Square Pharmaceuticals

Nafis Islam
Id: 111092189 Sec: B Submitted to
Interpretation of Square Pharmaceuticals manufacturing ratio and compare it with the Industry average of peer group ( Beximco Pharmaceuticals, Reneta pharmaceuticals, Khohinor Chemicals). Manufacturing Ratios: Square Pharmaceuticals SQUARE Centre, 48, Mohakhali C/A, Dhaka - 1212, Bangladesh
+88-02-8859007 , +88-02-8833047

Suborna Barua

Quick Ratio Current Ratio Current Liabilities To Net Worth Current Liability To Inventory Total Liabilities to Net Worth Fixed asset To net Worth Inventory Turnover

+88-02-8834941, +88-02-8828768, +8802-8828609

7/15/2012

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Sales to Net Working Capital Account Payable to Sales

Contents: Manufacturing Ratio

Quick ratio:...................................................3 Current Ratio:................................................4 Current Liabilities To Net Worth...................5 Current Liability To Inventory .......................6 Total Liabilities to Net Worth........................7 Fixed asset To net Worth ..............................8 Inventory Turnover .......................................9 Asset to Sales ..............................................10 Sales to Net Working Capital ......................11 Account Payable to Sales ............................12 Return on Sales (Profit Margin) ..................13 Return On Asset (ROA)................................14 Return On Net Worth (ROE)........................15 Daliy Sales Outstanding (Collection Period)16

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Quick ratio:

current liability so decrease ration at negative 29.25%.

Distance of quick ratio with industry average quick ratio is that:

2006 (0.09)
Quick ratio, define as acid test ratio, reveals a company's ability to meet shortterm operating needs by using its liquid assets. It considers a more reliable indicator of a companys short-term financial strength. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 32.39% 10.78% 80.73% 18.51% 29.25%

2007 (0.14)

2008 (0.07)

2009 (0.24)

2010 (0.27)

2011 (0.14)

Square Pharma quick ratio is close to good situation in 2006 & 2008 including moderate rate was in 2007 & 2011 but was worst in 2009 & 2010. Deviation with industry average:
2006 -25.06% 2007 2008 -44.43% -31.42% 2009 -44.81% 2010 2011 -44.06% -37.16%

Square Pharma current liability increase and proportion of quick asset can offset less amount of current liability in 2007. In 2008 Current liability increase more than 2007 so quick ratio rate decrease and change in percentage negative 10.78%. in 2009, 859 Million current liability decrease so quick asset now offset more current liability and increase more than 80%. In 2010, current liability decrease slightly and cash decrease some amount but account receivable increase. In 2011, current liability increase in 2,451 Million so quick asset can off less portion of

In 2006, Reneta and beximco Pharma quick ratio was 0.40 and 0.43. Their quick asset can more offset their current liability. In 2009, deviation is most within 2006-12. Beximco pharma quick ratio was .75 in 2009 so they can offset almost three fourth of the current liability with quick asset. In previous year square have 0.24 quick ratio where beximco pharma quick ratio was .57 so we can easily understand the deviation of square pharma quick ratio with industry average in 2011.

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Current Ratio:

Square Pharma CR ratio was too good in 2006 & 2019 but too bad in 2009.

Deviation from Industry Average 2006 2007 2008 2009 2010 2011 35.66% -6.49% 15.93% -31.83% 11.06% -19.43%
In 2006, Square pharma have Current Ratio better than Beximco pharma, Reneta pharma. In 2007, Beximco Pharma ratio better than squarepharma so industry average and square pharma ratio very close. In 2008, current asset increase so square ratio is better position than industry average. In 2009, square current asset and current liability decrease but Beximco pharma current ratio was 2.98 so a large scale of deviation happened. In 2011, though current asset increase 2,469 million but beximco pharma current ratio was 2.7 as a result industry average go up than the square pharma current ratio.

