NORTH SOUTH UNIVERSITY

Introduction to Financial Management

FIN254
Main Company: Pharma Aids Limited
Competitor Company: Beacon Pharmaceuticals Limited

SUBMITTED TO,
Syed Asif Hossain
Department of Accounting and Finance
North South University

SUBMITTED BY,
Name ID
Israt Jahan 1430921630
Anika Nawer 1430922630
Abrar Jahin 1721264630
Tahania Afrin Chowdhury 1821943630
Sony Komer Dey 1812020630
Table of Contents
Letter of Testimonial...................................................................................................................................2
Executive Summary.....................................................................................................................................3
Introduction.................................................................................................................................................4
Liquidity Ratio:.............................................................................................................................................5
Current Ratio:..........................................................................................................................................5
Quick Ratio:.............................................................................................................................................6
Activity Ratios:.............................................................................................................................................8
INVENTORY TURNOVER RATIO:...............................................................................................................8
Total Asset Turnover:..............................................................................................................................9
Average Collection Period:....................................................................................................................11
Average Payment Period:......................................................................................................................13
Average age of inventory :.....................................................................................................................15
Debt Ratio..................................................................................................................................................16
Time interest earned ratio:....................................................................................................................18
Profitability Ratios:....................................................................................................................................20
Gross Profit Margin................................................................................................................................20
Operating Profit Margin:.......................................................................................................................21
Cross Sectional Analysis............................................................................................................................24
Net Profit Margin...................................................................................................................................24
Return on Total asset:............................................................................................................................25
Return on Common stockholder’s Equity..............................................................................................27
Market Ratios:...........................................................................................................................................29
Price/Earnings Ratio..............................................................................................................................29
Market/Book (M/B)...............................................................................................................................31

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Letter of Testimonial

Lecturer, Department of Accounting and Finance

North South University
Bashundhara R/A, Dhaka-1229
Subject: Submission of Group Project

Dear Sir,
We thank you for giving us the opportunity to do a project on ratio analysis which not only
helped us learn calculating ratios but also helped us understand how these ratios affect
decision making in the real life. We have worked together in completing the project and tried
our best to follow your guidelines while working on the project.
We enjoyed working on this project and we are thanking you again for giving us this project and
hopefully it will help us in our professional career as well.

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Executive Summary
We had to calculate the financial ratios of 2 companies using their financial statements for the range of

4 years: 2015, 2016 ,2017, 2018. We select Parma Aids Limited and Beacon Pharmaceuticals Limited for

our analysis. We found out the Liquidity ratios, the Activity ratios, the Financial Leverage ratios, the

Profitability ratios and also the Market position for the 2 companies. After that we were able to

accumulate all the ratios using the annual reports of the respected years and then also analyzed them to

understand the real financial standings of the company.

We first did a “time series” analysis on the 2 companies. The pharmaceutical industry is quite

competitive in Bangladesh. To compare our finding, we have chosen these companies as competitors

among each other, and then carried out a ‘cross sectional’ analysis as well. Our main company is Pharma

Aids and for competitor company we choose Beacon Pharmaceutical. We tried our best to make

accurate calculations and analysis and this report has benefited all of the team members as we also got

to understand how the Dhaka Stock Exchange works.

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Introduction
Pharma Aids Limited

Pharma Aids limited is a Bangladesh based company, which manufactures neutral glass
ampoules. This company established in 1981 and went into commercial operation on July 1,
1984. The company has a mission to produce the highest quality of Neutral Glass Ampoules for
the pharmaceutical industries in Bangladesh. They actually produce different kind sizes of
ampoules, such as one ml, two ml, three ml, five ml, ten ml, twenty ml, and twenty-five ml.both
clear and amber color. They also produce open mouth and close mouth ampoules. They also
print with customizable product description, with break ring at the neck, and up to three color
show rings at the stem. They have the facilities to produce flame cut/ optic-cut ampoules.

Beacon Pharmaceuticals Limited

Beacon Pharmaceuticals Limited is the number one oncology company and one of the leading
and fastest growing pharmaceutical companies of Bangladesh. This company started their
operation in 2006. Manufacturing plant of Beacon has the finest infrastructure and facilities
developed and engineered by foreign consults to confirm world class standards. They have
dedicated facilities to manufacture lifesaving oncology, general products. The company
manufactures more than two hundred world class generic drugs and even successfully introduced
a number global first generic drug. After meeting the local market demand, they export their
medicines to many other countries of Asia, Europe and Latin America.

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Liquidity Ratio:
Liquidity ratios measure a company’s ability to pay debt obligations and its margin of safety
through the calculation of metrics including the current ratio, quick ratio.

Current Ratio:
Current ratio measures whether a firm has enough resources to meet its short-term obligations. It
compares a firm’s current assets to its current liabilities.

Current Ratio
Pharma Aid Beacon Pharma

Year Current Ratio Current Ratio

2015 1.63 2.33
2016 1.89 2.23
2017 2.44 2.13
2018 2.58 1.80
Interpretation
 To pay each dollar of liability Pharma Aids Ltd. has 2.58-dollar asset.
 To pay each dollar of liability Beacon Pharma Ltd. has 1.80 dollar of asset.

