5%
353.7%
100.0%
100.0%
87.0%

181.7%
231.8%
353.7%
100.0%
100.0%
83.4%

100%

118.8%

137.5%

156.5%

179.0%

Non-Current Liabilites
Long Term Borrowings-Net off Current Maturity
(Secured)
Fully Convertible, 5% Dividend, Preference Share
Liability for Gratuity & WPPF
Deferred Tax Liability

100%

43.2%

48.7%

46.6%

49.6%

100%
100%
100%
100%

98.8%
0.0%
109.3%
183.6%

98.2%
9.8%
313.4%
0.0%

76.3%
0.0%
162.5%
325.6%

59.8%
0.0%
198.6%
440.0%

100%
100%
100%

108.3
%
113.0%
113.0%

114.1%
113.2%
117.8%

132.0%
105.2%
215.2%

188.8%
191.3%
244.4%

TOTAL ASSETS

2013
143.1%
141.6%
3461.5
%
166.3%

SHAREHOLDER"S EQUITY AND LIABILITES

Current Liabilities and Provisions

Short Term Borrowings
Long Term Borrowings-Current Maturity

Creditors and Other Payables

Accrued Expenses
Dividend Payable
Income Tax Payable
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY

2009

2010

2011

2012

100%
100%
100%
100%

105.5%
114.4%
87.3%
0.0%

127.8%
128.4%
78.8%
21.9%

114.7%
162.6%
59.1%
388.3%

93.5%
179.0%
56.3%
461.4%

100%

107.4
%

115.8%

123.6%

138.1%

2013

Non-Current Assets

Horizontal Analysis:
1. Non-current Assets- The non-current assets of Beximco have increased somewhat steadily in
the last five years as a result of expansion of business operations. Notably, there was a steep
incline in the years 2010 and 2013 which were a result of significant increases in the property,
plant and equipment in those two years. Apart from that, intangible assets have increased
exponentially in all the five years resulting in the net increase in non-current assets in the five
years.
2. Current Assets- While most current assets of Beximco have steadily increased with the growth
of business in the last five years, there was a sharp decline in the short-term investments in 2010,
and cash and cash equivalents have also dramatically fell in 2011 and has very gradually

10

2009

2010

2011

2012

2013

Current Assets

increased since then. Now, a decrease in cash and cash

equivalents could be a result of more efficient use of liquid assets by the management meaning
less idle, liquid cash lying around in the business.

2009

2010

2011

2012

2013

Shareholders' Equity

3.

Shareholders Equity- The shareholders

equity has consistently increased since 2009 with the gradual expansion of the business
operations of Beximco and more shares being issued. In 2010, there was a rather steep incline in
the shareholders equity compared to the base year as a huge amount of 5% convertible,
preference shares were converted to ordinary shares in 2010.

11

2009

2010

2011

2012

2013

Non-Current Liabilities

4.

Non-current Liabilities- The non-current

liabilities of the firm underwent significant changes from 2009 onwards as a $4,100,000,000 of
5%, fully convertible, preference shares (non-current liability) were converted to ordinary shares
(equity) in 2010 causing a drastic fall in non-current liabilities of the firm. Most other
components of this item have had insignificant changes over the five year period.

2009

2010

2011

2012

2013

Current Liabilities & Provisions

5. Current Liabilities- The current liabilities and

provisions of the company have gradually increased with expanding operations. There was a
notable hike in current liabilities and provisions in 2013 which was caused due to the companys
increased need for short-term

4.2. Vertical Analysis

Vertical analysis is a method of financial statement analysis in which each entry for each of the
three major categories of accounts (assets, liabilities and equities) in a balance sheet is
represented as a proportion of the total account. Also in an income statement, the major
categories of accounts (COGS, Gross Profit, Operating Expenses, Profit from Operations and
Profit after Tax ) are presented as a proportion of the Net Sales. The main advantages of vertical
12

analysis are that the balance sheets of businesses of all sizes can easily be compared. It makes it
easy to see relative annual changes within one business.
i) Income Statement: First we look at the Vertical Analysis of Comprehensive Income
Statement. The broad headings taken here are- COGS, Gross Profit, Operating Expenses, Profit
from Operations and Profit after Tax
Statement of Comprehensive Income
For the Year Ended 31st December
Vertical Analysis
2009
2010
100%
100%
53%
51%
47%
49%
27%
24%
21%
25%
13%
16%

