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Company Profile:Square Pharmaceuticals Ltd. was established as a partnership firm in 1958. In 1991 it was converted into a public limited company. Square Pharmaceuticals Limited is the largestpharmaceutical company in Bangladesh and it has been continuously in the 1stposition among all national and multinational companies since 1985. Since 1987 Square has taken aggressive measures to explore new countries as potential export market.VisionSquares view business as a means to the material and social wellbeing of the investors, employees and the society at large, leading to accretion of wealth through financial and moral gains as a part of the process ofthe human civilization.MissionSquaresMission is to produce and provide quality &innovative healthcare relief forpeople,maintainstringentlyethicalstandardinbusinessoperationalsoensuringbenefittothe shareholders, stakeholders and the society at large.ObjectiveSquaresobjectives are to conduct transparent business operation based on market mechanism within the legal & social frame work with aims to attain the mission reflected by our vision.

Top Management: Board of Directors:As per provisions of the Article of Association, Board of Directors holds periodic meetings to resolve issue of policies and strategies, recording minutes/decisions for implementation by the Executive Management.Executive Management:The Executive Management is headed by the Managing Director, the Chief Executive Officer (CEO) who has been delegated necessary and adequate authority by the Board of Directors. The Executive Management operates through further delegations of authority at every echelon of the line management. The Executive Management is responsible for preparation of segment plans/sub-segment plans forever profit centers with budgetary targets for every items of goods & services and are held accountable for deficiencies with appreciation for exceptional performance. These operations are carried out by the Executive Management through series of committees, sub-committees, ad-hock committees, standing committees assisting the line management.Products of Square Pharmaceuticals Ltd:SQUARE has latest technologies for production of a wide varieties of dosage forms including Tablet, Sustained Release formulation, Capsule, Metered Dose Inhaler (MDI), Injectable, Syrup(liquid and dry), Suspension (liquid and dry), Pediatric Drops, Nasal & Ophthalmic formulations, Topical Gel/Ointment/Cream, and oral care formulations.Current product mix of Square Pharmaceuticals Ltd. comprised of products from the following types of Drug Delivery Systems: Tablets: Non-coated (Vaginal, Dispersible, Chewable, Plain) Coated (Sugar coated, Film coated, Enteric coated) Sustained released (coated/non-coated) Capsules Injectable: Vials containing dry powder for injections Small volume parenteral Liquids: Oral (suspension, syrup, drops, and stomatologicals) Topical solutionsNasal drops Dry powders: Oral (for reconstitution to make suspension, syrup and drops) Topical Semisolids (creams, ointments and gels) Solid suppository formulations Metered Dose Inhalers (MDIs) Dry Powder Inhalers (DPIs) Sterile Ophthalmic Formulations (drops)

Financial performances analysis:Financial performance analysis means a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues. This term is also used as a general measure of a firm's overall financial health over a given period of time, and can be used to compare similar firms across the same industry or tocompare industries orsectors in aggregation.There are many different ways to measure financial performance, but all measures should be taken in aggregation. Here we look at the ratio analysis to measure the financial condition ofthe Square pharmaceuticals.Liquidity Ratio:Current Ratio:The current ratio is widely used measure for evaluating a companys liquidity and short term debt paying ability. Current Ratio indicates the extent to which current liabilities are converted by current assets. The ratio is computed by dividing current assets by current liabilities.The Current Ratio formula is:

