Its a full complete report.

1. Page | 1
Group Members Name:
1. Md. Enamul Islam Shemul
2. Ripon Kumar Sarkar
3. Md. Fazle Rabbi
4. Tonmoy Mandal
5. Mosa. Rima Akter
Project Title:
Financial Ratio Analysis of Square Pharmaceuticals Ltd. ( Financial year 2013-14 &
2014-15)

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Introduction:
Financial ratios are mathematical comparisons of financial statement accounts or
categories. These relationships between the financial statement accounts help investors,
creditors, and internal company management understand how well a business is
performing and areas of needing improvement. Financial ratios are the most common and
widespread tools used to analysis a business financial standing. Ratios are easy to
understand and simple to compute. They can also be used to compare different companies
in different industries. Since a ratio is simply a mathematically comparison based on
proportions, big and small companies can be use ratio to compare the financial
information. In a sense, financial ratios don’t take into consideration the size of a
company or the industry. Ratios are just raw computations of financial position and
performance.
Keyword:
Square Pharmaceuticals Ltd, Financial Analysis, Ratio Analysis, Liquidity Ratio,
Profitability Ratio, Asset Management Ratio, Debt Management Ratio.
Objectives of the Report:
a) To analysis Financial Ratios of Square Pharmaceuticals Ltd.
b) To assess the performance and financial condition of Square Pharmaceuticals Ltd.
c) To compare the financial condition between last two years.
Methodology of the Report:
A well designed work always deserves appraisal and greetings. Every work is needed to
have a standard methodology to make it quite successful in the course of its preparation.
To make this report the best one as well as a means to further necessary analysis that are
given bellow:
 Research Problem
For the convenience of the study, causal research approach is applied to conduct the
study and presented the result so obtained.

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 Sampling:
There are some criteria of ratio analysis given below,
 Liquidity Ratio
 Quick ratio
 Profitability Ratio
 Asset Management
 Debt Management
 Market value
 Data collection
To quantify the relationship between dependent variable and independent variable, data
was collected by using different procedures. Sample of one company is taken from
Square Pharmacy of Bangladesh for the period of two years from 2013-14 to 2014-15.
The data has been collected from the annual reports of the company listed at Dhaka stock
exchange for the period of 2013-14 to 2014-15. The purpose of this article is to see the
relation between Dividends either Cash Dividend or Stock Dividend with Stock Prices
after controlling Earnings per Share, Retention Ratio and Return on Equity.
 Variable Description
Dependent variable
Market Price (MP):
Market Price of share is calculated by taking the average of high and low market prices of
the shares. It is expected that Cash Dividends are positively related to Stock Prices. In the
absence of clientele effect, if the company pay larger amount of cash Dividends then it
will result in high market value of shares.
Independent variable
Stock Dividend
Stock Dividend is an important type of dividends. Its effect on Stock Prices will depend
on the perception of investors. So it can positively or negatively affect the Stock Prices.
Earnings per Share (EPS):
Earnings per Share are calculated by subtracting preferred stock from net income and by
dividing the resulting amount with the number of outstanding shares. It is considered as
an indicator for measuring the profitability of the companies
Return on Equity (ROE):
Return on Equity is also considered as important variables in this study. Return on Equity
is calculated by dividing profit after tax with shareholders’ equity. It is expected that
Return on Equity is positively associated with Stock market Prices.

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 Procedure of data analysis
 Current ratio = Current Asset ÷ Current liability
 Quick Ratio = (Current Asset-inventory) ÷ Current liability
 Inventory Turnover Ratio = Cost of goods sold ÷ inventory
 Days Sales Outstanding = Accounts receivable ÷ average daily sales
 Fixed asset Turnover Ratio = Sales ÷ Net fixed asset
 Total Asset Turnover Ratio = Sales ÷ Total asset
 Debt Ratio = Total Liability ÷ Total asset
 Times Interest Earned Ratio = Earnings before interest & tax ÷ Interest charges
 Net Profit Margin = Net profit ÷ Sales
 Return on Total Asset = Net income ÷ Total asset
 Return on Common Equity = Net income available to common stockholders ÷
Common Equity
Conceptual Discussion of the report:
1. Current Ratio:
Current ratio is an efficient tool to measure that the organization is capable in meeting up
its short term debts or not. Current ratio basically assesses a firm’s liquidity because, if a
firm is enough liquid and it has enough resources then it can pay back the all debts that
need to cover during 12 months.
Formula: Current ratio =Current assets / Current liabilities
2. Quick Ratio:
This ratio assesses the capacity of an organization to recover its current liabilities by
using the organization’s quick assets. The asset which can be turned into cash rapidly at
an amount that is very close to its book value is known as quick asset.
Quick ratio is also known as Acid-test ratio and liquid ratio. If any quick ratio less than 1
means that the firm cannot pay back its current debts.
Formula: Acid test = (Current assets – Inventory) / Current liabilities
3. Inventory Turnover Ratio:
In the business, the sufficient volume of inventory is must and we can judge that enough
inventories are being produced or not through the inventory turnover ratio. This ratio
basically shows that over a period, how many times the inventories are sold and
renovated in a business. Generally, a company with high inventory turnover ratio is
assumed as strong one. When the inventory level is very high then the ratio will be low
which means the inventories are kept idle in the warehouse so definitely it is bad for
future growth.
Formula: Inventory turnover ratio = cost of goods sold / inventory

