Financial Profile Analysis of Square Pharmaceuticals Limited Bangladesh

Financial Analysis of SQUARE PHARACEUTICALS

Group Report

Corporate Finance (FIN 440)

Section 9

Prepared for

Tashfeen Hussain

Prepared By

Rashadat Anowar Chowdhury

0930101020

Taufiq Ul Islam

0920436030

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Letter of Transmittal

10 August 2011 Tashfeen Hussain School of Business North South University Dear Sir,

We are delighted to present the Report on “Analysis of Financial Summary” of Square Pharmaceutical Limited Bangladesh Fiscal Yearly 2006-2010.

The report includes the financial ratios, annual report, capital structure of the company during fiscal year 2006-2010.

Your instructions have been strictly followed by us to build up a vivid picture of the company’s financial performance and profile for past 5 (five) fiscal year.

Yours Sincerely

Rashadat Anowar Chowdhury 0930101020

Taufiq Ul Islam 0920436030

III

Content

Executive Summary 4 Company Profile 5 Financial Ratio Analysis 7 Short Term Liquidity Ratio Analysis 8 Long Term Liquidity Ratio Analysis 11 Asset Management (Turnover) Ratio Analysis 13 Profitability Ratio Analysis 17 Market Value Ratio Analysis 18 Dividend Ratio Analysis 21 Free Cash Flow Ratio Analysis 23 Cost of Capital Analysis 24 Capital Structure Analysis 25 Appendix Financial Ratio Table FY2006-2010 Appendix 1 Balance Sheet and Income Statement FY2006-2010 Appendix 2 List of Equations Appendix 3Table of Data Used for Calculating Beta Appendix 4of Square Pharmaceuticals Limited Bangladesh

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Executive Summary

Square Pharmaceutical Limited Bangladesh is one of the leading pharmaceuticals in Bangladesh. Its journey to the growth and prosperity has been no bed of roses. From the inception in 1958, it has today burgeoned into one of the top line conglomerates in Bangladesh. Square Pharmaceuticals Ltd., the flagship company, is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high performance global player. In this report, we have tried to focus on the financial performance of the company during the fiscal year of 2006-2010. We have used financial ratios to determine its performance in short term and long term period. The firm had a strong financial backbone as it uses less debt for investment, uses its asset efficiently for producing goods. Sales had increases on regular basis over past the years. In one word based on our analysis this firm can be an example in certain financial segment for other company.

Though, the firm pays fewer cash dividends than past fiscal years, which might be disliked by investors. But it must be added that the company had been increasing it’s the number of outstanding share regularly and also provide bonus share to its shareholder.

The company’s fiscal year is based on April to March. And regularly hold annual general meeting and publishes financial report both annually, half yearly and quarterly.

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Vision - We view business as a means to the material and social wellbeing of the investors, employees and the society at large, leading to accretion of wealth through financial and moral gains as a part of the process of the human civilization.

Mission -Our Mission is to produce and provide quality & innovative healthcare relief for people, maintain stringently ethical standard in business operation also ensuring benefit to the shareholders, stakeholders and the society at large.

Objective- Our objectives are to conduct transparent business operation based on market mechanism within the legal & social frame work with aims to attain the mission reflected by our vision.

Company Profile

Square Pharmaceuticals Limited Bangladesh is the largest pharmaceutical company in Bangladesh and it has been continuously in the 1st position among all national and multinational companies since 1985. It was established in 1958 and converted into a public limited company in 1991. The sales turnover of SPL was more than Taka 11.46 Billion (US$ 163.71 million) with about 16.43% market share (April 2009– March 2010) having a growth rate of about 16.72%.

Subsidiary Company Associate Company Square Cephalosporin Ltd Square Biotech’s Ltd. Square Multifabrics Ltd

Square Textiles Ltd. Square Knit Fabrics Ltd. Square Fashions Ltd. Square Hospitals Ltd.

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Top Management: Board of Directors

As per provisions of the Article of Association, Board of Directors holds periodic meetings to resolve issue of policies and strategies, recording minutes/decisions for implementation by the Executive Management.

Executive Management

The Executive Management is headed by the Managing Director, the Chief Executive Officer (CEO) who has been delegated necessary and adequate authority by the Board of Directors. The Executive Management operates through further delegations of authority at every echelon of the line management. The Executive Management is responsible for preparation of segment plans/sub-segment plans for every profit centers with budgetary targets for every items of goods & services and are held accountable for deficiencies with appreciation for exceptional performance. These operations are carried out by the Executive Management through series of committees, sub-committees, ad-hock committees, standing committees assisting the line management.

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SHORT TERM LIQUIDITY RATIO ANALYSIS

Current Ratio

On average the current ratio of Square Pharmaceuticals Limited Bangladesh was 1.62 during fiscal year (FY) 2006-2010. According to current ratio, it must be assumed that Square Pharmaceuticals Limited Bangladesh was successful to meet its short term obligations very well for the past fiscal years and will maintain a successful healthy financial performance in coming years.

The current asset of the firm had increased by 18.42% between the fiscal year of 2006 and 2010 but at the same time the current liabilities had decreased by 1.95 %.

While analyzing a firm’s current assets, firm’s inventories had played an important role to discover firm actual position to meet short-term obligation. The inventories of Square pharmaceuticals Limited Bangladesh had positively changed by 13.75% annually on average throughout the fiscal year of 2006 – 2010. Having a huge amount of inventory is not good for a firm. There is a chance of having outdated or slow moving product in the inventory. As a pharmaceuticals firm this is quite a concern because they produce drugs which are used by humans and an outdated product might cause some one illness or death. Therefore, increase in inventory is a good sign for a pharmaceuticals company as far as their inventory do not have obsolete products. Firm’s cash and cash equivalents had decreased by 18.13%, short term loan [current asset] had decreased by 35.65 %, Trade debtors had increased by 76.03% between the fiscal year 2006 and 2010.

The decrease in current liabilities by 1.95% is a positive sign towards the growth of the company and its ability to meet the short term obligations.

In addition, in our depth analysis of the firm’s current asset and liabilities figure we have found that in 2007 current asset of the firm reduced by 8.66 % and current liabilities increased by 13.04%. This was caused by an increase in Short-term Bank Loans and Other Financial Liabilities. Besides in last five years the worst current ratio figure was in 2008 FY. In 2008 FY the short-term bank loans was 54.84% more than 2006 FY. This increase made firm more vulnerable to meet its short term obligations than its previous fiscal years. In contrary, the firm made significant improvement to reduce its short-term bank loans in FY 2009 and 2010. In 2009 and 2010 FY the short-term bank loan reduced by 42.53 % and 72.41 % from FY 2008.

