Application of Transmittal

November 4, 2003

Rakibur Rahman
Course instructor
School of Business,
Independent University,
Baridhara, Dhaka.

Subject: Letter of transmittal.

Dear Sir,

Please find enclosed with this letter the report of “Beximco Pharmaceuticals, Ltd” that
you wanted as partial requirement for the course of “Intermediate Accounting-305”. The
name of my project is " Ratio Analysis of a company."

I collected all the relevant information and the annual report 2001, I go through from
“Beximco Pharmaceuticals, Ltd.” I thing that is the report contains the information that
you need to get an idea about the “Ratio Analysis”. If you need any clarification or any
further information I would be happy to provide it to you.

Yours sincerely,
Md. Mostafizur Rahman
Acknowledgements

At first our thanks go to Mr. Rakibur Rahman Khan, Accounting Lecturer, School of
Business, Independent University, Bangladesh (IUB) For handing us this report which we
found to be a rather interesting topic to work on. We are going to get help to many people
in the context of preparing this report and some of the persons have been very helpful and
cooperative with information and suggestions. In this regard we would like to thank Mr.
C.H.Rahman is the managing director of the company who is the pioneer person in the
country in the Pharmaceuticals sector and I have worked hard to prepare this report. So
by this way I could finish the report properly and on time.

Origin of the Report

This report is made as a Report on the ‘Financial accounting course’ in a Beximco

Pharmaceuticals company. So the business organization of Beximco Pharmaceuticals was
chosen and I am discussing on the ratio analysis of Beximco Pharmaceuticals, Ltd. This
had the formal approval of Mr. Rakibur Rahman who is the Accounting lecturer, School
of Business, Independent University, Bangladesh. I based on this report from the
background of information and knowledge that I required from Pharmaceuticals and it
provides a reliable effective insight into the ratio process of the particular company.

The Profile of Beximco Pharmaceuticals LTD.

Operational Head Quarter : Dhamnondi-19, R/A, Road #7, Dhaka-1209, Bangladesh.

Factory in Bangladesh : Tongi, Gazipur

Establishment : 1976

Commercial Production : 1980

Status of company : Public Limited Company

Business Type : Marketing, Manufacture,and Export

Authorized Capital : Taka of 100 million

Shareholders : 50,367

Stock Exchange : Dhaka, Chittagong

Export Activities : USA, Bhutan, Georgia, Germany & Yemen etc.

Introduction

Beximco Pharmaceuticals Ltd. is on of the leading Pharmaceuticals Company in

Bangladesh. Beximco Pharmaceuticals Ltd. is producing world class of Medicine,
following the requirement of the World Health Organization (WHO) in order to improve
the health happiness and the quantity of life. We placed greatest emphasis on maintaining
the highest standard of the Corporate Governance. On the basis of Financial Statement
we can describes how the principles of the good Governance is applied in Beximco
Pharmaceuticals Ltd. The Beximco Pharmaceuticals Ltd.committed to efforts our health
care needs of the country, about 26 new products have been added to the existing
products during this year. As a result Triocim, Prosan, Recox, Atova, and lot of medicine
are already achieve themselves in a good position in the world Market within a short
period of time. But Beximco Pharmaceuticals Ltd. Company’s superstar product “NAPA”
continued to retain the number of one position since 1990’s.

The performances of various devices are used in the Beximco Pharmaceuticals Ltd.
analysis of Financial Statement data to bring out the comparative and relative
significance of the financial information presented. This are include in the below:

1. Comparative analysis
2. Percentage (Common size) analysis
3. Ratio analysis

1. Comparative analysis:
In Comparative analysis the same information is presented for two or more different dates
or periods so that like items may be compared. In Comparative analysis an investment
analyst can concentrate on a given item and determine whether it appears to be growing
or diminishing year by year and the proportion of such change to related items.