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4. Days Sales Outstanding:
It is the ratio by which we can know that within how much days the firm collects its
money from the sales, so it means that how much times a firm takes to convert its
accounts receivables into cash. If the ratio is lower, then it is good for the organization as
it indicates that the organization collects its receivables at the shortest possible time. If an
organization collects money quickly then can meet up the cash demand to operate the
business and also can reinvest more money thus more sales can be occurred.
Formula: Days sales outstanding = (Accounts receivable * 360)/ Annual sales
5. Fixed Asset Turnover:
It is the ratio where sales are compared with the fixed assets of the firm. The ratio
actually clarifies that the firm is capable enough to use its fixed assets to earn revenues or
not. In fixed asset turn over, normally investments on property, plant and equipment are
counted and the depreciations of these are subtracted. A high fixed asset turnover is
always appreciable as it signals towards the firm’s high productivity. Higher fixed asset
turnover means the firm is utilizing its fixed assets and generating revenues from these.
On the other hand, low fixed asset is the signal that the firm is not productive and the
firm fails to generate sales revenue by utilizing the fixed assets.
Formula: Fixed assets turnover ratio = Sales / Net fixed assets
6. Total Asset Turnover:
Total Asset Turnover judge that how much sales revenue is gathered in against of each
dollar of assets. Through this ratio, the effectiveness of asset management of the firm is
measured. Higher the ratio, higher the efficiency of the firm and the vice versa.
Formula: Total assets turnover ratio = Sales / total assets
7. Debt to total assets Ratio:
This ratio finds out that how much of the total asset is funded through debt. So, it actually
shows the dependency on debt in order to manage assets. If the ratio is higher, then it
means that the firm has higher debt and it is more dependent to its creditors for necessary
financing.
If the ratio is higher than 1, it indicates excess debt over total assets and the vice versa.
Although higher debt is not a problem if interest payments are made on time, if it is not,
then definitely a great risk for the firm.
Formula: Debt to total assets ratio = Total liabilities / total assets
8. Time Interest Earned Ratio:
Time Interest Earned ratio is basically a solvency ratio which assesses that firm has the
capacity or not to pay back all its loans. This ratio is also known as interest coverage

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ratio. Through this ratio it can be judged that how many times a firm can face its interest
expenses that are due to the taken borrowings. If the ratio is higher, then it means that the
firm has the ability to payback its loans. On the other hand, if the ratio is less than 1 then
it means that the firm is not achieving much profit to meet up the debt obligations.
Formula: Times interest earned ratio (TIE) = EBTI / Interest changes
9. Net Profit Margin:
This is the ratio of Net Income to Sales or Revenues. Through the net profit margin, we
asses that out of each dollar of sales how much is kept as earning. Higher the profit
margin, better the condition of the firm.
Formula: Net profit margin = Net profit /Sales
10. Return on Assets (ROA):
It measures that the firm how efficiently uses its assets to generate profits. This is also
known as Return on Investment (ROI) as it tells that a firm how effectively transforms its
investments on profits. It is often expressed in percentage. Higher ROA is always desired
as it indicates that higher profit has been made through fewer investments.
Formula: Return on total assets (ROA) = Net income / total assets
11. Return on equity: Return On Equity is the ratio of net income to total
shareholder’s equity. It measures that the firm how much earns from the
shareholders’ equity. Increasing ROE indicates improved performance.
Formula: ROE= Net Income/Total Equity Capital
12. Price Earnings Ratio or P/E:
This is the ratio of market value to EPS. Through this ratio, the recent trading price of the
firm is compared with its EPS. The P/E ratio actually represents the expectation of
investors about the firm. Higher P/E means that investors have high expectations about
the firm’s future growth and that’s why they are interested to invest
Formula: P/E ratio= Market Price/EPS
13. The ratio of a stock’s market price to its book value gives indication of how investors
regard the company. The stock of companies with relatively high rates of return on equity
generally sells at higher multiples of book value than those with low returns.
Formula: Market/ Book (M/B): Market Price per share / Book value per share

