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Number
Topics PageNumbe
r
1.1. Title Fly 1
2.2. Title page 2
3.3. Copyright Notice 3
4.4. Letter of Transmittal 4
5.5. Letter of Authorization 5
.. !roup"s #eclaration 6
$.$. Ac%no&le#gement 7
'.'. Ta(le of contents 8
).). List of Chart 9
1*.1*. List of !raphs 1011.11. Limitations of the report 11
12.12. An intro#uction to +,e-imco harma/ 12
13.13. Current ratio analysisCurrent ratio analysis 13
14.14. 0uic% ratio analysis0uic% ratio analysis 15
15.15. nentory turnoernentory turnoer 17
1.1. Aerage collection perio#Aerage collection perio# 18
1$.1$. Aerage payment perio#Aerage payment perio# 19
1'.1'. Total assets turnoerTotal assets turnoer 21
1).1). e(t ratio analysise(t ratio analysis 22
2*.2*. Time interest earne# ratio analysisTime interest earne# ratio analysis 24
21.21. Commonsize income statementCommonsize income statement 25
22.22. !rossprofit margin!rossprofit margin 2623.23. perating profit marginperating profit margin 27
24.24. Net profit margin.Net profit margin. 28
25.25. 6arnings per share 76896arnings per share 7689 29
2.2. :eturn on total assets 7:A9:eturn on total assets 7:A9 30
2$.2$. :eturn on common e;uity 7:69:eturn on common e;uity 7:69 31
2'.2'. rice
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Number Chart heads Page Number
1.1. Current ratio analysisCurrent ratio analysis 14
2.2. 0uic% ratio analysis0uic% ratio analysis 15
3.3. nentory turnoernentory turnoer 17
4.4. Aerage collection perio#Aerage collection perio# 18
5.5. Aerage payment perio#Aerage payment perio# 20
.. Total assets turnoerTotal assets turnoer 21
$.$. e(t ratio analysise(t ratio analysis 23
'.'. Time interest earne# ratio analysisTime interest earne# ratio analysis 24
).). Commonsize income statementCommonsize income statement 25
1*.1*. !rossprofit margin!rossprofit margin 26
11.11. perating profit marginperating profit margin 27
12.12. Net profit margin.Net profit margin. 29
13.13. 6arnings per share 76896arnings per share 7689 30
14.14. :eturn on total assets 7:A9:eturn on total assets 7:A9 31
15.15. :eturn on common e;uity 7:69:eturn on common e;uity 7:69 32
1.1. rice
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Number Graph heads Page Number
1.1. Current ratio analysisCurrent ratio analysis 14
2.2. 0uic% ratio analysis0uic% ratio analysis 15
3.3. nentory turnoernentory turnoer 17
4.4. Aerage collection perio#Aerage collection perio# 18
5.5. Aerage payment perio#Aerage payment perio# 20
.. Total assets turnoerTotal assets turnoer 21
$.$. e(t ratio analysise(t ratio analysis 23
'.'. Time interest earne# ratio analysisTime interest earne# ratio analysis 24
).). !rossprofit margin!rossprofit margin 26
1*.1*. perating profit marginperating profit margin 27
11.11. Net profit margin.Net profit margin. 29
12.12. 6arnings per share 76896arnings per share 7689 30
13.13. :eturn on total assets 7:A9:eturn on total assets 7:A9 31
14.14. :eturn on common e;uity 7:69:eturn on common e;uity 7:69 32
15.15. rice
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The analysis of financial statements is based on the use of ratio. Ratio analysis involvesmethod s of calculating and interpreting financial ratio to analyze and monitor the firms performance. Thebasic inputs to ratio analysis are the firms income statement and balance sheet.
Financial Ratios can be divided for convenience into five basic categories !i"uidity Ratio. #ctivity Ratio. $ebt Ratio. %rofitability Ratio. &ar'et Ratio.
Liquidi! R"i#$The li"uidity of a firm is measured by its ability to satisfy its short term obligation as they
come due. !i"uidity refers to the solvency of the firms overall financial position. These ratios are vie( asgood leading indicators of cash flo( problem.
The t(o basic measures of li"uidity ratio are) The current ratio. The "uic' *#cid Test+ ratio.
T%& 'u((&) ("i#$
The current ratio is one of the most commonly cited financial ratios. ,t measures the firmsability to meet its short - term obligation. ,t is epressed as follo(s
Cu((&) A**&*
Cu((&) R"i# +
Cu((&) Li"i-ii&*
11
Ratio AnalysisRatio Analysis
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14
T%& qui' A'id T&* ("i#$
The "uic' ratio is similar to the current ratio ecept that it ecludes inventory (hich isgenerally the least li"uid current assets. ,t is epressed as follo(s.