Measures the margin of safety present to cover any possible reduction of assets. Time series analysis of Square Pharmaceuticals 2007 19.20% 2008 2009 2010 2011 26.76% 12.54% 15.49% 41.13%

Current asset decrease 349 Million in 2007 so current ratio of time series analysis decrease. In 2008, current asset and liability increase more than 1,000 million. In 2010, current asset increase 709 million and current liability decrease so best increase in current ratio than its previous year we get this ration in 2010. In 2011, current asset increase 2459 million where current liability increase 2461 million so we get negative growth than previous year. Distance of Current ratio with industry average Current ratio is that:

2006 0.47

2007 (0.10)

2008 0.17

2009 (0.68)

2010 0.20

2011 (0.36)
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Current Liabilities To Net Worth

in best position from 2007 to 2011. At present, their current liability increase significantly so ratio get high and are in worst position to cover current liability by shareholders equity. Distance from Industry Average:
2006 (1.62) 2007 (1.72) 2008 (1.97) 2009 (2.38) 2010 (2.62) 2011 (2.90)

Square Pharma have very high rate of equity for payment of debt. Situations are becoming good increasing at a increasing rate. Indicates reliance on the equity for payment of debt. It is one of the measures of the solvency of a firm and, as a rule of thumb, should not exceed 60 percent; higher percentages mean significant pressure on future flows. The smaller the net worth and the larger the liabilities, the greater the risk. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 1.31% 19.35% -36.18% -28.75% 78.64% If the current liability to net worth ratio less previous year mean company are in better position than previous year. From 2006 to 07 current liabilities increase not more than value of the shareholder equity increases. So we get negative percentage of ratio. In 2008, current liability increase so ratio high. In 2009, significant of share issue by square so ratio gets low and was

Deviation from Industry Average 2006 2007 2008 -82.09% -83.16% -82.57%

2009 -89.97%

2010

2011

-93.26% -89.57%

In 2006 square have o.35 ratio where Khohinor chemicals had 10.29 so deviation from square to industry average was high. In 2007, square had 0.35 ratio where beximco pharma was 0.20 ratio but khohinor had11.25 ration here we found deviation from square to industry average. In2011, Square ratio was 0.34, though Beximco ratio was 0.20 but khohinor ratio was 18.68 so here we found a big deviation between square to industry average ratio of current liability to net worth ratio.

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Current Liability To Inventory

2006 0.34

2007 0.44

2008 0.14

2009 (0.10)

2010 (0.33)

2011 0.35

Higher the deviation, lower the capability of meeting debt by selling inventory. Square pharma fully capable of repaying current debt by selling inventory in 2009 & 2010.
Deviation from Industry Average 2006 2007 2008 25.35% 35.86% 8.55%

2009 -7.50%

2010 -24.54%

2011 23.26%

How much a firm relies on fund from disposal of unsold inventory to meet debt. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 1.73% 4.37% -27.15% -20.18% 82.86% 1st three years inventory and current liability increase and current liability are more than inventory. In 2009, current liability decrease and approximate equal position to offset each other. In2010, inventory increase and current liability decrease and ratio get smaller. In 2011, Inventory increase but current liability increase more than 2,451 million so ratio get bigger create worst situation from company to offset current liability by inventory. Distance from Industry Average:

In 2006, Beximco ratio was 1.44 and renata ratio was 1.03 but square ratio was 1.68 so oviously square ratio was more than 25% higher than industry average. In 2007, Square rato was 1.65 though Beximco ratio was1.44 and Renata ratio was 1.08 so Square ratio increase by more than 35%. In 2009. Square ratio was 1.26 where Beximco And Raneta ratio are 1.35 and 1.31. So industry average are above than the square pharma. They maintain this good ratio two years but in 2011, Square ratio above than the industry average .

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Total Liabilities to Net Worth

good. In 2011, total liability increase by 2,151 million and net worth increase by 2,096 million so ratio get bigger and more than 35% increase in result than last year Distance from Industry Average:

2006 (2.52)

2007 (2.62)

2008 (2.74)

2009 (3.47)

2010 (3.65)

2011 (3.93)

Compare the company indebtedness to the venture of capital investment. A measure of the extent that the net worth of the Square can offset the liabilities. The lower rate has more capability to offset shareholder equity by total liabilities. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 4.96% 18.41% 34.83% 10.66% 37.35% In 2007, Total liability increase by 256 million and net worth is increasing by 931 million so ratio get smaller than previous year and company financial condition become good. In 2008, current liability increase by 1,132 million and net worth increase by 1,083 million so ratio get larger and company condition become in this sector in this year. In 2009, total liability decrease by 984 million and net worth increase by 1,532 million so ratio get lower and company condition become

Square have lower total liabilities to net worth ratio than its industry average so we can say creditor can satisfy for investing in low risk company.