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Financial Ratio Analysis at a Glance:
Ratios Formula For Calculation 2013-2014 2014-2015
Liquidi
ty
Tk. Rati
o
Tk. Rati
o
Curre
nt
Ratio
Current assets
Current liabilities
7499373281
2394537126
3.13:
1
9732170099
2549018066
3.82:
1
Quic
k
Ratio
Current assets− Inventory
Current Liabilities
7499373281 −2737085779
2394537126
1.98
: 1
9732170099− 3310086668
2549018066
2.51
: 1
Asset
Manag
ement
Inven
tory
Turn
over
Cost of good
Inventory
12960738683
2737085779
4.74
time
s
14942870155
3310086668
4.51
4
time
s
DSO
Account receivable
Annual sales/360
766634978
64634481
1
1.86
894543303
74123814 2.06
Fixed
Asset
s
Turn
over
Sales
Net fixed assets
23268413217
23546701250
0.99
time
s
26684573116
25458986164
1.04
8
time
s
Total
Asset
s
Turn
over
Sales
Total assets
23268413217
31046074531
0.75
time
s
26684573116
35191156263
0.76
time
s
Debt
Manag
ement
Debt
to
Total
Asset
s
Total liabilities
Total assets
∗ 100
4297122799
31046074531
* 100 13.8
4%
4099523843
35191156263
* 100 11.6
5%
Profita
bility
Ratio
Net
Profit
Marg
in
Net profit margin
Net profit/sales
∗ 100
4250580863
23268413217
*100
18.2
6 %
5186436869
26684573116
*100
19.4
3 %
ROE
Net income
Common equity
* 100
4250580863
26739581929
*100
15.8
9 %
5186436869
31093302284
*100
16.6
8 %
Retur
n on
Total
Asset
s
Net income
Total assets
* 100
4250580863
31046074531
* 100
13.6
9%
5186436869
35191156263
*
100
14.7
4 %

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Organizational overview:
Square pharmaceutical limited, the pharmaceutical giant in the country, is a trusted name
in the industry of manufacturing quality medicines for more than four decade.
The company was founded in 1958 By Samsong H Chowdhury along with three of his
friends as a private firm. It went to Public in 1991 and is currently listed on the Dhaka
stock exchange. Square Pharmaceutical limited, the flagship company of SQUARE
Group, is holding the strong leadership position in the pharmaceutical company of
Bangladesh since 1985 and it has been continuously in the 1st position among all national
and multinational companies since 1985. Square Pharmaceutical limited, is now on its
way to becoming a high performance global player.
Result and Discussion:
2013-14 and 2014-15 financial ratio analysis:
Liquidity Ratio:
In 2013-14,
Current Ratio = Current Assets / Current Liabilities.
=
7499373281
2394537126
= 3.13:1
In 2014-15,
Current Ratio = Current Assets / Current Liabilities.
=
9732170099
2549018066
= 3.82:1
Comparative Ratio Analysis:
In 2013-14 & 2014-15 Current ratios are 3.13 & 3.82 respectively. The Current Ratio of
2014-15 is higher than 2013-14 because the Current Asset of 2014-15 is greater than
2013-14 but the current liability of 2014-15 is almost same of 2013-14.

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In 2013-14,
Quick ratio = (Current Assets-Inventory) / Current Liabilities
=
7499373281−2737085779
2394537126
= 1.98 : 1
In 2014-15,
Quick ratio = (Current Assets - Inventory) / Current Liabilities
=
9732170099−3310086668
2549018066
= 2.51: 1
Comparative Ratio Analysis:
I found that the Quick Ratio of 2014-15 is upper than 2013-14. Because the Current
Assets and Inventory increases but liability does not increases.
Profitability Ratio:
In 2013-14,
Net Profit Margin = Net Income / Net Sales
=
4250580863
23268413217
*100
=18.26 %
In 2014-15,
Net Profit Margin = Net Income / Net Sales
=
5186436869
26684573116
*100
=19.43 %
Comparative Ratio Analysis:
In 2013-14 & 2014-15 Net Profit Margin are 18.26% & 19.43% respectively. The Net
Profit Margin of 2014-15 is higher than 2013-14, because the Net Income & Net Sales
increases from 2013-14 to 2014-15.