Cu((&) A**&* I)&)#(!
ui' ("i# +
Cu((&) Li"i-ii&*
088112343 - 114251081ui' ("i# .#( 2003 +
128959
; 0.51
4513123 - 1294594905ui' ("i# .#( 2004 +
150139343
; 0.62
2493849162 - 16825039ui' ("i# .#( 2005 +
30184368
;0.5
T%& qui' ("i#* #. B&/i'# P%"("$
Quick Ratio
1
2
3
ui' ("i#
2003 2004 2005 A&("&
071 063 072 066
12
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15
I)&((&"i#)$# "uic' ratio of 1.0 or greater is occasionally recommended .e can see from the abovecalculation that the "uic' ratio of eimco %harma is fluctuating over the year 002 to 003. #s eimco%harma is a pharmaceutical company its average ratio of .066 is relatively acceptable.
R&'#&)d"i#)$ although their "uic' ratio acceptable but they should increase their "uic' ratio. They canincrease their "uic' ratio by increasing their current assets or by decreasing their current liabilities
14
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R&'#&)d"i#)$For increasing their inventory turnover eimco pharma should increasetheir cost of goods sold.
17
A&("& '#--&'i#) &(i#d$The average collection period is the average amount of time need to collect accounts
receivable. ,t is useful in evaluating credit and collection policies. ,t is epressed as follo(s
A''#u) (&'&i"-&
A&("& C#--&'i#) P&(i#d +
A&("& S"-&* &( :"!
A''#u) (&'&i"-&
A&("& C#--&'i#) P&(i#d .#( 2003 +
A))u"- S"-&*
360
499655356 ;
18289593 260
; 8.8 days60008182
#verage /ollection %eriod for 004 ;4050096 260
; 89.9 days
559598942
#verage /ollection %eriod for 004 ; 2250354
260 ; 84.4 days
S%#; %& "&("& '#--&'i#) &(i#d #. B&/i'# P%"("$
@ear
2**3
Collectionerio#
'2.4
@ear
2**4
Collectionerio#
').)
@ear
2**5
Collectionerio#
'4.4
!vera"e co##ection $erio%
@ear Collection erio#
A&("& '#--&'i#) &(i#d
2003 2004 2005
824 d"!* 899 d"!* 844 d"!*
I)&((&"i#)$The average collection period is meaningful only in relation to the firms credit term. Thethere years payment periods 8.4 days 89.9 days and 84.4 days are "uiet poor rate. ,t is possible to
16
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eimoco that the lengthened collection period resulted from an intentional relaation of credit termenforcement in response to competitive reassure.
18R&'#&)d"i#)$,n this situation eimco pharma should reduce their average collection period. They
can do so by reducing their accounts receivable mare (ith their average sales per days.
A&("& "!&) &(i#d$#verage payment period is the average amount of time needed to pay accounts payable.
%rospective lenders and suppliers of trade credit are most interested in the average payment period because itprovides insight into the firms bill paying patterns. The average payment period is epressed as follo(s.
A''#u) "!"-&
A&("& P"!&) P&(i#d +
A&("& u('%"*& &( d"!
A''#u) "!"-&
A&("& P"!&) P&(i#d .#( 2003 + A))u"- u('%"*&*
360
16828353 ;
0.50 < 1233548848 260
16828353
; 626158
; 62.9 days.
06448258#verage %ayment %eriod for 004 ;
0.50 < 125899281 260
06448258 ;
6813
;56.99 days.
16660542#verage %ayment %eriod for 003 ;
0.50 < 15683262 26016660542
;2428592
15
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; 62.0 days.
19
T%& "&("& "!&) &(i#d #. B&/i'# P%"("$
!vera"e &ay'ent $erio%
2**3>
34A
2**4>33A
2**5>
33A 1
2
3
A&("& "!&) &(i#d
2003 2004 2005
639 d"!* 7699 d"!* 630 d"!*
I)&((&"i#) $The average payment period is meaningful only in relation to the avg /redit termsetended to the firm. The avg payment period for beimco from 002 to 003 are 62.9 days 56.99 days and62.0 days. ,f the companys suppliers have etended and average of 20 days credit terms then the eimcoavg payment period is very poor.
R&'#&)d"i#)$eimco pharma should reduce their payment period. The can do so by reducing theiraccounts payable as much as possible compare to their average purchase per day.
18
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0
T#"- "**& u()#&($
Total asset turnover is indicates the efficiency (ith (hich the firm uses its assets to generatesales. This measure is probably of greatest interest to management because it indicates (hether the firmsoperations have been financially efficient. ,t is calculated as follo(s
S"-&*
T#"- "**& u()#&( +
T#"- A**&*
18289593
Total asset turnover for 002 ; 80806341
; 0.5 times
4050096Total asset turnover for 004 ;
863849654
; 0.8 times
2250354Total asset turnover for 003 ;
10943459980
; 0.20 times T%& #"- "**& u()#&( #. B&/i'# P%"("$
ota# !((eturnover
2**3>
34A
2**4>
33A
2**5>
33A 1
2
3
T#"- "**& u()#&(
2003 2004 2005
027 i&* 028 i&* 030 i&*
I)&((&"i#)$7enerally the higher a firms total asst turnover the more efficiently its assets have beenused. Form the above calculation (e can see the Total #sset Turnover of eimco pharma is graduallyincreasing. The average of the three years total asset turnover is 0.82 that means the company turnover itsassets 0.82 times a year. ,t is a very poor rate.