Deviation from Industry Average 2006 2007 2008 -84.78% -85.89% -84.35%

2009 -91.27%

2010 -92.49%

2011 -90.61%

In 2006, Square ratio was 0.45 where Beximco and Renata ratio were 0.50 and 0.81 but khohinor chemicals ratio was 15.83 so they create a large deviation from square to industry average by more than 78%. In 2008, Square ratio was 0.51 where Beximco and Renata ratio were 0.42 and 0.90 but Khohinor ratio was 17.74 so huge deviation belong to square and industry average. In 2011, Square ratio was 0.41 but Beximco did better 0.34 and Renata ratio was 0.94 yet Khohinor can increase their equity value and ratio is the biggest than ever which is 24.89%. So khohinor is in serious trouble with equity But square have no defect in total liability to net worth ratio over all its a strength for square pharmaceuticals.
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Fixed asset To net Worth

2006 (1.39) 2007 (1.23) 2008 (1.21) 2009 (1.32) 2010 (1.25) 2011 (1.21)

Square pharma fixed asset to net worth ratio good than industry average in 20062011.

Deviation from Industry Average 2006 2007 2008 -79.65%

Portion of net worth consist of fixed asset. A measure of the extent of an Square's investment in non-liquid and often over valued fixed assets. A ratio of .75 or higher is usually undesirable as it indicates possible over-investment and causes a large annual depreciation charge that will be deducted from the income statement. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 35.57% 0.88% 1.38% -2.45% 5.18% In 2007, fixed asset increase by 1,257 million and net worth increase by 931 million so square ratio increases by more than 35%. In 2009, fixed asset increase by 811millions and net worth increase by 1,532 millions so square ratio increases by 1.38% than previous year. In 2010 fixed increase by 731 million and net worth increase by 1,771 million but square ratio decrease by more than 2%. Distance from Industry Average:

2009 -72.82%

2010 -72.24%

2011 -70.62%

-71.79% -71.28%

In 2006, Square ratio was .36 where Beximco ratio was 1.07 and Renata ratio was .70 and Khohinor ratio was 6.09 so large deviation occur between square to industry average. In 2008 Square ratio was .49% where Beximco, Reneta& khohinor chemicals ratio were 1.14, .61, 5.66 so deviation happened by 71% more. In 2010, Square ratio was .48 where Beximco, Renata & Khohinor ratio were .95, .86, 6.13 deviation occurred more than 72%. In 2011 Square ratio was .51 where Beximco, Reneta& khohinor chemicals ratio were .93, .96, 5.97 so deviation happened by more than 70%.

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Inventory Turnover

should be reduced its inventory turnover ratio.

Deviation from Industry Average 2006 2007 2008 113.07% 85.99% 66.25%

2009 78.46%

2010 83.06%

2011 75.04%

A ratio showing how many times a company's inventory is sold and replaced over a period. Time series analysis of Square Pharmaceuticals 2007 2008 6.87% -16.33% 2009 2010 2011 14.75% 11.09% 1.86%

In 2006, Square inventory turnover is 5 times where Beximco, Renata, Khohinor inventory turnover is 2.11, 3.02 and 2.78 times so deviation between square and industry average were more than 113%. In 2008, Square inventory turnover is 4.72 where Beximco, Renata, Khohinor inventory turnover are 2.66, 3.22, 2.75 so deviation is more than 66%. In 2011, Square inventory turnover is 6.13 where Beximco, Renata, Khohinor turnover are 3.44, 4.11, 2.57 so deviation is more than 75%.

In 2007, sale increase by 1,625 million and inventory increase by 201 million So inventory turnover ratio increase by more than 6%. In 2009, sales increase by 1,800 million and inventory increase by 72 million so inventory turnover ratio increase by more than 14 %. In 2011, sales increase by 2,297 million and inventory increase by 334 million so inventory turnover ratio increase by more than 1% Distance from Industry Average:
2006 2.80 2007 2.61 2008 1.88 2009 2.38 2010 2.73 2011 2.63

Square inventory turnover ratio is bad in all year compare to industry average
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Asset to Sales
Square pharma asset to sales ratio is lower than its industry average means its asset generate sales capability is too high.
Deviation from Industry Average 2006 2007 2008 -40.04% -45.43% -46.12%

2009 -56.34%

2010 -49.27%

2011 -40.03%

Reflects the total amount of investment in asset to generate this sale. Lower the rate of ratio, higher capability to generate sale. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 -8.27% 10.31% -12.21% -1.84% 9.08% In 2007, Square total asset increase by 1,187 and sales increase by 1,625 million but ratio get lower than previous by more than 8%. In 2009, Square total assets Increase by 518million and sale increase by 1800 million but ratio get lower than previous year by more than 12%. In 2011, Square total asset increase by 4,247 million and sales increase by 2,297 million but the ratio get higher than previous year by more than 9%. Distance from Industry Average:
2006 (0.88) 2007 (1.00) 2008 (1.14) 2009 (1.50) 2010 (1.11) 2011 (0.83)