2. Percentage analysis:
Percentage analysis consists of reducing a series of related amounts to a series of
percentages of a given vase. All items in an income statement are frequently expressed as
a percentage of sales or sometimes as a percentage of cost of good sold. This analysis
facilitates comparison and is helpful in evaluating the r4elative size of items or the
relative changes in items. It may facilitate comparison between companies of different
sizes. Analyst can use this analysis to evaluate and compare companies.

3. Ratio analysis:
Ratio analysis is the starting point in developing the information desired by the analyst.
Ratio analysis provides only a single snapshot, the analysis being for one given point or
period in time. In the ratio analysis it is possible to defined the company ratio with a
standard one. Ratio analysis can be classified as follows:

A) Liquidity ratio
B) Activity ratio
C) Profitability ratio
D) Debt-coverage ratio

A) Liquidity ratio:
Liquidity ratio measures the ability of the firm to meet its obligations. These ratios
establish relation between cash and other current asset and current liabilities. Creditors to
evaluate the creditworthiness of the firm use these ratios. These ratios also provide revels
management’s policy in managing liquidity position of the firm.

The Liquidity ratio we can satisfy on the three ratios, those are:
1. Current ratio
2. Quick ratio or acid test
3. Current cash debt coverage ratio.

1. Current Ratio:

Current Ratio indicates the ability of a company to achieve its short-term obligations,
where short-term obligations indicate those obligations that are due within a year or
within the operating cycle. Current ratios are extent to which the assets that are expected
to cash cover the claims of short-term creditors.

Current Ratio = Current Assets / Current Liabilities

Ratio 2001 2000

Current ratio 1.20 Times 1.14 Times

Analysis:
In the table we see that in 2000 the ratio is only 1.14 times and in the 2001 increases to
1.20 times. Here we can see that in 2001 the current assets and current liabilities are
decreasing than the 2000. And the decreasing rate of current asset is lower than current
liabilities at. So, the current ratio increases in 2001. This ratio gives us a gross idea of
liquidity position of the company. This ratio includes Inventory, which is considered two
steps from cash. That’s why it doesn’t tell us the actual liquidity position of the firm to
meet its obligations.

2. Quick Ratio:

Quick ratio is most important measure of liquidity than the current ratio. Because
inventories which are the least liquid of the current assets from the ratio. It is essential for
a company to realize its ability to pay the short-term obligation, without knowing on the
sales of inventory because they are the assets on which losses are mostly in the event of
liquidation.

Quick ratio = (Current assets - Inventory) / Current Liabilities

Ratio 2001 2000

Quick ratio .43 Times .42 Times

Analysis:
The quick ratio has increase over the year 2001 than 2000. This has happened because
inventory has decreased about 1.02 times in 2001 and we know that inventory is deducted
from current asset while calculating quick ratio.

3. Current cash debt coverage ratio:

Current cash debt coverage ratio is the most unadventurous of analyzing liquidity
position. The use of the current or quick ratio absolutely understand that the current asset
will be changed into cash, but in reality it does not happened in the current asset to pay
the current liabilities. For that reasons Current cash debt it’s really vital to look how much
cash has in hand or in Bank to get together its financial obligations.

Current cash debt coverage ratio = Cash / Current Liabilities

Ratio 2001 2000

Current cash debt .34 Times .24 Times

Analysis:
The ratio has decreased over 2001. This way company is holding its cash, which is not
good from investor points of view. Current cash has increase about 1.35 times. The
company must invest that money to get a good return.

Ratio Analysis - Activity ratio

B) Activity ratio:
Activity ratios are used to evaluate the competence, which the company manages and
utilizes on its asset. This ratio also calls the turnover ratios because they indicate the
speed with which the assets are transformed or turnover into sales. A proper balance
between assets and sales generally reflects on that the assets.

The Activity ratio we can satisfy on the three ratios, those are:
1. Receivable turnover.
2. Inventory turnover.
3. Assets turnover.