Short-Term Bank Loans are the major portion of current liabilities for firm financial figures. Other current liabilities accounts such as Trade Creditors, Long Term Loan (current portion) and other liabilities expense has increased throughout the fiscal years 2006-2010 of Square Pharmaceuticals Limited Bangladesh.

2006 2007 2008 2009 2010 Current Ratio1 1.78 1.44 1.26 1.46 2.15

Table of Current Ratio for Fiscal Year 2006-2010

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Quick Ratio (Acid Test)

Square Pharmaceuticals Limited Bangladesh had an average of 0.91 for the fiscal year 2006-2010.

0.91 is a unhealthy figure for a firm. Alongside, the higher the figure, the better opportunity for the firm to eliminate its current liabilities without relying on its inventory.

By analyzing the current asset and inventory of this pharmaceuticals firm, on average the total inventory is 44.40% of its current assets between FY 2006 and 2010 and this refers that the firm’s current asset consists a large portion of inventories. Therefore the firm will need to increase the figures of other accounts, under its current asset and reduce the dependency on inventories to meet short term obligations. In addition, Current assets without the inventories portion decreased by 4.54% between the fiscal year of 2006 and 2010 and the inventories of Square pharmaceuticals Limited Bangladesh has increased by 64.41% at the same time.

The firm had the worst quick ratio figure in 2009 but eventually it has increased in 2010 due to a decline in its short-term bank loans.

2006 2007 2008 2009 2010 Quick Ratio2

1.19 0.84 0.68 0.66 1.16

Table of Quick Ratio for Fiscal Year 2006-2010

Net Working Capital to Total Assets On average Square Pharmaceuticals Limited Bangladesh had Net working capital worth of 1,513,815,265.40 BDT between FY 2006 to 2010. Net Working Capital to Total Assets ratio shows a firm ability of short-term liquidity. A positive Net Working Capital shows that the firm have meet the short term obligations and more likely to have a flat operation in future.

As stated before, this firm’s current asset had increased by 18.42% between the fiscal year of 2006-2010 but at the same time the current liabilities had decreased by 1.95 %.Due to this difference between current asset and current liabilities the firm was able to have a positive Net Working Capital. In addition, Square Pharmaceuticals Limited Bangladesh Total Asset had increased by 61.63% between the FY 2006 and 2010 and Net Working Capital had increased by 44.42% in the same period.

The firm faced its worst Net Working Capital to Total Assets ratio figure in FY 2008 because the firm had lowest Net Working Capital in terms of last 5 (five) fiscal year caused by an increase in short-term bank loans.

2006 2007 2008 2009 2010 NWC to Total Assets3 0.19 0.11 0.07 0.09 0.17

Table of NWC to Total Assets for Fiscal Year 2006-2010

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Interval Measure

Interval measure exhibits a firm’s ability to maintain its daily business expense by using its current assets just. In other word this ratio is expressed in terms of days and shows that the firm can cover its daily operating expense by relying on its current asset only and run its business for specific number of days.

In case of Square Pharmaceuticals Limited Bangladesh, the average interval measure is 260.26 days during the fiscal years 2006-2010.

The daily operating expense and current asset of this pharmaceutical firm on average was 16,555,423.74 BDT and 4,148,771,230 BDT respectively. On average the daily operating expense of this firm had changed by 17.59 % annually on average between FY 2006 and 2010. The current asset of the firm had increased by 18.42% between the fiscal year of 2006 and 2010 but the daily operating expense had increased at a staggering rate of 90.92% at the same time. Therefore, the interval measure of Square Pharmaceuticals Limited Bangladesh had dropped by 132.62 days in FY 2010 from 2006, which was approximately 37.97% less than 2006.

Interval measure provides a strong view of firm’s ability to run its operation even it faces any financial disaster. In present, Square Pharmaceuticals Limited Bangladesh is not performing as well as performing in FY 2006 according to interval measure. Therefore, it would advisable for this firm to minimize its operating cost and increase its short term asset for the betterment of the firm.

2006 2007 2008 2009 2010 Interval Measure4 349.23 260.83 268.30 206.31 216.61

Table of Interval Measure (in days) for Fiscal Year 2006-2010

Cash Ratio

Square Pharmaceuticals Limited Bangladesh had a cash ratio of 0.10 on average during the fiscal years 2006-2010. Cash ratio reflects firms ability to pay its current liabilities, using its most liquidate asset such as Cash and cash equivalents only.

By evaluating the current asset and cash and cash equivalents of this, on average the cash and cash equivalents was 5.87% of its current assets between FY 2006 and 2010 and this refers that the firm’s inventories consist a large portion in its current asset. In terms of other account, the portion of cash and cash equivalents in current asset was very undersized and we must add that firm’s cash and cash equivalents had decreased by 18.13% between 2006 and 2010 FY.

For the betterment of the firm, it should try to increase its cash and cash equivalents. This would help to establish a good foundation to attract investors since many investors take cash ratio under deliberation for investing in a firm. The firm experienced its worst cash ratio figure in 2007 and by 2010 it had comparatively reached to a better state of cash ratio.

2006 2007 2008 2009 2010 Cash Ratio5 0.14 0.05 0.06 0.11 0.12

Table of Cash Ratio for Fiscal Year 2006-2010

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LONG TERM LIQUIDITY RATIO ANALYSIS

Total Debt Ratio

During the fiscal years 2006-2010, on average Square Pharmaceuticals Limited Bangladesh had a debt ratio of 0.29 and total debt was worth of 3,422,741,464 BDT. The Total Debt Ratio expresses the fraction of its total debt relative to its total assets.

In addition, the total debt of the firm had increased by 19.96% between fiscal 2006 and 2010. This was caused by significant increased in short term bank loans, loan term secured loans and trade credits. Besides throughout the FY 2006-2010, total assets of the firm had yearly changed at 12.91% on average but total debt of the firm had changed yearly at 22.69% on average.

In contrary, the company had more debt in FY 2008, 47.95% more than FY 2006. And in 2008 FY the short-term bank loans was 54.84% more than 2006 FY. But the debt had decreased by 22.96% and 18.92% in FY 2009 and FY 2010 respectively comparing to FY 2008. The firm’s debt ratio had decreased in past 5 (five) fiscal year and in near future it is expected to have a sound financial performance based on the current situation of its debt ratio.

The company had worst debt ratio in 2008 FY though it gradually recovers itself and established a strong financial foundation to overcome its debt.

2006 2007 2008 2009 2010 Total Debt Ratio6 0.31 0.30 0.34 0.25 0.23

Table of Total Debt Ratio for Fiscal Year 2006-2010

Debt Equity Ratio

Debt equity ratio refers to a firm’s investment dependency on its debt and equity. If a firm’s debt equity ratio is 1 then it shows that the firm relies more on debt for investment rather than its own equity. Square Pharmaceuticals Limited Bangladesh had a strong financial backbone since its debt equity ratio is far below 1 and we can say that they do not rely a lot on debt for their investment.