Net Sales Revenue

Cost of Goods Sold
Gross Profit
Operating Expenses
Profit from Operations
Profit after Tax

2011
100%
52%
48%
23%
25%
15%

2012
100%
53%
47%
23%
24%
14%

2013
100%
54%
46%
24%
22%
13%

Vertical Analysis
Cost of Goods Sold
53%
51%
2009

2010

52%
2011

53%

2012

54%

2013

Cost of Goods Sold(COGS): The ratio of

COOGS has been consistently around 53% over the 5 years time period. In 2009, it was 53%
which fell to 51% in 2010. In 2011, 2012 and 2013 the ratios were 52%, 53% and 54%. This
means that the COGS ratio has been increasing by 1% over the last 3 years. This indicates that
the company is being less efficient in maintaining its COGS ratio in lower proportionate to Net
Sales.

13

Vertical Analysis
49%
48%
Gross Profit

47%

47%
46%

2009

2010

2011

2012

2013

Gross Profit: The fluctuations in COGS Ratios

have been reflected in the Gross Profit ratio as well. As seen in the COGS ratios, it went down in
2010 and increased in the later years. Accordingly, Gross profit ratio increased in 2010, as a
decrease in COGS ratio and then eventually Gross Profit ratio decreased by 1% in the following
consecutive 3 years.

Vertical Analysis
Operating Expenses
27%
24%
2009

2010

23%
2011

23%
2012

24%
2013

Operating Expenses: In 2009, the operating

expense ratio was 27%. In 2010 the ratios decreased sharply by 3%. In 2010, the Net Sales
increases by 33% whereas operating expense increased by 18%. This means the company
managed to support its increased sales with proportionately less administrative expenses. In the
following 3 years, the operating expenses ratio has been around 23% and 24%.

Vertical Analysis
21%

2009

25%

25%

24%
Profit from Operations

2010

2011

2012

22%

2013

Profit from Operations: In 2009, the Profit

from Operations ratio was only 21%. As Net Sales increased but Operating Expenses increased
by less proportion, the Profit from Operations ratio increased by 4% in 2010. The efficiency in
14

keeping the Operating expenses proportionately lower resulted in increased Profit from
operations ratio.

Vertical Analysis
Profit after Tax
13%

2009

16%

2010

15%

2011

14%

13%

2012

2013

Profit after Tax(PAT): The PAT ratio reflects

the efficiency in managing Administrative Expenses. In 2010, the ratio increased by 3% along
with Profit from Operations. However, PAT ratios decreased by 1% in the consecutive 3 years.
ii) Balance Sheet: In the vertical analysis of Balance Sheet, items taken are: Non-Current assets
and Current assets in proportion of Total assets. On the other hand, Shareholders' Equity, Non
current Liabilities and Current Liabilities and Provisions are taken in proportion of Total Equity
and Liabilities.
Balance Sheet
As on 31 Dec

ASSETS
Non current Assets
Current assets
Total Assets
EQUITY AND LIABILITIES
Shareholders' Equity
Non current Liabilities
Current Liabilities and
Provisions
Total Equity and Liabilities

Vertical Analysis
2009
2010

2011

2012

2013

65%
35%
100%

71%
29%
100%

69%
31%
100%

67%
33%
100%

68%
32%
100%

55%
34%
12%

75%
13%
12%

74%
14%
11%

75%
13%
12%

72%
12%
16%

100%

100%

100%

100%

100%

15

Vertical Analysis
Non current Assets
71%

69%
67%

65%
2009

2010

2011

2012

68%

2013

Non-Current asset: the Non-current Assets to

Total Assets ratios were in between 65%-71% over the last 5 years. In 2010, the tangible and
intangible assets both increased, thus increasing the ratio. This ratio remained relatively stable in
the following 3 years.