(Figures in Thousands)Year20142013201220112010

Current Asset7,768,0685,996,6986,745,9807,022,2144,774,311

Current Liabilities3,416,6193,792,4384,252,9354,668,1892,216,744

Current Ratio2.271.581.591.502.05

Source: Annual report of SPL from year 2010-2014

From the graph it can be concluded that Squares current assets are increasing and current liabilities are decreasing. So, its liquidity position is relatively stronger compare to others. Here we see that, the current ratios are fluctuating in last few years. From 2010, 2011, 2011, 2012, 2013, 2014. It was in ups and down. It may not a good sign for squarepharmaceutical. According to current ratio, it must be assumed that Square Pharmaceuticals Limited Bangladesh was successful to meet its short term obligations very well for the past fiscal years and will maintain a successful healthy financial performance in coming years.Butonlyin2014 & 2010thecurrentratiowas 2.27 &2.05whichwereacceptableifthe square pharmaceutical company maintain that ratio itmay good for further investment.Quick Ratio:Quick ratio is also known as Acid-test ratio and it excludes the inventories as inventories are less liquid. Quick ratio less than 1 indicates that the firm is currently unable to pay its current debts. A high quick ratio is not considered as good always depending on the accounts receivables and current liabilities. If it happens that the firm has huge account receivables which will be collected after a long time and the current liabilities are lesser but needs to be paid instantly then the quick ratio will be higher. However, the firm will be in a risky situation as there is liquidity crisis. On the other hand, opposite thing can also happen.


Current Asset7,768,0685,996,6986,745,9807,022,2144,774,311


Inventory2,345,3892,503,6832,687,8182,541,6882,207,078

Quick Ratio1.590.920.950.961.15


We calculate quick ratio to see the real picture of liquid asset. Quick ratio is always less than current ratio. Quick ratio is more stringent than current ratio. In 2011, 2012, 2013 ratio was .96, .95, .92 that means the company has not more liquidate money, because it was less 1. But year 2010 & 2014 the company has more liquidate money, because it was more than 1.Cash Ratio:Cash ratio is a companys ratio of cash and cash equivalents to its total current liabilities. This formula is most often used to gauge a business liquidity. Potential investors or creditors frequently look to cash ratio when determining a companys capacity to repay debtsincluding how much it could feasibly repay, and how much time it would need to do so. (Figures in Thousands)Year20142013201220112010

Cash781,697932,407586,920370,301258,727


Cash Ratio0.210.240.130.070.12


The Cash ratio is an indicator of a companys liquidity that further refines both the current ratio and the quick ratio by measuring the amount of cash. Cash cover the current liabilities. In 2012 it is slightly below, but in 2013-2014 cash ratio was commendable. The firm experienced its worst cash ratio figure in2014 and by 2013 it had comparatively reached to a better state of cash ratio.Debt coverage ratio:Debt equity Ratio:The debt equity ratio is a measure of the relationship between the capital invested by creditors and the capital contributed by shareholders. Lower values of debt equity ratio are favorable indicating less risk. Higher debt equity ratio is unfavorable because it means that the business relies more on external lenders thus it is at higher risk, especially at higher interest rates. A debt equity ratio of 1 means that half of the assets of that business is financed by debt and half by shareholders' equity. A value higher than 1 means more assets are financed by debt than those financed by money of shareholders' and vice versa. An increasing trend in of debt equity ratio is also alarming because it means that the percentage of assets of a business which are financed by the debts is increasing. Higher debt can lead to both higher gain and risk, so firms should be very careful while taking financial leverage.

Year20142013201220112010

Total Debt 136,440,907313,421,158508,778,060655,645,7341032,633,160

Total Equity22,277,516,62818,844,746,18416,266,884,25513,817,708,99911,721,331,851

Debt to equity Ratio0.0060.0170.030.040.08


If debt Equity Ratio is high the cost of capital is low but it has risk of bankruptcy. If the ratio is low the cost of capital is high but bankruptcy risk is low. In 2014 the company debt equity ratio is low there less risk of bankruptcy.Debt to Asset Ratio:This ratio finds out how much of the total asset is funded through debt. A debt ratio greater than 1 indicates that a company has more debt than assets and it is more dependent to its creditors for necessary financing. Meanwhile, a debt ratio of less than 1 indicates that a company has more assets than debt. The higher this ratio, the more leveraged the company and the greater its financial risk. Although higher debt is not a problem if interest payments are made on time, but if it is not then definitely a great risk for the firm.

