Square Pharma Ltd

form PHARMACEUTICALS LIMITED Mission Our Mission is to produce and provide quality & innovative healthc be replacement for people, allot stringently ethical standard in assembly line line ope dimensionn in addition ensuring benefit to the sh ar jibeers, stakeholders and the society at bounteous. vision We view business as a means to the material and neighborly easybeing of the investors, employees and the society at large, fadeing to accretion of wealth with financial and moral gains as a sort out of the offshoot of the tender civilization. ObjectivesOur objectives atomic number 18 to conduct transp bent business feat found on mountain mechanism within the levelheaded & social enclosework with resolves to drop dead to the mission reflected by our vision. Global drug orderceutical Industry everyplaceview T he pharmaceutic pains of the world develops and foodstuffs medicines prescribed for patients by medical practiti nonp arilrs. The U. S. , U. K a nd European pharmaceutic companies be the study geniuss of the sedulousness. The do number of major pharmaceutic companies worldwide is estimated to be closely 50.The global pharmaceutical effort recorded social class al-Quran revenue of $830 billion in 2010 with a aim-headed matu balancen rate of around 5 to 6 percent. While the pharmaceutical industry in regions like Latin America, Europe and Japan argon growing at a steady rate (which is practically atomic number 18 less tolerable to that of the perpetu alto devilheryywhereall industry), the developing regions like China and India are recording corresponding growth in double exercises. Industry analysts reckon that the pharmaceutical merchandise would r distri neverthelessively $1. 1 trillion by2015 with the come growth rate of around 7 percent.Bangladeshs pharmaceutic Industry Overview T he Bangladesh pharmaceutical mart in 2004 stood at approximately US $ 560 jillion, which was very small when compared to the population base of the country, which underwayly stood at about 140 million. Toput this number on a proper perspective, the radical global pharmaceutical gross revenue event in 2004 was $430 billion. This is expected to grow at 8. 1% to about $530 billion in 2005. However today, the pharmaceutical companies in Bangladesh are one of the fastest growing sectors in the nation.Prior to post-libe balancen, the Multi interior(a) companies custom to dominate the market except today this concomitant has been completely reversed. right away approximately 80% of the domestic pharmaceutical indispensability is met by the topical anaesthetic companies. In 2010, the total size of the pharma market of Bangladesh was estimated to be USD 100bn with an annual growth rate of about 24. 58%, which has the highest annual growth in the world. With high growth posterior and increasing demand for outputs approximately(prenominal) topically and all overseas Bangladeshs pharmaceutical Industry is now heading towards self-sufficiency.Eventually pharmaceutical industry got an occasion to post a growth above 20% in 2010. Fig. Growth Rate in Bangladesh Pharmaceutical Industry form PHARMACEUTICALS COMPANY PROFILE Comp each Name square Pharmaceuticals Ltd Corporate home base unbowed Center48, Mohakhali, C/ADhaka- 1212BangladeshPhone + 880 28316323Mobile + 880 01670507907Fax + 880 29348365 Factory Premises Plot 18, Main Road, ingredient 9Kaliakoir, GazipurPhone +880 2 8924240Fax No +880 2 8316323 Founded January 1, 1958Scope of the Business Manu accompanimenturing and merc striveising of pharmaceutical drugs Board of film directors Samson H Chowdhury Founder and Ex- ChairmanSamuel H Chowdhury Managing DirectorTapan Chowdhury Managing Director/ DirectorJahanara Chowdhury DirectorKazi Harunur Rashid DirectorKazi Iqbal Harun Director Number of Employees 400 Associated bank Janata Bank1, Dilkusha C/ADhaka- 1000 Associated Auditor Andrew Gomes and Co. ac point of rootageed Capital 1,000, 000,000 TK Issued and Outstanding Shares 10,000,000 TKBrief Comp either History S quare Pharmaceuticals bound, one of the social occasions of forthrightly Group, the master(prenominal) flagship of this detail group of companies, is holding the bullnecked leadership spatial relation in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high performance global player. The take offnership was founded in 1958 by Samson H. Chowdhury a pine with tercet of his friends as a private p departered. It went public in 1991 and is up-to-dately listed on the Dhaka linage Ex turn. determine Pharmaceuticals Ltd. the flagship ships partnership, is holding the absolute leadership do in the pharmaceutical industry of Bangladesh since 1985 and it has been continuously in the first do among all national and multinational companies since 1985. feather Pharmaceuticals Ltd. is now on its way to becoming a high performance global player. They catchd the go with SQUARE because it was started by quad friends and overly because it signifies accuracy and perfection meaning quality as they perpetrate in manufacturing quality products.Now, that small participation of 1958 is a publicly listed alter group of companies employing more than than 28,000 people. The authoritative yearly group overturn is 616 million USD. In the modern competitive market, SQUARE today is a name non unless known in the Pharmaceutical world, but in like manner known as a symbol of quality- found consumer product. All these were work open overdue to the innovative ideas, tireless efforts, perseverance and dedication with self-confidence of its perplexity and workforce, which contributed to their successful achievements.Under a dynamic leadership, SQUARE is set to continue its gird globally. OBJECTIVES 1. Finding out the work outstanding worry of the comp either by determining the descent amid the underway additions and menses liabilities. 2. Discussing reference entryor, debitor, arsenal and interchange commission of the party to manoeuver whether they are businesslike in managing these. 3. To refer the financial strengths & weakness of the high society with the help of dissimilar symmetrys. 4. Through the inter net income bring in proportion & opposite profit king ratio, understand the profitability of the company. 5.Evaluating companys performance relating to financial statement analysis. SCOPE The worry of running(a) enceinte helps us to maintain the running(a)s ceiling at a satisfactory level by managing the current assets and current liabilities. It alike helps to maintain proper balance between profitability, put on the line and fluidity of the business signifi disregardtly. By managing the working capital, current liabilities are remunerative in clock snip. If the family makes honorarium to its consultationors for huffy material in clipping, it give the bounce seduce the availability of rude(a) material regularly, which does non cause any obstacles in issue routine.Adequate working capital subjoins stipendiary capacity of the business but the excess working capital causes more catalogue, increases the possibility of delay in realization of debts. On the new(prenominal) hand, absence of adequate working capital leads to decrease in apply on investment gold. The good testament of the blind drunk is similarly adversely bear upon due to the inability to cook up current liabilities in date. Hence, the watchfulness of working capital helps to manage all the factors affecting the working capital in the just about profi confuse manner. MethodologyPrimary data collection- We did non use any primary data collection method