Vertical Analysis
Current assets
35%

2009

29%

2010

31%

2011

33%

2012

32%

2013

Current Assets: The vertical analysis of

Current Assets shows that in 2010, the company decreased its Current Assets to Total Assets
ratios. In 2009, the ratio was 35%. In 2010 the ratio decreased by 6% and became 29%. Which
means the company tied its current assets to Non-current assets. This strategy used its idle assets
into revenue generating assets.

Vertical Analysis
Shareholders' Equity
75%

74%

75%

72%

55%

2009

2010

2011

2012

2013

Shareholders Equity: The company

increased its Shareholders Equity ratio by 20% in 2010. In 2009, the ratio was 55% and within
a year the ratio raised to 75%. In 2010, the company issued stocks, which were sold at huge
16

premium. This is the reason behind sharp increase in shareholders equity ratio. In the following
3 years, the Shareholders Equity ratio remained constant.

Vertical Analysis
34%
Non current Liabilities
13%
2009

2010

14%

2011

13%
2012

12%
2013

Non-current Liabilities: The company shifted its financing source from Non-current liabilities
to Stock Equity in 2010. The Non-current liability to Total Equity and liability ratio in 2009 was
34%. In 2010, it fell to 13%. In the following 3 years the ratio has been consistent in between
12%-14%.

Vertical Analysis
16%
12%

2009

12%
12% Liabilities
11%
Current
and Provisions

2010

2011

2012

2013

Current Liabilities and Provisions: The

Current Liabilities and Provisions to Total Equity and Liability ratio has been consistent in the
2009-2010. The ratio has been in between 11%-12% in the 4 years. in 2013, the current liability
ratio increased to 16%. Among the Current Liabilities and Provisions items, the short-term
investment increased by Tk.1.2 billion, this resulted in increased Current Liabilities and
Provisions ratio.

4.3. Ratio Analysis

Liquidity Ratios:
1.

Current Ratio =

Current Assets
Current Liabilities
17

Year
Current Ratio

2009
2.98

2010
2.46

2011
2.70

2012
2.67

2013
2.03

The current ratio of a company indicates its ability to pay off its short-term obligations using its
current assets. A current ratio of 1:1 means that the company has $1 of current asset to match
every $1 of current liability. In case of Beximco Pharmaceuticals Ltd., they have had a current
ratio well over 2 in all the five years analyzed in this report. Although a low current ratio (less
than 1) can be alarming, a very high current ratio also means that the management is not using
the working capital efficiently as there is idle money not being used. Beximco have gradually
brought their current ratio from nearly 3 in 2009 to nearly 2 in 2013, which is a positive change
towards the efficient use of the working capital.
2.

Quick Ratio=

Current AssetsInventory
Current Liabilities

Year
Quick Ratio

2009
2.24

2010
1.67

2011
1.83

2012
1.88

2013
1.48

The quick ratio is almost the same measure as the current ratio, with one exception; it does not
consider inventory in the current assets to calculate the amount of current assets available to pay
off short-term obligations. This is a more accurate measure of the short-term liquidity of a firm
as inventory can sometimes take time to turn to cash. As long as the quick ratio of a firm is above
1, there isnt much to worry about. In 2009, Beximco had a quick ratio of 2.24 which, certainly
desirable to suppliers of a firm, means that the company was being slightly inefficient with its
use of cash equivalents. However, in 2013, Beximco had a quick ratio of 1.48 meaning it had
nearly $1.5 of highly liquid assets (cash and cash equivalents) to pay off its current liabilities,
which could be considered satisfactory.
3.

