Accounting for Managers (ACC 7201)

A Term Paper on Financial Statement Analysis of Square Pharmaceuticals Ltd

1. Horizontal Analysis
2. Vertical Analysis
3. Ratio Analysis

Bangladesh University of
Professionals (BUP)

Submitted to: Mohammed Moin Uddin Reza

Assistant Professor

&

Program Co-ordinator

Masters of Business Administration (MBA)

 Roll: 2023031053

Batch: 23rd

Section: A

MBA Professionals

Submitted by: Mohammad Mydul Islam

Bangladesh University of Professionals

nd
Date of Submission: 2 September 2020
Letter of Transmittal

September 2, 2020

Mohammad Moin Uddin Reza

Assistant Professor

Faculty of Business Studies

Bangladesh University of Professionals

Subject: Financial Statement Analysis on Square Pharmaceuticals Ltd.

Dear Sir,

Greetings, it is a matter of great pleasure as well as learning to prepare a term paper on “Square
Pharmaceuticals Ltd.” under the course of Accounting for Managers. So, I would highly
oblige if the content of the term paper has been acceptable to you.

Though I have put my best efforts, yet it is very likely that the term paper may have some
mistakes and omissions that are unintentional. So, I hope that the term paper will be worthy of
your consideration.
Sincerely yours,

Mohamad Mydul Islam

rd
Batch: 23

Section: A

Roll: 2023031053
Declaration Statement

I would like to start by expressing our deep sense of gratitude to Almighty Allah for his infinite
grace that allowed me to complete this assignment successfully. I want to express our sincere
appreciation to our honorable course teacher Assistant Professor Mohammad Moin Uddin Reza
Sir for his consistent guidance and encouragement for making this work possible. The
completion of this study would not have been possible without the expertise of my dear
Supervisor. I feel honored and privileged to work under his guidance and expertise.

A debt of gratitude is also owed to the entire people who prepared those informative and
ingenious places which really helped me in all steps of our study.

Last but not the least I would like to thank Bangladesh University of Professionals for giving all
the help and support whenever we needed.

I feel that we perceive this opportunity as a big milestone in our career development. I will strive
to use gained skill and knowledge in the best possible way in order to attain desired career
objective.

Sincerely,

Mohamad Mydul Islam

rd
Batch: 23
Section: A

Roll: 2023031053
Table of Content

Seria Chapter Page

l Content
Name Number
1 One Financial Statement of Square Pharmaceuticals 1-3
Ltd
2 Two Horizontal Analysis of Square Pharmaceuticals 4-9
Ltd for the FY 2017-18 and 2018-19
3 Three Vertical Analysis of Square Pharmaceuticals Ltd 10-15
for the FY 2017-18 and 2018-19
4 Four Ratio Analysis for the FY-2017-18 and 2018-19 16-25
Recommendation and Conclusion 26
 Square Pharmaceuticals Ltd

CHAPTER 01

Financial Statement of Square Pharmaceuticals Ltd

1|Page
 Square Pharmaceuticals Ltd

Consolidated

SQUARE PHARMACEUTICALS LTD.

AND ITS SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

Particulars Notes Amount in Taka

30 June 2019 30 June 2018

Cumulative Translation Adjustment

ASSETS:
Retained Earnings 33,734,410,538
Non-Current Assets:
Non Controlling Interest
Property, Plant and Equipment-Carrying Value 2
20,853,956,270
Non-Current Liabilities:
Investment - Long Term (at Cost) 3
Deferred Tax Liability655,408,674
Investment - Associates Undertaking 4
Current Liabilities:
Investment in Marketable Securities (Fair Value) 5 9,211,605,860
Trade Creditors
Current Assets:
Liabilities for Expenses
3,013,439,734
Inventories 6
Liabilities for Other Finance
Trade Debtors 7 38,411,642,036
TOTAL SHAREHOLDERS' EQUITY AND L
Advances, Deposits and Prepayments 8
Net Assets Value per Share (NAV)
Short Term Loan 9 4,596,512,673
Number of Shares used to compute NA
Cash and Cash Equivalents 10
1,561,818,167
TOTAL ASSETS