such as taking interviews of office personnel. Secondary data collection- For this underwrite we bead in roll up our data mainly from the annual report. We pack conducted the report ba sed on 6 eld financial report of foursquare Pharmaceuticals from 2005 to 2010. In our report we showed working capital steering under which we showed opinionor, debtor, armoury and currency direction. We besides took data from different websites as get as our text defend for relevant information. Company OrganogramThe general prudence and superintendence of the company is vested in the Board of Directors. Since the demise of the founder and chairman of the company Mr. Samson H Chowdhury, the pisseds day to day operations are now being run by his son Mr. Tapan H Chowdhury. He is masking up by a group of highly qualified professionals. The basic anatomical structure for the Board of Directors for the company are accustomed infra, The board of directors is therefore accountable for hiring a CEO and a management team whose duty allow be to manage the daily operations of comforting Pharmaceuticals.SWOT Analysis Strengths * Establishing strong distribution channel th rough franchising both in local and foreign market. * Weakness * Obsolescence of current technology employ in pharmaceutical plants * dependence on imports of raw materials from foreign markets Opportunity * Building strong scrape image of a pharmaceutical company, that arouse be carried to the global market * Opportunity to grow in the local market as tumesce as the planetary market huge un-captured market in Africa. Threats * whatsoever adverse change in the Government Drug Policy and importation Policy * Restrictions from the Department of Environment on plant facilities in Pabna. running(a) CAPITAL perplexity works Capital Management works capital is the money inevitable for running day-to-day business of a self-colored. Hence, it is the line of life of any business concern. The basic theme of working capital management is to provide adequate support for radiate and effectual functioning of ordinary day-to-day business by striking a flip-flopoff between the th ree dimensions of working capital runniness, profitability and risk (Sur & Chakroborty, 2011).Excessive working capital leads to unproductive use of scarce resources and inadequate working capital interrupts the smooth flow of business activity and profitability. The balance allocation of working capital funds between inventories, book debts and different components of working capital is a crucial phase in Working Capital Management. concord to Harris (2005) Working capital management is a simple and straightforward concept of ensuring the ability of the firm to fund the difference between the inadequate term assets and compendious term liabilities.Nevertheless, a complete and mean approach is preferred to put over all of a companys activities related to vendors, customer and product (Hall, 2002). Now a days working capital management is considered as the main central issue in the firms, and financial omnibuss are trying to identify the basic drivers and level of working cap ital management (Lamberson, 1995). Scope of Working Capital Management As we have look outn originally working capital management is the ability of a company to throw its operations through its current assets and current liabilities.Current assets are those assets that understructure be converted into gold within one year without diminishing its value. about of the major current assets are notes, marketable securities, accounts receivable and blood. Current liabilities are those liabilities which are intended to be paid within a year of inception. Some major current liabilities include accounts payable, bills payable, camber overdraft and outstanding expenses. importance of Working Capital ManagementThe importance of working capital management stems from deuce discernments (i) A substantial portion of the investment is invested in current assets, and (ii) The level of current assets result change quickly, with the variation in gross revenue. Hence, in this study, an l ook for has been made to analyze the size and composition of working capital and whether such an investment has increased or declined over a achievement of heptad geezerhood. After determining the requirement of current assets, one of the important tasks of the financial manager is to select a group of appropriate sources of pay for the current assets.Normally, the excess of current assets over current liabilities should be financed by the extensive-term sources. It is not achievable to find out precisely which long-term sources has been utilize to finance current assets, but it can be examined as to what semblance of current assets has been financed by long-term funds. Why is working capital in deriveible? exchange strain Receivables Given that the basic assumption of finance is to maximize shareholders fair-mindedness it is necessary to generate sufficient profits.In general we can pronounce that profits are the direct product of gross revenue. hence it is safe to consecrate that in order to have profits a business of necessity to have a successful sales program. However sales do not convert into funds easily and there is an invariable cadence lag between the sale of goods and the receipts of change. There is therefore the consume for working capital in the form of current assets to deal with the task a travel out of the lack of immediate realization of hard currency against that of the goods interchange. Technically this is referred to as the run cycle.In a simpler form the term gold cycle refers to the quaternaryth dimension needed to complete the following activities 1. Conversion of money into instrument- purchase of raw materials, conversion of raw materials into WIP account, and finally transferring the finished goods to the warehouse for sale. 2. Conversion of fund into Accounts Receivables through Sales- this happens when firms make credit sales to customers 3. Conversion of Receivables into Cash- this is the stage wh ere receivables are collected from the credit sales that were made.If it were likely to complete the sequence of the three events instantaneously there would be no need for current assets or current liabilities. However since cash inflows and cash outflows do not see firms have to respect cash or invest in absolutely term liquidities so that they will be in a position to tack together any obligations in field they a wind. CASH MANAGEMENT Cash is an important current asset of the business. Cash is the basic input needed to keep the business running on a continuous basis, it is too the ultimate output expected to be realized by sell the product or answer manufactured by the firm.The firm should keep sufficient cash, neither more or less cash famine will disrupt the firms manufacturing operations while uppity cash will simply remain idle, without contributing anything towards the firms profitability. Cash is the money which a firm can disburse at one beat without any restr iction. The term cash includes coins, currency, and checks held by the firm as wholesome as balances in the bank account. Somemultiplication near cash items such as marketable securities or bank eon deposits are also included as cash.Facets of Cash Management Cash Management is have-to doe with with three things, i. Cash flows into and out of the firm ii. Cash flows within the firm iii. Cash balances held by the firm at a point of time by financing deficit or investing surplus cash The cash management process can be represented by the cash management cycle as shown below, Motives for Holding Cash A firms causal agency for holding cash whitethorn be to three main reasons 1. Transactional- the transaction motive requires a company to hold cash for daily transaction purposes.The firm unavoidably cash in the main to make pays for purchases, wages, salaries and anformer(a)(prenominal) operating expenses such as taxes and dividends. On the other hand there is a regular cash inflow into the company from sales operations, returns on outside investments and so on. However these inflows and outflows are not always synchronized and hence the firm take to hold an unembellished cash balance. 