Mba511 Final Report

Independent University, Bangladesh
(FINANCIAL MANAGEMENT)
REPORT ON FINANCIAL ANALYSIS
Course ID: MBA511
Section: 01
Submitted By:
Name ID
Nabila Binta Bashar 2421132
Mohaiminul Islam 2222278
Ashfaqul Islam Siddique Rafi 2312672
Submitted To:
Dr. Samiul Parvez Ahmed
Professor at the School of Business
& Entrepreneurship.
Deadline of Submission: 13th April 2024.

Page 1 of 39
Table of Contents
EXECUTIVE SUMMARY ....................................................................................................... 3
BACKGROUND OF THE PHARMACEUTICAL INDUSTRY .......................................................... 4
ACME LABORATORIES LTD ................................................................................................. 5
FINANCIAL ANALYSIS ...............................................................................................................5
PROFITABILITY SITUATIONS OF ACME LABORATORIES LTD ...................................................... 11
LIQUIDITY SITUATIONS OF ACME LABORATORIES LTD. ............................................................ 12
DEBT UTILIZATION SITUATION OF ACME LABORATORIES LTD. .................................................. 13
ASSET UTILIZATION SITUATION OF ACME LABORATORIES LTD. ................................................ 14
BEACON PHARMACEUTICALS LTD .....................................................................................17
FINANCIAL ANALYSIS ............................................................................................................. 17
PROFITABILITY SITUATIONS OF BEACON PHARMACEUTICALS LTD. .......................................... 23
LIQUIDITY SITUATIONS OF BEACON PHARMACEUTICALS LTD.................................................. 24
DEBT UTILIZATION SITUATION OF BEACON PHARMACEUTICALS LTD. ...................................... 25
ASSET UTILIZATION SITUATION OF BEACON PHARMACEUTICALS LTD...................................... 26
ORION PHARMA LTD .........................................................................................................28
FINANCIAL ANALYSIS ............................................................................................................. 28
PROFITABILITY SITUATION OF ORION PHARMA LTD. ................................................................ 34
LIQUIDITY SITUATION OF ORION PHARMA LTD. ....................................................................... 35
DEBT UTILIZATION SITUATION OF ORION PHARMA LTD............................................................ 35
ASSET UTILIZATION SITUATION OF ORION PHARMA LTD. ......................................................... 36
WHICH COMPANY’S STOCK WE WILL BUY? ........................................................................38
REFERENCES: ..................................................................................................................39
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EXECUTIVE SUMMARY
This assignment has started with the notion of analyzing the financial health of 3 companies
from the pharmaceutical industry. We have chosen Acme Laborites Ltd, Beacon Pharmaceutical
Ltd, and Orion Pharma Ltd. as our companies. The ideas were made possible due to academic
practices and findings using group discussion sessions. The collective opinion took place while
finalizing it.
The main focus of this report is to calculate all the financial ratios of each company and give an
opinion about how these 3 companies are doing in Profitability, Liquidity, Asset & Debt
utilization. The attractive part of this report is that it shows all the financial calculations and
financial comparisons among these companies. Later, we have also described which company’s
stock we will buy as shareholders.
With our understanding of the assignment, we would like to add that the room for corrections can
be made and solved in a systematic way.
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BACKGROUND OF THE PHARMACEUTICAL INDUSTRY
The pharmaceutical industry is one of the most developed technology sectors in Bangladesh.
Manufacturers produce almost all types of medicine which includes high-tech products like
insulin, hormones, anti-cancer products, etc. This sector provides 98% of the total medicinal
requirement of the local market. The industry also exports medicines to 150+ countries,
including the USA, UK, Canada, Australia, Germany, EU, etc. Pharmaceutical companies are
expanding their business with the aim to expand the export market.
The Pharmaceutical sector of Bangladesh has been transforming and evolving since the early
80s. The sector has grown from strength to strength over the last 5 decades. Since this is a
technology and knowledge-based sector, the journey was not an easy one for an LDC country
faced with enormous economic challenges. Now, Bangladesh proudly stands alone as the only
LDC that has a well-developed pharma sector. Besides it stands as a shining example of self-
sufficiency, with local production meeting a staggering 98% of demand. In 2021, the market size
reached approximately $3.2 billion, boasting a robust growth rate of 10.72%. This growth
trajectory has been consistent, with a Compound Annual Growth Rate (CAGR) of 8.93% over
the past four years. Fueling this success is a solid manufacturing base supported by a skilled
workforce, making pharmaceuticals the largest white-collar labor-intensive employment sector in
Bangladesh and the second-highest contributor to the national exchequer. With 284 registered
allopathic pharmaceutical companies, of which approximately 213 are functional, the industry is
teeming with vitality. Notably, the top 10 companies, all local entities, command around 70% of
the market share. These leading companies have garnered significant acclaim, holding major
Good Manufacturing Practice (GMP) accreditations.
Bangladesh Pharma has high capability in Specialized Pharmaceutical Products. The industry
continues its strong research orientation in generic formulation development and has already
proven its skills with the successful development of specialized, high-tech formulations that are
very difficult to imitate. Leading companies have focused on specialized dosage delivery systems
to create strong differentiation and successfully developed metered dose inhalers (MDI), dry
powder inhalers (DPI), lyophilized injectables, sterile ophthalmics, prefilled syringes, oral thin
films, multi-layer tablets, biological products, including insulin, vaccines, etc.
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ACME LABORATORIES LTD
FINANCIAL ANALYSIS
FOR 2021:
1. PROFITABILITY RATIOS:
Net Income
i Return on Sales (ROI) =
Sales
1,569
= ×100
20,770
= 7.55%
Net Income
ii Return on Equity (ROE) =
Owner′ s Equity
1,569
= ×100
19,931
= 7.87%
Net Income
iii Return on Asset (ROA) =
Total Asset
1,569
= ×100
40,476
= 3.88%
2. ASSET UTILIZATION RATIOS:
Credit Sales
i Receivable Turnover =
Total Receivable
20,770
=
3,058
= 6.79 times.
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Annual Credit Sales
*Average Daily Credit Sales =
360 Days
20,770
=
360
= 57.69
Account Receivable
ii Average Collection Period =
Average Daily Credit Sales
3,058
=
57.69
= 53.01 Days.
Sales
iii Inventory Turnover =
Total Inventory
20,770
=
6,189
= 3.36 times.
Sales
iv Fixed Asset Turnover =
Total Fixed Asset
20,770
=
25,100
= 0.83 times.
Sales
v Total Asset Turnover =
Total Asset
20,770
=
40,476
= 0.51 times.
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3. LIQUIDITY RATIOS:
Current Asset
i. Current Ratio =
Current Liabilities
15,341
=
13,487
= 1.14
Current Asset−Inventory
ii. Quick Ratio =
Current Liabilities
15,341−6189
=
13,487
= 0.68 times
4. DEBT UTILIZATION RATIOS
Total Debt
i. Debt to Total Asset =
Total Asset
20,366
= ×100
40,476
= 50.32%
Income Before Interest & Tax