SHAREHOLDERS' EQUITY AND LIABILITIES: 2,312,201,184

Shareholders' Equity:
2,937,071,066
Share Capital 11
27,004,038,946
Share Premium 12

General Reserve
72,146,052,574
Tax Exemption Reserve 13

Gain on Marketable Securities (Unrealized)

67,880,617,172
 2,891,208,53
7
7,890,084,660 2,035,465,000 105,878,200 2,211,743,936 145,585,283 (939,072) 3
55,492,799,165 - 2,
8 28,441,536,241
3
1,294,346,873 1,
4
6 4,432,935,11
5, 8
1,294,346,873
2
9
4 1,615,544,24
2,971,088,529
8

716,988,428 2
0,
2,280,668,74
5 7
239,913,331 4
5,
4 3,131,975,36
2,014,186,770 3 3
7,
6
72,146,052,574 3 16,980,412,765
3

61,273,001,535
86.03 9
4
0,
7 57,816,566,831
789,008,466
5
4,
3 7,373,910,90
9 0
1

2,035,465,00
8, 0
4
5
4, 105,878,200
0
6
1,949,557,72
4,
2
7
3
3 192,272,252

46,159,482,757

24,901,060

1,231,133,152
 1, 61,273,001,535
1,231,133,152 5
8
6,
2,200,400,492 73.28
0
5
524,676,136 9,
2 789,008,46
6 6
89,665,092
4

The annexed notes (1-33 ) form an integral part of these financial statements. Signed as per our annexed report on even date.

Samuel S Chowdhury Tapan Chowdhury Khandaker Habibuzzaman Mahfel Huq & Co.

Chairman Managing Director Company Secretary Chartered Accountants

Dhaka, 27 October, 2019

2| Page

64
SPL Annual Report 2018-19
 Square Pharmaceuticals Ltd

Consolidated

SQUARE PHARMACEUTICALS LTD.

AND ITS SUBSIDIARY

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019

Particulars Notes Amount in Taka

2018-2019 2017-2018

PROFIT AFTER TAX

GROSS REVENUE 19 50,866,867,352
Other Comprehensive Income:
Value Added Tax (6,833,233,083)
Gain/(Loss) on Marketable Secu
NET REVENUE 44,033,634,269 Cumulative Translation Adjustm

(22,091,384,351 TOTAL COMPREHENSIVE INCOM

Cost of Goods Sold 20 )

GROSS PROFIT 21,942,249,918 Profit Attributable to:

OPERATING EXPENSES: (7,799,800,561) Owners of the Company

Selling & Distribution Expenses 21 (6,603,747,456) Non Controlling Interest

Administrative Expenses 22 (1,195,957,909)

Finance Cost 23 (95,196)

Total Comprehensive Income Atti
PROFIT FROM OPERATIONS 14,142,449,357
Owners of the Company
Other Income 24 2,310,360,094
Non Controlling Interest
PROFIT BEFORE WPPF 16,452,809,451

Allocation for WPPF 25 (791,921,561)

PROFIT BEFORE TAX 15,660,887,890

Earnings Per Share (EPS)
Income Tax Expenses-Current 26 (3,876,979,330)

Income Tax Expenses-Deferred (63,213,721) Number of Shares used to comp

PROFIT AFTER TAX 11,720,694,839

Profit/(Loss) from Associate Undertakings 27 931,706,302

 1,115,299,919
45,886,959,303

11,606,191,20
(6,233,127,665) 1

39,653,831,638
(404,289,461)

(20,089,819,913) -

19,564,011,725 11,201,901,74
0

(6,783,069,126)

(5,751,408,276) 11,593,964,28
2
(1,031,567,251)
12,226,919
(93,599)
11,606,191,20
1
12,780,942,599

1,768,094,011
11,189,674,82
1
14,549,036,610
12,226,919
(701,097,850)

11,201,901,74
13,847,938,760
0

(3,255,148,172)

(101,899,306) 14.69

10,490,891,282 789,008,466

The annexed notes (1-33 ) form an integral part of these financial statements. Signed as per our annexed report on even date.