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In 2013-14,
Return on assets (ROA) = Net Income / Total assets *100
=
4250580863
31046074531
* 100
= 13.69 %
In 2014-15,
Return on assets (ROA) = Net Income / Total assets *100
=
5186436869
35191156263
* 100
=14.74 %
Comparative Ratio Analysis:
I found that the Return on assets (ROA) of 2014-15 is upper than 2013-14, because the
Net Income and Total assets are increases from 2013-14 to 2014-15.
In 2013-14,
Return on Equity (ROE) = Net Income / Shareholders’ equity *100
=
4250580863
26739581929
*100
= 15.89 %
In 2014-15,
Return on Equity (ROE) = Net Income / Shareholders’ equity *100
=
5186436869
31093302284
*100
= 16.68 %
Comparative Ratio Analysis:
In 2013-14 & 2014-15 the Return on Equity (ROE) are 15.89% & 16.68% respectively,
because the Net income & shareholders’ equity of 2014-15 is higher than 2013-14.

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Asset Management:
In 2013-14,
Inventory Turnover = Cost of goods sold / Inventory
=
12960738683
2737085779
= 4.74 times
In 2014-15,
Inventory Turnover = Cost of goods sold / Inventory
=
14942870155
3310086668
= 4.514 times
Comparative Ratio Analysis:
Here, I found that the Inventory Turnover of 2014-15 is superior to 2013-14, because the
Cost of goods sold & Inventory increases from 2013-14 to 2014-15.
In 2013-14,
Days Sales Outstanding (DSO) = Accounts Receivable/(Annual sales/360)
=
766634978
64634481
= 11.86
In 2014-15,
Days Sales Outstanding (DSO) = Accounts Receivable/(Annual sales/360)
=
894543303
74123814
= 12.06
Comparative Ratio Analysis:
From the calculation, I found that the Days Sales Outstanding (DSO) of 2014-15 is better
than 2013-14, because the Accounts Receivable & Annual sale increases from 2013-14 to
2014-15.

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In 2013-14,
Fixed asset turnover = Sales/Net fixed assets
=
23268413217
23546701250
= 0.99 times
In 2014-15,
Fixed asset turnover = Sales/Net fixed assets
=
26684573116
25458986164
= 1.048 times
Comparative Ratio Analysis:
In 2013-14 & 2014-15 the fixed asset turnover are 0.99 times & 1.048 times
respectively. For the reason that the Sales & Net fixed assets increases but the net fixed
assets are more increases than sales.
In 2013-14,
Total assets turnover = Sales/Total assets
=
23268413217
31046074531
= 0.75 times
In 2014-15,
Total assets turnover = Sales/Total assets
=
26684573116
35191156263
= 0.76 times
Comparative Ratio Analysis:
From the equation, I found that the Total assets turnover of 2014-15 is better than 2013-
14, as the Sales & Total assets increases from 2013-14 to 2014-15.

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Debt Management:
In 2013-14,
Debt to assets = Total Liabilities/Total assets
=
4297122799
31046074531
* 100
= 13.84%
In 2014-15,
Debt to assets = Total Liabilities/Total assets
=
4099523843
35191156263
* 100
= 11.65%
Comparative Ratio Analysis:
In 2013-14 & 2014-15 the Debt to assets are 13.84% & 11.65% respectively. Because
the Total Liabilities drops but Total assets rises in 2014-15 from 2013-14.

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Conclusion:
SQUARE today, symbolize a name – a state of mine from the inception in 1958 it has
today burgeoned into one of the top line conglomerates in Bangladesh. Square
pharmaceutical limited, the pharmaceutical giant in the country, is a trusted name in the
industry of manufacturing quality medicines for more than four decade. Square
Pharmaceutical limited, the flagship company of SQUARE Group, is holding the strong
leadership position in the pharmaceutical company of Bangladesh since 1985 and it has
been continuously in the 1st position among all national and multinational companies
since 1985. Square Pharmaceutical limited, is now on its way to becoming a high
performance global player.
Reference
 Kumar Debasis Dutta, Assistant Professor, Department of Finance and Banking,
Paruakhali Science and Technology University
 Essentials of Managerial Finance by Besley & Brigham
 www.dse.com. (25/11/2015)
 www.squarepharma.com.bd
 https://en.wikipedia.org/wiki/square pharmacy
Appendix:
 Income Statement of Square Pharmaceutical
 Balance Sheet of Square Pharmaceutical