ii. Time Interest Earned =
Interest
3546
=
1602
= 2.21 times
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FOR 2022:
Net Income
i. Return on Sales (ROI) =
Sales
2,111
= ×100
23,858
= 8.85%
Net Income
ii. Return on Equity (ROE) =
Owner′ s Equity
2,111
= ×100
21,511
= 9.81%
Net Income
iii. Return on Asset (ROA) =
Total Asset
2,111
= ×100
42,975
= 4.91%
Credit Sales
i. Receivable Turnover =
Total Account Receivable
23,858
=
3,026
= 7.88 times.
Annual Credit Sales

360 Days
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23,858
=
360
= 66.27
Account Receivable
ii. Average Collection Period =
3,026
=
66.27
= 45.66 Days.
Sales
iii. Inventory Turnover =
Total Inventory
23,858
=
8,946
= 2.67 times.
Sales
iv. Fixed Asset Turnover =
Total Fixed Asset
23,858
=
25,599
= 0.93 times.
Sales
v. Total Asset Turnover =
Total Asset
23,858
=
42,975
= 0.56 times.
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Current Asset
i. Current Ratio =
Current Liabilities
17,343
=
15,438
= 1.12
ii. Quick Ratio =
Current Liabilities
17,343−8,946
=
15,438
= 0.54 times
Total Debt
Total Asset
21,285
= ×100
42,975
= 49.53%

Interest
4,020
=
1305
= 3.08 times.
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PROFITABILITY SITUATIONS OF ACME LABORATORIES LTD.
Profitability ratios measure the ability of the firm to earn an adequate return on sales, total assets,
and invested capital. Shareholders are more interested in the profitability ratio. Under this ratio,
we calculate 3 ratios which are profit margin or return on sales, return on equity, and return on
asset.
Profit Margin/Return on Sales: Return on Equity (ROE):
PROFIT MARGIN RATIO RETURN ON EQUITY (ROE)

9.00% 8.85% 12.00%
9.81%
8.50% 10.00%
7.87%
Percantage
8.00%
Percantage
8.00%
7.55% 2021 6.00% 2021
7.50% 2022 2022
4.00%
7.00% 2.00%
6.50% 0.00%
Year Year
Return on Asset (ROA):
RETURN ON ASSET (ROA)

6.00%
4.91%
5.00%
3.88%
4.00%
Percantage
3.00% 2021
2022
2.00%
1.00%
0.00%
Year
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Here, we can see in 2021, Acme’s profit margin was 7.55% and in 2022, it was 8.85%. The
return on sale drastically has increased by 1.3% over a year. It means Acme Laboratories Ltd has
generated more sales in 2022 than the previous year.
ROE indicates how well a company utilizes its shareholder’s money. In 2021, the ROE was
7.87% & in 2022, it was 9.81% which means Acme has more effectively utilized its
shareholder’s money in 2022 than in 2021.
ROA indicates how well a company manages its assets in generating sales. Acme’s return on
assets in 2021 was 3.88% and 4.91% in the next year, 2022. It also has increased from 3.88% to
4.91%. Though 4.91% is not a good percentage for ROA still they are improving.
After analyzing all the profitability ratios, we can say that these figures indicate a reasonable
level of profitability, there's room for improvement, particularly in enhancing operational
efficiency and optimizing asset utilization to achieve higher returns for both equity holders and
asset owners. Continuous monitoring of expenses, revenue streams, and asset management will
be crucial for sustaining and enhancing profitability over the long term.
LIQUIDITY SITUATIONS OF ACME LABORATORIES LTD.
Liquidity ratios measure the firm’s ability to pay off short-term obligations as they come due.
Suppliers and banks (Lenders) are more interested in a company’s liquidity situation. Before
investing in a particular company, they check the liquidity ratios which are the Current ratio &
Quick ratio.
Current Ratio: Quick Ratio:
CURRENT RATIO QUICK RATIO