19
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R&'#&)d"i#)$eimco pharma ltd. should increase their total asset turnover ratio. Theyneed to increase their sales as much possible for increasing their turnover ratio
21
:& R"i#$
There are t(o basic measures of debt ratio calculation. $ebt ratio. Time interest earned ratio.
:& ("i#$
The debt ratio is measures the proportion of total assets financed by the firms creditors. Thisratio indicates that the company has financed close to half of its assets (ith debt. The debt ratio calculated asfollo(s
T#"- Li"i-ii&*
:& R"i# +
T#"- A**&*
2003 2004 2005
0
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ASSETS$
Cu((&) A**&*,nventories
#ccount receivable
!oans #dvances = deposits
/ash = /ash e"uipments/urrent account (ith related parties
N#)< Cu((&) A**&*$
%roperty %lant = >"uipment /arryingvalue,nvestment in shares
T#"- A**&*
LIABILITIES$
Cu((&) Li"i-ii&*$
:hort term borro(ing from ban'!ong term borro(ing)current maturity
/reditors = other payables
#ccrued epenses
$ividend payable
,ncome ta payable
/ustomer debenture
N#)< 'u((&) Li"i-ii&*$
!ong term orro(ing -?et off currentmaturity
!iability for gratuity = %%F$eferred Ta liability
T#"- Li"i-ii&*
2088113545
5,940,092,996
8,028,206,541
1,328,229,729
2,056,362,293
3,384,592,022
2471513225
6,186,983,049
8,658,496,274
1,701,529,545
2,120,954,071
3,822,483,616
3495849163
7,449,630,817
10,945,479,980
2,501,824,568
1,622,730,360
4,124,554,928
C"-'u-"i#) #. d& ("i# #. B&/i'# P%"("$
1
114251081
499655356
42981290
491186542981290
1294594905
60008182
468680822
800920)))
16825039
559598942
602564921
4836220)))
3893916546
4415630
614986599
2513630
514454365
2513630
959186301
)))
16828353
12359512
106531
4189829
1538285
111910904984482
06448258
4651685
1063425
694015
)))
10601119
1066020935
16660542
101839824
820440
3442140
)))
1996908089
)))
3943404
1919249631
13839361142008809
1285433909
190032330430901
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)e*t Ratio
2**3>
34A
2**4>
33A
2**5>
33A 1
2
3
Total !iabilitiesTotal #ssetsCu((&) R"i#
2003 2004 2005
228439080806341
42 =
28482616863849654
44 =
4143349810943459980
376 =
I)&((&"i#)$The debt ratios of eimco pharma from 002 to 003 are 0.4 0.44 and 0.25 respectively.e can see the debt ratio of the firm is gradually decreasing the higher this ratio the greater the firmsdegree of indebtedness and the more financial leverage it has.
R&'#&)d"i#)$Their debt ratio should be more lo( . ,t is recommended to eimco to reduce theirliabilities by avoiding the finance by creditors as much as possible.
23
Ti& i)&(&* &"()&d ("i#$
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Time interest earned ratio is measures the firms ability to ma'e contractual interestpayment .The higher its value the better able the firm is to fulfill its interest obligation. :ometimes it calledthe interest coverage ratio. ,t is epressed as follo(s.
E"()i) &.#(& i)&(&* > "/
Ti& i)&(&* &"()&d ("i# +
I)&(&**
C"-'u-"i#) #. i& i)&(&* &"()&d ("i# #. B&/i'# P%"("$
i'e Intere(t +arne% Ratio
2**3
2**4
2**5
>arning before interest = ta,nterest
Ti& i)&(&* &"()&d ("i#
2003 2004 2005
42008253136601306
27 =
336215848109358413
5 =
54231518194924
326 =
I)&((&"i#)$The time interest earned ratio of 2.0 and closer to 3.0 is acceptable. The time interest earnedratio for eimco is "uite acceptable thus it has a good margin of safety.
R&'#&)d"i#)$#s the higher the value of time interest earned ratio the higher the firms ability to fulfillits interest obligations. :o eimco should increase more of their ratio by increasing their >arning beforeinterest and taes.
24
P(#.i"i-i! R"i#$
2
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%rofitability ratios evaluate the farms profits (ith respect to a given level of sales a certainlevel of assets or the o(ners investment.
There are different measures of profitability ratios these are - /ommon)size income statement.
7ross)profit margin. @perating profit margin. ?et profit margin. >arnings per share *>%:+. Return on total assets *R # @+. Return on common e"uity *R@>+.