Samuel S Chowdhury Tapan Chowdhury Khandaker Habibuzzaman Mahfel Huq & Co.
Chairman Managing Director Company Secretary Chartered Accountants

Dhaka, 27 October, 2019

3| Page

SPL Annual Report 2018-19

65
 Square Pharmaceuticals Ltd

CHAPTER 02

Horizontal Analysis of Square Pharmaceuticals Ltd for the FY 2017-18 and

2018-19
4|Page
 Square Pharmaceuticals Ltd

Theoretical Overview of Horizontal Analysis

Horizontal analysis refers to the inter-year deviations or fluctuations of the financial and accounting
information of any financial or industrial organization. The analysis is mainly done to show the following very
important information:

1. Trend analysis

2. Future estimation

3. Growth analysis

4. Controlling

5. Idea generation

6. Cost minimization

7. Proper utilization of wealth

8. Future policy formulation

9. Making idea about the company

10. Providing information to the stakeholders.

Idea

generation
Controlling

Growth

analysis

Future
Trend
estimatio
n
analysis
Cost

minimizati
on
Providing
Making idea
about the information
company
Future policy to the

formulation stakeholders.
Proper

utilization
of

wealth

Figure: Significance of Horizontal Analysis at a Glance

5|Page
 Square Pharmaceuticals Ltd

Horizontal Analysis of Statement of Financial Performance for Square Pharmaceuticals

Ltd

Increase or decrease during 2018-2019

Particulars 2018-2019 2017-2018 Amount Percentage

Gross Revenue 50866867352 45886959303 4979908049 10.9%

Less: Value Added Tax -6833233083 -6233127665 -600105418 9.6%

Net Revenue 44033634269 39653831638 4379802631 11.0%

Less: Cost of Goods sold -22091384351 -20089819913 -2001564438 10.0%

Gross Profit 21942249918 19564011725 2378238193 12.2%

Less: Operating expenses -7799800561 -6783069126 -1016731435 15.0%

Selling & Distribution expenses -6603747456 -5751408276 -852339180 14.8%

Administrative expenses -1195957909 -1031567251 -164390658 15.9%

Finance cost -95196 -93599 -1597 1.7%

Profit from operations 14142449357 12780942599 1361506758 10.7%

Add: Other income 2310360094 1768094011 542266083 30.7%

Profit before WPPF 16452809451 14549036610 1903772841 13.1%

Less: Allocation for WPPF -791921561 -701097850 -90823711 13.0%

Profit before Tax 15660887890 13847938760 1812949130 13.1%

Less: Income tax expenses-current -3876979330 -3255148172 -621831158 19.1%

Less: Income tax expenses-deferred -63213721 -101899306 38685585 -38.0%

Profit after tax 11720694839 10490891282 1229803557 11.7%

Add: Profit/(Loss) from associate

931706302 1115299919 -183593617 -16.5%
undertakings

Profit after tax 12652401141 11606191201 1046209940 9.0%

 Less: Other comprehensive income

Gain/(Loss) on Marketable securities

-46686969 -404289461 357602492 -88.5%
(Unrealized)

Cumulative translation adjustment -939072 -939072

Total comprehensive income for the

12604775100 11201901740 1402873360 12.5%

year

This is the calculation of horizontal analysis for Square Pharmaceuticals Ltd. For better and sophisticated
analysis, two years have been considered for making a good analysis.

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 Square Pharmaceuticals Ltd

Horizontal Analysis

Horizontal Analysis of Gross profit

The chart represents that there have been positive 12.2% changes in gross profit over FY 2018-19 comparing
to the FY 2017-18 that is surely a good sign.

Horizontal Analysis of Operating Profit

The chart represents that there have been positive 10.7% changes in operating profit over FY 2018-19
comparing to the FY 2017-18 that is surely a good sign of profitability.