The company’s equity had increased by staggering 80.48% between FY 2006 and 2010 though the total debt of the firm had increased by 19.96% at the same time.

Debt equity ratio also shows that a firm’s riskiness. In case of Square Pharmaceuticals, it is quite unlikely to be risky since it had debt equity ratio of 0.40 on average during the FY 2006-2010. Investors would be happy to invest in such firm having a good debt equity ratio.

Though this firm experienced worst debt equity condition in FY 2008, it progressively had reduced the ratio in its following FY. As we have observed before in 2008 FY, the short term bank loans was at peak in last 5 (five) FY. It caused the ratio to increase from 2007 FY.

2006 2007 2008 2009 2010 Debt-Equity Ratio7 0.45 0.43 0.51 0.33 0.30

Table of Debt Equity Ratio for Fiscal Year 2006-2010

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Equity Multiplier

On average the equity multiplier of Square Pharmaceuticals Limited Bangladesh was 1.40 during FY 2006-2010. Since we have portrayed before that the company’s equity had increased by staggering 80.48% and total Asset had increased by 61.63% between the FY 2006 and 2010, the company do not rely on debt for its investment.

The equity multiplier shows a firm’s assets per 1 unit of equity. In case of Square pharmaceuticals the ratio is relatively fine and this firm observed its worst equity multiplier condition in FY 2008.

2006 2007 2008 2009 2010 Equity Multiplier8 1.45 1.43 1.51 1.33 1.30

Table of Equity Multiplier Ratio for Fiscal Year 2006-2010

Times Interest Earned

Square Pharmaceuticals Limited Bangladesh had a time interest earned ratio of 9.19 on average during FY 2006-2010. This ratio stats a firm’s ability to meet interest obligations by using its earnings before income tax or EBIT.

In this fiscal period, square pharmaceuticals EBIT had increased by 87.20% and interest payment had been increased by 54.72%. During this period of time average EBIT of each year was approximately 2,483,706,253 BDT and interest expense was 286,914,843 BDT. So the figures clearly shows that this firm had a better financial performance according to its time interest earned ratio for last 5(five) FY.

Though in 2008 FY , firm’s times earned ratio drops to 6.58, which was minimum of last 5 (five) FY. In this specific fiscal year the interest expense of the firm had increased by 48.56% compared to its preceding fiscal year. Besides, in 2008 FY the EBIT was 13.10% more than its preceding fiscal year. The huge difference between the increased percentiles of each account causes the firm to have a low TIE ratio. But in following years the firm had improved on its interest obligation and in FY 2010 it had an excellent TIE ratio.

2006 2007 2008 2009 2010 Times Interest Earned10 12.51 8.64 6.58 7.64 10.60

Table of Times Interest Earned Ratio for Fiscal Year 2006-2010

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Long Term Debt

Long term debt ratio is concerned with firm’s long term debt. Long term debt do not changes frequently alike short term debt. Square Pharmaceuticals Limited Bangladesh had an average long term debt worth of 635,978,867 BDT for FY 2006-2010. In addition, Company’s equity had increased at a rate of 15.92% annually at the same time. On average long term debt ratio during this fiscal period was 0.07

Square pharmaceuticals had lowest long term debt ratio in 2009 FY but it had recovered in following year making the long term debt ratio better than before.

2006 2007 2008 2009 2010 Long Term Debt ratio9 0.09 0.06 0.07 0.04 0.08

Table of Long Term Debt Ratio for Fiscal Year 2006-2010

Cash Coverage

Square Pharmaceuticals Limited Bangladesh had cash coverage of 11.17 on average during FY 2006-2010. Cash coverage ratio represents a firm’s ability to meet its interest expense by the cash generated from its operation. We have stated before that in this fiscal period, square pharmaceuticals EBIT had increased by 87.20% and interest payment had been increased by 54.72%. During this period of time average EBIT of each year was approximately 2,483,706,253 BDT and interest expense was 286,914,843 BDT. But in calculating cash coverage, we must add the depreciation expense because it is a non cash expense. The firm had worst cash coverage during FY 2008 because in this fiscal year interest expense of the firm had increased by 48.56% compared to its preceding fiscal year though the EBIT increased at a rate of 13.10% at the same time.

2006 2007 2008 2009 2010 Cash Coverage Ratio12 14.63 10.84 8.13 9.28 12.96

Table of Cash Coverage Ratio for Fiscal Year 2006-2010

ASSET MANAGEMENT (TURNOVER) RATIO ANALYSIS

Inventory Turnover and Day’s Sales in Inventory

Square Pharmaceuticals Limited Bangladesh had an average cost of goods sold value of 4,976,753,344 BDT during FY 2006-2010. Inventory turnover represents firm’s cost of goods sold per inventory. The cost of goods sold had increased for the company by 86.11% between FY 2006 and 2010 and the ending inventory had increased by 64.42% in the same period. On average the cost of goods sold had increased at a rate of 16.83% annually during FY 2006-2010 period.

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The average inventory turnover was 2.69 throughout FY 2006-2010. If we take a closer look at the table of inventory turnover ratio, in FY 2008 it was lowest among last 5 (five) FY and in following fiscal years the scenario had improved and in FY 2010 the firm have highest inventory turnover for past 5 (five) fiscal year.

2006 2007 2008 2009 2010 Inventory Turnover13 2.63 2.76 2.40 2.70 2.97

Table of Inventory Turnover Ratio for Fiscal Year 2006-2010

Day’s sales in inventory (average days’ sales in inventory) ratios show the efficiency of a firm. It represents firm’s ability to use inventory efficiently. Square Pharmaceuticals Limited Bangladesh had an average day’s sales in inventory of 136.24 days during FY 2006-2010. The firm day’s sales in inventory had reduced by 13.20% between FY 2006 and 2010. As a result the firm had become efficient in using its inventory.

The worst day’s sales in inventory was recorded in 2008 FY and it was caused by a low inventory turnover of 2.40

2006 2007 2008 2009 2010 Day’s Sales in Inventory14 138.98 132.05 152.34 135.04 122.78

Table of DSI Ratio for Fiscal Year 2006-2010

Receivables Turnover and Days’ Sales in Receivables

Receivables turnover ratios illustrates how many times per period the company collects its average collectable amount. Square Pharmaceuticals Limited Bangladesh had an average account receivables worth of 391,530,719.20 BDT and it had increased by 76.03% between FY 2006 and 2010. Between FY 2006 and 2010, on average this firm had earned revenue of 8,626,387,092 BDT and had increased by 88.22%. So, we can say that the company is doing well in case of receivables turnover.