Current Ratio
3.00
2.50 2.44 2.58
2.33 2.23
2.00 2.13
1.89 1.80
1.63
1.50
1.00
0.50
0.00
2015 2016 2017 2018

Pharma Aid Current Ratio Beacon Pharma Current Ratio

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Time series analysis:
Pharma Aids Ltd: The graph implies that Pharma Aids Ltd current ratio has increased from
1.63 to 2.58 over the year of 2015 to 2018. It means that the company has a lot of cash and they
don’t invest it in market which means they don’t take any risk in business.

Beacon Pharma Ltd: The graph shows that Beacon Pharma Ltd.’s current ratio has become
agitated from 2.33 to 1.80 over the time of 2015 to 2018. It means that the ability of paying
current obligations has reduced at that time. So the company takes risks in business and invest
their cash in market.

Cross sectional analysis:

We know that current ratio is higher is better. So here, Pharma Aids Ltd is doing better as its
current ratio is higher than Beacon Pharma Ltd on an average. Pharma Aids Ltd.’s current ratio is
in thriving trend but Beacon Pharma Ltd.’s current ratio is in fluttering trend. Over all Pharma
Aids Ltd is better than Beacon pharma in terms of current ratio.

Quick Ratio:
Quick ratio measures the ability of a company to use its near cash or quick assets to extinguish or
retire its current liabilities immediately.

Quick Ratio
Pharma Aid Beacon pharma
Year Quick Ratio Quick Ratio
2015 1.42 1.22
2016 1.75 1.19
2017 2.13 1.17
2018 2.23 1.03

Interpretation:
 To pay each dollar of liability Pharma Aids Ltd has 2.23 assets excluding inventories.
 To pay each dollar of liability Beacon Pharma Ltd. has 1.03 assets excluding inventories.

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 Quick Ratio
2.50
2.13 2.23
2.00
1.75
1.50
1.42
1.22 1.19 1.17
1.00 1.03

0.50

0.00
2015 2016 2017 2018

Pharma Aid Quick Ratio Beacon pharma Quick Ratio

Time series analysis:

Pharma Aids Ltd.: The graph shows that Pharma Aids Ltd.’s quick ratio has increased from
1.42 to 2.23 over the year of 2015 to 2018. It means that the capability of paying short term
obligations by liquid assets have increased over the time.

Beacon Pharma: The graph implies that Beacon Pharma Ltd.’s quick ratio has decreased over
the year of 2015 to 2018 from 1.22 to 1.03. Which gives a negative impact as quick ratio is
higher is better. In this case it’s not good for Beacon Pharma Ltd. That implies that the ability of
paying short term obligations by liquid assets has decreased over the time.

Cross sectional analysis:

Our main company Pharma Aids Ltd is doing better job compare to the Beacon Pharma Ltd. As
its quick ratio is higher. And we know that quick ratio is higher is better. So, we can say that
Pharma Aids Ltd is better than Beacon Pharma Ltd at quick ratio.

Recommendation:
Our main company Pharma Aids Limited is doing better compare to the Beacon Pharma Limited.
To hold this success, they have to maintain the disposal of their inventories and invest the current
asset in the market.

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Activity Ratios:
Activity Ratios measure the speed with which various accounts are converted into sales or cash, or
inflows or outflows. How efficiently the firm using their assets.

INVENTORY TURNOVER RATIO:

This ratio measures that how many times the Inventory are sold and re-stocked during a financial
year. How frequently inventories are turned into sales. Inventory turnover higher is better.

Inventory Turnover Ratio = Cost of Goods Sold/Inventory

Inventory Turnover
Year Pharma Aids Beacon pharmaceutical
2015 6.04 0.87
2016 9.23 1.09
2017 5.72 1.36
2018 6.18 1.89

Interpretation
 Inventory turnover of Pharma Aids Limited 6.18 implies that the company has sold and
re-stocked inventory on an average for 6.18 times.
 Beacon Pharmaceuticals inventory turnover 1.89 times implies that the company has sold
and re-stocked inventory on an average for 1.89 times

Inventory Turnover
10.00 9.23
9.00
8.00
7.00 6.04 6.18
5.72
6.00
5.00
4.00
3.00 1.89
2.00 1.09 1.36
0.87
1.00
0.00
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharmaid Inventory Trunover Beacon Pharma Inventory Turnover

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Time Series Analysis:

Pharma Aids Limited: In the recent 4 years (2015-2018) Pharma Aids has sold and re-stocked
inventories gradually 6.04, 9.23, 5.72 and 6.18 times. The inventory turnover has increased to
9.23 times in 2016 from 6.04 times in 2015 which indicates a good performance of the company
in 2016. But In 2017 the inventory turnover has reduced to 5.72 from 9.23 which shows a bad
performance of the company than the previous year. Then from the following year the inventory turnover
started increasing again slowly. So, we can say the company is continuously doing good except for the
year 2015. The company's increasing inventory turnover means the company is doing well as it describes
the inventories were sold to market on a continuous basis.

