5 years ratio for RENATA LIMITED

Liquidity Ratios
2010 2011 2012 2013 2014
Current ratio 1.14 0.74 1.12 0.75 0.94
Quick (acid-test) ratio 0.42 0.25 0.41 0.24 0.40

Activity Ratios
2010 2011 2012 2013 2014
Inventory turnover 2.07 1.97 1.79 1.68 2
Average collection period 31.3 days 33.3 days 35.3 days 34.9 days 53.2 days
Average payment period (a) 4.7 days 6 days 4.2 days 31.6 days 9 days
Total asset turnover 1.90 0.99 0.77 0.69 0.77

Debt Ratios
2010 2011 2012 2013 2014
Debt ratio 39.82% 47.63% 47.89% 50.1% 46.08%
Times interest earned ratio 11.70 7.41 5.29 5.19 5.75
(b)
Fixed-payment coverage n/a n/a n/a n/a n/a
ratio

Profitability Ratios
2010 2011 2012 2013 2014
Gross profit margin 52.52% 51.09% 51.53% 49.07% 49.98%
Operating profit margin 26.72% 25.14% 26.91% 26.34% 25.45%
Net profit margin 18.10% 15.79% 15.08% 15.30% 14.76%
Earnings per share (EPS) Tk 543.23 Tk 47.08 T k 41.96 Tk 39.57 Tk 38.24
Return on total asset (ROA) 17.98% 13.11% 11.65% 10.66% 11.38%
Return on equity (ROE) 29.89% 25.04% 22.51% 21.42% 21.47%

Page | 1
 Market Ratios
2010 2011 2012 2013 2014
Price/earnings (P/E) ratio 23.82 25.59 17.62 18.24 25.73
Market/book (M/B) ratio 129.42 120.5 73.95 72.2 98.4

Notes:
(a) From 2012 purchase is calculated with this formula (cost of goods sold + closing
inventory – opening inventory).
(b) Finance cost is used as interest.

Page | 2
 Analysis on 5 year ratio of Renata Limited

Liquidity Ratios

Current Ratio
1.14 1.12
1.2
0.94
1
0.74 0.75
0.8
0.6
Current Ratio
0.4
0.2
0
2010 2011 2012 2013 2014

Interpretation: Current ratio: In 2010 the Reneta Limited’s current assets was the highest
which was 1.14. We can see from the graph the current ratio is fluctuated over the year. At
2011 and 2013 their current ratio was lowest. But it started to get stable at 2014.

Quick Ratio
0.5 0.42 0.41 0.4
0.4
0.3 0.25 0.24
0.2 Quick Ratio
0.1
0
2010 2011 2012 2013 2014

Interpretation: In 2011 and 2013 the quick ratio of the company almost same. In 2010 the
highest quick ratio is 0.4. There is big difference between quick and current ratio because most
of the current asset of Renata Limited is inventory. This can create cash flow problem.

Page | 3
 Activity Ratios

Inventory Turnover Ratio

2.5 2.07 1.97 2
2 1.79 1.68
1.5 Inventory Turnover
Ratio
1
0.5
0
2010 2011 2012 2013 2014

Interpretation: In 2010, the total inventory turnover was 2.07. It is seen that the companies
invent turnover gradually decreased and reached its lowest point at 2013. But it started to get
normal from 2014.

Total Asset Turnover Ratio

2 1.9

1.5

0.99 Total Asset Turnover

1 0.77 0.77 Ratio
0.69

0.5

0
2010 2011 2012 2013 2014

Interpretation: Total asset turnover is really from2011 to 2014 compare to 2010. From 2011 to
2013 total asset turnover decreased every year. But at 2014 it increased.

Page | 4
 Average Collection Period
60 53.2
50
40 33.3 35.3 34.9
31.3
Average Collection
30
Period
20
10
0
2010 2011 2012 2013 2014

Interpretation: Average collection period is pretty much stable from 2010 to 2013. But during
2014 average collection period increased which can create cash flow problem.

Average Payment Period

35 31.6
30
25
20 Average Payment
15 Period
9
10 6
4.7 4.2
5
0
2010 2011 2012 2013 2014

Interpretation: In 2010 and 2012, average payment days nearly same. In 2013 increased a lot.
This can both be good and bad for Renata Limited. Increase in average payment period will
improve their cash flow because 2013 their average collection and payment period is close. But
this can create bad relation with the supplier. At 2014 average payment period decreased.