The average receivables turnover was 22.07 throughout FY 2006-2010. In FY 2009 it was lowest among last 5 (five) FY and in following fiscal years the situation had improved though the company had performed well in FY 2007 and 2008 comparing to recent years.

2006 2007 2008 2009 2010 Receivables Turnover15 21.09 23.23 22.92 20.56 22.55

Table of Receivables Turnover Ratio for Fiscal Year 2006-2010

Day’s sales in receivables (Average Collection Period) ratio show how long the firm takes to collect its trade debt. Square Pharmaceuticals Limited Bangladesh had an average day’s sales in inventory of 16.57 days during FY 2006-2010. The firm day’s sales in receivables had reduced by 6.48% throughout FY 2006 and 2010. As a result the firm takes less time to collect it receivables than preceding years.

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The worst day’s sales in inventory was recorded in 2008 FY and it was caused by a low inventory turnover of 2.40

2006 2007 2008 2009 2010 Day’s sales in receivables16 17.31 15.71 15.92 17.75 16.18

Table of DSR Ratio for Fiscal Year 2006-2010

Payables Turnover and Days’ Sales in Payables

Payables turnover refers how many times per period the company pays its average payable amount. The bigger the turnover, the better its reputation becomes to its supplier and creditors. Square Pharmaceuticals Limited Bangladesh had an average account payables worth of 151,976,756.20 BDT and it had increased by 397.18% between FY 2006 and 2010.

The average receivables turnover was 45.05 throughout FY 2006-2010. In FY 2007, it was highest among last 5 (five) FY and in following fiscal years the situation had worsen. In FY 2010, the worst payables turnover was recorded for company’s past 5 (five) fiscal year.

2006 2007 2008 2009 2010 Payables Turnover17 44.41 70.43 48.10 45.66 16.62

Table of Payables Turnover Ratio for Fiscal Year 2006-2010

Day’s sales in payables (Average Payment Period) ratio show how long the firm takes to pay its trade credit. Square Pharmaceuticals Limited Bangladesh had an average day’s sales in payables of 10.19 days during FY 2006-2010. The firm day’s sales in inventory had increased by 167.14% throughout FY 2006 and 2010. As a result the firm takes more time to pay its payables than preceding years.

The worst day’s sales in inventory was recorded in 2010 FY and it was caused by a low payables turnover of 16.62

2006 2007 2008 2009 2010 Day’s Sales in Payables18 8.22 5.18 7.59 7.99 21.96

Table of DSP Ratio for Fiscal Year 2006-2010

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Net Working Capital Turnover

Net working capital turnover shows how much the firm is earning from investing in its working capital. The bigger the turnover, the better it is for the company. Square Pharmaceuticals Limited Bangladesh had an average net working capital worth of 1,513,815,265.40 BDT and it had increased by 44.42% between FY 2006 and 2010.

During FY 2006-2010, the average net working capital turnover was 6.36; In FY 2008, it was highest among last 5 (five) FY and in following fiscal years the situation had worsen. In FY 2010, the worst net working capital turnover was recorded for company’s past 5 (five) fiscal year. In FY 2010, net working capital was112.66% and the sales was only 16.72 % more than FY 2009. So, the huge difference between the increased accounts caused the net working capital turnover to fall.

2006 2007 2008 2009 2010 NWC Turnover19 3.44 6.66 9.06 8.17 4.48

Table of NWC Turnover Ratio for Fiscal Year 2006-2010

Fixed Asset Turnover

Fixed asset turnover shows how much the firm is earning from investing in its fixed assets. The bigger the turnover, the better the firm gains from fixed assets investment. Square Pharmaceuticals Limited Bangladesh had average fixed assets worth of 4,084,733,699 BDT and it had increased by 147.64% between FY 2006 and 2010.

During FY 2006-2010, the average fixed asset turnover was 2.17; In FY 2006, it was highest among last 5 (five) FY and in following fiscal years the situation had worsen. In FY 2009, the worst fixed asset turnover was recorded for company’s past 5 (five) fiscal year. In FY 2010, though the situation had improved.

2006 2007 2008 2009 2010 Fixed Asset Turnover20 2.68 2.12 2.02 2.00 2.04

Table of Fixed Asset Turnover Ratio for Fiscal Year 2006-2010

Total Asset Turnover

Square Pharmaceuticals Limited Bangladesh had total asset turnover of 0.70 on average during FY 2006-2010. Total asset turnover represents a firm’s return from its investment in asset. Square pharmaceuticals total asset had increased by 61.63% and average total asset was approximately 12,153,959,574 BDT. The firm had worst asset turnover during FY 2006 and 2008. But in succeeding the asset turnover had raised to a healthy level.

2006 2007 2008 2009 2010 Total Asset Turnover21 0.65 0.72 0.65 0.74 0.76

Table of Total Asset Turnover Ratio for Fiscal Year 2006-2010

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PROFITABILITY RATIO ANALYSIS

Profit Margin

Profit margin ratio represents the figure of a firm’s earnings of net profits against its net sales. Every firm have desire to have a big profit margin. Though if a firm’s profit margin is low, it does not mean that the firm is losing money with every sale occurs in its favor. Square Pharmaceuticals Limited Bangladesh had net sales of 8,626,387,092 BDT on average and it had increased by 88.22% between FY 2006 and 2010. During the same fiscal period, on average the net income after tax was 1,565,779,054 BDT and had increased by 79.08%

In case of Square Pharmaceuticals, it’s profit margin had been stable during FY 2006-2010.The average profit margin was 0.18; In FY 2006, it was highest among last 5 (five) FY. Moreover, in following 2 (two) fiscal years the ratio had slightly fall. In FY 2007 and 2008 the net profit had increased by 11.78% and 6.03% respectively, compared to their earlier year. Though, net profit of FY 2009 had increased by 36.78% but in subsequent year its growth had dropped to 10.47%. However, net sales during FY 2007 and 2008 had increased by 23.17% and 10.09% respectively, compared to their preceding year and net sales of FY 2009 had increased by 18.93% but in subsequent year its growth had dropped to 16.72%. So as we can observe that growth of net sales and net profit of FY 2008, 2009 and 2010 were less than their respective preceding year, causing the profit margin ratio to fall.

2006 2007 2008 2009 2010 Profit Margin22 0.19 0.17 0.17 0.19 0.18

Table of Profit Margin Ratio for Fiscal Year 2006-2010

Return on Assets

Return on assets ratio or ROA represents firm’s net profits against its total assets. Like profit margin, if the number of ratio is big than it shows that the firm is earning well against the investment on firm’s assets.