1. Receivable turnover:
Receivable turnover ratio indicates the rate of receivable to turn into cash. It indicates the
level of outlay in receivables wanted to continue the company's sale stage. This also
events of the helpfulness of the company's credit strategy.

Receivable turnover = Sales / Accounts Receivable

Ratio 2001 2000

Receivable turnover 7.19 Times 7.94 Times

Analysis:
The company has faced a great problem in collecting its receivable. Here we see that the
sales have decreased from previous years, on the other hand receivable by increased in
quite high rate. Sometimes it indicates that the company has failed to collect its debts
efficiently.

2. Inventory turnover:
The liquidity of the company’s register can be considered by this ratio. Its ratio indicates
how many periods it is needed to twist inventory of sales on a standard. This event on the
efficiency of the company's inventory organization.

Inventory turnover = Cost of goods sold / inventory average

Ratio 2001 2000

Inventory turnover 1.28 Times 1.33 Times

Analysis:
Because of decreasing sales, cost of good sold have decreased at 1.07 times to other hand
inventory has also decreased at 1.02 times. So that the ratio by decrease because of the
decreasing rate of cost of good sold is higher than the decreasing rate of inventory. It
mean company is holding excessive amount if inventory.

3. Assets turnover:
Assets turnover ratio indicates to the capability of the company’s to create sales using the
asset appropriately. The underutilized assets raise the companies require for the expensive
finance. By the achieving a sky-scraping turnover a companies cut cost and increase final
profit of the proprietorship.

Assets turnover = Sales / Total Assets

Ratio 2001 2000

Asset turnover .05 Times .07 Times

Analysis:
Here we that total assets turnover has decreased because of decreasing total sales and
increase of total assets. So analyzing this ratio we can justify that increment has failed to
used its assets efficiently.

Ratio Analysis - Profitability ratio

C) Profitability ratio:
There are many measures of profitability, which relate the returns of the firm to its sales,
assets, or equity. As a group, these measures allow the analyst to evaluate the firm’s
earnings with respect to a given level of sales, a certain level of assets, or the owners’
investment. This ratio specify the capacity of the company to survive difficult
circumstances, which might occur from a number of basis, such as declining price,
increasing cost and declining sale.

The Profitability ratio we can justify on the six ratios, those are as follows:
1. Profit margin on sales.
2. Return on asset.
3. Return on common stock.
4. Earning per share.
5. Price earning ratio.
6. Pay out ratio.

1. Profit margin on sales:

Profit margin on sales ratio offered information as regards a company’s success from the
action of core trade. Ratio gives you an idea about the success relation to sales on after
the cost of goods sold is remove. It’s could be used as a pointer of the good organization
of the manufacture action and relationship between cost of manufacturing goods and
selling price.

Profit margin on sales = Gross Profit / Sales

Ratio 2001 2000

Profit margin on sales 16.73% 16.24%

Analysis:
In this case the ratio has increased, which is very good sign from on investor’s point of
view. It means that management has able to handle the operating cost and other cost. As a
result company has generated more profit during 2001from the year 2000.

2. Return on asset:
Return on asset compute the success of a company by using the advantage to create to get
self-governing of the financing of those assets. Its compute consequently divides
financing action from working and invests tricks.

Return on asset = Net Income / Total Asset

Ratio 2001 2000

Return on asset 9% 11%

Analysis:
In this case we see that there is a slight decreased of this ratio because the increasing rate
of total asset is higher than the increasing rate of net income. Now investors will be
unhappy with many current job decreasing this ratio.

3. Return on common stock equity:

Return on common stock ratio indicates the amount of, which the company is capable to
exchange in service income into an after tax income that finally can be maintain by the
investor. It is a helpful ratio for investigate the capability of the company’s administration
to understand a sufficient come back on the capital invest by the proprietors of the
company.

Return on common stock equity = Net income / Common stockholders equity

 Ratio 2001 2000
Return on common stock 10% 11%

Analysis:
For the same revenue in this case also the ratio has decreased because the increasing rate
of total equity 1.11 is higher than the increasing rate of return of net income 1.01.