Page | 5
 Debt Ratios

Debt Ratio
60.00%
47.63% 47.89% 50.10%
50.00% 46.08%
39.82%
40.00%
30.00%
Debt Ratio
20.00%
10.00%
0.00%
2010 2011 2012 2013 2014

Interpretation: In 2010, the lowest debt ratio is 39.82 percent. We can see from the graph in
2011 to 2012 the ratio is nearly same. The highest debt ratio was 50.10 percent in the year
2013.

Times Interest Earned ratio

15
11.7

10
7.41
5.75 Times Interest Earned
5.29 5.19
ratio
5

0
2010 2011 2012 2013 2014

Interpretation: Time ratio was decreased gradually and reached its lowest point in 2013, and
the figure is 5.19.

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 Profitability Ratios

Gross Profit Margin

53.00% 52.52%
52.00% 51.53%
51.09%
51.00% 49.98%
50.00% Gross Profit
49.07%
49.00% Margin
48.00%
47.00%
2010 2011 2012 2013 2014

Interpretation: In 2013, company’s gross profit margin was lowest profit and it's below 50.
Highest gross profit margin gained in 2010. But overall ratio is stable.

Operating Profit Margin

28.00%
26.72% 26.91%
27.00%
26.34%
26.00% 25.45% Operating Profit
25.14% Margin
25.00%

24.00%
2010 2011 2012 2013 2014

Interpretation: 26.91 percent profit earned in 2012, which was the highest. The profit margin
fluctuated over the year

Page | 7
 Net Profit Margin
20.00% 18.10%
15.79% 15.08% 15.30% 14.76%
15.00%

10.00% Net Profit

Margin
5.00%

0.00%
2010 2011 2012 2013 2014

Interpretation: In 2010, net profit was 18.10 percent. We can see the company’s profit slightly
decreased from the year 2011 to 2014, and reached 14.78 percent during 2014.

Earnings Per Share (EPS)

600 543.23

400 Earnings Per

Share in TAKA
200
47.08 41.96 39.57 38.24
0
2010 2011 2012 2013 2014

Interpretation: From the graph we can see there is a huge difference in 2010’s earnings per
share with other years. And there is a good explanation for this. In 2010 book value per share
was Tk 100 but from 2011 Renata Limited’s book value per share is Tk 10. So from 2011 Renata
Limited convert 1 share into 10 shares. That is the reason why EPS of 2010 is so high.

Page | 8
 Return on Assets (ROA)
20.00% 17.98%
15.00% 13.11% 11.65% 10.66% 11.38%
Return on Assets
10.00% (ROA)
5.00%
0.00%
2010 2011 2012 2013 2014

Interpretation: Renata limited’s return on assets was highest during 2010. From 2012 to 2014
their ROA is stable but during 2013 they had lowest ROA of 5 year.

Return on Equity (ROE)

40.00%
29.89%
30.00% 25.04%
22.51% 21.42% 21.47%
20.00% Return on Equity
(ROE)
10.00%

0.00%
2010 2011 2012 2013 2014

Interpretation: The situation of return on equity is same as return on asset. The ratio started to
decrease from 2011 to 2013. Of this 5 year 2010 has the best ROE.

Page | 9
 Market Ratios

Price-Earnings Ratio (P/E)

30 25.59 25.73
23.82
17.62 18.24
20
Price-Earnings Ratio
(P/E)
10

0
2010 2011 2012 2013 2014

Interpretation: In 2014, 25.73 was the highest price earnings per share, where the company
earned lowest ratio in 2012 which is 17.62

Market/book (M/B) ratio

150 129.42 120.5
98.4
100 73.95 72.2 Market/book
(M/B) ratio
50

0
2010 2011 2012 2013 2014

Interpretation: In 2010, the M/B ratio was the highest. From 2011 to 2013 the ratio decreased.
But it increased again in 2014