For Square Pharmaceuticals Limited Bangladesh, the return on assets ratio on average was 0.13 during FY 2006-2010. In addition, the ratio did not fluctuate a lot during this period. So we can come to a conclusion that the firm did not face any serious financial issue to maintain the balance between its net income and total asset. However, in FY 2008, the ROA was lowest among last 5 (five) FY. It was caused by a low growth (6.03%) of net profit compared to its preceding year. At the same time, total asset increased by 21.13%. So the huge gap of growth between total asset and net profit caused ROA in 2008 to fall. Nevertheless, the company bounces back and had better ROA in FY 2009 than FY 2008. Since the growth of net profit (36.78%) was greater than the growth of total asset (4.31%) in FY 2009. In FY 2010 the ratio was indifferent with FY 2009 though the growth of net profit (10.47%) was less than the growth of total assets (16.72%). But the growth of net profit in FY 2009 was too huge which makes up the missing growth of FY 2010 and helped ROA to stay constant.

2006 2007 2008 2009 2010 Return on Assets23 0.13 0.12 0.11 0.14 0.14

Table of Return on Assets Ratio for Fiscal Year 2006-2010

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Return on Equity

Return on equity ratio or ROE represents firm’s net profits against its total equity. The difference between ROA and ROE is that ROE shows the difference between net profit and total equity of a firm.

For Square Pharmaceuticals Limited Bangladesh, the return on equity ratio on average was 0.18 during FY 2006-2010. Alike ROA, the ratio did not fluctuate a lot during this period. So we can approach to a conclusion that the firm did not feature any serious financial issue to maintain the balance among its net income and total equity. However, in FY 2008, the ROE was lowest among last 5 (five) FY. It was caused by a low growth (6.03%) of net profit compared to its preceding year. At the same time, total equity increased by 14.78%. So the gap of growth between total asset and net profit caused ROE in 2008 to fall. Nevertheless, the company bounces back and had better ROE in FY 2009 than FY 2008. Since the growth of net profit (36.78%) was twice than the growth of total equity (18.21%) in FY 2009. Because growth of net profit (10.47%) and total equity were (16.13%) less than its preceding year, in FY 2010 the ratio was a bit low than FY 2009

2006 2007 2008 2009 2010 Return on Equity24 0.18 0.18 0.16 0.19 0.18

Table of Return on Equity Ratio for Fiscal Year 2006-2010

MARKET VALUE RATIO ANALYSIS

Earnings per Share

Square Pharmaceuticals Limited Bangladesh had earnings per share of 180.55 BDT on average during FY 2006-2010. Earnings per share represent a firm’s profits from its each outstanding share. The company had outstanding shares of 9,406,908 on average and had increased by 203.75% during FY 2006-2010. At the same time net profit of the company was 1,565,779,054 BDT on average and had increased by 79.08%

In FY 2006, EPS was highest among last 5 (five) FY. Moreover, EPS after FY 2006 begun to fall, reached the minimum at FY 2010. Though, a descending EPS does not mean that the firm had performed badly during that fiscal period. In contrary, net profit and outstanding number of share had changed annually at a rate of 16.26% and 32.50% on average respectively during FY 2006-2010. Therefore, EPS of this company were falling after FY 2006 because the annual growth rate of outstanding share was greater than the annual growth rate of net profit.

2006 2007 2008 2009 2010 Earnings per Share25 234.67 218.61 154.53 156.56 138.36

Table of Earnings per Share ratio for Fiscal Year 2006-2010

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PE Ratio

Square Pharmaceuticals Limited Bangladesh had PE ratio of 18.42 on average during FY 2006-2010. PE ratio represents how much an investor is paying for one taka of current earning. A higher PE ratio shows that the firm has prospect for good return in future and a lower PE ratio refers opposite. Historical report on square pharmaceuticals shows that the firm’s price of share fluctuated during FY 2006-2010 a lot. In FY 2008 and 2009, the price per share was 4,110 BDT and 2,935 BDT respectively. So the price per share of FY 2009 was 28.59% less than its preceding year and it was 22.01% greater in FY 2010 than FY 2009.

In FY 2006, EPS was highest among last 5 (five) FY. Moreover, EPS after FY 2006 begun to fall, hit the minimum point at FY 2010 as stated in previous segment of ratio analysis. The EPS was recorded lowest in FY 2010, among last 5 (five) FY. The EPS of FY 2008 was 29.31% less than its preceding year. However the following fiscal year had an increase of 1.31% in EPS and FY 2010 had a decrease of EPS by -11.62% compared to FY 2009. Therefore, the inconsistent growth of EPS and PPS causes an inconsistent PE ratio throughout the FY 2006-2010. And based on current PE ratio, investors are expecting a great prospect of the company since 25.88 is a good figure as a PE ratio.

2006 2007 2008 2009 2010 PE Ratio26 9.70 11.19 26.60 18.75 25.88

Table of PE Ratio for Fiscal Year 2006-2010

Sales per Share

Square Pharmaceuticals Limited Bangladesh had sales per share of 996.11 BDT on average during FY 2006-2010. Sales per share represent a firm’s net revenue from its each outstanding share. The company had outstanding shares of 9,406,908 on average and had increased by 203.75% during FY 2006-2010. At the same time net sales of the company had increased by 8,626,387,092 BDT on average and had increased by 88.22%.

In FY 2007, SPS was highest among last 5 (five) FY. Moreover, SPS after FY 2007 begun to fall, reached the minimum at FY 2010. Though, a descending SPS does not mean that the firm had performed badly during that fiscal period. In contrary, net sales and outstanding number of share had changed annually at a rate of 17.23% and 32.50% on average respectively during FY 2006-2010. Therefore, SPS of this company were falling after FY 2007 because the annual growth rate of outstanding share was greater than the annual growth rate of net sales.

2006 2007 2008 2009 2010 Sales per Share27 1225.83 1258.19 923.45 813.50 759.60

Table of Sale per share Ratio for Fiscal Year 2006-2010

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Price- Sales Ratio

Square Pharmaceuticals Limited Bangladesh had price-sales ratio of 3.31 on average during FY 2006-2010. The smaller this ratio (less than 1.0) is usually thought to be a better investment since the investor is paying less for each unit of sales. Historical report on square pharmaceuticals shows that the firm’s price of share fluctuated during FY 2006-2010 a lot. In FY 2008 and 2009, the price per share was 4,110 BDT and 2,935 BDT respectively. The price per share of FY 2009 was 28.59% less than its preceding year and it was 22.01% greater in FY 2010 than FY 2009.

In FY 2006, SPS was highest among last 5 (five) FY. Moreover, SPS after FY 2007 begun to fall, reached the minimum at FY 2010 as stated in previous segment of ratio analysis. The SPS of FY 2008 was 26.60% less than its preceding year. However, SPS of FY 2009 and 2010 had decreased by 11.62% and 6.63% compared to their respective previous year. Therefore, the company had been doing bad cause the investors were paying more for each unit of sales as the price-sales ratio had increased after FY 2007.