Horizontal Analysis of Profit after Tax

The chart represents that there have been positive 9.0% changes in profit after tax over FY 2018-19 comparing
to the FY 2017-18 that is surely a good sign of profitability.
7|Page
 Square Pharmaceuticals Ltd

Horizontal Analysis of Statement of Financial Position for Square Pharmaceuticals Ltd

Increase or decrease during 2018-2019

Particulars Amount in Taka

Assets 30-Jun-19 30-Jun-18 Amount Percentage

Non-current assents 33734410538 32831465294 902945244 2.8%

Property, plant and equipment-

20853956270 20545437633 308518637 1.5%
carrying value

Investment-long term (at cost) 655408674 940754391 -285345717 -30.3%

Investment-associates undertaking 9211605860 8454064733 757541127 9.0%

Investment in marketable securities

3013439734 2891208537 122231197 4.2%
(fair value)

Current Assets 38411642036 28441536241 9970105795 35.1%

Inventories 4596512673 4432935118 163577555 3.7%

Trade Debtors 1561818167 1615544248 -53726081 -3.3%

Advances, deposits and prepayments 2312201184 2280668747 31532437 1.4%

Short term loan 2937071066 3131975363 -194904297 -6.2%

Cash and cash equivalents 27004038946 16980412765 10023626181 59.0%

Total assets 72146052574 61273001535 10873051039 17.7%

Shareholders' equity and liabilities

Shareholders' equity: 67880617172 57816566831 10064050341 17.4%

Share Capital 7890084660 7373910900 516173760 7.0%

Share premium 2035465000 2035465000 0 0.0%

General reserve 105878200 105878200 0 0.0%

Tax exemption reserve 2211743936 1949557722 262186214 13.4%

Gain on marketable securities
145585283 192272252 -46686969 -24.3%
(Unrealized)

Cumulative translation adjustment -939072 -939072

Retained earnings 55492799165 46159482757 9333316408 20.2%

Non-controlling interest 24901060 -24901060

Non-current liabilities 1294346873 1231133152 63213721 5.1%

Deferred tax liability 1294346873 1231133152 63213721 5.1%

Current liabilities 2971088529 2200400492 770688037 35.0%

Trade creditors 716988428 524676136 192312292 36.7%

Liabilities for expenses 239913331 89665092 150248239 167.6%

Liabilities for other finance 2014186770 1586059264 428127506 27.0%

Total shareholder equity and

72146052574 61273001535 10873051039 17.7%

liabilities

8|Page
 Square Pharmaceuticals Ltd

Horizontal Analysis

Horizontal Analysis of Non-Current Assets

The chart represents that there have been positive 2.8% changes in NCA over FY 2018-19 comparing to the
FY 2017-18 that is surely a sign to invest more in NCA in FY 2018-19.

Horizontal Analysis of Current Assets

The chart represents that there have been positive 35.1% changes in CA over FY 2018-19 comparing to the
FY 2017-18 that is surely a sign to invest more in CA in FY 2018-19.

Horizontal Analysis of Total Assets

The chart represents that there have been positive 17.7% changes in Total Assets over FY 2018-19 comparing
to the FY 2017-18 that is surely a sign to invest more in Total Assets in FY 2018-19.

Horizontal Analysis of Total Equity

The chart represents that there have been positive 17.4% changes in Total Equities over FY 2018-19
comparing to the FY 2017-18 that is surely a sign to convert to Debt less in FY 2018-19.

Horizontal Analysis of Total Liabilities

The chart represents that there have been positive 17.7% changes in Total Liabilities over FY 2018-19
comparing to the FY 2017-18 that is surely a sign to mature current liabilities less in FY 2018-19.
9|Page
 Square Pharmaceuticals Ltd

CHAPTER 03

Vertical Analysis of Square Pharmaceuticals Ltd for the FY 2017-18 and 2018-19
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 Square Pharmaceuticals Ltd

Theoretical Overview of Vertical Analysis

Vertical analysis is a method of financial statement analysis in which each line item is listed as a percentage of
a base figure within the statement. Thus, line items on an income statement can be stated as a percentage of
gross sales, while line items on a balance sheet can be stated as a percentage of total assets or liabilities, and
vertical analysis of a cash flow statement shows each cash inflow or outflow as a percentage of the total cash
inflows.

Key Element:

1) Vertical analysis makes it easier to understand the correlation between single items on a balance sheet and
the bottom line, expressed in a percentage.