Page | 10
 5 years ratio for GlaxoSmithKline

Liquidity Ratios
2010 2011 2012 2013 2014
Current ratio 2.59 2.05 1.78 1.68 1.73
Quick (acid-test) ratio 1.60 0.94 1.05 1.08 1.39

Activity Ratios
2010 2011 2012 2013 2014
Inventory turnover 3.43 2.97 3.74 3.72 5.15
Average collection period 46.5 days 16.3 days 32 days 27.2 days 53 days
Average payment period 123 days 122 days 151 days 176 days 188 days
Total asset turnover 1.64 1.82 1.81 1.69 1.42

Debt Ratios
2010 2011 2012 2013 2014
Debt ratio 31.76% 45.32% 51.51% 53.69% 53.93%
Times interest earned ratio 675.09 124.79 n/a n/a n/a
(a)
Fixed-payment coverage n/a n/a n/a n/a n/a
ratio

Profitability Ratios
2010 2011 2012 2013 2014
Gross profit margin 34.20% 28.47% 28.61% 32.66% 37.71%
Operating profit margin 14.74% 8.80% 6.76% 8.92% 14.78%
Net profit margin 11.29% 5.95% 4.39% 8.06% 11.5%
Earnings per share (EPS) Tk 34.05 Tk 23.42 Tk 20.25 Tk 45.35 Tk 68.63
Return on total asset (ROA) 18.52% 10.84% 7.96% 13.66% 16.44%
Return on equity (ROE) 29.69% 19.83% 16.42% 29.50% 35.69%

Page | 11
 Market Ratios
2010 2011 2012 2013 2014
Price/earnings (P/E) ratio 33.17 28.37 28.14 21.07 22.03
Market/book (M/B) ratio 112.96 66.45 57 95.57 151.23

Notes:
(a) Finance cost is used as interest.

Page | 12
 Analysis on 5 year ratio of GlaxoSmithKline

Liquidity Ratios

Current Ratio
3
2.59
2.5
2.05
2 1.78 1.68 1.73
1.5
Current Ratio
1
0.5
0
2010 2011 2012 2013 2014

Interpretation: In 2010, GlaxoSmithKline’s current assets were higher 2.59 times than its
current liabilities. The current ratio was slightly decreased from 2012 to 2014 and fluctuating
from 2010-2013. The current ratio decreased in last few years because the proportionate change
in current liabilities was more than the proportionate change in current assets.

Quick Ratio
2 1.6
1.39
1.5
1.05 1.08
0.94
1 Quick Ratio
0.5
0
2010 2011 2012 2013 2014

Interpretation: In 2014, GlaxoSmithKline’s current assets excluding inventory where 1.39

times of their current liability. The quick ratio was sharp decreased from 2010 to 2011 and
slightly increased in 2013 from 2012. The quick ratio increased to 1.39 times in 2014 from last
year’s 1.08 times.

Page | 13
 Activity Ratios

Inventory Turnover Ratio

6
5.15
5
3.74 3.72
4 3.43
2.97
3 Inventory Turnover Ratio
2
1
0
2010 2011 2012 2013 2014

Interpretation: In 2014, the company had sold & restocked its inventory 5.15 times. The
Inventory turnover ratio has been fluctuated over the last 5 years.

Total Asset Turnover Ratio

2 1.82 1.81
1.64 1.69
1.42
1.5

1
Total Asset Turnover Ratio
0.5

0
2010 2011 2012 2013 2014

Interpretation: In 2014, every $1 dollar worth of total asset generated 1.42 times worth of sales.
Total asset turnover ratio has been fluctuating over the last 5 years from 2010 to 2014. But in
2014 the total asset turnover ratio was at the lowest point.

Page | 14
 Average Collection Period
60 53
50 46.5

40 32
30 27.2 Average Collection Period
20 16.3

10
0
2010 2011 2012 2013 2014

Interpretation: In 2014, it took GlaxoSmithKline on an average 53 days to collect the accounts

receivable from the customers. This can create problem in the cash flow. The average collection
period fluctuated in every year.

Average Payment Period

200 188
176
151
150 123 122

100
Average Payment Period
50

0
2010 2011 2012 2013 2014

Interpretation: In 2010, it took GlaxoSmithKline 123 days to pay back the accounts payable.
From that year the average payment period was increased in a significant amount. In 2014 it took
188 days to pay back their accounts payable. This can create problem with the supplier.