1.15 0.8 0.68
1.14
1.14 0.6 0.54
Times
Times
1.13 2021 0.4 2021

1.12
1.12 2022 0.2 2022
1.11 0
Year Year
The current ratio describes the relationship
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between current assets & current liabilities. The higher percentage of the current ratio means the
company has more liquid assets to cover its short-term obligations. A good current ratio is
between 1.2 to 2. Below 1 is not required by any company because it means that the company
doesn’t have enough money to finish off its short-term debts. Here, the current ratio in 2021 is
1.14 & in 2022, it is 1.12. In both years, Acme maintained enough liquidity as it is above the
minimum ratio, but it has slightly declined in 2022 from 2021 which is not good. They should
take into consideration the reasons.
Besides, the Quick ratio also describes a firm’s ability to pay off its short-term debt with current
assets. It measures how quickly current assets can be converted into cash to cover short-term
financial obligations as it doesn’t take inventory while calculating the quick ratio. The ratio
below 1 means the company does not have enough quick assets to meet its financial obligations
in crisis. The ratio should be more than 1. Here, in Acme, we can see that both years have a quick
ratio of less than 1 which depicts a bad liquidity situation. Though it has increased from 0.54 to
0.68, they are still under the minimum requirement.
So, after analyzing the liquidity ratio, we can say that Acme’s liquidity situation is not up to the
mark. They have a considerable current ratio but are not doing well in quick ratio. They may
have a significant portion of the company's current assets tied up in inventory. This could
potentially pose a risk if the company faces unexpected liquidity needs, as inventory may not be
easily convertible into cash.
DEBT ULILIZATION SITUATION OF ACME LABORITIES LTD.
Debt utilization ratios measure the prudence of the debt management policies of the firm. Long-
term creditors concentrate on debt utilization ratios. Before investing in a particular company,
they check the liquidity ratios which are a debt to total asset ratio, time interest earned, and fixed
charge coverage. It measures how effectively the company is using debt to finance its operations
and generate returns for shareholders.
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Debt to total Asset: Time Interest Earned:
DEBT TO TOTAL ASSET TIME INTEREST EARNED

50.40% 50.32% 3.50 3.08
50.20% 3.00
50.00% 2.50 2.21
Percantage
Times
49.80% 2.00
49.53% 2021 2021
49.60% 1.50
2022 2022
49.40% 1.00
49.20% 0.50
49.00% 0.00
Year Year
The debt to total assets ratio compares the total amount of liabilities of a company to all of its
total assets. It also tells us how leveraged the company is. The higher percentage of this ratio
refers to taking higher debt which is not desirable. Here we can see that Acme’s debt to total
asset ratio in 2021 was 50.32% whereas in 2022, it was 49.53% which means Acme has taken
more debt in 2021 compared to 2022 which is not a good sign because the debt-taking
percentage is much higher. In 2022, it has decreased which is good for Acme.
On the other hand, Time interest earned refers to how a company covers its interest expense with
its operating income. Higher the ratio indicates how many times a company can pay off its debts
with its earnings. Acme’s time interest earned ratio in 2021 was 2.21 & 3.08 in 2022. As it has
increased, it is comparatively doing well in covering its interest expenses through its operating
income.
Overall, the company's debt utilization is moderate, but there are areas for improvement to
enhance its debt utilization stability.
ASSET UTILIZATION SITUATION OF ACME LABORITIES LTD.

Asset utilization ratios measure how many times per year a company sells its inventory or
collects all of its accounts receivable. To measure this, we calculate the Receivable Turnover,
Average Collection Period, and Inventory Turnover. For long-term assets, the utilization ratio
tells us how productive the fixed assets are in terms of generating sales. To identify these we
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calculate Total Asset Turnover & Fixed Asset Turnover. It is the management’s responsibility to
the effective utilization of assets.
Receivable Turnover: Average Collection Period:
RECEIVABLE TURNOVER AVERAGE COLLECTION

8.00 7.88 PERIOD
7.80 53.01
54.00
7.60
52.00
7.40
50.00
Times
7.20
2021 48.00
Days
7.00 45.66 2021
6.79
6.80 2022 46.00
2022
6.60 44.00
6.40 42.00
6.20 40.00
Year Year
Inventory Turnover: Fixed Asset Turnover:
INVENTORY TURNOVER FIXED ASSET TURNOVER