In 2006, Square ratio was 1.31 where Beximco, Renata, Khohinor ratio were 3.22, .92, .87 so deviation occur by 40%. In 2008, Square ratio was 1.33 where Beximco, Renata, Khohinor ratio were 3.7, 1.02, .75 so deviation occur by 46%. In 2011, Square ratio was 1.25 where Beximco, Renata, Khohinor ratio were 2.92, 1.18, 0.77 so deviation occur more than 40%.

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Sales to Net Working Capital

2006 4.86

2007 8.09

2008 1.36

2009 7.60

2010 (12.56)

2011 (13.22)

Square pharma sales to net working capital more or less good until 2009. Huge problem face in 2010 and 2011. The problem is increasing so square pharma is in trouble with in this problem.

Deviation from Industry Average 2006 2007 2008 -563.48% -2251.06%

2009

2010

2011

14.87% 410.43%

-68.84% -66.64%

Reflects the efficiency to use it short term asset and liability to generate profit. The higher the ratio, the higher the efficiency.

Time series analysis of Square Pharmaceuticals 2009 93.19% 35.84% 9.99% 2007 2008 2010 39.86% 2011 16.42%

In 2006, Square ratio was 4 where Beximco, Renata, Khohinor ratio were 4.46, 6.02, -32.65 so deviation happened more than 563%. In 2008, Square ratio was 10.50 where Beximco, Renata, Khohinor ratio wee 15.43, 16.04, -26.12 so deviation happened more than 14%. In 2011, Square ratio was 6.62 where Beximco, Renata, Khohinor ratio were 1.75, -7.07, 134.38 so deviation occurred by more than 66%.

In 2007, Square sales increase by 1,625 million and net working capital decrease by 643 million but ratio increase by more than 93% than previous year. In 2009, Sales increase by 1800 million and net working capital increase by 291 million but ratio decreased by more than 9%. In 2011, Sales increase by 2,297 million and net working capital increase by 17 million so ratio more than 16% increase than previous year. Distance from Industry Average:
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Account Payable to Sales

Square pharma use less amount of account payable to generate sale than its industry average.

Deviation from Industry Average 2006 2007 2008 -89.06% -92.69% -90.03%

2009 -90.44%

2010

2011

-71.83% -42.68%

Measure the extent to which supplier money generate sale. The higher the rate of ratio, reflect higher efficiency to account payable on sale. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 37.91% 51.70% 3.55% 171.98% 58.39% In 2007, Account payable decrease by 18 million and sales increase by 1625 million so more than 37% increase than previous year. In 2009, account payable increase by 23million and sales increase by 1800 million. So 3.5% increase than previous year. In 2011, account payable increase by 338 million and account payable increase by 2,297 million so 58% increase than previous year. Distance from Industry Average:

In 2007 Square ratio was 2.54 where Beximco, Renata, Khohinor ratio were 27.58, 546, 114.76 so deviation occurred by 92%. In 2009 Square ratio was 3.99 where Beximco, Renata, Khohinor ratio were 30.73, 2.61, 153.68 so deviation occurred by 90%. In 2011, Square ratio was 17.18 where Beximco, Renata, Khohinor ratio were 24.23, 2.81, 100.98 so deviation happened by 42%.

2006 (33.31)

2007 (32.21)

2008 (34.80)

2009 (37.74)

2010 (27.66)

2011 (12.79)
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Return on Sales (Profit Margin)

Square pharma have good profit on sale than its peer group companies.

Deviation from Industry Average 2006 2007 2008 5.51% 5.46% 2.48%

2009 4.64%

2010 1.50%

2011 2.64%

Reflects profit earn in each sale. The higher the ratio, higher the profit earn on sale. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 -9.08% -3.44% 15.11% -5.44% 3.39%

In 2007, Square ratio was .15 where Beximco, Renata, Khohinor ratio were .10, .13, .01 so deviation occurred by 5,51%. In 2011 Square ratio was .16 where Beximco, Renata, Khohinor ratio were .15, .17, .02 so deviation increased by 2,64%

In 2007, net profit after tax increase by 137 million and sales increase by 1625 million so more than 9% increase than previous year. In 2009, net profit after tax increase by 508 million and sales increase by 1800 million to 15% increase ratio than previous year. In 2011, net profit after tax increase by 444million and sales increase by 2297 million to 3.39% increase than previous year.