2) Vertical analysis can become a more potent tool when used in conjunction with horizontal analysis, which
considers the finances of a certain period of time.
11 | P a g e
 Square Pharmaceuticals Ltd

Vertical Analysis of Statement of Financial Performance for Square Pharmaceuticals

Ltd

Percentage with Respect to Statement of financial Performance

2018-2019 2017-2018

Particulars Taka Percentage Taka Percentage

Gross Revenue 50866867352 100.0% 45886959303 100.0%

Less: Value Added Tax -6833233083 -13.4% -6233127665 -13.6%

Net Revenue 44033634269 86.6% 39653831638 86.4%

Less: Cost of Goods sold -22091384351 -43.4% -20089819913 -43.8%

Gross Profit 21942249918 43.1% 19564011725 42.6%

Less: Operating expenses -7799800561 -15.3% -6783069126 -14.8%

Selling & Distribution expenses -6603747456 -13.0% -5751408276 -12.5%

Administrative expenses -1195957909 -2.4% -1031567251 -2.2%

Finance cost -95196 0.0% -93599 0.0%

Profit from operations 14142449357 27.8% 12780942599 27.9%

Add: Other income 2310360094 4.5% 1768094011 3.9%

Profit before WPPF 16452809451 32.3% 14549036610 31.7%

Less: Allocation for WPPF -791921561 -1.6% -701097850 -1.5%

Profit before Tax 15660887890 30.8% 13847938760 30.2%

Less: Income tax expenses-current -3876979330 -7.6% -3255148172 -7.1%

Less: Income tax expenses-deferred -63213721 -0.1% -101899306 -0.2%

Profit after tax 11720694839 23.0% 10490891282 22.9%

Add: Profit/(Loss) from associate 931706302 1.8% 1115299919 2.4%

undertakings

Profit after tax 12652401141 24.9% 11606191201 25.3%

Less: Other comprehensive income

Gain/(Loss) on Marketable securities -46686969 -0.1% -404289461 -0.9%

(Unrealized)

Cumulative translation adjustment -939072 0.0% 0.0%

Total comprehensive income for the 12604775100 24.8% 11201901740 24.4%

year

12 | P a g e
 Square Pharmaceuticals Ltd

Vertical Analysis

Gross Profit as Percentage of Revenue

The chart represents that there have been positive 42.6% changes in Gross Profit over FY 2018-19 comparing
to the FY 2017-18 that is surely a positive sign for Profitability.

Profit after Tax as Percentage of Revenue

The chart represents that there have been positive 25.3% changes in Profit after Tax over FY 2018-19
comparing to the FY 2017-18 that is surely a positive sign for Profitability.
13 | P a g e
 Square Pharmaceuticals Ltd

Vertical Analysis of Statement of Financial Position for Square Pharmaceuticals Ltd

Percentage with Respect to Statement of financial Position

2019 2018

Assets Taka Percentage Taka Percentage

Non-current assets 33734410538 46.8% 32831465294 53.6%

Property, plant and equipment-carrying 20853956270 28.9% 20545437633 33.5%

value

Investment-long term (at cost) 655408674 0.9% 940754391 1.5%

Investment-associates undertaking 9211605860 12.8% 8454064733 13.8%

Investment in marketable securities (fair 3013439734 4.2% 2891208537 4.7%

value)

Current Assets 38411642036 53.2% 28441536241 46.4%

Inventories 4596512673 6.4% 4432935118 7.2%

Trade Debtors 1561818167 2.2% 1615544248 2.6%

Advances, deposits and prepayments 2312201184 3.2% 2280668747 3.7%

Short term loan 2937071066 4.1% 3131975363 5.1%

Cash and cash equivalents 27004038946 37.4% 16980412765 27.7%

Total assets 72146052574 100.0% 61273001535 100.0%

Shareholders' equity and liabilities

Shareholders' equity: 67880617172 94.1% 57816566831 94.4%

Share Capital 7890084660 10.9% 7373910900 12.0%

Share premium 2035465000 2.8% 2035465000 3.3%

General reserve 105878200 0.1% 105878200 0.2%

Tax exemption reserve 2211743936 3.1% 1949557722 3.2%

Gain on marketable securities 145585283 0.2% 192272252 0.3%

(Unrealized)