WorkingCapital Ratio=

Year
Working Capital Ratio

Current AssetsCurrent Liabilities

Current Assets
2009
0.66

2010
0.59

2011
0.63

2012
0.63

2013
0.51

The working capital of a company shows how much liquid assets the company is left with, after
meeting all its short-term obligations for its everyday operations. Although it is generally
18

desirable to have a positive working capital ratio, many organizations who have a steady cash
flow are trying to reduce this ratio in order to be more efficient with their use of the current
assets of the business. Beximco has successfully reduced its working capital ratio from 0.66, five
years ago to 0.51 in 2013 indicating more efficiency by the management, while keeping
sufficient funds in the bank to finance everyday operations.
Activity/Efficiency Ratios:
1.

Total Asset Turnover =

Net Sales
Average Total Assets

Year
Total Asset Turnover

2009
0.28

2010
0.31

2011
0.36

2012
0.39

2013
0.40

This ratio indicates the sales generated by every dollar of assets applied to a business. The
greater the total asset turnover ratio, the better it is as that would mean that more sales/revenue
are being generated by the same amount of assets. Beximco has been able to steadily increase its
total asset turnover ratio in the last five years. In 2013, its total asset turnover was 0.40 meaning
the business was generating $0.40 sales for every $1 of revenue. Now, although the increase in
this ratio is veritably a good sign, it would have been more apt if this ratio could be compared to
the industry average.
2.

Accounts Receivable Turnover=

Year
Accounts Receivable Turnover

Credit Sales
Average Accounts Receivable
2009
1.17

2010
1.03

2011
0.93

2012
0.90

2013
0.98

This ratio signifies how many times a company collects its receivables, on average, within a year
or an accounting period. This ratio shows the measure of how liquid a companys receivables are,
or in other words, how soon can a company turn its receivables into cash. Hence, a ratio of 1.17
means the company converts its total due to debtors into cash 1.17 times in a year. The accounts
receivable turnover ratio of Beximco has been declining which is an alarming sign for the
company.

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3.

A / R Conversion Period=

365
Accounts Receivable Turnover

Year
2009
2010
2011
2012
2013
A/R Conversion Period
308.41 350.11 385.48 399.17 365.85
The accounts receivable conversion period is an extension of the previous ratio that measures the
number of days a company takes to convert its receivables to cash. Beximcos A/R conversion
period increased from 308 days in 2009 to 366 days in 2013 which is certainly a very alarming
situation for Beximco.
4.

Inventory Turnover=

Cost of Goods Sold

Average Inventory

Year
Inventory Turnover

2009
1.59

2010
1.79

2011
1.92

2012
2.07

2013
2.33

The inventory turnover ratio of a company shows the average number of times a company
completely sells out its entire inventory. In other words, it is a measure of how many times did
Beximco completely sell out the merchandise it had in stock. The greater this ratio, the better it
is, because that would mean that the companys goods are being sold out quickly. An inventory
turnover of 5 means the company sold out its stocked merchandise completely 5 times in a year.
Although Beximco has a low overall inventory turnover, the ratio has improved and increased
steadily since 2009. Furthermore, a comparison with the industry average would have enabled us
to comment on the significance of the numbers. However, since that is one limitation of this
report, we can only comment on the trend of the ratio and not the numbers.
5.

Days Held Inventory=

Year
Days Held Inventory

365
Inventory Turnover
2009
226.44

2010
201.11

2011
187.54

2012
173.61

2013
154.33

An extension of the inventory turnover ratio, this ratio measures the number of days a particular
merchandise stays in stock before it gets sold out. In other words, how quickly do manufactured
goods get sold out and what is the waiting period for them in the warehouse. In 2009, Beximco
had a DHI of 226 meaning goods were held for as long as 226 days before being sold. That ratio
has now decreased to 154 in 2013, which is certainly a positive sign.
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Profitability Ratios:
1.

Gross Profit Ratio=

Year
Gross Profit Ratio

Gross profit
Net Sales
2009
0.47

2010
0.49

2011
0.48

2012
0.47

2013
0.46

The gross profit ratio of a firm shows the percentage of sales revenue that is eventually converted
into profits after deducting the cost of the goods sold. Thus, a gross profit ratio of 0.5 means that
for every $1 sale, the company makes a profit of $0.50. The gross profit ratio of Beximco has
remained static at around 0.5 or 50% for most of the five years under analysis and does not show
any particular trend in its variation. However, comparing this ratio with the industry average
would have given a better idea about whether the company is making enough profits or not as
per the industry norms.
2.