2. Precautionary- the precautionary motive requires a company to hold cash to meet contingencies in the future. It provides a cushion or a yellowish brown zone to withstand any unexpected emergencies.The sum total of precautionary cash we need to have will depend on the predictability of the cash flows. If cash flows can be predicted with accuracy wherefore less precautionary cash will be required, and vice versa. The broadside of precautionary cash a firm holds will also depend on how quickly a firm will be able to borrow money at short notice. Stronger the ability to borrow cash the less precautionary cash that needs to be kept. 3. Speculative- the speculative motive requires the company to hold cash for future investments in profit making opportunities if required.T hese opportunities whitethorn arise when there is a change in the price of securities n the stemma market. When the matter to rates on the markets are rising then firms will withhold cash, as this signals the drop in the price of the securities. When the interest rates are travel then firms will invest in securities as this signals the rise in the price of securities in the near future. Objectives of Cash Management The basic objectives of cash management is to 1. Meet Payment Schedules-in order to meet defrayal schedules a firm needs to have sufficient cash to meet the cash disbursements of the firm.It is important for firms to have adequate cash because apart from providing just liquidity cash also helps to ensure that the a) Relationship with the bank is not heavy b) The firm has a good relationship with trade creditors and suppliers of raw materials, as prompt allowances help them with their own cash managements. c) Cash discount can be obtained if payment is made before t he due date. d) credence gain ground remain high and hence the firm can purchase other goods on favorable terms and helps to maintain its line of credit with banks and other loan handling institutions. ) Advantage of favorable business opportunities is taken on a terminationic basis. f) The company can unanticipated cash consumption during outcomes of strain. 2. Minimizing Funds Committed to Cash symmetrys- the second objective of cash management is to reduce the cash balances. While minimizing the cash balances two conflicting aspects of have to be reconciled. Firstly a large cash balance will ensure prompt payment. However it will also imply that large amounts of funds will remain idle, and as we know cash is a non-earning asset. On the other hand a low level of cash balance means that the firm is not able to meet the payment schedule.Hence the aim of cash management should be to have an optimal amount of cash balance. Preparation of Cash Budget Cash budget is the most sign ificant device to plan and go over cash receipts and payments. A cash budget is a summary statement of a firms expected inflows and outflows over a projected end of time. The cash budget gives the timing and the magnitude of future expected cash flows over the projected consummation. This cash budget helps finance managers plan the future cash requirements of the company, and make plans to assure the liquidity of the company.In order to doctor the cash budget much information is required such as 1. Estimation of cash inflows- this includes all operating, non-operating and financing information of the company 2. Estimation of cash outflows- this includes * direct outflows (wages, payment of A/P etc. ) * Capital expenditures * Contractual payments (such as repayment of loans) and * Discretionary payments (dividends) Besides this it is also necessary to know the serving of credit sales vs. cash sales being made and the mean(a) collection gunpoint for accounts receivables.Howev er since most of this information is company sensitive information, it was not possible for us to collect this information and hence we could not prepare the cash budget. CREDITORS MANAGEMENT Creditors/Payable Management Managing creditors / payables is a let out part ofworking capital management. The working capital requirements of a firm are affected by credit terms granted by its creditors. A firm will need less working capital if full(a) credit terms are forthcoming to it. Similarly, the availability of credit from banks also influences the working capital needs of the firm.A firm which can get bank credit easily on favorable condition will act upon with less working capital than a firm without such a facility. disdain credit is the simplest and most important source of short-term finance for many companies. The objectives ofpayablesmanagement are to ascertain theoptimum level of trade credit to convey from suppliers. Deciding on the level of credit to acceptis a balancing act between liquidity and profitability. By delaying payment to suppliers companies face possible troubles * supplier may refuse to supply in future * supplier may notwithstanding supply on a cash basis * there may be loss of record Supplier may increase price in future. Relationship between self-colored Pharmaceuticals Ltd & Creditors The board of Square Pharmaceutical Ltd manages the financial transactions and ensures to meet companys commitments to the lenders without default. This has resulted in securing lower interest rates from them financers. The company receives the highest level of banking function and conducts its business operations efficiently. The company enjoys the minimum interest rate on the lending by the banks. The company has established long term business relationship with the banks namely Janata Bank Ltd. , Citibank N.A, Standard Chartered Bank, HSBC Ltd. , Eastern Bank Ltd. , Commercial Bank of Ceylon Ltd. , Mercantile Bank Ltd. , Bank Alfalah Ltd. , Sha hjalal Islami Bank Ltd. , blaspheme Bank Ltd. , Bank Asia Ltd. and DEG Germany who provide most efficient service at minimum constitute/interest that benefit the shareholders. The company has neither ever defaulted in any commitment with its Bankers nor did get entangled in licit dispute at any court premises. Relationship between Square Pharmaceuticals Ltd Suppliers Square is a renowned company which imports plant and machinery and almost all the raw materials from well-known suppliers of abroad.It maintains cordial and mutually beneficial interest with its international as well as local suppliers and this has enabled the company to avoid any legal disputes in international/local courts and enhanced the companys image as a good customer to its suppliers. Creditors & Sales 2011 2010 2009 2008 2007 2006 Collection 18,579,768,546 15,264,808,445 11,401,786,553 9,706,402,257 8,231,097,525 7,455,061,355 Of sales 2,016,551,125 2,627,483,864 736,443,848 1534345782 2 ,669,693,184 1,818,777,878 rook Term ank loan Long-term loans-current portion. 477,141,480 478,199,933 462,090,211 295,590,601 297,002,646 225,176,449 2493692605 3105683797 1198534059 1829936383 2966695830 2043954327 kernel credits Creditsas a % of 13. 