4.00 0.95 0.93
3.36
0.90
3.00 2.67
Times
0.85 0.83
Times
2.00 2021
0.80
2022
1.00 0.75
Year
0.00
Year 2021 2022
Total Asset Turnover:
0.58
TOTAL ASSET TURNOVER
0.56
0.56
0.54
Times
2021
0.52 0.51
2022
0.50
0.48
Year
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The receivable turnover ratio measures how effectively a company collects its debts. The higher
percentage in receivable turnover indicates that the company collects its money from its
customers on time which is a good sign. Acme Laboratories Ltd's receivable turnover in 2021
was 6.79 and in 2021, it was 7.88. The ratio has increased which means they are doing well in
collecting money.
Average collection period refers to the amount of time it takes for a business to receive payments
owed by its clients in terms of accounts receivable. The lower average collection period is
preferable because it refers to taking fewer days to collect all the receivables from the customers
which also indicates higher liquidity. Companies use the average collection period to make sure
they have enough cash on hand to meet their financial obligations. For Acme, it is 53.01 days in
2021 and 45.66 days in 2022. Here we can see the average collection period has declined in a
good manner which is beneficial for the company.
Inventory turnover measures how often a company replaces inventory relative to its cost of sales.
Generally, the higher the ratio, the better. A low inventory turnover ratio might be a sign of weak
sales or excessive inventory, also known as overstocking. Acme had a higher ratio in 2021 which
was 3.36 but it decreased in the following year 2022 and became 2.67. That means 2022, Acme
couldn’t do better sales in 2022 which is why the inventory amount increased leading to
increased inventory turnover.
The fixed asset turnover ratio reveals how efficient a company is at generating sales from its
existing fixed assets. A higher ratio implies that management is using its fixed assets more
effectively. Acme’s fixed asset turnover in 2021 was 0.83 and 0.93 in 2022. Though the ratio has
increased from 2021 to 2022, in both the years the ratio is below 1 which is not a good sign. It
means that Acme is not efficiently utilizing its fixed assets to generate sales.
The total asset turnover ratio also reveals how efficient a company is at generating sales from its
total assets. A higher ratio implies that management is using its total assets more effectively.
Acme’s total asset turnover in 2021 was 0.51 and 0.56 in 2022. Though the ratio has slightly
increased from 2021 to 2022 but in both the years the ratio is below 1 which is not a good sign. It
means that Acme is not efficiently utilizing its total assets to generate sales. The total asset
turnover should be above 1.
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The company demonstrates efficient management of accounts receivable, as indicated by a high
receivable turnover ratio and relatively short average collection period. However, inventory
turnover, fixed asset turnover, and total asset turnover ratios are relatively low, indicating
potential inefficiencies in utilizing inventory, fixed, and total assets to generate sales revenue.
BEACON PHARMACEUTICALS LTD

FINANCIAL ANALYSIS
FOR 2021:
Net Income
iv Return on Sales (ROI) =
Sales
863
= ×100
7,121
= 12.11%
Net Income
v Return on Equity (ROE) =
Owner′ s Equity
863
= ×100
5,350
= 16.13%
Net Income
vi Return on Asset (ROA) =
Total Asset
863
= ×100
8536
= 10.11%
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Credit Sales
vi Receivable Turnover =
Total Receivable
7121
=
2347
= 3.03 Times.
Annual Credit Sales

360 Days
7121
=
360
= 19.78
Account Receivable
vii Average Collection Period =
2347
=
19.78
= 118.65 Days.
Sales
viii Inventory Turnover =
Total Inventory
7121
=
1512
= 4.71 times.
Sales
ix Fixed Asset Turnover =
Total Fixed Asset
7121
=
3319
= 2.14 times.
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Sales
x Total Asset Turnover =
Total Asset
7121
=
8536
= 0.83 times.
Current Asset
iii. Current Ratio =
Current Liabilities
5216
=
2793
= 1.86
iv. Quick Ratio =
Current Liabilities
5216−1512
=
2793
= 1.32 times
Total Debt
iii. Debt to Total Asset =
Total Asset
3180
= ×100
8536
= 37.25%

iv. Time Interest Earned =
Interest
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1363
=
168
= 8.11 times
FOR 2022:
Net Income
iv. Return on Sales (ROI) =
Sales
935
= ×100
8023
= 11.65%
Net Income
v. Return on Equity (ROE) =
Owner′ s Equity
935
= ×100
5944
= 15.73%
Net Income
vi. Return on Asset (ROA) =
Total Asset
935
= ×100
10816
= 8.64%
Credit Sales
vi. Receivable Turnover =
8023
=
2638
= 3.04 times.
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Annual Credit Sales
360 Days
8023
=
360
= 22.28
Account Receivable
vii. Average Collection Period =
2638
=
22.28
= 118.40 Days.
Sales
viii. Inventory Turnover =
Total Inventory
8023
=
2167
= 3.70 times.
Sales
ix. Fixed Asset Turnover =
Total Fixed Asset
8023
=
4371
= 1.83 times.
Sales
x. Total Asset Turnover =
Total Asset
8023
=
10816
= 0.74 times.
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Current Asset
iii. Current Ratio =
Current Liabilities
6444
=
4674
= 1.37
iv. Quick Ratio =
Current Liabilities
6444−2167
=
4674
= 0.91 times
Total Debt
Total Asset
4872
= ×100
10816
= 45.04%