Page | 15
 Debt Ratios

Debt Ratio
60.00% 53.93%
53.69%
51.51%
50.00% 45.32%

40.00%
31.76%
30.00%
Debt Ratio
20.00%

10.00%

0.00%
2010 2011 2012 2013 2014

Interpretation: In 2010, 31.76% of total asset of GlaxoSmithKline was financed by their total
debt. The debt ratio has gone up in 2011 which was not a good sign. Even after that they failed
to manage their debt ratio in 2012. From 2013 to 2014 the ratio went up as they took a large
amount of loans.

Times Interest Earned

800 675.09
600

400 Times Interest Earned

200 124.79
0 0 0
0
2010 2011 2012 2013 2014

Interpretation: The Times Interest Earned ratio of GlaxoSmithKline for the year of 2010-2014
could not be determined.

Page | 16
 Profitability Ratios

Gross Profit Margin

40.00% 37.71%
34.20%
35.00% 32.66%
28.47% 28.61%
30.00%
25.00%
20.00%
Gross Profit Margin
15.00%
10.00%
5.00%
0.00%
2010 2011 2012 2013 2014

Interpretation: From the view of time series analysis, GlaxoSmithKline generated 34.20 Taka
gross profits from every 100 Taka in 2010. But in the following years of 2011-2012, the ratio
went slightly down at respectively 28.47% and 28.61%. Again in the year of 2013-2014, there is
a noticeable increase in the gross profit of the company.

Operating Profit Margin

16.00% 14.74% 14.78%
14.00%
12.00%
10.00% 8.80% 8.92%
8.00% 6.76%
Operating Profit Margin
6.00%
4.00%
2.00%
0.00%
2010 2011 2012 2013 2014

Interpretation: From the view of time series analysis, in 2010, GlaxoSmithKline generated
14.20 Taka for every 100 Taka of sale. But the operating profit margin fluctuated from 2011 to
2014.

Page | 17
 Net Profit Margin
14.00%

12.00% 11.29% 11.50%

10.00%
8.06%
8.00%
5.95% Net Profit Margin
6.00%
4.39%
4.00%

2.00%

0.00%
2010 2011 2012 2013 2014

Interpretation: In time series analysis, GlaxoSmithKline generated 11.29 Taka from every 100
Taka of sales in 2010. From then their performance was very low and their net profit margin got
decreased in the fellow years. In 2014, the company earned the highest 11.50% net profit margin
in these five years.

Earnings Per
Share (EPS)
80 68.63
60
45.35
34.05 Earnings Per
40
23.42 20.25 Share (EPS)
20

0
2010 2011 2012 2013 2014

Interpretation: In time series analysis, GlaxoSmithKline had 34.05 Taka per share for their
stockholders in 2010. But From 2011 to 2012 it went down. Again in 2013 and 2014 it took a
pace and able increase earnings per share.

Page | 18
 Return on Assets (ROA)
20.00% 18.52%
16.44%
15.00% 13.66%
10.84%
10.00% Return on Assets
7.96%
(ROA)

5.00%

0.00%
2010 2011 2012 2013 2014

Interpretation: From the view of time series analysis, in 2010 GlaxoSmithKline made 18.52
Taka profit from every 100 Taka worth of assets. From then till 2014 the return on asset has
fluctuated in every year.

Return on Equity (ROE)

40.00% 35.69%
35.00% 29.69% 29.50%
30.00%
25.00% 19.83%
20.00% 16.42% Return on Equity
15.00% (ROE)
10.00%
5.00%
0.00%
2010 2011 2012 2013 2014

Interpretation: In time series analysis, GlaxoSmithKline had 29.69 Taka profit worth of every
100 Taka of stockholders equity in 2010. From 2011 to 2012, the company had a decreasing
return on equity rate. But just like return on assets, from 2013 to 2014 for the consecutive years
the return on the equity increased. This is a good sign for the business and its stakeholders.

Page | 19
 Market Ratios

Price-Earnings Ratio (P/E)

40 33.17
28.37 28.14
30
21.07 22.03
20 Price-Earnings
Ratio (P/E)
10

0
2010 2011 2012 2013 2014

Interpretation: In 2014, the common shareholders of the company were willing to pay 22.03
Taka for each 1 Taka of reported earnings. In 2010 it was 33.17 Taka which decreased at an
extensive rate this is a very bad sign for the company.