2006 2007 2008 2009 2010 Price- Sales ratio28 1.86 1.94 4.45 3.61 4.71

Table of Price-Sales Ratio for Fiscal Year 2006-2010

Book Value per Share

Square Pharmaceuticals Limited Bangladesh had Book value per share of 1009.96 BDT on average during FY 2006-2010. This ratio states a firm’s value of equity per outstanding share. The company had outstanding shares of 9,406,908 on average and had increased by 203.75% during FY 2006-2010. At the same time total equity of the company was 8,731,218,110 BDT on average and had increased by 80.48%

In FY 2006, BPS was highest among last 5 (five) FY. Moreover, BPS after FY 2006 begun to fall, reached the minimum at FY 2010. Though, a descending BPS does not mean that the firm had performed badly during that fiscal period. In contrary, total equity and outstanding number of share had changed annually at a rate of 15.92% and 32.50% on average respectively during FY 2006-2010. Therefore, BPS of this company was falling after FY 2006 because the annual growth rate of outstanding share was greater than the annual growth rate of total equity.

2006 2007 2008 2009 2010 Book Value per Share29 1288.65 1230.08 941.25 824.16 765.68

Table of Book Value per Share Ratio for Fiscal Year 2006-2010

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Market to Book Ratio

Square Pharmaceuticals Limited Bangladesh had market to book ratio of 3.27 on average during FY 2006-2010. This ratio states comparison between firm’s market value and its cost of investment. A higher market to book ratio shows that firm’s market values is greater than its book value and negative ratio shows that firm’s market value is less than its book value. In FY 2008 and 2009, the price per share was 4,110 BDT and 2,935 BDT respectively. The price per share of FY 2009 was 28.59% less than its preceding year and it was 22.01% greater in FY 2010 than FY 2009.

In FY 2006, BPS was highest among last 5 (five) FY. Moreover, BPS after FY 2006 begun to fall alike EPS and reached at FY 2010 it was minimum of last 5 FY. In FY 2008 and 2009, the BPS was 23.48% and 12.44% correspondingly less than their respective previous year. As a result the book value per share dropped to 12.44% in FY 2009 and 7.09% in FY 2010 compared to their respective previous year. But, the market to book ratio increased to a better figure and clearly states that the company’s market value had increased.

2006 2007 2008 2009 2010 Market to book Ratio30 1.77 1.99 4.37 3.56 4.68

Table of Market to Book Ratio for Fiscal Year 2006-2010

DIVIDEND RATIO ANALYSIS

Dividend per Share

Square Pharmaceuticals Limited Bangladesh had dividend per share of 44.88 BDT on average during FY 2006-2010. This ratio states the amount of dividend a firm pays on each outstanding share. The average total dividend of the company was 368,781,120 BDT and had increased by 45.17% throughout FY 2006-2010. In FY 2008 the total dividend of share of the company had decreased by 20%. In FY 2009 and 2010, total dividend had increased by 20% and 35% respectively. The company had outstanding shares of 9,406,908 on average and had increased by 203.75% during FY 2006-2010. . In FY 2008 and 2009 the outstanding number of share of the company had increased by 50% and 35%, followed by a 25% increase in FY 2010 compared to their respective previous year. In FY 2008 and 2009 the dividend per share of the company dropped by 46.67% and 11.11%, compared to their respective previous year. But it increased by 8% in FY2010, offered a better dividend per share to it investor than FY 2009. DPS depends on firms outstanding number of shares and total dividend allotted for the shareholders. If a firm’s DPS is falling it does not mean that the firm is offering fewer dividends than before. It might reflect that the firm’s dividend growth is less than the growth of its outstanding number of shares. In case of square pharmaceuticals, the growth rate of share outstanding was greater than the growth of total cash dividend. And this caused the DPS to fall.

2006 2007 2008 2009 2010 Dividend per Share31 66.96 62.50 33.33 29.63 32.00

Table of Dividend per Share Ratio for Fiscal Year 2006-2010

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Payout Ratio

Square Pharmaceuticals Limited Bangladesh had payout ratio of 0.24 on average during FY 2006-2010. This ratio states how well the earning supports the dividend payment of the firm. A higher payout ratio refers that the firm have a strong backbone for its dividend and a lower payout ratio refers opposite. In FY 2008 and 2009 DPS were 33.33 BDT and 29.63 BDT. In FY 2009, it had dropped by 11.10% and in FY 2010 it had increased by 8%.

However, net sales during FY 2007 and 2008 had increased by 23.17% and 10.09% respectively, compared to their preceding year and net sales of FY 2009 had increased by 18.93% but in subsequent year its growth had dropped to 16.72%. Due to the difference situation of such growth and fall of both ratio, payout ratio fluctuated and in recent fiscal year.

2006 2007 2008 2009 2010 Payout Ratio32 0.29 0.29 0.22 0.19 0.23

Table of Payout Ratio for Fiscal Year 2006-2010

Retention Ratio

Square Pharmaceuticals Limited Bangladesh had payout ratio of 0.76 on average during FY 2006-2010. This ratio shows the proportion of net income, which is not paid as dividend. In other word we could say that this ratio reflects a company’s proportion retained earnings of net income. The higher retention ratio refers that the firm have greater retained earnings than cash dividend and lower retention ratio refers opposite. In FY 2008 and 2009 retained earnings were 97,418,224 BDT and 153,140,253 BDT. In FY 2009, its growth was 29.27% and in FY 2010 it had increased by 4.52%

However, net sales during FY 2007 and 2008 had increased by 23.17% and 10.09% respectively, compared to their preceding year and net sales of FY 2009 had increased by 18.93% but in subsequent year its growth had dropped to 16.72%. The company had better figure in retention ratio for past 5 (five) fiscal years. Due to the difference between the growth of retained earnings and net profit, the retention ratio was slightly different in each fiscal year

2006 2007 2008 2009 2010 Retention Ratio33 0.71 0.71 0.78 0.81 0.77

Table of Retention Ratio for Fiscal Year 2006-2010

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Free Cash Flow Ratio Analysis

Free Cash Flow per Share Square Pharmaceuticals Limited Bangladesh had FCF per share of 195.15 BDT on average during FY 2006-2010. This ratio shows a measure of a company's financial flexibility that is determined by dividing free cash flow by the total number of shares outstanding. This measure serves as a proxy for measuring changes in earnings per share. The free cash flow per share can be used to give a preliminary prediction concerning future share prices. When a firm's share price is low and free cash flow is on the rise, the odds are good that earnings and share value will soon be on the up, because a high cash flow per share value means that earnings per share should potentially be high as well. In FY 2008 and 2009 FCF were 2,032,183,105 BDT 1, 962,412,823 BDT. In FY 2009 and 2010, its reduction were 3.56% and 66.29%

However, The Company had outstanding shares of 9,406,908 on average and had increased by 203.75% during FY 2006-2010. . In FY 2009 and 2010 the outstanding number of share of the company had increased by 35% and 25% compared to their respective previous year. Therefore, the reduction of FCF and growth of share outstanding caused the FCF per share to decrease in FY 2009 and 2010.