Distance from Industry Average:

2006 0.06 2007 0.05 2008 0.02 2009 0.05 2010 0.01 2011 0.03

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Return On Asset (ROA)

Square have very good ROA ratio than its peer group companies.

Deviation from Industry Average 2006 2007 2008 95.10% 93.09% 67.60%

2009 109.94%

2010 72.23%

2011 74.94%

Key indicator to judge the profitability of a firm. Operating profit with asset available to earn return. The higher the ratio means higher return on asset. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 0.88% -12.47% 31.12% 3.67%

2011 5.22%

In 2007, Square ratio was .12 where Beximco, Renata, Khohinor ratio were .03, .16, .02 so deviation occur by more than 93%. In 2009, Square ratio was .14 where Beximco, Renata, Khohinor ratio were .03, .16, .03 so deviation occurred by more than 109%. In 2011, Square ratio was .13 where Beximco, Renata, Khohinor ratio were .05, .14, .03 so deviation occur by 74%.

In 2007, Net profit after increase by 137 million and total asset increase by 1187 millions so ratio decrease by .88% than previous year. In 2009, Ne profit after tax increase by 508 million and total asset increase by 528 millions so 31% increase than previous year. In 2011, net profit after tax increase by 444 million and total asset increase by 4247 million so ratio decrease by more than 5%. Distance from Industry Average:
2006 0.06 2007 0.06 2008 0.04 2009 0.07 2010 0.06 2011 0.06

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Return On Net Worth (ROE)

Square have good condition on ROE but becoming worst condition at present.

Deviation from Industry Average 2006 2007 2008 21.13% 20.00% -13.91%

2009 -11.78%

2010 -19.19%

2011 -21.77%

Ability to generate profit on share holder invested money. The higher ratio, the higher efficiency of generating return on equity. Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011 -2.41% -7.62% 15.71% -6.23% 2.88%

In 2007, Square ratio was .18 where Beximco, Renata, Khohinor ratio were .04, .26, .31 so deviation occur by 20%. In 2009, Square ratio was .19 where Beximco, Renata, Khohinor ratio were .06, .27, .67 deviation decrease by more than 11%. In 2011, Square ratio was .18 where Beximco, Renata, Khohinor ratio were .07, .27, .75 so deviation decrease by 21%.

In 2007, Net profit after tax increase by 137 million and equity increase by 931 milion so ratio decrease by morethan 2% than previous year. In2009, Net profit after tax increase by 508 million and equity increase by 1532 million so ratio increase by 15% more than previous year. In 2011, Net profit after tax increase by 444 million and equity increase by 2096 million so more than 2% increase than previous year. Distance from Industry Average:
2006 0.03 2007 0.03 2008 (0.03) 2009 (0.03) 2010 (0.04) 2011 (0.05)

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Daliy Sales Outstanding (Collection Period)

million so 29.56% increase than previous year. Distance from Industry Average:

2006 (19.87)

2007 (22.98)

2008 (23.72)

2009 (23.09)

2010 (22.03)

2011 (17.57)

Square pharma DSO is very high. Its means it require more time to collect money from buyer. They have to reduced this problem in short time.

The average collection period is the number of days, on average, that it takes a company to collect its credit accounts or its accounts receivables. In other words, this financial ratio is the average number of days required to convert receivables into cash.

Deviation from Industry Average 2006 2007 2008 -57.19% -62.94% -63.31%

2009 -60.09%

2010 -61.20%

2011 -49.26%

Time series analysis of Square Pharmaceuticals 2007 2008 2009 2010 2011

In 2007, Square DSO was 13.53 where Beximco, Renata, Khohinor ratio were 50.70, 28.05, 1.55 so deviation decrease by 57%. In 2009, Square DSO was 15.34 where Beximco, Renata, Khohinor ratio were 52.04, 32.18, 1.45 so deviation decrease by 60%. In 2011, Square DSO was 18.10 where Beximco, Renata, Khohinor ratio were 45.25, 35.84, 1.18 so deviation decrease by more than 49%.

-9.04% 1.61% 11.56% -8.90% 29.56% In 2007, Account receivable increase by 34 million and sales increase by 1625 millions so ratio decrease 9% than previous year. In 2009, Account receivable increase by 117 million and sales increase by 1800 millions so 11.56% increase than previous year. In 2011, Account receivable increase by 264 million and sales increase by 2,297
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