Market/book (M/B) ratio

200
151.23
150
112.96
95.57 Market/book
100 (M/B) ratio
66.45 57
50

0
2010 2011 2012 2013 2014

Interpretation: The book-to-market ratio attempts to identify undervalued or overvalued

securities. GlaxoSmithKline has a diverse M/B ratio over the five years.

Page | 20
 Comparison between Renata Limited and GlaxoSmithKline

RENATA GLAXO RENATA GLAXO RENATA GLAXO RENATA GLAXO RENATA GLAXO
Liquidity Ratios 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Current
ratio 1.14 2.59 0.74 2.05 1.12 1.78 0.75 1.68 0.94 1.73
Quick (acid test) ratio 0.42 1.6 0.25 0.94 0.41 1.05% 0.24 1.08 0.4 1.39
Comments Glaxo is more able to meet it's short term obligations than Renata

Activity Ratios 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Inventory Turnover 2.07 3.43 1.97 2.97 1.79 3.74 1.68 3.72 2 5.15
27.2
Average Collection Period 31.3 days 46.5days 33.3 days 16.3days 35.3 days 32 days 34.9 days days 53.2 days 53 days
Average Payment Period 4.7 days 123 days 6 days 122 days 4.2 days 151 days 31.6 days 176 days 9 days 188 days
Total Asset Turnover 1.9 1.64 0.99 1.82 0.77 1.81 0.69 1.69 0.77 1.42
Comments Glaxo's speed to convert accounts into sales or cash is higher than Renata

Debt Ratios 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Debt ratio 39.82% 31.76% 47.63% 45.32% 47.89% 51.51% 50.10% 53.69% 46.08% 53.93%
Time Interest earned ratio 11.7 675.09 7,41 124.79 5.92 NA 5.19 NA 5.75 NA

In 2010 & 2011 Renata's debt ratio was higher but from 2012-2014 Glaxo became more able to payoff
Comments it's payment required over the life of debt

Page | 21
 RENATA GLAXO RETANA GLAXO RENATA GLAXO RENATA GLAXO RENATA GLAXO
Profitability Ratios 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Gross Profit Margin 52.52% 34.20% 51.09% 28.47% 51.53% 28.61% 49.07% 32.66% 49.98% 37.71%
Operating Profit Margin 26.72% 14.74% 25.14% 8.80% 26.91% 6.67% 26.34% 8.92% 25.45% 14.78%
Net Profit Margin 18.10% 11.29% 15.79% 5.95% 15.08% 4.39% 15.30% 8.06% 14.76% 11.50%
TK TK TK TK TK TK
Earnings per share(EPS) 543.23 34.05 TK 47.08 23.42 TK 41.96 20.25 TK 39.57 45.35 TK 38.24 68.63
Return On Total
Asset(ROA) 17.98% 18.52% 13.11% 7.69% 11.65% 7.96% 10.66% 13.66% 11.38% 16.44%
Return On Equity(ROE) 29.89% 29.69% 25.04% 16.42% 22.51% 16.42% 21.42% 29.50% 21.47% 35.69%
The gross profit & operating profit are more in Renata than Glaxo each year resulting in a better net
Comments profit though Renata is showing a decreasing net profit each year for the last five years

Market Ratios 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014
Price/Earning ratio 23.82 33.17 25.59 28.37 17.62 28.14 18.24 21.07 25.73 22.03
Market/Book ratio 129.42 112.96 120.5 66.45 73.95 57 72.2 95.57 98.4 151.23
Both the companies are not maintining any consistant price ratio or following any sort of increasing or
Comments decreasing pattern in earning ratio as well as in book ratio

Page | 22
 Conclusion

The profit of RENATA is in a better position than GLAXO. GLAXO can take some alternative steps in order
to improve their situation.