Year20142013201220112010

Total Debt 136,440,907313,421,158508,778,060655,645,7341032,633,160

Total Asset2654953487823734742933216375535442145378476219444409654

Debt to Asset Ratio0.0060.0130.030.030.05


Asset management ratio:Inventory Turnover Ratio Analysis:Inventory turnover is theratioof cost of goods sold by a business to its average inventory during a given accounting period. It is an activity ratio measuring the number of times per period; a business sells and replaces its entire batch of inventory again.


COGS1172799211810961916725377036616561288

Inventory2,424,53653921732,687,8182,541,6882,207,078

Inventory Turnover4.842.193.413.032.97

Source: Annual report of SPL from year 2010-2014From the above figure, we can say that the inventory turnover of Square Pharmaceuticals Ltd. in 2014 is 4.84 times, 2012 is 3.41 times and 2011 is 3.03 times. The inventory turnover is high in 2014. But in 2013 & 2010, it has decreased. So the company is in a better position.Accounts receivable turnover:Accounts receivable turnover means how quickly receivables or debtors are converted into cash. In other words, debtor turnover ratio is test of liquidity of the debtors of a firm. This ratio indicates the speed with which debtors/accounts receivable are being collected. It implies the efficiency of trade credit management. The higher the turnover ratio and shorter the collection period, the better is the trade credit management and the better is the liquidity of debtors as short collection period and high turnover ratio imply prompt payment on the part of debtors.

Year20142013201220112010

Net Sales209107738261795948949616054425243134714244691146578410

Accounts Receivable779366165804643313808365323772435259508205588

Accounts Receivable Turnover26.8322.4219.8617.4422.55


From the above figure, we can say that receivables turnover of Square Pharmaceuticals Ltd. in 2014 is 26.83 times, 2013 is 22.42 times and 2010 is 22.55 times. The receivables turnover of Square Pharmaceuticals Ltd. is low in 2011 & 2012. But in 2013 & 2014 it has increased. So the company is in a good position.

Average collection period:The average collection period formula is the number of days in a period divided by the receivables turnover ratio. The numerator of the average collection period formula shown at the top of the page is 365 days. For many situations, an annual review of the average collection period is considered. However, if the receivables turnover is evaluated for a different time period, then the numerator should reflect this same time period.

Year20142013201220112010

Days365365365365365

Inventory turnover26.8322.4219.8617.4422.55

Average collection period13.6016.2818.3820.9316.19


Avg. collection period indicate how much time required to collect the credit. From the above figure, we can say that the average collection period of Square Pharmaceuticals Ltd. in 2014 is 14 days, 2013 is 16 days and 2010 is 16 days. The average collection period in 2011 is high. But in 2013 & 2014 it is low. So the company is in a good position.

Net Working CapitalThe formula for net working capital (NWC), sometimes referred to as simply working capital, is used to determine the availability of a company's liquid assets by subtracting its current liabilities. Current Assets are the assets that are available within 12 months. Current Liabilities are the liabilities that are due within 12 months.


Current Asset7,768,0685,996,6986,745,9807,022,2144,774,311


Net working Capital4,351,4492,204,2602,493,0452,354,0252,557,567

Source: Annual report of SPL from year 2010-2014Profitability Ratio:Gross Profit Margin:Gross margin express of the company efficiency of raw material and labor during the working process .If any company higher gross profit margin then the company more efficiency to controls their raw material and labors. It can be assigned to single products or an entire company. It determines the gross profit to divide by net sales.

Year20142013201220112010

Gross Profit91827811557825814319688717162357677632594901289925

Net Sales209107738261795948949616054425243134714244691146578410

Gross Profit Margin0.440.430.420.430.41


Gross profit margin indicates that how efficient the management is in using its labor & raw materials in the process of production. From the above figure, we can say that the gross profit margin of Square Pharmaceuticals Ltd. in 2014 is 44%, 2013 is 43% and 2012 is 42%. The gross profit margin of Square Pharmaceuticals Ltd. has increased year by year. So the company is in a good position.Net Profit Margin:A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.