Interest
1632
=
344
= 4.74 times
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PROFITABILITY SITUATIONS OF BEACON PHARMACEUTICALS LTD.
Profit margin: Return on Equity:
PROFIT MARGIN RATIO RETURN ON EQUITY

12.20% 12.11%
(ROE)
20.00%
12.00% 15.73%
Percantage
Percantage
15.00% 11.65%
11.80% 2021
11.65% 10.00% 2021
2022
11.60% 5.00% 2022
11.40% 0.00%
Year Year
Return on Asset:

10.50% 10.11%
10.00%
Percantage
9.50%
9.00% 8.64% 2021
8.50% 2022
8.00%
7.50%
Year
Here, as it is seen that in 2021, Beacon’s profit margin was 12.11% and in 2022, it was
11.65%. The return on sale has gradually decreased by 0.46% over a year. It means Beacon
Pharmaceutical’s has generated less sales in 2022 than the previous year.
ROE indicates how well a company utilizes its shareholder’s money. In 2021, the ROE was
11.65% & in 2022, it was 15.73% which means Beacon has more effectively utilized its
shareholder’s money in 2022 than in 2021.
ROA indicates how well a company manages its assets in generating sales. Beacon’s return on
assets in 2021 was 10.11% and 8.64% in the next year, 2022. It also has decreased from 10.11%
to 8.64%. The corporation is making less profit per dollar of assets it owns, as indicated by the
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decreased ROA. Underutilized assets, diminishing profitability, or a mix of these could be the
cause of this decline.
After examining every profitability ratio, we can conclude that these numbers a does not show a
very good level of profitability, there should be many spaces for development, especially in
terms of improving operational effectiveness and making the best use of available assets to
maximize returns for asset owners and equity holders. Long-term sustainability and improvement
of profitability will depend heavily on ongoing oversight of costs, sources of income, and asset
management.
LIQUIDITY SITUATIONS OF BEACON PHARMACEUTICALS LTD.


2 1.87 1.5 1.33
1.5 1.38
0.92
1
Times
Times
1 2021 2021
2022 0.5 2022
0.5
0 0
Year Year
The relationship between current assets and current liabilities is shown by the current ratio. To
meet its short-term obligations, the company has more liquid assets, as indicated by the larger
current ratio %. A current ratio of 1.2 to 2 is considered optimal. No company should require a
score lower than 1, as it indicates insufficient funds to settle its immediate liabilities.
Here, the current ratio in 2021 is 1.87 & in 2022, it is 1.38. In both years, Beacon maintained
enough liquidity as it is above the minimum ratio, but it has declined in 2022 from 2021 which
is not a good indicator. They should take into consideration the reasons.
Besides, the Quick ratio also describes a firm’s ability to pay off its short-term debt with current
assets. It measures how quickly current assets can be converted into cash to cover short-term
financial obligations as it doesn’t take inventory while calculating the quick ratio.
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The ratio below 1 means the company does not have enough quick assets to meet its financial
obligations in crisis. The ratio should be more than 1. Here, in Beacon, we can see that in the
year 2022, they have a quick ratio of less than 1 which does not indicate a good liquidity
situation. And their quick ratio is declining from 1.33 to 0.92, which is not good for the
company.
DEBT UTILIZATION SITUATION OF BEACON PHARMACEUTICALS

LTD.
Debt to Total Asset: Time Interest Earned:

50.00% 45.04% 10.00
8.11
40.00% 37.25% 8.00
Percantage
30.00% 6.00
Times
4.74
2021 2021
20.00% 4.00
2022 2022
10.00% 2.00
0.00% 0.00
Year Year
The debt to total assets ratio compares the total amount of liabilities of a company to all of its
total assets. It also tells us how leveraged the company is. The higher percentage of this ratio
refers to taking higher debt which is not desirable. Here we can see that Beacon’s debt to total
asset ratio in 2021 was 37.25% whereas in 2022, it was 45.04% which means Beacon has taken
more debt in 2022 compared to 2021 which is not a good sign because the debt-taking
percentage is quite higher.
On the other hand, Time interest earned refers to how a company covers its interest expense with
its operating income. The higher the ratio indicates how many times a company can pay off its
debts with its earnings. Beacon’s time interest earned ratio in 2021 was 8.11 & 4.74 in 2022. As
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it has decreased, it is not doing so well in covering its interest expenses through its operating
income.
ASSET UTILIZATION SITUATION OF BEACON PHARMACEUTICALS

LTD.