Beacon Pharmaceuticals Limited: As we can see from the graph, for the recent 4 years Beacon Pharma
has sold and re-stocked inventories gradually 0.87, 1.09, 1.36, 1.89 times. The inventory turnover of
Beacon pharma is increasing year to year. It has slightly increased to 1.09 times in 2016 from 0.87 times
in 2015. The ratio gradually continued to rise to 1.36 and 1.89 in the year 2017 and 2018. This increasing
ratio of inventory turnover defines that Beacon pharma has continuously increased its sales and re-
stocked more and more inventories than previous years, it shows the company’s better performance year
to year. Allowing cash discount and encouraging customers to buy on credit were the reason behind the
increase in inventory turnover.

Cross-sectional Analysis:

From ratios of pharma Aids and Beacon pharma, we can see pharma Aids performance is better than
Beacon pharma in terms of inventory turnover. The inventory turnover of recent 4 years for pharma Aids
has an increase from 5.50(approximately), at the other side the inventory turnover of Beacon pharma
starts from 0.87 which lower than Pharma Aids. The higher the inventory turnover indicates that the
inventories are being sold more frequently. Though Pharma Aids performance is good than Beacon
pharma in terms of inventory turnover but Beacon pharma also has an increase in Its ratio year by year.

Total Asset Turnover:

This ratio indicates how efficiently the company utilized their total assets are being converted into
revenue or used in order to generate revenue. It describes the efficiency of total

Total Asset Turnover = Sales/Total Assets

Total Asset Turnover

Year Pharma Aids Beacon Pharmaceutical

2015 0.78 0.43

2016 0.73 0.36

2017 0.81 0.46

2018 0.91 0.77

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Interpretation
 Total asset turnover 0.47 times implies that each $1 investment in asset, Pharma Aids has
generated 0.47 cents of revenue.
 Beacon pharmaceutical’s total asset turnover 0.77 means that for each $1 investment, the
company has generated 0.77 cents of revenue.

Total Asset Turnover

1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharmaid Total Asset Trunover

Beacon Pharma Total Asset Trunover

Time Series Analysis:

Pharma Aids Limited: For the past four years the total asset turnover ratios were 0.75, 0.60,
0.36, 0.47 which means Pharma Aids has generated 0.78, 0.73, 0.81, 0.91 cents of sales from
each 1$ of investment made.
In the year in 2016, the total asset turnover has slightly decreased to 0.73 from 0.78 which was in
2015.Then, from 2017 it has started increasing slowly again to 0.81 in 2017 and ended up at 0.91
in 2018. This shows that the company was doing good every year except 2016 as it was
continuous earning more than the previous year one from each $ 1 of investment.

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Beacon pharmaceutical Limited: In the last four years the total asset turnovers were 0.43, 0.36,
0.46, 0.77 which means Beacon pharma has generated 0.43, 0.36, 0.46, 0.77 cents of sales from
1$ of investment. In the year of 2016, the total asset turnover has slightly decreased to 0.36 from
0.43 in 2015. After 2016 the total asset turnover ratio has gradually increased in the next 2 year
which are 0.46 in 2017 and 0.77 in 2018 that indicates the good performance of the management
of the firm. The company is doing good year by year as it is earning more than the previous year
except the year 2016.

Cross-sectional Analysis:
In terms of Total Asset Turnover, Pharma Aids is at a better position. Pharma Aids generates greater
revenues than their total assets than Beacon pharmaceutical company. As we can see, in 2018 Pharma
Aids total asset turnover was 0.91 on the other hand Beacon's total asset turnover was 0.77. So, we can
come up to the decision that Pharma Aids is doing well than Beacon in terms of total asset turnover.

Average Collection Period:

Indicates how many days the company takes to collect their payment from their debtors. This is shown in
days. The lower ratio the better the performance is.

Average Collection Period = Accounts Receivable/Average Sales

Average Collection Period
Year Pharma Aids Beacon pharmaceutical

2015 189.83 54.26

2016 220.52 64.78

2017 211.78 46.68

2018 183.31 42.40

Interpretation
 Average collection period 183.31 days implies that, Pharma aid pharmaceutical has taken
on an average 183.31 days to collect cash from its credit customers.
 Average collection period of Beacon pharmaceutical 42.40 days implies that, the
company has taken 42.40days to collect cash from its debtors.

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 Average Collection Period
250.00

200.00

150.00

100.00

50.00

-
2015.5 2016 2016.5 2017 2017.5 2018 2018.5 2019 2019.5

Pharmaid Average Collection Period

Beacon Pharma Average Collection Period

Time-series Analysis:

Pharma Aids Limited: In the recent 4 years Pharma Aids gradually took 189.83, 220.52, 211.78
and 183.31 days to collect money from debtors. The average collection period of Pharma Aids
was 189.83 days in the year 2015. It has started to increase in the following year and become
220.52 in 2016 which was not good for the company as it takes more time to collect money from
debtors that may create a mess of the company’s financial system. From following year, the ratio
again gradually started to decrease to 211.78 days and 183.31 days in 2017 and 2018 which
indicates a good sign for the company's performance.