C##)
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increase in its selling and administrative epense from 13.83B in 004 to 1.49B in 003 decreased itsoperating profit margin from 2.135B to 1.55B .ut epenses (hich are increased from 004 to 003resulting an increased rate of 14.51B of sales of net profit margin in 003. *,n 004 it (as 12.51B+.
R&'#&)d"i#)$#s (e can see in operating epenses selling and administrative epenses increased from004 to 003 .:o eimco %harma should try to reduce their these epenses.
G(#**
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O&("i) (#.i "(i)$
@perating profit margin &easures the percentage of each sales dollar remaining after all costsand epenses other than interest taes and preferred stoc' dividends are deducted the CCpure profits earnedon each sales dollar. The operating profit margin is calculated as follo(s O&("i) (#.i O&("i) (#.i "(i) +
S"-&*
C"-'u-"i#) #. #&("i) (#.i "(i) #. B&/i'# P%"("$
S"-&*
/ost of goods sold
2003 2004 2005
2,183,829,795
*1233548848+2,402,700,962
*125899281+3,327,022,574
*15683262+ G(#** P(#.i
O&("i) &/&)*&* $
#dministrative epenses:elling = $istributing epense
P(#.i .(# #&("i#)*
828,080,947
*29599835+1,023,771,581
*465432522+1,558,500,211
*824148492+
430,082,375 556,317,848 724,351,718
T%& #&("i) (#.i "(i) ("i# #. B&/i'# P%"("$
.$eratin" &ro,it -ar"in
2**3> 34A
2**4> 33A
2**5> 33A
O&("i) P(#.i "(i)
2003 2004 2005
1969 = 2315 = 2177 =
I)&((&"i#)$@perating profit margin of eimco %harma is fluctuating from 002 to 004 it increasesfrom 14.69B to 2.13B but from 004 to 003 it decrease from 2.13B to 1.55B of salesdue to deceasein operating profit.
R&'#&)d"i#)$ eimco %harma should increase their operating profit by reducing their operatingepenses .
27
N& (#.i "(i)$
6
*842922+*21266940+
*86698224+ *280533299+
*119006323+*513141938+
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The net profit margin measures the percentage of each sales dollar remaining after all costsand epenses including interest taes and preferred stoc' dividends have been deducted. The higher thefirms net profit margin the better. The net profit margin is calculated as follo(s
E"()i)* ""i-"-& .#( '##) *#' %#-d&(
N& (#.i "(i) +
S"-&*
C"-'u-"i#) #. N& (#.i "(i) #. B&/i'# P%"("$
:ales/ost of goods sold
2003 2004 2005
18289593*1233548848+
4050096*125899281+
2250354*15683262+
G(#** P(#.iO&("i) &/&)*&* $
#dministrative epenses:elling = distributing epense
%rofit from operations@ther incomeFinance cost
N& (#.i &.#(& '#)(iui)
# @PPF
/ontribution to (or'ers profitparticipationA(elfare fund
N& (#.i &.#(& "/
,ncome ta epense
/urrent Ta$eferred Ta incomeAepense
N& (#.i ".&( "/&"()i) ""i-"-&
.#( '##) *#' %#-d&(*
88080945*29599835+
420082532218390
*136601306+
102551381*465432522+
3362158482831006
*190358413+
133830011*824148492+
5423151852609
*194924+
56599439
*1218096+
62618322*36458165+
207,140,366
269390429
*1399409+
232661020*48330+
329,375,780
309623002
*468222+
483266650*2893094+
489,261,764
8
T%& N& (#.i "(i) ("i# #. B&/i'# P%"("$
5
*842922+*21266940+
*86698224+*280533299+
*119006323+*513141938+
*4616906+3006410
*2895306+*1530961+
*8469982+4184522
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/et &ro,it -ar"in
2**3
2**4
2**5
12
3
N& P(#.i "(i)
2003 2004 2005
949 = 1371 = 1471 =
I)&((&"i#)$ The value of net profit margin differ from industry to industry. eimco %harma is a
manufacturing company .:o its net profit margin of 14.51B is considerable acceptable and it is alsogradually increased from 002 to 003 .
R&'#&)d"i#)$ #s their gross profit margin is increasing they should continue their (or' accordingly.ut if they (ant to increase more than eimco %harma is suggested to try to decrease their cost of goodssold as much as possible.