Cumulative translation adjustment -939072 0.0% 0.0%

Retained earnings 55492799165 76.9% 46159482757 75.3%

Non-controlling interest 0.0% 24901060 0.0%

Non-current liabilities 1294346873 1.8% 1231133152 2.0%

Deferred tax liability 1294346873 1.8% 1231133152 2.0%

Current liabilities 2971088529 4.1% 2200400492 3.6%

Trade creditors 716988428 1.0% 524676136 0.9%

Liabilities for expenses 239913331 0.3% 89665092 0.1%

Liabilities for other finance 2014186770 2.8% 1586059264 2.6%

Total shareholder equity and 72146052574 100.0% 61273001535 100.0%

liabilities

14 | P a g e
 Square Pharmaceuticals Ltd

Vertical Analysis

Non-Current Asset as Percentage of Total Assets

The chart represents that there have been negative changes in NCA as a percentage of Total Assets over FY
2018-19 comparing to the FY 2017-18 that is surely a sign of maturing some NCA for FY 2018-19.

Current Asset as Percentage of Total Assets

The chart represents that there have been positive changes in CA as a percentage of Total Assets over FY
2018-19 comparing to the FY 2017-18 that is surely a sign of buying some CA for FY 2018-19.

Equity as Percentage of Total Equity and Liability

The chart represents that there have been negative changes in Total Equity as a percentage of Total Equity and
Liability over FY 2018-19 comparing to the FY 2017-18 that is surely a sign of reducing the value of equity
for FY 2018-19.

Total Liability as Percentage of Total Equity and Liability

The chart represents that there have been positive changes in Total Liability as a percentage of Total Equity
and Liability over FY 2018-19 comparing to the FY 2017-18 that is surely a sign of increasing Non-Current
Debt for FY 2018-19.
15 | P a g e
 Square Pharmaceuticals Ltd

CHAPTER 04

Ratio Analysis for the FY-2017-18 and 2018-19

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 Square Pharmaceuticals Ltd

Ratio Analysis:

Ratio analysis is a very useful tool for comparing the companies with different size and use different unit of
currency. Financial ratios are mathematical comparisons of financial statement accounts or categories. These
relationships between the financial statement accounts help investors, creditors, and internal company
management understand how well a business is performing and areas of needing improvement.

Ratios allow us to compare companies across industries, big and small, to identify their strengths and
weaknesses. Financial ratios are often divided up into seven main categories: liquidity, solvency, efficiency,
profitability, market prospect, investment leverage, and coverage.

Summary of Square Pharmaceuticals Ltd Ratio Analysis:

Percentage
S.L Ration Formula 2018-2019 2017-2018
1 Current ratio Current assent/Current liability 12.9 12.9
2 Current asset-prepaid expense- 10.6 9.9
Acid test ratio
Inventory)/ Current liability
3 Cost of goods sold/Average 4.9 4.4
Inventory turnover
inventory
4 Net profit margin Net income/Net sales 20 30
5 Asset turnover Net sales/Average asset 7.6 6.9
6 Return on asset Net income/Average asset 1.9 1.7
7 Return on equity Net income/ Average equity 20.1 18.5
8 Debt to total asset Total Debt/ Total asset 5.9 5.6
17 | P a g e
 Square Pharmaceuticals Ltd

1. Current Ratio:

The current ratio is a liquidity and efficiency ratio that measures a firm’s ability to pay off its short-term
liabilities with its current assets. The current ratio is an important measure of liquidity because short-term
liabilities are due within the next year.

This means that a company has a limited amount of time in order to raise the funds to pay for these liabilities.
Current assets like cash, cash equivalents, and marketable securities can easily be converted into cash in the
short term. This means that companies with larger amounts of current assets will more easily be able to pay off
current liabilities when they become due without having to sell off long-term, revenue generating assets.

Formula: The current ratio is calculated by dividing current assets by current liabilities. This ratio is stated in
numeric format rather than in decimal format. Here is the calculation:

2019 2018

28411536241
38411642036
=
=
2971088529 2200400490
 =12.9:1 =12.9:1

Findings: The declining current ratio for Square Pharmaceuticals Ltd is a bad sign of liquidity
for the company though a good Current ratio lies near about 1.

1
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