3.05 PERIOD
3.04 118.65
3.04 118.70
118.60
Times
3.04 2021 118.50
Days
118.40 2021
3.03 2022 118.40
3.03 2022
118.30
3.03 118.20
Year Year
Inventory Turnover: Fixed Asset Turnover:

5.00 4.71 2.20 2.14
4.00 3.70
2.00
Times
1.83
Times
3.00
2021 1.80
2.00
2022
1.00 1.60
Year
0.00
Year 2021 2022

0.85 0.83
0.80
Times
0.74
0.75 2021
2022
0.70
0.65
Year
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The receivable turnover ratio measures how effectively a company collects its debts. The higher
percentage in receivable turnover indicates that the company collects its money from its
customers on time, which is a good sign. Beacon Pharmaceutical’s receivable turnover in 2021
was 3.03 and in 2022, it was 3.04. The ratio has slightly increased which means they are doing
well in collecting money.
The average collection period refers to the amount of time it takes for a business to receive
payments owed by its clients in terms of accounts receivable. The lower average collection
period is preferable because it refers to taking fewer days to collect all the receivables from the
customers which also indicates higher liquidity. Companies use the average collection period to
make sure they have enough cash on hand to meet their financial obligations. For Beacon’s, it is
118.65 days in 2021 and 118.40 days in 2022. Here we can see the average collection period has
little bit declined in which is beneficial for the company though it has many days which is not
good for the company.
Inventory turnover measures how often a company replaces inventory relative to its cost of sales.
Generally, the higher the ratio, the better. A low inventory turnover ratio might be a sign of weak
sales or excessive inventory, also known as overstocking. Beacon had a higher ratio in 2021
which was 4.71 but it decreased in the following year 2022 and became 3.70. That means 2022,
It couldn’t do better sales in 2022 which is why the inventory amount increased leading to
increased inventory turnover.
The fixed asset turnover ratio reveals how efficient a company is at generating sales from its
existing fixed assets. A higher ratio implies that management is using its fixed assets more
effectively. Beacon’s fixed asset turnover in 2021 was 2.14 and 1.83 in 2022. Though the ratio
has decreased from 2021 to 2022, in both the years the ratio is above 1 which is a good sign. It
means that beacon is efficiently utilizing its fixed assets to generate sales.
The total asset turnover ratio also reveals how efficient a company is at generating sales from its
total assets. A higher ratio implies that management is using its total assets more effectively.
Acme’s total asset turnover in 2021 was 0.83 and 0.74 in 2022. Though the ratio has increased
from 2021 to 2022 but in both the years the ratio is below 1 which is not a good sign. It means
that Beacon is not efficiently utilizing its total assets to generate sales. The total asset turnover
should be above 1.
Page 27 of 39
The company's satisfied ratio of accounts receivable turnover and comparatively less average
collection duration illustrate its quite effective management of accounts receivable. However, the
ratios for inventory turnover, fixed asset turnover, and total asset turnover are all a bit low,
suggesting that there may be inefficiencies in the way that inventory, fixed assets, and total assets
are used to generate sales revenue.
ORION PHARMA LTD

FINANCIAL ANALYSIS
FOR 2021:
Net Income
Sales
939
= ×100
10851
= 8.65%
Net Income
Owner′ s Equity
939
= ×100
18663
= 5.03%
Net Income
Total Asset
939
= ×100
42333
= 2.21%
Page 28 of 39
Credit Sales
iv. Receivable Turnover =
Total Receivable
10851
=
12491
= 0.86 times.
Annual Credit Sales

360 Days
10851
=
360
= 30.14
Account Receivable
v. Average Collection Period =
12491
=
30.14
= 415 Days.
Sales
vi. Inventory Turnover =
Total Inventory
10851
=
1516
= 7.15 times.
Sales
vii. Fixed Asset Turnover =
Total Fixed Asset
10851
=
19856
= 0.546 times.
Page 29 of 39
Sales
viii. Total Asset Turnover =
Total Asset
10851
=
42333
= 0.256 times.
Current Asset
ix. Current Ratio =
Current Liabilities
16223
=
6008
= 2.70
x. Quick Ratio =
Current Liabilities
16223−1516
=
6008
= 2.44 times
Total Debt
xi. Debt to Total Asset =
Total Asset
22259
= ×100
42333
= 52.58%

xii. Time Interest Earned =
Interest
Page 30 of 39
1524
=
361
= 4.22 times
FOR 2022:
Net Income
Sales
846
= ×100
9667
= 8.75%
Net Income
Owner′ s Equity
846
= ×100
20769
= 4.07%
Net Income
Total Asset
846
= ×100
48,107
= 1.75%
Credit Sales
iv. Receivable Turnover =
Page 31 of 39
9667
=
15023
= 0.64 times.
Annual Credit Sales

360 Days
9,667
=
360
= 26.85
Account Receivable
v. Average Collection Period =
15023
=
26.85
= 560 Days.
Sales
vi. Inventory Turnover =
Total Inventory
9667
=
2494
= 3.88 times.
Sales
vii. Fixed Asset Turnover =
Total Fixed Asset
9667
=
23,009
= 0.42 times.
Page 32 of 39
Sales
viii. Total Asset Turnover =
Total Asset
9667
=
48107
= 0.20 times.
Current Asset
ix. Current Ratio =
Current Liabilities
18755
=
9437
= 1.98
x. Quick Ratio =
Current Liabilities
18,755−2,494
=
15,438
= 1.053 times
Total Debt
xi. Debt to Total Asset =
Total Asset
27,338
= ×100
48,107
= 56.82%

xii. Time Interest Earned =
Interest
681
=
280
= 2.43 times
Page 33 of 39
PROFITABILITY SITUATION OF ORION PHARMA LTD.
Profit Margin: Return on Equity
PROFIT MARGIN RATIO RETURN ON EQUITY (ROE)