E"()i)* &( *%"(& EPS$
The earnings per share are generally of interest to present or prospective stoc'holders andmanagement. >%: represents the number of dollars earned during the period on behalf of each outstanding
share of common stoc'. >arning per share is calculated as follo(s
E"()i) ""i-"-& .#( '##) *#' %#-d&(*
E"()i)* &( *%"(& EPS +
Nu&( #. *%"(&* #. '##) *#' #u*")di)
29
T%& E"()i) &( *%"(& #. B&/i'# P%"("$
8
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+arnin" &er 0hare
2**3
2**4
2**5
1 2 3
?umber of shares of common stoc' outstanding>arning available for common stoc' holdersE"()i) &( *%"(&
2003 2004 2005
339563005140266
37
699502129253580
471
5685844648961564
636
R&u() #) #"- "**&* RAO$
The return on total assets measures the overall effectiveness of management in generatingprofit (ith its available assets. ,t is often called the return on investment.The return on total assets iscalculated as follo(s
E"()i) ""i-"-& .#( '##) *#' %#-d&(*
R&u() #) #"- "**&* RAO +
T#"- "**&
C"-'u-"i#) #. T#"- "**&* #. B&/i'# P%"("$
?on current assets
%roperty %lant = >"uity carryingvalue,nvestment in shares
/urrent #ssets
,nventories
#ccount Receivable
!oans #dvance = deposits
/ash = /ash >"uipments
T#"- A**&*
2003 2004 2005
394009996
05564850
801835866
6186982049
4513123
863849654
5449620815
2493849162
10943459980
30
C"-'u-"i#) #. R&u() #) #"- "**&* #. B&/i'# P%"("$
9
3893916546
4415630
614986599
2513630
541454365
2513630
114251081
499655356
44464613
4911865
1294594905
60008182
468680822
800920
16825039
559598942
602564921
4836220
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Return .n ota# !((et
2**3
2**4
2**5
1
23
>arning available for common stoc' holdersTotal #ssetsR&u() #) T#"- A**&*
2003 2004 2005
05140266801835866
259 =
29253580863849654
380 =
4896156410943459980
447 =
I)&((&"i#)$ The value of R@# indicates that ho( much the company can earn on each dollarinvestment .The R@# of eimco %harma is increasing every year and in 003 it stri'es 4.45B .Thatmeans the eimco %harma has earned T'. 4.45 for each dollar investment.
R&'#&)d"i#)$ They should try to increase their earnings available for common stoc'holder tomaimize their R@#.
R&u() #) '##) &qui! ROE $The return on common e"uity measures the return earned on the common stoc'holders
investment in the firm. The higher this return the better off is the o(ners. Return on common e"uity iscalculated as follo(s
E"()i) ""i-"-& .#( '##) *#' %#-d&(*
ROE +
C##) *#' &qui!
C"-'u-"i#) #. S%"(&%#-d&(* Equi! C##) *#' &qui! #. B&/i'# P%"("$
S%"(&%#-d&(* Equi!
C##) *#' &qui!$
,ssued share capital:hare premium>cess of price over face value of
7$R/apital reserveTa holding reserveRetained earnings
2003 2004 2005
4,596,420,977 8,360,126,658 6,820,925,052
31
C"-'u-"i#) #. R&u() #) C##) Equi! #. B&/i'# P%"("$
20
308853000
1489530000
))))))
))))))
109003309
1305542468
33956300
1489530000
))))))
))))))
443233048
241143110
9391360
1489530000
969153203
94930930
414348999
69284158
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Return .n Co''on +1uity
2**3
2**4
2**5
1
2
3
>arning available for common stoc' holders/ommon stoc' e"uityR&u() #) C##) Equi!
2003 2004 2005
05140266439640955
451 =
29253580826016638
681 =
489615646809303
717 =
I)&((&"i#)$ The R@> of eimco %harma is found in good condition from 002 to 003 . The R@>indicate that during the years *002 to 003+ eimco %harma has earned 4.31 6.81 and 5.15 on each ta'aof common stoc'.
R&'#&)d"i#)$ They should try to increase their earnings available for common stoc'holder tomaimize their R@# e"uity.
32
21
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"(& R"i#$&ar'et ratios relate the firms mar'et value as measured by its current share price to certain
accounting values. These ratios give insight into ho( (ell investors in the mar'et place feel the firm is doingin terms of ris' and return.
e consider t(o types of popular mar'et ratios these are) %riceA>arnings *%A>+ ratio. &ar'etAoo' *&A+ ratio.
P(i'&E"()i)* PE ("i#$
The price A earnings *%A>+ ratio is commonly used to assess the o(ners appraisal of sharevalue. The %A> ratio measures the amount that investors are (illing to pay for each dollar of a firmsearnings. The %A> ratio is calculated as follo(s
"(& P(i'& &( *%"(& #. '##)
P(i'&&"()i)* PE ("i#$ +
E"()i)* &( *%"(&
C"-'u-"i#) #. P(i'&E"()i)* PE ("i# #. B&/i'# P%"("$
2**3
1*.$4
2**4
1).55
2**5
).*)
&rice 2 +arnin" Ratio
@ear rice < 6arnings :atio
&ar'et price per share of common stoc'>arning %er :hare *>%:+P(i'&&"()i)* PE ("i#
2003 2004 2005
29.52.5
1074
9.104.51
1955
35.806.26909
I)&((&"i#)$ %A> ratio of eimco industries that the investors (as (illing to pay T'. 10.54 19.33 and9.09 follo(ed by the years 002 to 003 for each ta'a of earnings of eimco %harma.