2006 2007 2008 2009 2010 FCF per Share34 250.32 257.44 227.25 162.56 78.20

Table of FCF per Share Ratio for Fiscal Year 2006-2010

Price to FCF Ratio Square Pharmaceuticals Limited Bangladesh had price to FCF ratio of 20.11 on average during FY 2006-2010.This ratio refers a company's market price to its level of annual free cash flow. The bigger the ratio, the more valuable the company becomes in terms of its market values. Historical report on square pharmaceuticals shows that the firm’s price of share fluctuated during FY 2006-2010 a lot. In FY 2008 and 2009, the price per share was 4,110 BDT and 2,935 BDT respectively. The price per share of FY 2009 was 28.59% less than its preceding year and it was 22.01% greater in FY 2010 than FY 2009.

In FY 2007, price to FCF ratio was highest among last 5 (five) FY. Moreover, SPS after FY 2007 begun to fall, reached the minimum at FY 2010 as stated in previous segment of ratio analysis. The FCF per share of FY 2008 was 13.28% less than its preceding year. In addition, FCF per share of FY 2009 and 2010 had decreased by 39.79% and 107.88% compared to their respective previous year. As we can see, due to a huge gap between the growth of price per share and reduction of FCF per share, price to FCF ratio began to increase which states that the company faced a tough time to balance its FCF per share with price per share.

2006 2007 2008 2009 2010 Price to FCF Ratio35 9.09 9.51 18.09 18.06 45.79

Table of Price to FCF Ratio Ratio for Fiscal Year 2006-2010

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Capital Structure

FY Weight of

Debt

Weight of

Equity

Cost of Debt Cost of

Equity

WACC

2006 17.12% 82.88% 7.21% 13.21% 11.90% 2007 15.75% 84.25% 7.21% 13.21% 12.00% 2008 14.02% 85.98% 7.21% 13.21% 12.12% 2009 4.39% 95.61% 7.21% 13.21% 12.87% 2010 4.80% 95.20% 7.21% 13.21% 12.84% 100% Equity Financed*

- 100% - 13.21% 13.21%

50% Debt and 50% Equity Financed*

50% 50% 7.21% 13.21% 9.31%

* Fiscal year 2010

Value of Unlevered Firm Square pharmaceuticals EBIT had increased by 87.20% during FY 2006-2010 and average EBIT of each year was approximately 2,483,706,253 BDT. In FY 2010 EBIT was highest among last 5 (five) FY about 3,275,183,812 BDT. During this year the tax rate was 24.85% and unlevered cost of capital was 12.84%. As a result, square pharmaceuticals value of unlevered was 19,169,008,059 BDT Value of Levered Firm Square pharmaceuticals value of unlevered was 19,169,008,059 BDT in FY 2010. The amount of total debt 2,231,167,169 BDT and the tax rate was 24.85%. So the firm’s value as a levered firm was 19,723,453,100 BDT in FY 2010.

Present Value of Tax Shield Square pharmaceuticals Limited Bangladesh had a cost of debt of 7.21% in FY 2010. The amount of total debt 2,231,167,169 BDT and the tax rate was 24.85%. Present value of Tax Shield was 554,445,041 BDT

Graph of Capital Structure in FY 2010

,ܸୀૢ,ૠ, = + ×

In 2010 the value of the farm was 46,521,197,669 BDT, which was 4.80% debt financed and 95.20% equity financed. The value of the firm will be higher if they borrow more because of the tax shield but it also increases the cost of bankruptcy. After borrowing, from a certain level the value of the firm will decline. The chances of bankruptcy of the firm increases as soon it borrows more. So the optimal capital structure is at that point on which firm’s value ishigher and WACC is lower. higher and WACC is lower.

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Ratio / Fiscal Year 2006 2007 2008 2009 2010 Short Term Debt Ratio

Current Ratio 1.78 1.44 1.26 1.46 2.15 Quick Ratio 1.19 0.84 0.68 0.66 1.16 Cash Ratio 0.14 0.05 0.06 0.11 0.12 Interval Measure 349.23 260.83 268.30 206.31 216.61 Net Working Capital to Total Assets 0.19 0.11 0.07 0.09 0.17

Long Term Debt Ratio Total Debt Ratio 0.31 0.30 0.34 0.25 0.23 Debt-Equity Ratio 0.45 0.43 0.51 0.33 0.30 Equity Multiplier 1.45 1.43 1.51 1.33 1.30 Long Term Debt Ratio 0.09 0.06 0.07 0.04 0.08 Times Interest Earned 12.51 8.64 6.58 7.64 10.60 Cash Coverage Ratio 14.63 10.84 8.13 9.28 12.96

Turnover Ratio Inventory Turnover 2.63 2.76 2.40 2.70 2.97 Days Sales in Inventory 138.98 132.05 152.34 135.04 122.78 Receivables Turnover 21.09 23.23 22.92 20.56 22.55 Average Collection Period 17.31 15.71 15.92 17.75 16.18 Payables Turnover 44.41 70.43 48.10 45.66 16.62 Average Payment Period 8.22 5.18 7.59 7.99 21.96 NWC Turnover 3.44 6.66 9.06 8.17 4.48 Fixed Assets Turnover 2.68 2.12 2.02 2.00 2.04 Total Assets Turnover 0.65 0.72 0.65 0.74 0.76

Profitability Ratio Profit Margin 0.19 0.17 0.17 0.19 0.18 Return on Assets 0.13 0.12 0.11 0.14 0.14 Return on Equity 0.18 0.18 0.16 0.19 0.18

Market Value Ratio Earnings Per Share 234.67 218.61 154.53 156.56 138.36 PE Ratio 9.70 11.19 26.60 18.75 25.88 Sale Per Share 1225.83 1258.19 923.45 813.50 759.60 Price- Sales ratio 1.86 1.94 4.45 3.61 4.71 Book Value Per Share 1288.65 1230.08 941.25 824.16 765.68 Market to Book Ratio 1.77 1.99 4.37 3.56 4.68

Dividend Ratio Earnings Per Share 234.67 218.61 154.53 156.56 138.36 Divide Per Share 66.96 62.50 33.33 29.63 32.00 Payout Ratio 0.29 0.29 0.22 0.19 0.23 Retention Ratio 0.71 0.71 0.78 0.81 0.77

Free Cash Flow Ratio Free Cash Flow per Share 250.32 257.44 227.25 162.56 78.20 Price to Free Cash Flow Ratio 9.09 9.51 18.09 18.06 45.79