Profit Margin=

Year
Profit Margin

Net profit
Net Sales
2009
0.13

2010
0.16

2011
0.15

2012
0.14

2013
0.13

The profit margin or the net profit ratio shows how much of the sales was converted to profits
after making all kinds of deductions including operating expenses, interest and taxes and so on.
This is the ultimate tool to judge the profitability of a company, because the gross profit ratios
can sometimes be misleading as they do not present a clear picture of the operating expenses of a
company. The profit margin of Beximco has been fluctuating from 0.13 to 0.16 in the last five
years, being the highest in 2010. Now, there are several factors that could affect the profit margin
of a company such as increased operating costs, reduced sales and so on. The horizontal analysis
of the income statement presents a clearer picture of these issues.
Net profit
Return on Equity=
3.
Average Equity
Year
Return on Equity

2009
0.06

2010
0.08

2011
0.07

2012
0.07

2013
0.07

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The return on equity of a firm measures the profit earned on every dollar of equity put into the
business by the owners/shareholders of the company. Hence, an ROE of 0.5 would mean that for
every $1 of equity, a shareholder will earn a profit of $0.50 on that $1, every year. The ROE of
Beximco has somewhat remained steady at 0.07 for the past consecutive three years meaning the
shareholders are getting 7% as a return on their share of equity in the business, every year.
4.

Return on Asset=

Net profit
Average Assets

Year
Returnon Asset

2009
0.04

2010
0.05

2011
0.05

2012
0.06

2013
0.05

The return on asset is a measure calculating the profit as a proportion of the total assets of a
business used to generate those profits. This gives the business an idea of how efficiently and
profitably are assets being used. If the ROA of two different businesses with the same amount of
total assets is differing, it is certain that the business with a higher ROA is being more profitable
as it is generating more profits using the same amount of assets. The ROA of Beximco has also
remained steady at around 0.05.
5.

Returnon Investment=

Year
Return on Investment

Net Income
Average Investment ( TACL )
2009
0.04

2010
0.06

2011
0.06

2012
0.06

2013
0.06

Similar to ROE and ROA, the ROI measures the profit made for every dollar of additional
investment in the business. The ROI of Beximco has increased from 0.04 to 0.06 in 2010 and has
remained so for the next four years. Although most of these ratios do imply overall profitability,
they would have been much more informative and relative if compared to industry average
ratios.

6.

Year

Earnings per Share=

Net profit prefered dividends

Number of S h ares
2009

2010

2011

2012

2013
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Earnings per Share

3.50

4.18

4.76

3.77

4.01

This is the profitability ratio most commonly used by investors and shareholders in deciding the
profitability of a particular companys share. The earnings per share ratio projects how much
profit is being made for every single share (unit of equity for a public company). Since
preference shareholders are not considered to be the ultimate owners of a company, the earnings
per share is calculated after deducting the preference dividend from the net income and divided
by the number of ordinary shares outstanding. It should be noted that the EPS is the amount of
profit made per unit of ordinary share and not per dollar. The EPS of Beximco suffered a sharp
decline in the year 2012 when EPS fell to $3.77 but seems to be recovering from it with an EPS
of $4.01 in 2013
Solvency Ratios:
1.

DebtTotal Asset Ratio=

Year
DebtTotal Asset Ratio

Total Debt
Total Assets

2009
0.45

2010
0.25

2011
0.26

2012
0.25

2013
0.28

The debt to total asset ratio of a company shows how much of the business is financed by debt.
This ratio was rather high for Beximco in 2009 due to the 5% dividend, fully convertible,
preference shares that the company had due in that year. However, in the following years, this
ratio drastically fell to 0.25 onwards as those shares were bought back. This ratio slightly rose to
0.28 in 2013 due to a significant increase in short-term borrowings in 2013.
2.