42% 20. 35% 10. 51% 18. 85% 36. 04% 27. 42% Sales In the gauges of creditors only the creditors-Short term bank loans, long term bank loans- current portion which are related to purchases are taken. Other payments relating to tax, outstanding expenses or any other liability are not taken under it.The creditors as a fortune of sales show the sales of Square Pharma Ltd, generating from credit purchases up to what extent. If more sales are contributed by credit then the working capital required will be less. In the above table of the creditors as a percentage of sales focus on the data of 2006 to 2012 where we can see that the company achieved highest percentage in the year 2007-2008 b ut then it came down to 10. 51% in 2008-2009. During 2010-2011 periods the creditors as a percentage of sales again increased to 20. 35% but then again it dropped to 13. 42% in 2011-2012 periods.Square Pharmaceuticals Ltd should try to enhance this percentage so that to increase sales the company does not need to cuss on working capital but rather on credit. disdain CREDITORS Time period 2011-2012 2010- 2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006 Trade Creditors 875,431,555 733,369,218 394,715,915 124,222,699 124,222,699 100,953,258 60,601,743 79,390,166 The amounts shown in the above chart are the payables to regular suppliers of raw materials, packing materials, promotional materials etc. All suppliers were paid on a regular basis. account Management Inventory management is the process of efficiently overvisual perception the constant flow of units into and out of an existing origin. This process ordinarily involves controlling the transfer in of units in order to prevent the arsenal from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent gunstock management also seeks to control the costs associated with the armory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory.Balancing the motley tasks ofinventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means intelligence how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid rationality of how long it will take for those materials to transfer out of the inventory be established. discerning these two important lead clock makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly.Ca lculating what is known as buffer stock is also key to effective inventory management. Essentially, buffer stock is additional units above and beyond the minimum number required to maintain production levels. For example, the manager may determine that it would be a good idea to keep one or two extra units of a given machine part on hand, just in subject area an emergency situation arises or one of the units proves to be defective once installed. Creating this cushion or buffer helps to minimize the chance for production to be interrupted due to a lack of essential parts in the operation supply inventory.Inventory management is not confine to documenting the delivery of raw materials and the action of those materials into operational process. The movement of those materials as they go through the various stages of the operation is also important. typically known as a goods or work in age inventory, tracking materials as they are used to create finished goods also helps to identi fy the need to adjust ordering amounts before the raw materials inventory gets dangerously low or is inflated to an unfavorable level. Finally, inventory management has to do with keeping accurate records of finished goods that are ready for shipment.This often clock means posting the production of newly completed goods to the inventory totals as well as subtracting the most recent shipments of finished goods to buyers. When the company has a return indemnity in place, there is usually a sub-category contained in the finished goods inventory to account for any returned goods that are reclassified as refurbished or second grade quality. Accurately maintaining figures on the finished goods inventory makes it possible to quickly convey information to sales personnel as to what is available and ready for shipment at any given time.In addition to maintaining control of the volume and movement of various inventories, inventory management also makes it possible to prepare accurate record s that are used for accessing any taxes due on each inventory type. Without precise data regarding unit volumes within each phase of the overall operation, the company cannot accurately calculate the tax amounts. This could lead to underpaying the taxes due and possibly incurring stiff penalties in the event of an individual audit. Inventory as a strategic assetBy deploying inventory as a strategic asset rather than a tactical sticking plaster, any geological formation can achieve * ? high service levels with reduced inventory * ? simplified planning processes * ? reduced obsolescence * ? significant liberation of cash. However, this can only really be delivered in a sustainable way if the current inventory deployment can be modeled and assessed, and alternative strategies developed and tested in a safe environment before any effectuation of change.The inventory profile can then be reviewed and re-aligned as the business evolves into new markets or new products come on stream. I t is essential for the organization to hold the stocks to minimize the cost The important elements those need to manage inventory and run the production In other words ,Inventory is an idle stock of strong-arm goods that contain economic value, and are held in various forms by an organization in its custody awaiting packing, affect, transformation, use or sale in a future point of time. Any organization which is into roduction, trading, sale and service of a product will necessarily hold stock of various physical resources to aid in future consumption and sale. While inventory is a necessary evil of any such business, it may be noted that the organizations hold inventories for various reasons, which include speculative purposes, functional purposes, physical necessities etc. From the above definition the following points stand out with reference to inventory * All organizations engaged in production or sale of products hold inventory in one form or other. Inventory can be in comple te state or broken state. * Inventory is held to facilitate future consumption, sale or further processing/value addition. * All inventoried resources have economic value and can be considered as assets of the organization. The whole above process is needed to run a companys production. Debtor management Trade Debtors or motley debtors or accounts receivable is the person(s) to whom goods are sold on credit and concord to receive payment in future. If company starts to sell on return of cash, then it decreases the level of companys sale and profitability.If company promotes credit sale, it can increase the risk of bad debts. So, it is required to control and to manage debtors and to minimize the loss due to not receiving money from debtors is the main aim of debtor management. Main elements or dimensions of Debtors management 1. Credit policy Credit policy effects debtor management because it guides management about how to control debtors and how to make balance between liberal a nd strict credit. This liberated credit policy which means there is no restriction in case of credit sales will increase the amount of sale and profitability.If goods sold to those debtors whose capability to pay is not good, then it is possible that some amount will become bad debts. Company can increase the time limit for paying by such debtors. On the other hand, if companys credit policy is strict, then it will increase liquidity and security, but decrease the profitability. So, finance manager should make credit policy at optimum level where profitability and liquidity will be equal. We can show it graphically Sub part of credit policy- (a) distance of Credit periodLength of credit period is also an element that affects conclusions of finance manager relating to manage debtors. It is the time which allows to debtor to pay his debt for purchasing goods on credit from vendor. Finance manager can increase the length of credit period according to reputation of customers. (b) Cash discount Cash discount is technique to get money faster from debtors. It is cost of investment in credit sale. once again many companies provide with cash discount to attract more customers and increase the overall sales of the company. 