Beacon Pharmaceutical Limited: For the recent 4 years Beacon pharma took gradually 54.26,
64.78, 46.68 and 42.40 days to collect money from the debtors. The average collection period of
Beacon pharma was 54.26 days in 2015. The ratio then rises to 64.78 days in the following year
2016 which is a negative sign for the company. Again, it started decreasing in the next two years
which is good for the company. 46.68 days was the average collection period of Beacon pharma
in 2017 and in 2018 it was decreased to 42.40 days. The decreasing ratio of average collection
period shows the good performance of Beacon pharma as the firm is taking less time to collect
money from debtors. And also making opportunities to use the money or invest the money and
make profit.

Cross-sectional Analysis:
The lower the collection period is, the better it is as the company takes less time to collect money
from debtors. Both the company’s average collection period was reducing throughout the years
but the performance of Beacon pharma to collect money from debtors was better as their average

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collection period ratio was 65 days maximum. On the other hand, Pharma Aids average
collection period was also decreasing over the years except from 2016 but their collection period
was over 150 days which is much more than Beacon pharma. This may be, because of industry
was providing higher days to collect their debts. However, it can be said that Pharma Aids is
doing bad performance in this sector as they are taking more time to collect money than Beacon
pharma.

Average Payment Period:

This ratio describes that how many days the company takes to pay their creditors. This is shown
in days. It is higher the better as the company can use the money to invest somewhere else.

Average Payment Period = Accounts payable/ Average Purchase

Average Payment Period
Year Pharma Aids Beacon Pharmaceutical
2015 30.00 7.35
2016 20.29 24.19
2017 8.76 23.84
2018 2.55 20.38

Interpretation
 Pharma Aids average payment period 2.55 days implies that the company has taken on an
average 2.55days to pay their suppliers.
 Average payment period 20.38 days implies that Beacon pharmaceutical has taken 20.38
days to pay their creditors.

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 Average Payment Period
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharmaid Average Payment Period

Beacon Pharma Average Payment Period

Time Series Analysis:

Pharma Aids Limited: The graph shows the days taken by Pharm aids to pay their suppliers. The
timings are 30.00 days in 2015, 20.29 days in 2016, 8.76 days in 2017 and in 2018 it was 2.55 days. As
we can see the ratio started to decrease gradually year by year which means that the company took less
time to pay their suppliers and it is definitely not a good sign for the company. It means that pharm aids is
compelled to pay early and could not use the money to earn extra from the missing opportunities to
invest.

Beacon pharmaceutical Limited: From the graph, it shows the days taken by Beacon pharma to pay
their suppliers. The ratios are 7.35 in 2015, 24.19 in 2016, 23.84 in 2017 and 20.38 in 2018.
It shows that the company has taken 7.35, 24.19, 23.84 and 20.38 days to pay their creditors.
In 2016, the ratio of average payment period of Beacon pharmaceutical has increased where it was
7.35 in 2015 and jumps up to 24.19 in 2016. It shows that, Beacon pharma takes more time
to pay their suppliers and they can use that money wisely which gave them the chance to earn more. But
2017, it has decreased to 23.84 and in 2018 it has again decreased to 20.38 days which is not good for the
firm and indicates that Beacon pharma was compelled to pay early and couldn’t use the money to earn
extra profits.

Cross-sectional Analysis:

As we can see, both the companies are paying their creditors early and can't make the
opportunity to use the money for extra earning. But when we compare to both companies,
Beacon pharma wins the race in terms of average payment collection period. As It can be seen,
after decreasing ratios in year by year Pharm aids has reached 2.55days in 2018 on the other side
Beacon has reached 20.38days which is much more than Pharm aids. It describes, Beacon
pharma had 20 days to pay their suppliers and made more earnings with using the money.
Meanwhile, pharma aids had only 2.55 days to using the money for extra earnings.

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Average age of inventory :
This ratio shows how many days the company takes to collect their payment from their debtors.
This is shown in days. It is lower is better.

Average Collection Period = Accounts Receivable/Average Sales

Average Age of Inventory
Year Pharma Aids Beacon Pharmaceutical
2015 60.40 417.39
2016 39.53 335.63
2017 63.78 267.60
2018 59.10 251.15

Interpretation
 Average age of inventory of Pharma Aids 60.40 days implies that the company holds inventories
for 60.40 days on an average before its selling.
 Beacon pharmaceutical has 417.39 days average age of inventory, it means that the company is
holding 417.39 days on an average before its selling.

Average age of Inventory

450.00 417.39
400.00
335.63
350.00
300.00 267.60 251.15
250.00
200.00
150.00
100.00 60.40 63.78 59.10
39.53
50.00
0.00
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharmaid Average Age of Inventory

Beacon Pharma Average Age of Inventory
Time series analysis:
Pharma Aids Limited: In the last 4 years the average age of inventories was 60.40, 39.53,
63.78, 59.10 days. This means the firm was holding inventories for 60.40, 39.53, 63.78, 59.10
days before its selling. In the year 2015, the company hold inventories 60.40 days before its
selling and it decreased in the next year to 39.53 in 2016 which represents the good performance
of the company's sales department. But in 2017, suddenly the ratio increased in a large number
which was 63.78 days as it means the company has taken more time to sell their inventories than

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previous year. Then in 2018, it again started decreasing to 59.10 days which shows that the
company sells their inventories and earns more quickly than previous year.