 RENATA has come up with a fluctuating current ratio whereas GLAXO has shown an pattern in
the last five years. So the company should improve and maintain it’s current ratio so that it can
meet the short term obligations smoothly.
 The firms do not maintain a stable liquidity position over the last five years. So maintaining
proper liquidity funds like cash and bank balance is suggested.
 The firm should enhance employees’ efficiency, more training to its employees in order to
increase their production capacity and minimize mistakes while doing tasks.
 GLAXO has overall a better activity ratio providing a higher total asset turnover. If the firms have
a large number of inventories they should increase sales and reduce stock.
 The firms should have a check in the manufacturing process to provide better products.

By observing the financial statements of the companies named “GLAXOSMITH KLINE” and “RENATA
LTD” we came to know about the financial ratio of the last five years. A thorough analysis has been done
by which we were able to compare between these two companies’ activity and financial condition.

Page | 23
 Limitations

Financial ratios help the investors to understand the condition of the business. It simplifies the
financial statements. It helps in comparing companies of different size with each other. It helps
in trend analysis which involves comparing a single company over a period. It highlights
important information in simple form quickly. A user can judge a company by just looking at
few numbers instead of reading the whole financial statements.

But financial ratios don’t always tell the actual position of the companies. It is difficult to
generalize about whether a ratio is good or not. A high cash ratio in a historically classified
growth company may be interpreted as a good sign, but could also be seen as a sign that the
company is no longer a growth company and should command lower valuations. A company
may have some good and some bad ratios, making it difficult to tell if it's a good or weak
company. Financial accounting information is affected by estimates and assumptions.
Accounting standards allow different accounting policies, which impairs comparability and
hence ratio analysis is less useful in such situations. Ratio analysis explains relationships
between past information while users are more concerned about current and future
information. Ratios deal mainly in numbers – they don't address issues like product quality,
customer service, employee morale and so on. Though this factors play an important role in
financial performance. Financial information can be "massaged" in several ways to make the
figures used for ratios more attractive. For example, many businesses delay payments to trade
creditors at the end of the financial year to make the cash balance higher than normal and the
creditor days figure higher too. Ratios are generally distorted by inflation.

Page | 24
 Appendix

Information for Renata Limited

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 Additional information of Renata Limited
2010 2011 2012 2013 2014
Purchases 2,402,778,052 3,461,601,270 n/a n/a n/a
Number of ordinary share 1,807,480 22,593,500 28,241,875 35,302,343 44,127,929
Par value of ordinary share 100 10 10 10 10
Market price per ordinary share 12942.75 1205 739.50 722 984

Page | 35
Information for GlaxoSmithKline

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 Additional information GlaxoSmithKline
2010 2011 2012 2013 2014
Purchases 1,640,184,000 2,759,629,000 2,893,187,000 3,624,657,000 4,552,195,000
Number of ordinary share 12,046,449 12,046,449 12,046,449 12,046,449 12,046,449
Par value of ordinary share 10 10 10 10 10
Market price per ordinary share 1129.60 664.50 570 955.70 1512.30

Page | 46
 Formulas used for the ratios
Liquidity ratios
Current ratio Current assets ÷ Current liabilities
Quick (acid-test) ratio (Current assets - Inventory) ÷ Current liabilities

Activity ratios
Inventory turnover Cost of goods sold ÷ Inventory
Average collection period Accounts receivable ÷ Average sales per day
Average payment period Accounts payable ÷ Average purchases per day
Total asset turnover Sales ÷ Total assets

Debt ratios
Debt ratio Total liabilities ÷ Total assets
Times interest earned ratio Earnings before interest and taxes ÷ Interest
Fixed-payment coverage ratio Earnings before interest and taxes + Lease payments
Int + Lease pay + {(Prin + Pref div) × [1/(1-T)]}

Profitability ratios
Gross profit margin
Operating profit margin
Net profit margin
Earnings per share (EPS)
Return on total assets (ROA)
Return on equity (ROE)
Gross profit ÷ Sales
Operating profit ÷ Sales
Earnings available for common stock holders ÷ Sales
Earnings available for common stock holders
Number of shares of common stock outstanding
Earnings available for common stock holders
Total assets
Earnings available for common stock holders
Common stock equity

Market ratios
Price/earnings (P/E) ratio Market price per share of common stock
Earnings per share
Market/book (M/B) ratio Market price per share of common stock
Book value per share of common stock

Page | 47