8.80% 6.00%
5.03%
8.75% 5.00%
4.07%
Percantage
8.75% 4.00%
Percantage
8.70% 2021 3.00% 2021
8.65% 2.00% 2022

2022
8.65% 1.00%
8.60% 0.00%
Year Year
Return on Asset:

2.50% 2.22%
2.00% 1.75%
Percantage
1.50%
2021
1.00%
2022
0.50%
0.00%
Year
Return on Sales (ROI): There was a slight increase in ROI from 8.65% in 2021 to 8.75% in
2022, indicating a marginal improvement in profitability relative to sales. A slight increase in
ROI indicates a small improvement in generating profits from each dollar of sales. However, a
minimal change might not be significant.
Return on Equity (ROE): ROE decreased from 5.03% in 2021 to 4.07% in 2022. This suggests a
decline in the return generated on shareholders' equity. The decrease in ROE suggests a decline
in the return on investment for shareholders. This could be due to lower profits, increased equity
issuance, or a combination of both.
Page 34 of 39
Return on Assets (ROA): ROA also decreased from 2.21% in 2021 to 1.75% in 2022, implying a
lower return on the company's assets. The lower ROA indicates the company is generating less
profit per dollar of its assets. This could be due to declining profitability, underutilized assets, or
a combination of these factors.
LIQUIDITY SITUATION OF ORION PHARMA LTD.


3 3
2.45
2.5 2.5
2 2 1.72
Times
Times
1.5 2021 1.5 2021
1 2022 1 2022
0.5 0.5
0 0
Year Year
Current Ratio: The Current Ratio decreased from 2.70 in 2021 to 1.98 in 2022. While still above
1, this indicates a lower short-term liquidity buffer to meet current obligations.
Quick Ratio: The Quick Ratio also dropped significantly from 2.44 times in 2021 to 1.053 times
in 2022. This suggests a potential challenge in meeting short-term obligations solely with highly
liquid assets.
DEBT UTILIZATION SITUATION OF ORION PHARMA LTD.

Debt to Total Asset: Time Interest Earned:

58.00% 56.83% 6.00
4.22
Percantage
56.00%
4.00
Times
54.00% 2021 2.43 2021

52.58%
2022 2.00 2022
52.00%
50.00% 0.00
Year Year
Page 35 of 39
Debt to Total Asset: The debt ratio increased from 52.58% in 2021 to 56.82% in 2022. This
indicates a rise in reliance on debt financing, which could increase financial risk if not managed
properly.
Time Interest Earned: This ratio decreased from 4.22 times in 2021 to 2.43 times in 2022. While
still above 1, it suggests a decline in the company's ability to cover interest expenses with
earnings from operations.
ASSET UTILIZATION SITUATION OF ORION PHARMA LTD.

1.00
0.87
PERIOD
600 560
0.80
0.64
500 415
0.60
Times
400
2021
Days
0.40 300 2021