LongTerm Debt Equity Ratio=

Year
LongTerm Debt Equity Ratio

Long term Debt

Total Equity

2009
0.61

2010
0.18

2011
0.19

2012
0.17

2013
0.17

This ratio calculates the ability of a firm to pay off its long-term obligations from the equity of a
business. In any case, a long-term debt to equity ratio below 1 is considered safe. A long-term
debt to equity of 0.5 would thus mean that that firm has $1 of equity to pay of $0.5 of long-term
debts. For Beximco, this ratio is well below in the later years of the analysis period. The ratio
was relatively high in 2009 due to the existence of the 5%, convertible, preference shares in the
23

long-term liabilities. Once those preference shares were converted to ordinary shares, the equity
of the firm increased significantly and the long-term debt of the company also decreased
drastically causing this ratio to fall below 0.2.
Other Ratios:
1.

Interest Earned =

Income before interest expensetax

Interest Expense

Year
Interest Earned

2009
4.15

2010
3.16

2011
4.10

2012
4.11

2013
4.45

The times interest earned ratio is just a proportion of the profit in terms of the interest expense of
a company. In other words, it represents the number of times by which the profit exceeds the
interest paid on the long-term debts of the firm. It compares the cost of debt to the benefit (profit)
of those debts. The times interest earned ratio of Beximco has remained well over 4 in most of
the years except in 2010 due to increased interest expenses.
2.

PriceEarnings Ratio=

Year
PriceEarnings Ratio

Market price of per s h are of stock

Earnings per s h are
2009
44.51

2010
32.32

2011
23.82

2012
14.83

2013
11.77

The price to earnings ratio of a company essentially shows the number of years it will take to
receive back the purchase price of a share from its accumulated returns. Thus, if a particular
share costs $10 and has an EPS of $1, its PE ratio would be $10/$1, which is 10. Thus, it would
mean that it would take 10 years for an investor to get back his principal amount in the form of
dividends or earnings, apart from the market price of the share of course, if s/he invests in this
share. The PE ratio of Beximco has drastically reduced from almost 45 in 2009 to almost 12 in
2013. This may have been caused by increased EPS or reduced market price of the share. A
deeper analysis of the issue could reveal the actual reason for this.

5.0. Conclusion
Beximco Pharmaceuticals has been consistent in its performance of making profits and kept its
Earnings per Share consistent (4.18-3.50). In 2010, the company took some strategic decision
24

and made investments in assets to increase its revenue. This resulted in increased Inventory
Turnover ratio and decreased Days in Inventory ratio. It shows that the company not only has
been able to maintain its performance, but also it managed to improve its turnover.
Beximco Pharmaceuticals has been consistent in maintaining its Current Ratio and Working
Capital ratio. It decreased its Quick ratio over the years by 0.76 by reducing the volume of
inventory they hold.
In the Efficiency ratio, the company significantly improved in each ratio measurement. Total
Asset Turnover ratio improved in the 5 years (from 0.28 in 2009 to 0.40 in 2013). Inventory
Turnover and Days Held in Inventory also improved during 2009-2013. However, the Accounts
receivable conversion period increased from 308.41 in 2009 to 365.85 in 2013. This indicates
inefficiency in collection from the customers. On the other hand, this increased A/R conversion
period might be necessary for the increased the Net Sales.
In solvency ratio, it has been seen that the company decreased its Debt-Equity ratio in 2010 by
issuing new stock at huge premium. The company used finances from the shareholders to support
its investment. It reduced its dependency on debt over the last 4 years. In 2009, the Long Term
Debt - Equity Ratio was 0.61. Beximco Pharma reduced the ratio to 0.17 in 2013.
The Beximco Pharma has been able to maintain its profitability thus the shareholders return as
well. Still, the P/E ratio decreased from 44.51 in 2009 to 11.77 in 2013. This might have
occurred because of the overall stock market crush.

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