R&'#&)d"i#)$They should increase their mar'et price of common stoc' for increasing %A> ratio.Dnless they (ill fail to attract the confidence of the investors.
33
2
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"(&B## B ("i#$
The mar'et Aboo' *&A+ ratio provides an assessment of ho( investors vie( the firmsperformance. ,t relates the mar'et value of the firms shares to their boo')strict accounting - value. Tocalculate the firms &A ratio (e first need to find the boo' value per share of common stoc'.
C##) *#' &qui!
B## "-u& &( *%"(& #. '##) *#' +
Nu&( #. *%"(& #. '##) *#' #u*")di)
C"-'u-"i#) #. B## "-u& &( *%"(&* #. '##)* #' #. B&/i'# P%"("$
/ommon stoc' e"uity?umber of shares of common stoc' outstandingB## "-u& &( *%"(&* #. '##)* #'
2003 2004 2005
4396409553395630
8211
4826016386995021
6912
680930356858446
8872
Then the mar'et value is calculated as follo(s"(& (i'& &( *%"(& #. '##) *#'
"(& B## B ("i# +
B## "-u& &( *%"(& #. '##) *#'
C"-'u-"i#) #. "(& B## B ("i# #. B&/i'# P%"("$
2**3
*.4'
2**4
1.33
2**5
*.5
1 2 3
@ear =ar%et < ,oo% :atio
"(& B## B ("i#
2003 2004 2005
048 133 065
24
22SustainableSustainable
GrowthGrowth
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F#( !&"( 2003
:ustainable gro(th *g+ ; b < R@>here b ; 1) $ividend payout ratio
; 1) 0.10 ; 0.90
Su*"i)"-& (#;% ; 0.90 < 0.0431 ; 0.04039 ; 4.039 B
F#( !&"( 2004
:ustainable gro(th *g+ ; b < R@>
here b ; 1) $ividend payout ratio ; 1) 0.03 ; 0.93
Su*"i)"-& (#;% ; 0.93 < 0.0681 ; 0.064693 ; 6.45 B
F#( !&"( 2005
:ustainable gro(th *g+ ; b < R@>here b ; 1) $ividend payout ratio
; 1) 0.13 ; 0.83Su*"i)"-& (#;% ; 0.83 < 0.0515
; 0.060943 ; 6.0943 B
S%#; %& Su*"i)"-& (#;%#. B&/i'# P%"("$
Su*"i)"-& (#;%
2003 2004 2005
4059= 647= 609=
24
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:ales/ost of goods sold
B"*& &"(
2005
5= G(#;% 10= G(#;% 20= G(#;%
2250354*15683262+
2492252502*1836948481+
263954821*1943254399+
29945089*16826+
G(#** P(#.iO&("i) &/&)*&* $
#dministrative epenses:elling = distributing epense
%rofit from operations
@ther incomeFinance cost
N& (#.i &.#(& '#)(iui)
# @PPF
/ontribution to (or'ers profitparticipationA(elfare fund
N& (#.i &.#(& "/
,ncome ta epense
/urrent Ta
$eferred Ta incomeAepense
N& (#.i ".&( "/
(")*.&((&d # *"&&) #.
'%")&* i) &qui!
E"()i) P&( *%"(&
1,558,500,211
834,148,493
54231518
52609*194924+
1,636,425,222
875,855,918
560369204
539429*22046590+
1,714,350,232
917,563,342
596586890
5933850*4414436+
1,870,200,053
1,000,978,192
869061
8659121*66229189+
509,635,003
*468222+
485,366,670
2893094
489,261,764
6 36
535,116,753
*3481530+
509,635,004
4089849
513,724,852
6 678
560,598,503
*6693166+
611,562,004
*911910+
533,903,337
484602
538,187,940
6 996
582,440,004
4654112
587,144,117
7 632
23
*119006323+*513141638+
*1493686+*530899036+
*120905189+*586636134+
*3058399+
3305032
*4616906+
3006410
*48455455+
336526
*1480584+*838150230+
*3340821+
60056944
Calculation of Best Scenario of Beximco
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:ales/ost of goods sold
B"*& &"(
2005
5= G(#;% 10= G(#;% 20= G(#;%
2250354*15683262+
2160651443*168009643+
99420215*139165015+
661618039*1414815890+
G(#** P(#.iO&("i) &/&)*&* $
#dministrative epenses:elling = distributing epense
%rofit from operations
@ther incomeFinance cost
N& (#.i &.#(& '#)(iui)
# @PPF
/ontribution to (or'ers profitparticipationA(elfare fund
N& (#.i &.#(& "/
,ncome ta epense
/urrent Ta
$eferred Ta incomeAepense
N& (#.i ".&( "/
(")*.&((&d # *"&&) #.
'%")&* i) &qui!