4. Price earning ratio:

Price earning ratio does analysis in discussing the investment possibility of a given
enterprise use an off-quoted statistic? This is computed by dividing the market price of
stock by it’s earning per share.

Price earning ratio = Market price of stock / Earning per share

Ratio 2001 2000

Pay out ratio 22% 39%

Analysis:
As a well-established organization it’s earning per share is increasing day by day. In 2000
it was 9 Tk and in the 2001it has increased to 9.08. It’s a good sign for company
reputation and investors will be interested to invest on this company.
Ratio Analysis - Debt coverage ratio
D) Debt-coverage ratio:
Debt ratios are calculated to judgement the long-term financial position of the company.
This ratio indicate, mix of funds provided by owners and lenders, the manner in which
the assets are finance, the extent of earning that is magnified or leveraged by use of debt
and finally the extent of limited stakeholders control over the company.

The Debt-coverage ratio we can satisfy on the three ratios, those are:
1. Debt to total assets.
2. Time interest earned.
3. Book value per share.

1. Debt to total assets:

Debt ratio maintain how much of the company’s total assets have been financed by the
lending.

Debt to total asset = Total debt / Total Asset

Ratio 2001 2000

Debt to total asset 30% 30%

Analysis:
In debt ratio is no change between 2000and 2001. The ratio is only 30%. And the only
30% of total assets is financed by the creditor. It’s good sign at creditor points of view.
2. Time interest earned:
This ratio provides an indication of the margin of safety between financial obligations
and the net income thus it provides an indication of the available protection to creditors.
Failure to meet this obligation can bring legal action by the company’s creditors, possibly
resulting in bankruptcy.

Time interest earned (TIE) = EBIT / Interest charged

Ratio 2001 2000

Times interest earned 3.60 Times 3.84 Times

Analysis:
Here we see that earning before interest tax has increased as well as interest has also
increased. But the increasing vote as interest is higher than that of EBIT. The company
must this situation.

3. Book value per share:

Book value per share = Common stockholders equity / Outstanding shares

Ratio 2001 2000

Book value per share 94.14 85.06

Analysis:
In this case the ratio has increased. Its many equity is increasing day by day. It indicates
the healthy position of the company in the market.
Investors point of view
We know that the life of a company in the fund provided by the investors. On the other
hand we can also imagine that investors invest in a company to get some return at the end
of each accounting period. Now a day Beximco Pharmaceuticals Ltd. also become on of
the targeted place, where investors can invest. At the end of accounting year 2001 the
50,367 shareholders invest their fund in this company.

The growth of this company is discussed based on the 5 years summery data:

1. Authorized capital:
From the year of 1997 to 2001 the Beximco Pharmaceuticals Ltd. company has its
authorized capital of 1,000,000,000 Taka.

2. Paid up capital:
The last 5 years paid up capital is constant (BDT) 442,500,000 Taka.

3. Net turnover:
Beximco Pharmaceuticals Ltd. Company the net turnover of this company is 2.09% over
than that of 2000. This is because the recession on the worlds economy, which is the
result of 11TH September occurrences.
4. Export turnover:
Beximco Pharmaceuticals Ltd. company is playing a vital role for the economy of this
country. The export turnover is 4.15% higher than 1997, which is 6.09% higher than
2001. From the 1997 Beximco Pharmaceuticals Ltd. managed to maintain an increasing
trend on export turnover.

5. Contribution to Government treasury:

During the year of 2001 Beximco Pharmaceuticals Limited has to contributed TK. 426
million to national exchequer in the form of import related taxes value added tax and
income tax.

6. Net profit:
Although net sales decreased to 2.09% compare to the 2000, the company earned a net
profit of 401,780,000 in 2001 as against 2000 the profit of 398,295,000. If we have a 100
TK on the five years trend of net profit from this graph, wee can easily understand the
profitability of this company.