Year20142013201220112010

Net Income41515464703318309302289771064125320545502087871791

Net Sales209107738261795948949616054425243134714244691146578410

Net Profit Margin0.200.180.180.190.18


Net profit margin measures the percentage of each operating income\revenue (TK) remaining after all costs and expenses. The higher the firms net profit margin, the better position a company are. From the above figure, we can say that the net profit margin of Square Pharmaceuticals Ltd. in 2014 is 20%, 2011 is 19%. But net profit margin is low in 2013, 2012 & 2010. But still the company is in a good position.Return on Equity (ROE):The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

Year20142013201220112010

Net Income41515464703318309302289771064125320545502087871791

Common Equity2227751662819052891818162668842551381770899011721331851

Return on Equity0.190.180.170.170.18


Higher this return, the better of this owner. From the above figure, we can say that the return on equity of Square Pharmaceuticals Ltd. in 2014 is 19%, 2013 is 18% and 2010 is 18%. The return on equity is low in 2012 and 2011. But in 2014 it is high. But the company is still in a stable position.Return on Asset (ROA):The return on assets ratio, often called the return on total assets, is a profitability ratio that measures the net income produced by total assets during a period by comparing net income to the average total assets. In other words, the return on assets ratio or ROA measures how efficiently a company can manage its assets to produce profits during a period.

Year20142013201220112010

Net Income41515464703318309302289771064125320545502087871791

Total Asset2654953487823734742933214537847621944440965415196452304

Return on Asset0.160.140.130.130.14


From the above figure, we can say that the return on assets of Square Pharmaceuticals Ltd. in 2014 is 16%, 2013 is 14% and 2013 is 13%. The return on assets of Square Pharmaceuticals Ltd. is increasing year by year. So the company is in a good position.Earnings per Share:The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time.

Year20142013201220112010

Net Income4,031,811,2683,419,785,256289771064125320545502087871791

number of shares outstanding481,999,263481,999,263264834760264834760196173901

Earnings per Share8.367.1010.949.5610.64


Qualitative analysis (SWOT analysis):The following SWOT analysis captures the main strengths and weaknesses within the company, and describes the opportunities and threats of the company.Strengths: highly experienced Senior Executives some of whom has local and international significant pharmaceutical literature. Good reputation with high image. Efficient, skilled, experienced and dedicated staff members Resources are available in Bangladesh Square pharma is able to make benchmarking medicines Regulatory performance is strong and positive Employee mobility is lower than that of its rival.Weakness: Non-availability of high technology Time consuming decision making process Incorrect method for collecting resources and inventory management Lack of asset management and debt. Minimum profit in comparison with others.Opportunities: Government Support Opportunity to take market share away from rivals by offering new innovative product or services. Opportunity to enter into the global market.Threats:Hiking price of raw materials Mergers and Acquisition Competitors are much in pharmaceutical industries Competitors are offering innovative new product and services regularly. Matching them is really hard.Findings: Liquidity position is relatively stronger compare to others. Company management has proven efficiency in managing its inventory. Companys management has dealt proficiency with its collection policies Company is generating sufficient volume of business given its total investment Operating expenses are going down signifying the companys efficiency. Recommendation:To strength the financial soundness in those areas where the Square Pharmaceuticals Ltd. needs to improve, the following suggestive measures are recommended- The company should give more attention to improve efficiency in utilizing the capital. The company should give more attention on how to effectively manage its cost and revenue mixes. The company should give more emphasizes in making the investment decision in a much better way.Conclusion:The financial performance analysis of Square Pharmaceuticals Ltd. shows that it has performed better in different specific aspects like short term and long term debt payment. However it has yet some financial and operating areas like profitability where those need much attention to be given. It can consider same actions recommended to improve its financial performance in the years to come.20

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