Beacon Pharmaceutical Limited: In the recent 4 years, the average age of inventories was
417.39, 335.63, 267.60, 251.15 days. This indicates the firm was holding inventories for 417.39,
335.63, 267.60, 251.15 days before its selling. The average age of inventories ratio of Beacon
pharma was decreasing year to year which is showing the great performance of the company and
its sales department. In the year 2015, the firm took 417.39 days to sell inventories. Then it
started to fall every year like in 2017 the average age of inventory reached to 267.60 days from
335.63 days in 2016. Finally, in 2018 it has reached to 251.15 days which represents the better
performance of the firm’s sales department. It indicates that the company takes less time to sell
their inventories over the years and earns revenue early. The decreasing ratio of Beacon pharma
is a sign that the firm is able to attract the customers and sell their inventories very early and will
get the chance to get and sell more inventories and earn more profit.

Cross Sectional Analysis:

In terms of Average age of inventory Pharma Aids is doing much better as they hold their
inventories for few days from Beacon pharmaceutical. Beacon pharma was holding inventories
for 417.39, 335.63, 267.60, 251.15days before selling which is higher than Pharma Aids. The
ratio was 60.40, 39.53, 63.78, 59.10 days. This shows that the firm was holding inventories less
time than Beacon pharmaceutical. We can say, Pharma Aids limited is doing good in sales
department and able to sell early and get new inventories and make more profit from Beacon
Pharmaceuticals.

Recommendations

Our main company is Pharma Aids and Pharma Aids is doing great than Beacon Pharmaceutical
in terms of inventory turnover, total asset turnover and average age of inventory. But "Average
collection period" and "average payment period" of Pharma Aids are not good at performance.
They take more time to collect money from creditors and pay early to their suppliers.
Pharma Aids should give discount term or time-limit policy to collect cash from customers early.

Debt Ratio
Debt ratio measures the proportion of total assets financed by the firm’s creditors. The higher
this ratio, the greater the amount of other people’s money being used to generate profits.

Debt ratio= Total liabilities/ total assets

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 Debt Ratio
Year Pharma Aids Beacon Pharmaceutical
2015 38% 417.39
2016 36% 335.63
2017 63.78 267.60
2018 59.10 251.15

Interpretation
 The company Pharma AID has 23% of debt ratio implies that 23% of debt has been
financed by the creditors.
 The company Beacon Pharmaceuticals has 38.87% of debt ratio implies that 38.87% of
debt has been financed by the creditors.

Debt Ratio
45%
40% 38.67% 40.13% 41.34%
38% 38.87%
35% 36%
30% 31%
25%
23%
20%
15%
10%
5%
0%
2015 2016 2017 2018

Pharma AID Column1

Time series analysis:

Pharma AID: The graph shows that company Pharma AID has debt ratio which is decreased 38%
to 23% over the year 2015 to 2018. So that we can assume that the company has ability to meet
interest income expense, debt are advantages because of its tax deductibility. And over the time
the percentage is going down and its better for the company that it has less debt from the
previous years which is 23%.

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Beason Pharma: The graph shows that company Beacon Pharmaceuticals has debt ratio which is
decreased 38.67% to 38.87% over the year 2015 to 2018. So that we can assume that the
company has ability to meet interest income expense, debt are advantages because of its tax
deductibility. And over the time the percentage is going down and its better for the company that
it has less debt from the previous years which is 38.87%. Because previous years the ratio is
38.67%, 40.13% and 41.34% and it has financed by the creditors to the company.

Cross sectional analysis:

The Pharma AID Company has better position than Beacon Pharmaceuticals because the
company’s assets are financed with debt 23%, weather the other company’s debt is 38.87%
which is higher than Pharma AID. As we know that too much debts will lead a company towards
bankruptcy. And the higher the ratio, the greater the company degree of in datedness and the
more financial leverage it has.

Time interest earned ratio:

The times interest earned ratio measures the firm’s ability to make contractual interest payments.
The higher its value, the better the firm is to fulfill its interest obligation.
Times interest earned ratio= Earnings before interest and taxes / Interest
Time interest earned ratio
Year Pharma AID Beacon Pharmaceuticals

2015 10.59 1.09

2016 17.23 1.20

2017 36.01 1.36

2018 73.73 1.51

 The company Pharma AID time interest earned ratio 73.73 times implies that the
company has the ability to pay the interest expense with its operating profits by 73.73
times.
 The company Beacon Pharmaceuticals time interest earned ratio 1.51 times implies that
the company has the ability to pay the interest expense with its operating profits by 1.51
times/

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 Times interest earned ratio
80
73.73
70
60
50
40
36.01
30
20 17.23
10 10.59
0 1.2 1.36 1.81 1.51
2015 Pharma AID
2016 Column1
2017 2018