2. Credit policy analysisIt means decision relating to analysis of credit policy. Evaluation and analysis of credit policy is based on following factors. a) Collection of debtors information For analyzing the financial position of debtors, information relating to debtors need to be collected. This information can be obtained from customers financial statements of previous years, bank reports, and information given by credit rating agencies. These information is useful for deciding where debtors are capable to get credit sales and whether they will be able pay out the outstanding debt or not. b) Credit DecisionsAfter solicitation and analyzing the debtors information, manager has to decide whether company should facilitate to sell goods on credit or not. If company sells the goods on credit to particular debtor, then at what level it will be sold after seeing his position. For this manager can fix the standard for providing goods on credit. If a particular debtor is below than given standard, then he should not accept his proposal of buying goods on credit. 3. Formulation Collection Policy To get the fund faster from debtor, the following steps will be taken under formulation of collection policy. ) Send reminding letter for paying debt b) institute the help of debt collection agency for getting bad debt. c) To do legal action against bad debtors. d) To request personally to debtor to pay his dues on mobile or email. e) Finance manager should monitor collection position through middling collection period from past sundry debtor and their disturbance ratio. f) To make ageing schedule. Debtor management of Square Pharmaceuticals from 2005-2010 Trade debtors occurred in the ordinary course of business are unsecured but consi dered good. Ageing of the debtors from 2004 to 2010 is as follows 012 2011 2010 2009 2008 2007 2006 Below 30 eld 317,174,045 239,122,710 189,657,421 209,027,961 247,995,969 138,729,113 131,653,153 Within 31-60 long time 188,262,890 78,672,302 43,329,446 32,015,833 37,053,893 30,428,440 63,588,500 Within 61-90 old age 94,301,441 49,905,875 12,010,002 9,245,177 15,330,219 14,028,426 20,624,190 Above 90 old age 208,573,338 404,720,458 263,252,305 227,273,031 59,865,565 139,678,658 72,866,294 Tk. 808,311,714 772,421,345 508,249,174 477,562,002 322,864,637 360,245,646 288,732,137 Debtor upset ratioDebtor turnover ratio is the relationship between credit sales and number debtors and it is also called account receivable turnover ratio. Debtor Turnover ratio = Credit Sales / Average Debtors Year 2006 2007 2008 2009 2010 2011 2012 lowest credit sales 288,732,137 360,245,646 322,864,637 477,562,002 508,249,174 772,421,345 808,311,714 Avg. debtors 278,129,939 324,488,892 341,555,142 400,2 13,320 492,905,588 640,335,260 790,366,530 Debtor Turnover ratio 1. 04 1. 11 0. 95 1. 20 1. 03 1. 21 1. 02 Debtors turnover ratio shows how long people normally take to pay a firm for purchases on average out. By comparing between the periods, management can tell if they are collecting their receivables quicker or eternal on average.If a firms debtors turnover ratio is higher than the amount the firm normally gives people to repay their credit, then the firm is doing a un worthyyy job of collecting receivables. The term Debtor Collection layover signalises the average time taken to collect trade debts. Debtors collection period = 365 long time/Debtor turnover ratio Year 2005 2006 2007 2008 2009 2010 2011 2012 Debtors collection period 338 351 329 384 304 354 302 358 present the number of days shows how long it takes Square Pharmaceuticals to collect its receivables and we know that reducing period of time is an indicator of increasing capability. Here we can see that there is a fluctuation in the ratio over the time period.It takes a lot of time for the company to collect the receivables. But the company should try to minimize the collection period to get more efficient performance. Export debtors Due from exportation sales Realized amount unrealised amount 2005 14,724,353 12,194,435 2,529,918 2006 26,490,877 10,330,471 16,160,406 2007 773,713,422 92,961,015 80,752,407 2008 33,874,927 13,852,927 20,022,000 2009 63,096,760 57,957,585 5,139,175 2010 31,693,422 16,089,143 15,604,279 2011 64,924,422 35,758,364 29,166,058 2012 98,568,421 62,347,054 36,221,367 From the above chart it is visible that the credit sales from export also have some uncollected receivable amount from the period of 2005-2010. The management needs to be more efficient in case of collecting the receivables from the debtors to ensure companys profitability. In all those years there was no amount due by the directors, managing agent, manager and other officers of the company and any of them severally or jointly with any other person. Also no amount is due by associate undertakings. Debtors and Working Capital As on 31st March ears 2006 2007 2008 2009 2010 2011 2012 Debtors 288,732,137 360,245,646 322,864,637 477,562,002 508,249,174 772,421,345 808,311,714 WorkingCapital 1,770,929,474 1,126,944,426 910,991,333 1,202,644,301 2,557,566,793 2,354,024,414 2,492,572,163 As a % of W. C. 16. 30% 31. 97% 35. 44% 39. 71% 19. 87% 32. 81% 32. 24% There a fluctuation in the ratio over the time period and it has decreased from 2005 to 2006 then again increased in 2007, 2008 and 2009. Again it dropped in 2010 and again rose in 2011 and 2012. The lower the ratio is the break up so management should try to manage their accounts receivables policy properly. RATIO ANALYSISCompany MKT coat Growth in 2011 securities industry Share 2011 2012 Square Pharmaceuticals 15,725. 8 20. 5% 18. 7% 19. 2% Incepta Pharmaceuticals 7,851. 5 28. 6% 9. 3% 9. 0% Beximco Pharm aceuticals 7,415. 0 30. 5% 8. 8% 8. 4% OpsoninPharma 4,275. 4 27. 2% 5. 1% 4. 9% Renata 4,076. 8 26. 1% 4. 9% 4. 8% full(a) Sector 84,044. 1 23. 6% Key monetary Highlights Before going to the main part of the paper, which is financial ratio analysis of Square Pharmaceuticals Limited, some key financial data about the company can give deep understanding on the companys financial positions and performance. Net acquireNet profit also increased all over the last hexad years. In from 2006-2012 net profit increased by 6. 06%, 36. 76%, 10. 48% and 21. 