7. New products for 2001:

Consistent to its committed efforts to later to the health care needs of the country 26 new
products have been added to the existing products portfolio during the year under
revenue.

8. Gross tangible assets:

Gross tangible assets stand to the year 2001 at 5,141,780,000TK as against
4,062,660,000TK of 2000, which is 26.56% higher.

9. Shareholders equity:
Total shareholders equity at the end of 1997 was 2,848,305,000, and at the end of 1998 it
was 3,156,141000. At 2001 total shareholders equity stands at the 4,165,791,000. Below
there was a graphs can easily exposes the growth in shareholders equity at a glance.

10. Dividend:
During the financial year Beximco Pharmaceuticals Ltd. Company declared a10%
dividend to its shareholders compare to last year it is 100% lower. Return on paid up
capital stands on 97%, which was 96% during last year.

11. Earning per share:

Earning per share increased by 0.87% to compare last year, that also indicate the
continuous growth of this Beximco Pharmaceuticals Ltd. Company.

Last 2 years growth at a glance (in thousand)

Particulars 2001 2000 Amount Growth %

Income &
Profitability
 Turnover (Net) 2,401,241 2,452,524 (51,283) (2.09)%
Net profit 401,780 398295 3,485 .87%
Earning per share 9.08 9.00 0.08 .89%

12. Other important side of Beximco Pharmaceuticals:

Beximco Pharmaceuticals Ltd. Company is run by some experienced and innovative
management group, who always invest their talent, knowledge, and experience for the
development of the company It also organize various management development training
for its employee. It also participated in various social awareness building programs in
2001. The Beximco Pharmaceuticals Ltd. Company also sponsored supplements in the
national details on health care awareness and development issue.

The above analysis of Beximco Pharmaceuticals LTD led me to write the following
concessive sentences from the investor’s view of point.
Creditors point of view and Conclusion
Beximco Pharmaceuticals LTD has three types of creditors in its Amortize book for the
year 2000 and 2001. This are

1. Customers Dividend.
2. Short term borrowing form Bank.
3. Other creditors.

The balance sheet shows that customers debenture is unchanged compare to the previous
amortize year, where as short term borrowing from the Bank increase significantly.

If we have a look at the debt pay out ratio:

RATIO 2001 2000

Debt pay out ratio .22 .39

We can see that the company is well ahead to repay its loan to the creditors.

The previous analysis (Investors point of view), we observed that Beximco

Pharmaceuticals LTD managed to maintain a increasing trend during the last couple of
years. Generally Bank and individual wants to finance to that organizations which are
profitability on the other hand Bank also has the tendency to increase it’s assets based by
funding to the company.
The Bank also gradually increases its funding limit to a company based on its
performance.

During the last 2 years Beximco Pharmaceuticals LTD took loan from the following
Banks:

Name of this represents(Banks) 2001 2000

a) Janata Bank :
Cash credit-Pledge 155,337,898 155,965,760
Cash credit-Hypothecation 625,133,177 597,268,061
LIM 43,695,796 000
B) Citi Bank N.A. 76,015,905 77,547,254
C) Credit agricole indosuez 51,521,670 116,361,562
D) Standard Chartered Grindlays 130,200,229 120,565,128
Total 1,081,904,675 1,067,707,765

If we have a to the look above table, we will see that short term borrowing from Bank
have been increased by 1.30%, compare to the last year. That means, thus Banks are also
very much willing to finance of Beximco Pharmaceuticals LTD as it is keeping a
satisfaction of business growth for the last couple of year.

Conclusion

Beximco Pharmaceuticals LTD is a well-established and leading Pharmaceuticals firm of

the country. The 5 years financial data show a growing trend of the company. The net
profits after tax (NOPAT) indicates the company’s excellent performance in operation,
turnover, management and competitive business statically. As the inventors expectation is
to earn more money over their investment,- Beximco Pharmaceuticals LTD is playing an
important role to set the investors on it.