Time series analysis

Pharma AID: The graph shows that the time interest earned ratio of Pharma AID company
increase from 10.59 to 73.73 over the year of 2015 to 2018. Depending on this value, we can say
that the debt ratio can be made interest earning a higher value in this ratio implies that the
company has no raise of a relatively higher amount of debt, because its ability to make
contractual of interest payments. The company has ability to pay interest expense by 73.73 times
with the operating profits and this is increased over time 2015 to 2018.
Beacon Pharmaceuticals: The graph shows that the time interest earned ratio of Beacon
Pharmaceuticals company increase from 1.2 to 1.51 over the year of 2015 to 2018. Depending on
this value, we can say that the debt ratio can be made interest earning a higher value in this ratio
implies that the company has no raise of a relatively higher amount of debt, because its ability to
make contractual of interest payments. The company has ability to pay interest expense by 1.51
times with the operating profits and this is increased over time 2015 to 2018.

Cross sectional analysis:

The pharma AID is doing better than the Beacon Pharmaceuticals because the higher its value,
the better able the firm is to fulfill its interest obligations. As Phrma AID company has 73.73
times interest earned and the Beacon Pharmaceuticals has 1.51 times so that it can appears that
the Pharma AID Company has better opportunity to pay the interest expense than Beacon
Pharmaceuticals.

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Recommendations
Pharma Aids is doing great than Beacon Pharmaceutical in terms of DEBT ratio, total asset, total
liabilities, time interest earned ratio. In both ratio, debt and time interest earned ratio term
pharma aid is doing really good and they have good interest earned.

Profitability Ratios:
The profitability ratio measures enable the analyst to evaluate the firm’s profits with respect to a
given level of sales, certain level of assets and owner’s investment.

Gross Profit Margin:

Thw gross profit margin measures percentage of each sales dollar remaining after the firm bas
paid for its good.
Gross Profit Margin=sales-cost of goods sold/sales

Pharma AID Beacon Pharmaceuticals

2015 38.39% 48.29%

2016 35.34% 65.89%

2017 37.18% 62.70%

2018 38.71% 48.75%

Interpretation
 The company pharma AID has made gross profit margin ratio 38.71%. The firm is left
with 38.71% of after paying for its goods.
 The company Beacon Pharmaceuticals has made gross profit margin ratio 48.75%.The
firm is left 48.71% of after paying for its goods

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 Gross Profit Margin
70
60
50
40
30
20
10
0
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharma AID Beacon Pharmaceuticals

Time series analysis

Pharma AID: Pharma aid: the graph shows that Pharma aid’s Gross profit margin fluctuated
from 38.39% to 38.71% over the year of 2015 to 2018. It means that the amount of leftover
money from revenue after deducting all the cost of goods sold has fluctuated over the year.
Beacon pharma: the graph shows that Beacon pharma’s Gross profit margin fluctuated from
48.29% to 48.75% over the year of 2015 to 2018. It means that the amount of leftover money
from revenue after deducting all the cost of goods sold has fluctuated over the year.

Cross sectional analysis:

Higher the better.Comparing both of them Beacon pharma is doing better job than Pharma aid
.because the higher the ratio, the better it is from comparing each years gross profit margin

Operating Profit Margin:

The operating profit margin measures the percentage of each sales dollar remaining after all costs
and expenses other.
Operating Profit Margin=operating profit/sales

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 Pharma AID Beacon Pharmaceuticals
2015 28.15% 13.88%
2016 24.05% 14.51%
2017 26.16% 11.45%
2018 28.37% 5.54%

Interpretation:
 The company Pharma AID has made operating profit 28.37
 The company Beacon Pharmaceuticals has made operating profit margin 5.54

Operating Profit Margin

30

25

20

15

10

0
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharma AID Beacon Pharmaceuticals

Time series analysis

*Pharma AID: The graph shows that Pharma AID’s company operating profit margin has
increased without 2016.That means the company has the value of operating profit margin profit
after paying for all his expense without interest tax and preferred stock dividend in increasing.
*Beacon Pharma:The graph shows that Beacon Pharma company operating profit has decreased
without 2016.It means that the company the value of Operating Profit Margin after paying all his
expense without interest tax and preferred stock dividend in decreasing .

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Cross sectional Analysis
Higher the better. So that’s why Pharma AID is better than the Beacon Pharma
Earnings per share: Earnings per share measures or represents the dollar amount earned on
behalf of each outstanding share of common stock
Earnings Per Share =Earnings available for common stockholders/Number of shares of
common stock outstanding

Year Pharma AID Beacon

Pharmaceuticals
2015 8.59 0.17
2016 7.52 0.27
2017 9.48 0.45
2018 15.07 0.35

Interpretation:
 The Pharma AID has earned 15.07 on behalf of each outstanding share of common
stock.
 The Beacon Pharma has earned 0.35 on behalf of each outstanding share of common
stock.