26% respectively. But key point here is that the rate of growth from year to year is not so much pursuant(predicate), although increment of turnover is very much consistent from one year to another. This also indicate that increment of expenditures were not consistent from these years. asset Ratio Analysis surgical process evaluation of a company is usually related to how well a company can use its assets, shareholder equity and liability, revenue and expenses. financial ratio analysis is one of the best tools of performance evaluation of any company.In order to determine the financial position of the Square Pharmaceutical Limited and to make a judgment of how well is the efficiency of Square Pharmaceutical Limited, its operation and management and how well the company has been able to utilize its assets and earn profit. We use ratio analysis for easily measurement of efficiency, liquidity position, asset management circumstance, investment condition, and profitability, market value and debt insurance coverage situation of the Square Pharmaceutical Limited for performance evaluation. It analyzes that how the company uses of its assets and control of its expenses. It determines the greater the coverage of liquid assets to short-term liabilities and it also compute ability to pay. It measures overall efficiency and performance of Square Pharmaceutical Limited.It determines of share market conditi on of Square Pharmaceutical Limited. Square Pharmaceutical Limited is the most famous company in Bangladesh. It was established in 1958 but their converted into public limited company in 1991. It is the first among all national, multinational, private and public of pharmaceutical company of Bangladesh. Their mission is to produce and provide quality healthcare relief of people, maintain strongly ethical standard in business operation also ensuring benefit to the shareholder, stakeholder, and society. Their vision is social wellbeing of the investors, employee and society at large, wealth financial and moral gains as a part of the process of the human civilization.Their objectives are to conduct transparent business operation based on market mechanism within the legal and social frame work. pecuniary ratios are useful indicators of a firms performance and financial situation. Financial ratios can be used to analyze slides and to compare the firms financials to those of other firms. Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used 1. liquidity ratios 2. Asset management ratios 3. Debt management ratios 4. positiveness ratios 5. Market value ratios variant and Analysis of Financial Ratios LIQUIDITY RATIOS Liquidity ratios are the first ones to come in the picture.These ratios actually show the relationship of a firms cash and other current assets to its current liabilities. Two ratios are discussed under Liquidity ratios. They are 1. Current ratio 2. Net Working Capital 3. tender/ Acid Test ratio. 4. Cashflow to Total Debt 5. Cash rhythm 6. Cash Turnover 7. Net Liquid eternal sleep Liquidity Ratio 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Current ratio 1. 44 1. 26 1. 46 2. 15 1. 50 1. 59 Net Working Capital 1126945 910991 1202644 2557567 2354025 2492572 bustling ratio 0. 84 0. 68 0. 66 1. 05 0. 96 1. 58 Cashflow to Total Debt 0. 81 0. 60 1. 30 2. 21 1. 04 1. 51 Cash Cycle 138. 33 145. 63 140. 4 158. 5 142. 39 114. 9 Cash Turnover 2. 63 2. 50 2. 6 2. 30 2. 56 3. 18 Net Liquid Balance 17906710 18117139 71456952 65071270 75554041 259448647 1. Current Ratio It is the ratio of current assets to current liabilities. reading * In 2012, Square Pharmaceuticals current assets were 1. 59 multiplication of its current liabilities. Current ratio increased steadily from 2006 to 2010 except for the year 2007 when it decreased compared to previous year and then finally it settled to 1. 59. * According to the industry average Squares current ratio is furthermost above at 1. 59 times, were as the industry average lies at 1. 8 times, so indicates a good performance by Square. The current ratio figure of Square indicates that their proportionate increase in assets has been more than their proportionate increase in liability because of which the ratio figure increased over the period. 2. Quick Ratio It is the ratio of current assets, excluding inventory, to current liabilities. rendering * In 2012, Square Pharmaceuticals current assets, excluding inventory, was 0. 96 times of its current liabilities. * Quick ratio did not follow the same upward trend of increasing, it fell from 0. 84 (2007) to 0. 68 (2008) and 0. 66 (2009) and it increased in 2010, again taking a fall and landing on 0. 96 times in 2011. Again, it slightly fall in 2012 to 0. 95. * The companys quick ratio was below the industry average unlike current ratio, which appears to be a negative sign. comparison the current ratio and quick ratio, we can conclude that the company had a high amount of inventory, which lead to a high current ratio but a low quick ratio. Net Liquid Balance 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 NLB 17,906,710 18,117,139 71,456,952 65,071,270 75,554,041 259,448,647 Net liquid balance for the square pharmaceuticals limited is increasing in the recent years 2011 and 2010. In 2006 company got the highest NLB of Tk. 259,448,674. Holding too much idle balance is bad as company lose investment opportunity. Thus the company invested in short term loan in the following years. In recent years, company holding some plentiful amounts of NLB. So the NLB position of square pharmaceuticals is good in recent years.ASSET MANAGEMENT RATIO ASSET MANAGEMENT RATIOS Asset management ratios are the financial statement ratios that measure how effectively a business uses and controls its assets. Below are discussed five types of asset management ratios 1. Inventory turnover ratio 2. The days sales outstanding 3. Average payment period 4. Fixed asset turnover ratio 5. Total asset turnover ratio Asset management ratio 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 Total Asset Turnover 2. 76 2. 40 2. 70 2. 97 3. 03 3. 25 Inventory Turnover Ratio 2. 76 2. 39 2. 70 2. 97 3. 03 3. 25 Days in Inventory 132. 27 138. 98 132. 05 152. 34 135. 04 122. 8 Average payment period 89 days 174 days 207 days 199 days 120 days 112 Days sal es outstanding 13 days 13 days 15 days 14 days 18 days 20 days Total Asset Turnover Ratio It is the ratio of sales to total assets. Interpretation * In 2012, the companys every 1-taka worth of Total Assets generated 0. 15 taka of sales. * Overall the total asset turnover alter over the years, except for the years except for 2008 when it felled to . 14 times, but it bit by bit increased passim 2009 to 2011 and stood at . 14 times at 2011. This is a good sign of utilization of assets. * The companys performance seems to be very satisfactory as total asset turnover is far above the industry average of 0. 33 times.Overall, the performance is very good. Inventory Turnover ratio It is the number of times a company sells and restocks its inventory. Interpretation * In 2012 the company sold and restocked its inventory 3. 41 times. * Inventory turnover ratio for Square has been move between the period 2007 and 2010 very insignificantly rising to a level of 3. 03 times in 2011. * The comp anys rate of inventory turnover is higher than the industry average of 2. 