2022
200 2022
0.20
100
0.00 0
Year Year

8.00 0.60 0.55
0.42
6.00 0.40
Times
Times
4.00 2021 0.20

2022
2.00 0.00
Year
0.00
Year 2021 2022
Page 36 of 39

0.30 0.26
0.25
0.20
0.20
Times
0.15 2021
0.10 2022
0.05
0.00
Year
Receivable Turnover: This ratio significantly decreased from 0.86 times in 2021 to 0.64 times in
2022. This indicates a slowdown in collecting payments from customers, potentially leading to
higher bad debts.
Average Collection Period: Due to the decrease in Receivable Turnover, the Average Collection
Period likely increased in 2022, signifying that it takes longer to collect customer receivables.
Specific calculations are needed to determine the exact number of days.
Inventory Turnover: Inventory Turnover dropped from 7.15 times in 2021 to 3.88 times in 2022.
This suggests a potential buildup of inventory, which could increase storage costs and impact
cash flow.
Fixed Asset Turnover: This ratio also decreased from 0.546 times in 2021 to 0.42 times in 2022.
This indicates the company might not be efficiently utilizing its fixed assets to generate sales.
Total Asset Turnover: Total Asset Turnover declined from 0.256 times in 2021 to 0.20 times in
2022. This suggests the company is generating less sales per dollar of total assets.
Page 37 of 39
WHICH COMPANY’S STOCK WE WILL BUY?
Considering all the ratios, we will buy Beacon Pharmaceuticals Ltd.’s stock. As shareholders,
we are always concerned about the company’s profitability. Because shareholders will be
benefited if the company makes a profit.
In our case, we have 3 companies which are Acme Laboratories Ltd, Beacon Pharmaceuticals
Ltd, and Orion Pharma Ltd. If we look at these companies' profitability ratios, we can see that
Beacon has a much higher profit margin than the other 2 companies. Not only profit margin, but
Beacon also has a higher Return on Equity (ROE) & Return on Asset (ROA). The profit margin
of Beacon Ltd in 2022 was 11.65% whereas Acme Ltd and Orion Pharma’s profit margins were
8.85% was 8.75% respectively. Here, we can see the vast difference in the profit margin of
Beacon with the other two companies. If we want to take ROE & ROA into consideration, here
also Beacon is the right company to choose for buying stock because Beacon has 15.73% ROE
and 8.64% ROA whereas Acme’s ROE & ROA was 9.81% & 4.91% and Orion’s was 4.07% &
1.75%.
If we look into other ratios like Liquidity, Asset & Debt Utilization ratios, Beacon has a better
Inventory, Fixed Asset & Total Asset turnover than Acme & Orion. But Beacon has lower
Receivable turnover and Average Collection Period days than Acme which is also not good in the
perspective of Asset Utilization. Besides Beacon’s are facing difficulties in liquidity management
compared to Orion. Orion has a better liquidity situation. But Beacon’s current ratio is above 1.2
which is considerable. On the contrary, they have a lower debt-to-total asset percentage than the
other 2 companies which is why their ROE is also higher than the others.
In conclusion we can say that Beacon has a commendable profit margin compared to Acme and
Orion also they are doing better in other ratios as well, so we will buy Beacon Pharmaceuticals
Ltd.’s stock.
Page 38 of 39
REFERENCES:
• https://www.wsj.com/market-
data/quotes/BD/XDHA/ACMELAB/financials/annual/income-statement
data/quotes/BD/XDHA/BEACONPHAR/financials/annual/income-statement
data/quotes/BD/XDHA/ORIONPHARM/financials/annual/balance-sheet
• http://www.bapi-bd.com/bangladesh-pharma-industry/overview.html
• https://en.wikipedia.org/wiki/List_of_pharmaceutical_companies_of_Bangladesh
• https://bangladesh.uz/pharmaceutical-industry
• https://en.wikipedia.org/wiki/Pharmaceutical_industry_in_Bangladesh
Page 39 of 39

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Independent University, Bangladesh

Deadline of Submission: 13th April 2024.

2. ASSET UTILIZATION RATIOS:

4. DEBT UTILIZATION RATIOS

Income Before Interest & Tax

Annual Credit Sales

4. DEBT UTILIZATION RATIOS

Income Before Interest & Tax

Profit Margin/Return on Sales: Return on Equity (ROE):

PROFIT MARGIN RATIO RETURN ON EQUITY (ROE)

Return on Asset (ROA):

RETURN ON ASSET (ROA)

LIQUIDITY SITUATIONS OF ACME LABORATORIES LTD.

Current Ratio: Quick Ratio:

CURRENT RATIO QUICK RATIO

1.13 2021 0.4 2021

The current ratio describes the relationship

DEBT ULILIZATION SITUATION OF ACME LABORITIES LTD.

DEBT TO TOTAL ASSET TIME INTEREST EARNED

ASSET UTILIZATION SITUATION OF ACME LABORITIES LTD.

Receivable Turnover: Average Collection Period:

RECEIVABLE TURNOVER AVERAGE COLLECTION

Inventory Turnover: Fixed Asset Turnover:

INVENTORY TURNOVER FIXED ASSET TURNOVER

Total Asset Turnover:

BEACON PHARMACEUTICALS LTD

Annual Credit Sales

4. DEBT UTILIZATION RATIOS

Income Before Interest & Tax

4. DEBT UTILIZATION RATIOS

Income Before Interest & Tax

Profit margin: Return on Equity:

PROFIT MARGIN RATIO RETURN ON EQUITY

RETURN ON ASSET (ROA)

LIQUIDITY SITUATIONS OF BEACON PHARMACEUTICALS LTD.

CURRENT RATIO QUICK RATIO

DEBT UTILIZATION SITUATION OF BEACON PHARMACEUTICALS

DEBT TO TOTAL ASSET TIME INTEREST EARNED

ASSET UTILIZATION SITUATION OF BEACON PHARMACEUTICALS

RECEIVABLE TURNOVER AVERAGE COLLECTION

3.04 2021 118.50

Inventory Turnover: Fixed Asset Turnover:

INVENTORY TURNOVER FIXED ASSET TURNOVER

Total Asset Turnover:

TOTAL ASSET TURNOVER

ORION PHARMA LTD

Annual Credit Sales

4. DEBT UTILIZATION RATIOS

Income Before Interest & Tax

2. ASSET UTILIZATION RATIOS:

Annual Credit Sales

4. DEBT UTILIZATION RATIOS

Income Before Interest & Tax

Profit Margin: Return on Equity

PROFIT MARGIN RATIO RETURN ON EQUITY (ROE)

8.70% 2021 3.00% 2021

8.65% 2.00% 2022

RETURN ON ASSET (ROA)