Chart Title
16
14
12
10
8
6
4
2
0
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharma AID Beacon Pharmaceuticals

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Time series analysis:
Pharma AID: The graph shows that Pharma AID’S company Earnings Per Share has increased
without 2016.That means company’s earning has increased without the year of 2016 for one
share.
Beacon Pharma: The graph shows that Beacon Pharma company Earnings Per Share has
increased without the year of 2018.That means company’s earning has increased without the year
of 2018 for one share.

Cross Sectional Analysis

Higher the better.so that’s why Pharma Aid has higher Earnings per share ratio of 15.07 and
Beacon Pharma Earnings per share is 0.35. For these reason Pharma AID will be better rather
than Beacon Pharma.

Net Profit Margin

The net profit margin measures the percentage of each dollar remaining after all cost and
expenses ,including interest, taxes and preferred stock dividends have been deducted.
Net Profit Margin=Earnings available for common shareholders/sales
Year Pharma AID Beacon Pharmaceuticals
2015 10.14 1.88
2016 22.82 3.37

2017 34.54 4.44

2018 34.07 2.13

Interpretation:
The Pharma AID has 34.07 of earning available for common stockholders. Beacon
Pharmaceuticals has 2.13 of earning available for common stockholders.

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 Chart Title
40
35
30
25
20
15
10
5
0
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharma AID Beacon Parmaceuticals

Time Series analysis:

Pharma AID: The graph shows that The Pharma AID net profit margin has increased from
10.14% to 34.07% over the year of 2015 to 2018.That means which had earned from revenue
had turned into profit. After paying for all the expense interest tax and stock dividends has
increased.
Beacon Pharmaceuticals: The graph shows that Beacon Pharma net profit margin has increased
except2018.
That means which had earned from revenue and turn into profit. After paying for all the expense
interest tax and stock dividends has increase without 2018.

Cross Sectional Analysis:

Higher the better. That’s why Pharma AID will be better than Beacon Pharmaceuticals.

Return on Total asset:

The return on total assets,often called “return on investment”it measures the overall effectiveness
of management in generating profits with its available assets.
Return on Total Assets=Earning available for common stockholders/Total assets

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 Year Pharma AID Beacon Pharmaceuticals

2015 14.29% 0.81

2016 11.30% 1.22

2017 13.31% 2.03

2018 18.10% 1.63

Interpretation:
The Pharma AID company investment in assets the company has earned 18.10 of net income.
Beacon Pharmaceuticals company investment in assets the company has earned 1.63 of net
income

Return on Total Assets

250.00%

200.00%

150.00%

100.00%

50.00%

0.00%
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharma AID Beacon Pharmaceuticals

Time Series Analysis:

The graph shows that Pharma AID has increased net profit margin 14.29% to 18.10% except
2016. It means that the amount which was earned from revenue and turned into profit after
paying for all the expenses including interest tax and preferred stock dividend has fluctuated.

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The graph shows that Beacon Pharma has increased net profit margin 0.81% to 1.63% except
2018.It means that the amount which was earned from revenue and turned into profit after paying
for all the expenses including interest tax and preferred stock dividend has fluctuated.

Cross sectional analysis:

Higher the better, that’s why we see that Pharma Aid is better than Beacon Pharma. In terms of
net profit margin of Pharma AID is 18.10% on the other part Beacon Pharma net profit margin is
1.63%.so we can say that Pharma AID

Return on Common stockholder’s Equity

The return on common equity common stockholder’s equity measure the return earned on
common stockholder’s investment in the firm
Return On common Stockholder’s Equity=Earnings Available for Common
Stockholders/Common Stockholder’s Equity

Year Pharma AID Beacon Pharmaceuticals

2015 22.96% 1.33%

2016 17.72% 2.05%

2017 19.26% 3.47%

2018 24.78% 2.67%

Interpretation:
 The Pharma AID common stockholder’s investment in the company has earned 24.78 for
available for common shareholders
 Beacon Pharma common stockholder’s investment in the company has earned 2.67 for
available for common shareholder

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 ROE
30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2014.5 2015 2015.5 2016 2016.5 2017 2017.5 2018 2018.5

Pharma AID Beacon Pharmaceuticals

Time Series Analysis:

The graph shows that Pharma AID’s ROE has onward 22.96% to 24.78% over the year of 2015
to 2018 except the year of 2016.For these reasons we say that these company has capability of
earning profit from the shareholder’s possessed money has onward except the year of 2016.
The graph shows that Beacon Pharma’s ROE has onward to 1.33% to 2.67% over the year of
2015 to 2017 except the year of 2018. For these reasons we say that these company has
capability of earning profit from the shareholder’s possessed money has onward except the year
of 2018.

Cross sectional analysis

Higher the better, that’s why we see that Pharma Aid is better than Beacon Pharma. Because of
earning profit of shareholder’s money in Pharma AID company is 24.78% and other company
Beacon Pharma has earning profit has invested 2.67%. So, we can easily say that Pharma AID is
doing good rather than Beacon Pharmaceuticals.

Recommendation
To improve profitability ratios the company must firstly improve the gross profit by reducing
the production cost. Because gross profit has an effect on almost all the measure of profitability
ratios
Secondly, If the company’s gross profit is already sound to increase or improve net income from
operation the company should reduce the operating expense

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Market Ratios:
Market ratios relate the firms market value, as measured by its current share price, to certain
accounting value.
Those ratios give insight into how investors in the marketplace believe that the firm is doing in
terms of risk and return.