E"()i) P&( *%"(&
1,558,500,211
834,148,493
5423151852609*194924+
1,480,575,200
792,441,068
688124126850959*10831838+
1402,650,190
750,733,644
6319163466309248*19953429+
1,246,800,169
667,318,794
3594812543586085*155339439+
509,635,003
*468222+
485,366,670
2893094
489,261,764
6 36
484,153,253
*2034916+
461,098,337
2500229
464,798,676
6 042
458,671,503
*1841410+
407,708,002
*19414666+
436,830,003
2303383
440,335,588
5724
38,829,336
2116053
391,409,411
5 088
25
26
*119006323+*513141638+
*11203608+*659284860+
*10510388+*6426556+
*413312+43035550
*4616906+3006410 *42860353+45360914
*93038+*35112366+
*269231+4003196
Calculation of Worst Scenario of Beximco
Risk AnalysisRisk Analysis
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:& &qui! ("i#
The debt ratio is measures the proportion of total assets financed by the firms creditors. Thisratio indicates that the company has financed close to half of its assets (ith debt. The debt ratio calculated asfollo(s
T#"- Li"i-ii&*
:& R"i# +
T#"- A**&*
C"-'u-"i#) #. d& ("i# #. B&/i'# P%"("$
Total !iabilitiesTotal #ssetsCu((&) R"i#
2003 2004 2005
22843908080634142 =
2848261686384965444 =
4143349810943459980376 =
Ti& i)&(&* ("i#Time interest earned ratio is measures the firms ability to ma'e contractual interest
payment .The higher its value the better able the firm is to fulfill its interest obligation. :ometimes it calledthe interest coverage ratio. ,t is epressed as follo(s.
E"()i) &.#(& i)&(&* > "/
Ti& i)&(&* &"()&d ("i# +
I)&(&**
C"-'u-"i#) #. i& i)&(&* &"()&d ("i# #. B&/i'# P%"("$
>arning before interest = ta,nterest
Ti& i)&(&* &"()&d ("i#
2003 2004 2005
42008253136601306
27 =
336215848109358413
5 =
54231518194924
326 =
Bu*i)&** (i*
25
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/alculation of usiness Ris' *R+ of eimco phama usiness Ris' is the chance that
the firm (ill be unable to cover its operating costs.
e 'no(
R ; E*/.. of >,T+ of a firm Gere i ; >,T
n; ?o. of years.
:td. $eviation of >,T
;
&ean of >,T
; HI *i)+ n
I iAn
T%& EBIT #. B&/i'# P%"("D* .(# 2003 # 2005 i* i&) &-#;$
&"( 2003 2004 2005EBIT 430082,375 556,317,848 724,351,718
J i
;
42008253 K 336215848 K 54231518
;
2
; 35030645
H *42008253)35030645+K *336215848)35030645+K*54231518)35030645+
R ;
35030645
; 0.114; 0.1; 1.14B
28
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Fi)")'i"- (i*
T%& C"*% .-#; '#&("& R"i# #. B&/i'# P%"("D* .(# 2003 # 2005 i* i&) &-#;$
?et opearting /Fs/ash flo( coverage Ratio for 002 ;,nternet A FiancL cost
20503089 ;
136601306
; .03
6846099/ash flo( coverage Ratio for 004 ;190358413
; 1.41
349142666/ash flo( coverage Ratio for 003 ;
1 946 24
; .45
29
FINDINGS
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From the study of Beximco pharma are have found the liquidity, of the
pharma desirable.
The inventory level of Beximco pharma is also seems good.
There is some problem with the companys accounts Receivable section. The
average collection period is above that of industry average.
Beximco harmas indebtedness is quiet consistent.
!n the other hand the profitability of the company is more than the company
average
"arnings per share #"$% of the company is also increasing each year.
&e have also seen that the mar'et Ratio of the company is dertreasing every
year.
(ompared to other company in the industry Beximco pharma shows good
erformance in all the sectors.
40
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34/40
@n the basis of the findings (e have some recommendations for beimco %harma.
Those are discussed belo(.
,t is recommended to eimco pharma to maintain their li"uidity level. They should
try their best to reduce their current liabilities.
The management of eceivablies and payables of eimco pharma need to beeamined as they fail to perform (ell.
41
RecommondatioRecommondatio
nn
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R&.&(&)'&&.&(&)'& $$ #nnual report of eimco %harmaceutical !td. *Mear - 002 004 003+
,ndustry report *year ) 003+
. eimcopharma.com
4
Summarization o Ratios
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Liquidi!$The overall li"uidity seems to ehibit a fluctuating trend having been maintained at a
level that is relatively lo( (ith the industry average in 003. The firms li"uidity seems to be poor.