2 times, so we can conclude that the company is efficiently and quickly merchandising off and restocking its inventory. The companys balance sheets show increase of inventory with declining turnover every year.Declining inventory turnover commonly indicates that the company is not being able to flush its inventory very well as it was doing in the previous years. A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product line or marketing effort. High inventory levels are unhealthy because they represent an investment with a zero rate of return in addition to the increased cost associated with maintaining those inventories. It also opens the company up to trouble should prices begin to fall. However, in some instances a low rate may by appropriate, such as where higher inventory levels occur in anticipation of rapidly rising prices or shortages. In order to improve Inventory Tur nover ratio, at first an end-to-end view in addressing inventory needs to be looked at.Supply chains need to be optimized, production processes should have to be efficient as well, so that the suppliers become able to produce and deliver materials in a timely, low cost fashion that allows the company to minimize their inventory and cost of materials. Collaborative relationships with customers can allow them to make their demand for products more predictable thereby allowing to minimize finished product inventory without helplessness to meet their needs for volume and timeliness. Discount-driven sales may generate a boost in sales. Such discounts can erode the companys profit margins but will boost revenue and rate of inventory turnover. The company might look like it is becoming leaner, when in fact it may simply be pushing products into the marketplace using unsubstantial low pricing. However, before it can be done, the gross margins reported by the business needs to be analyzed carefully.If gross margins decrease as a percentage of sales in spite of an increase in inventory turnover, they should not apply this policy. Supplier-financed inventory may reduce inventories and show improved inventory turnover by forcing suppliers to carry the inventory for the company. The suppliers wear upon the cost of maintaining inventory and passes that cost on. Alternatively, the company may reduce inventory by the use of express shipment or other high-priced means of delivery to ensure the availability of materials and supplies when needed. Solutions of maintaining inventory that simply disruption cost to suppliers return the cost in added mark-ups to the materials and supplies purchased. This results in a rise in unit product unit cost.Days in Inventory It shows the time taken by the company to sell out its inventory. Interpretation * In 2012, the company held onto its inventory for 123 days before selling it out. * In 2011, the company held onto its inventory for 12 0 days before selling it out. * Days in inventory rose dramatically in 2008 to 152 days in it late climbed down to 120 days in 2011. The company is improving in quickly selling off its inventory rather tying it back and arising cost. * In 2010, however its value was below the industry average, which shows its good position among competitors. Square has the lowest days in inventory. Average Collection Period It shows the time taken by the company to collect its account Interpretation For Square Pharmaceuticals, it took an average of 18 days to collect its accounts receivables from its customers in 2011. * The ACP started to flowering up after 2008 with 15 days (2009) and then falling to 14 days ( 2010) and then it gradually increased to 18 days in 2011 and stood there. The company seems to be inconsistent in collecting its debt and it is increasing which is a bad sign cause it will lead to a scenario of funds being tied up. * The companys figure is really below the industry average , which is a good sign for the company as it indicates that they at least more efficient in collecting their funds then their competitors. They will have more cash available at hand by elongating the payment periodSince the DSO was the highest in 2004-05 that indicates that customers were taking longer times to pay their bills, which may be a warning that customers were dissatisfied with the companys product or service, or that salespeople were making sales to customers that are less credit-worthy, or that salespeople have to offer longer payment terms in order to varnish the deal. Long credit policy might be used measuredly to boost sales temporarily. Of course, it could also mean that the company has an inefficient or overtaxed accounts receivables department. However, the significant improvement in 2005-06 signifies that the company collected its outstanding receivables quicker than the previous years and that the credit terms are getting more realistic.It also connotes that th e company had greater control over quality of its customer relationship management (CRM) during the following year. Average Payment Period It shows the time taken by the company to pay off its accounts payable. Interpretation * In 2011, it took an average of 120 days for the company to pay its accounts payables. * The companys average payment period started to rise from the period 2008 and continued to rise till 2009 amounting at 207 days and then it started to decline in 2010 and stood at 120 days in 2011. * The companys payment period was below the industry average which shows the company might be at lack of fund due to paying off its creditors early, than its competitors .The underlying reason for the ratio to go up is the significant increase of companys debt especially short and long term bank loans (which made the current portion of long-term loans high). Each year this amount is getting higher than the previous years. Furthermore, in 2004-05 there was a huge sum trade credits unpaid. All these played key role for the payables to increase. A long payment period at first improves the companys liquidity, but may also be an indicator for liquidity problems. Therefore, it is important to keep the value equal or close to the average value. Since the companys payment period is getting longer, i. e. the company pays too late, then it means the liquidity problem of the company.The company probably lacks of the money to pay its liability. Hence, questions may arise on the companys credit worthiness and paying habits. It has long been recognized that late payment of business debt is a serious problem for suppliers of goods and services. Late Payment can make it necessary for a company to increase borrowing and to extend overdraft facilities. Time and resources can be taken up on maintaining and collecting late payments instead of being devoted to other areas of business. PROFITABILITY RATIOS profitability is the net result of a number of policies and decisions. netability ratios show the have effects of liquidity, asset management and debt on operating results.There are four important profitability ratios that we are going to analyze 1. Net Profit boundary line 2. Gross Profit Margin 3. effect on Asset 4. Return on Equity 5. sugar Per Share Gross Profit Margin It is deliberate by dividing gross profit by sales. Interpretation * In 2012, for every 100-taka worth of sales, Square Pharmaceuticals earned 43. 2 taka * In 2011, for every 100-taka worth of sales, Square Pharmaceuticals earned 42. 8 taka. * Over the period of five years, Square Pharmaceuticals had an inclining trend leading to a shelter rate of 42. 8% over the past three years. This is an character of consistent and stable performance. The cross sectional analysis shows that the company has been maintaining its profit well enough as it is far above the industry average of 27. 2% The Gross Profit Margin has remained pretty much stable throughout the whole three years. It inc reased slowly each year. It indicates that Square Pharmaceutical is managing its Sales and Cost of Goods Sold very well. Operating Profit Margin It is calculated as the ratio of operating profit to sales. This shows the amount of operating profit earned relative to sales. Interpretation * In 2012, for every 100-taka worth of sales, Square Pharmaceuticals earned 20. 