Price/Earnings Ratio
Price/ earnings ratio is commonly used to assess the owner’s appraisal of share value. The P/E
ratio measures the amount that investors are willing to pay for each dollar of firms earning.

Price/ Earnings ratio= market price per share of common stock / Earnings per
share
Price/Earnings Ratios
Year Pharma AID Beacon Pharmaceuticals

2015 29.34 86.47

2016 32.98 64.07
2017 27.85 51.33
2018 29.86 32.36

Interpretation:
 The company pharma AID has price/ Earnings ratio 29.89 implies that the company is
willing to pay today for a stock based on its past or future earnings.
 The Beacon Pharmaceuticals has price/ Earnings ratio 32.36 implies that the company is
willing to pay today for a stock based on its past or future earnings.

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 Chart Title
100
90
86.47
80
70
64.07
60
50 51.33
40
30
29.34 32.76 32.36
29.86
27.85
20
10
0
2015 2016 2017 2018

Pharma AID Column1

Time series analysis:

Pharma AID: The graph shows that the Pharma AID Company has Price/Earnings ratio is
decreasing which is 29.34 to 29.89 over the year 2015 to 2018. So, it appears that the company
has ability to pay earnings 29.89 times and in 2015 the number is higher than the current years.
As a company’s earnings per share being to rise, so their market value per share. So that the
company has lower earnings ratio over the time which is indicate that the poor current and future
performance.
Beacon Pharmaceuticals: The graph shows that the Company Beacon Pharmaceuticals has
Price/Earnings ratio is decreasing which is 86.47 to 32.36 over the year 2015 to 2018. So, it
appears that the company has ability to pay earnings 32.36 times and in 2015 the number is
higher than the current years. As a company’s earnings per share being to rise, so their market
value per share. So that the company has lower earnings ratio over the time which is indicate that
the poor current and future performance.

Cross sectional analysis:

The company pharma Aid has lower earnings ratio of 29.89 and Beacon Pharmaceuticals has
higher earnings ratio of 32.26 which is more than the Pharma AID Company. It shows that the
company’s current market value per share also less. But the company beacon pharmaceuticals
has decrease over the year which is earning ratio of 32.26 and the previous year’s ratios is 86.47,
64.07, 51.33, over the year 2015, 2016, 2017. So that the company’s earnings per share is less
and the market value also.

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Market/Book (M/B)
The market book ratio provides an assessment of how investors view the firm’s performance.
Firms expected to earn high returns relative to their risk typically sell at higher M/B multiples.

Market/ Book ratio= Market price per share of common stock / book value
per share of common stock

Market/ Book ratio

Year Pharma AID Beacon Pharmaceuticals

2015 37.43 1.17

2016 42.45 1.33

2017 49.21 1.78
2018 60.81 1.37

Interpretation:
 The Pharma AID Company has Market/Book ratio 60.81 implies that the company
current stock price of all outstanding shares pays at 60.81times.
 The Beacon Pharmaceuticals has Market/Book ratio 1.37 implies that the company
current stock price of all outstanding shares pays at1.37 times.

Market/ Book Ratio

70
60 60.81
50 49.21
40 42.45
37.43
30
20
10
1.17
0 1.33 1.78 1.37
2015 2016 2017 2018

Pharma AID Column1

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Time series analysis:
Pharma AID: The graph shows that the Pharma AID Company has increasing 37.43 to 60.81
Market/book earnings ratio over the year 2015 to 2018. The value indicates that the company has
60.81 market/book ratio for the company liquidated all of its assets and repaid all of its liabilities.
A low price means that the stock is undervalued and higher ratio mean the stock is overvalued.
So, the company market/book ratio price is higher so that it’s overvalued over the year 2015 to
2018, which is according to 37.43, 42.45, 49.21, 60.81. The higher the value the better for the
company.
Beason Pharma: The graph shows that the Beacon Pharmaceuticals Company has increasing
1.17 to 1.37 Market/book earnings ratio over the year 2015 to 2018. The value indicates that the
company has 1.37 market/book ratio for the company liquidated all of its assets and repaid all of
its liabilities. A low price means that the stock is undervalued and higher ratio mean the stock is
overvalued. So, the company market/book ratio price is higher so that it’s overvalued over the
year 2015 to 2018, which is according to 1.17, 1.33, 1.78,1.37. The higher the value the better for
the company.

Cross sectional analysis:

We know that a high ratio mean that the company is a value stock, that is, it is trading cheaply in
the market compared to its book value. The Pharma AID Company has market/book ratio is
increasing 37.43 to 60.81 which is better than beacon pharmaceuticals which is increasing 1.37
to 1.37 over the year 2015 to 2018. So that the company is doing better than the other company
and the stock will increasing over the time.

Recommendation:
The Pharma AID Company is doing better than the Beacon Pharmaceuticals Company so that
they need to keep the performance by maintaining their share price values and overvalued the
price so that the company can do better performance in the future.

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