A'ii!$eimco %harms inventory level seems good. #lthough its inventory management
seems to have improved but in 003 it fail to perform at a level of industry average. There is some
problem (ith the companys #AR :ection. The average collection period is above that of the industry
eimoc is also slo( in payment of its bills. This could adversely affect the firms credit standing. Themanagement of receivables and payables shoudl be eamined eimcos . Total asset turnover reflects a
increase in the efficiency of total asset utilization from 002 to 003. #lthough in 003 it is less than
the industry average. @verall (e can say eimcos activity ratio is Nuito acceptable.
:&$eimco %harmas indebtedness decreases from 004 to 003 but in 002 to 004 it (as
less than industry average it could be cause for alarm the firms ability to meet interest and fied payment
obligations to a level that performs the industry. Go(ever in 004 it sho(s a good increase in debt ratioof the company. @verall (e can say the overall datedness of eimco ehibit a level that is relatively
consistent (ith industry average in 003. The firms datedness seems to be good.
P(#.i"i-i!$eimco pharmas %rofitability relative to sales in 003 (as better than the average
company in the industry . The gross profit operating profit and net profit margin of the firm (as
relatively favorable to industry average as (ell as its past performance. The firms >arning per share
*>%:+ return on total assent *R@>+ behave much as its profit margin from 002)003. #lthough it (asvery less compared (ith the industry.
@verall (e can say the firms profitability is more safe than other industry.
42
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"(& R"i#$,nvestors have greater confidence in the firm from 002)003 as reflected in %A> ratio.
Go(ever this ratio is belo( the industry average. The %A> ratio indicates that the firms risle has
declined but it is slightly above the other company in the industry.The firms &A ratio has increased over the years but it (as too la( compared (ith the industry. This
means in vectors are hopeful about the companys future but not enough compared (ith others in the
industry. The investors are epecting to earn high future returns as compensation for the firms above
average ris'.
,n summary the firm appears to be gro(ing and has recently undergone as epansion in assets financed
primarily through the use of debts. The 002)003 period seems to reflect a phase of adOustment and
recovery from the rapid gro(th in assets. eimcos sales profits and other (ith the increase in size of
the operation. ,n addition the mar'et response to these positive. ,n short the firm seems to have done
(ell in 003.
44eer Groupnalysis
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%eer group analysis in normally done to evaluate the performance of a company compared (ithits competitor in the industry. ,t helps the company to find out their lac's and the (ay to improve it.
e have chosen #/, !td. For peer group analysis as it follo(s the same. usiness line aseimco and it is one of the 'ey competitors of eimco pharma.
Gere (e have compared different ratios of eimco pharma of the year 003 (ith #/, !td.
I)&((&"i#)$
From the table (e can see li"uidity of eimco pharma maintained a goog figure than #/,. Thismeans eimco has more capacity to satisfy its short term obligations as they come due.
The #ctivity ratio sho(s a favorable vie( to #/, .The average payment and collection period of#/, is very good compared (ith eimco. This implies that the speed of #/, to convert variousaccounts into sales or cash inflo(s or outflo(s is greater than eimco.
Go(ever the debt ratio of eimco presents an eye catching vie( .The debt ratio sho(s a verygood figure than #/, .This means eimco %harma has less amount of other peoples money being usedto generate profits than #/,.
eimcos profitability relative to 003 (as better than #/, !td. The gross profit operatingprofit net profit margin and R@# figures of eimco are greater than #/,. These values are theindicator that the firm has more capability than #/, to improve profitability.
,n case of mar'et r"atio (e can see the position of #/, is better than eimco it in dictates theinvestors vie( to(ards the company ho( investors Oudge the company in response to rise and return.,nvestors pay little more preference to #/T than eimco in case of ris'.
R&'#&)d"i#)$
@verall (e can see the position of eimco %harma is better than #/, ltd in the industry. utthere are certain recommendation for eimco to fill up their lac's.
#ctivity Ratio of eimco pharma is comparatively very poor. They should eamined thereceivable ad pay able management of the company.
They should try to deal (ith cash instead of receivable or pay able as much aspossible.
43
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eimco should ta'e step to in care their sales volume. :o that their asset turnover ratio couldbe increased.
/ompare (ith #/, eimcos &ar'et ratio is also very poor. They can improve this by
follo(ing the given (ay -
i+ eimcos :hould try to increase the mar'et price per share of common stoc'
(hich affects the (illingness of investors for paying the amount for each dollar
of earnings of the firm.
ii+ ,n another (ay they can do by creating more common stoc' e"uity.
These are the recommendations (hich (e feet can ma'e eimco %harma the mar'et leader.
46
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:ubstituting the values for eimco %harmas R#@ of 2.80B calculated earlier and
eimco %harmas F!& of 1.59 *T'. 863849654 A T'. 482601638+ into the
modified $u %ont formula yields.
R>@ ; 2.80 B < 1.59 ; 6.8 B
The calculation 6.8 B R>@ by using $u %ont formula is the same as that calculation
directly.
The $u pont system of analysis as a diagnostic tool is best eplained using the figure.
Du Pontnalysis
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