9 taka of operating. * In 2011, for every 100-taka worth of sales, Square Pharmaceuticals earned 20. 4taka of operating. The operating profit figures show that Square Pharmaceuticals had a fluctuating trend over the period, with O/P margin being highest in 2007 and then it followed an up and down trend while gradually declining to 20. 4% in 2011. * Perhaps proportionate increase in sales was greater in the proportionate increase in operating which lead to a gradual decline in the figures. While the company had an inconsistent and declining figure for O/P margin, it still managed to catch up with the industry, with the ind ustry average being at 19. 8%. Net Profit MarginIt is calculated by dividing net profit by sales. Interpretation * In 2011, for every 100 taka worth of sales, Bangladesh Lamps generated 18. 8 taka worth of net income. * The Net income has deterioted over the years but still is being somehow consistent. The company has the highest industry average, so it shows their performance are way better than their rivals. The main reason that the profit margin declined is high cost. High cost, in turn, generally occurs due to inefficient operations. Profit margin also declined because in 2005-06 Square Pharmaceuticals used a lot of long-term debt. This invariably resulted in more interest cost, which brought the Net income down. Return on Asset It is the ratio of net income to total assets. Interpretation * In 2011, Square Pharma generated 13 taka worth of net profit from its 100 taka worth of total assets. * The company has an improving trend of ROA. In spite of this the companys ROA is below industry average. Return on Equity Interpretation We can see that the ROE of Square Pharmaceuticals is stable and having a good number which is a good indication cause the higher the ROE, the higher the rate of return. Earnings per share Over the years Square Pharmaceuticals earning per share has been increasing. For 2009-10 to 2010-11 EPS of Square Pharmaceuticals increased by 21. 42%. As its EPS is also higher than the industry average (presented at the after part of the paper), it can be said that Square Pharmaceuticals could use it equity efficiently in generating profit. MARKET VALUE RATIOSThe final group of ratios, the market value ratios relates the firms stock price to its earnings and book value per share. These ratios give management an indication of what investors think of the companys past performance and future prospects. In this section, we are going to have a discussion mainly on two types of ratios 1. expenditure/ Earnings ratio 2. Market/ Book ratio Price/ Earnings ratio The Price/ Earnings ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the income or profit earned by the firm per share. P/E ratio Price per share / earnings per share Market/ Book ratio The ratio of book value to market value of stocks.Market/Book ratio (M/B) = Market price per share / Book value per share Following table shows the P/E and M/B ratios of Square Pharmaceuticals in different years Year 2006-07 2007-08 2008-09 2009-10 2010-2011 2011-12 P/E Ratio 10. 3 times 17. 5 18. 3 17. 8 16. 5 15. 3 M/B ratio 1. 78 times 1. 77 times 2. 36 times 2. 41 times 2. 94 times 3. 26 times The P/E ratio was 8. 43 times in 2006-07. However, in 2007-08 it declined to 9. 70 times which is an alarming signal for the potential investors. The M/B ratio was 1. 78 times in 2006-07 and increased further to 2. 92 times in the following year which was excellent to draw the attention of investors.The main reason behind the declination of P/E and M/ B ratio is the fall of price per share. Price of share may fall for several reasons. Failing to meet market expectations is one of the main reasons for the market to lose interest in a share. Shares are usually treasured according to what investors reckon the company will do in future. Therefore, when a business fails to meet those expectations then it is not unreasonable for investors to reconsider their position. We can see this fact applicable for this company too. As the company was doing well in 2000-05, the share price was higher than among the three years. Interestingly, the violation on shares depends to a large degree on the influence that they have on the market as well.During 2005-06 financial year the capital market situation deteriorated to the level that the DSE General Index fell by 14. 91%. The overall hostile market situation put a negative impact on Square Pharmaceuticals stock price too. Therefore, the investors should not be concerned much about the particular companys P/E and M/B ratio. Debt management ratio happen and Return Standard deviation derived from the monthly returns of Square Pharmaceuticals Ltd. over the last 5 years, is 14. 32% and the average rate of monthly return is 2. 56% Standard deviation is a measure of total risk of this stock. Thus this 14. 32% indicates the fluctuation of the 60 monthly returns of Square Pharmaceuticals stock from its mean.Thus, compared to the average monthly return of the stock which is only 2. 56%, the stock seems to be volatile. Coefficient of Variation = RiskReturn = 14. 32%2. 56% = 5. 60 Consequently, the coefficient of variation of this stock is kinda high. The risk per unit of return is 5. 60. This means that the investors of Square Pharmaceuticals have taken only 5. 60 units of risk for every unit of historical return. important of Square Pharmaceuticals Limited The following scatter plot shows the relationship between the market returns (DSE) and Square Pharmaceuticals stocks return. T he scatter plot of Square Pharma stocks price change against DSE general-index shows the movement mock up of these 60 data.Plot also demonstrates fairly positive correlation between Square Pharmaceuticals Ltds return and market return. The slope of this regression line is genus Beta which is a standardized measure of systematic or market risk of the stock. The beta of the stock of Square Pharmaceuticals has a value of 0. 623 which indicates that the stock has market risk which is not very close to the average market risk. The beta of the market or average market risk is always 1 Working Capital Requirements 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 WCR 2,077,569,872 888,936,561 685,445,639 966,839,517 1,433,895,492 890,228,553 WCR for square pharmaceuticals ltd. shows an increasing trend over the years 2001 to 2010.This is happening because sales for square pharmaceuticals is increasing during those years. Net sales reflects the change in WCR. As we see from year 2001 to 20 03 sales falls as a result WCR also falls. Again in year 2004 sales increased and thus the WCR also increased. Working Capital Requirements/Sales (WCR/S) 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 WCR/S 0. 16 0. 08 0. 07 0. 11 0. 20 0. 14 WCR/S is more or less same in the early years 2006, 2009 and 2010. consequently we see an increase in 2008 and fall in 2007 and falls continues till 2011. Then increase in 2012 again. This ratio shows companys dependency on external funds and also talks about firms liquidity.Thus we can see in the year 2006, 2007, 2008 and 2009 this ratio is higher, as a result WCR is high in those year indicating companys OC needs a higher fund. DIH, DSO, DPO, OC, CCP 2011-2012 2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 DIH 122. 78 135. 04 152. 34 132. 05 138. 98 132. 27 DSO 13. 97 15. 34 13. 75 13. 53 14. 87 15. 75