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Balance Sheet of Square Pharmaceuticals Limited Bangladesh for Fiscal Year 2006 - 2010

2006 2007 2008 2009 2010

ASSETS: Non-Current Assets: 5,267,302,357 6,804,429,292 8,291,290,984 9,407,730,001 10,255,189,084 Property, Plant and Equipment-Carrying Value

2,273,761,161 3,531,003,509 4,088,432,171 4,899,679,832 5,630,791,822

Capital Work-in-Progress 1,077,707,832 481,239,419 591,114,649 N/A 634,347,093 Investment - Long Term (at Cost) 1,915,833,364 2,792,186,364 3,611,744,164 4,508,050,169 3,990,050,169 Current Assets: 4,031,684,955 3,682,510,712 4,411,836,436 3,843,512,855 4,774,311,194 Inventories 1,342,364,478 1,544,191,798 2,026,736,322 2,098,755,231 2,207,078,082 Trade Debtors (Accounts Receivables) 288,732,137 322,864,637 360,245,646 477,562,002 508,249,174 Advances, Deposits and Prepayments 166,492,706 236,455,395 288,806,440 260,330,162 358,250,076 Investment in Marketable Securities (at Cost)

20,250,000 20,250,000 20,250,000 20,250,000 221,269,226

Short Term Loan 1,897,124,652 1,418,893,703 1,510,502,334 693,157,720 1,220,736,941 Cash and Cash Equivalents 316,720,982 139,855,179 205,295,694 293,457,740 258,727,695 TOTAL ASSETS 9,298,987,312 10486940004 12,703,127,420 13,251,242,856 15,029,500,278

SHAREHOLDERS' EQUITY AND

LIABILITIES:

Shareholders' Equity: 6,402,014,772 7,333,257,612 8,417,040,705 9,949,397,634 11,554,379,825 Share Capital 496,800,000 596,160,000 894,240,000 1,207,224,000 1,509,030,000 Share Premium 2,035,465,000 2,035,465,000 2,035,465,000 2,035,465,000 2,035,465,000 Shares Outstanding 4,968,000 5,961,600 8,942,400 12,072,240 15,090,300 General Reserve 105,878,200 105,878,200 105,878,200 105,878,200 105,878,200 Tax Holiday Reserve 947,678,690 1,101,935,237 1,101,935,237 1,101,935,237 1,101,935,237 Retained Earnings 2,816,192,882 3,493,819,175 4,279,522,268 5,498,895,197 6,802,071,388 Non-Current Liabilities: 636,217,059 598,116,106 785,241,612 660,976,668 1,258,376,052 Long Term Loans – Secured 602,349,621 492,569,379 602,584,615 449,757,608 1,032,633,110 Deferred Tax Liability 33,867,438 105,546,727 182,656,997 211,219,060 225,742,942 Current Liabilities: 2,260,755,481 2,555,566,286 3,500,845,103 2,640,868,554 2,216,744,401 Short Term Bank Loans 1,471,158,187 1,818,777,878 2,669,693,184 1,534,345,782 736,443,848 Long Term Loans - Current Portion 261,416,941 225,176,449 297,002,646 295,590,601 462,090,211 Trade Creditors (Accounts Payables) 79,390,166 60,601,743 100,953,258 124,222,699 394,715,915 Liabilities for Expenses 49,771,374 24,565,248 32,290,235 69,573,702 56,463,570 Liabilities for Other Finance 399,018,813 426,444,968 400,905,780 617,135,770 567,030,857 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES

9,298,987,312 10486940004 12,703,127,420 13,251,242,856 15,029,500,278

Income Statement of Square Pharmaceuticals Limited Bangladesh for Fiscal Year 2006 - 2010

2006 2007 2008 2009 2010

Net Turnover 6,089,905,396 7,500,811,349 8,257,843,739 9,820,796,568 11,462,578,410 Costs of Goods Sold (3,525,402,669) 4,268,447,662 (4,856,061,933) (5,672,565,973) (6,561,288,485) Gross Profit 2,564,502,727 3,232,363,687 3,401,781,806 4,148,230,595 4,901,289,925 Operating Expenses: (984,298,192) (1,406,611,448) (1,692,475,988) (1,779,793,368) (2,211,670,939) Selling and Distribution Expenses (798,131,173) (1,000,132,914) (1,220,979,268) (1,319,362,317) (1,687,210,447) Administrative Expenses (186,167,019) (406,478,534) (471,496,720) (460,431,051) (524,460,492) Profit from operation 1,580,204,535 1,825,752,239 1,709,305,818 2,368,437,227 2,689,618,986 Other Income 169,353,845 220,144,368 604,628,504 665,520,915 585,564,826 Earnings Before Interest Tax (EBIT) 1,749,558,380 2,045,896,607 2,313,934,322 3,033,958,142 3,275,183,812 Financial Expenses (139,863,636) (236,845,084) (351,868,423) (397,135,963) (308,861,107) NET Profit Before WPPF 1,609,694,744 1,809,051,523 1,962,065,899 2,636,822,179 2,966,322,705 Allocation for WPPF (76,652,130) (86,145,311) (93,431,709) (125,562,961) (141,253,462) NET Profit Before Tax 1,533,042,614 1,722,906,212 1,868,634,190 2,511,259,218 2,825,069,243 Provision for Income Tax (333,310,560) (347,984,083) (409,660,827) (592,644,226) (688,499,602) Provision for Deferred Income Tax (33,867,438) (71,679,289) (77,110,270) (28,562,063) (48,697,850)

Net Profit After Income Tax 1,165,864,616 1,303,242,840 1,381,863,093 1,890,052,929 2,087,871,791 Cash Dividend 332,640,000 372,600,000 298,080,000 357,696,000 482,889,600 Retained Earnings 833,224,616 930,642,840 1,083,783,093 1,532,356,929 1,604,982,191 Earnings Per Share (EPS) 234.67 218.61 154.53 156.56 138.36 Shares Outstanding 4,968,000 5,961,600 8,942,400 12,072,240 15,090,300

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1 Current Ratio Current Assets/ Current Liabilities 2 Quick Ratio (Acid Test) (Current Assets-Inventory)/ Current Liabilities 3 Net Working to Total

Assets (Current Assets-Current Liabilities)/ Current Assets

4 Interval Measure Current Assets/ Average Daily Operating Expense 5 Cash Ratio Cash and Cash Equivalent/ Current Assets 6 Total Debt Ratio (Total Assets- Total Equity)/ Total Assets 7 Debt Equity Ratio (Total Assets- Total Equity )/ Total Equity 8 Equity Multiplier Total Assets/ Total Equity or [1+ Debt Equity Ratio] 9 Long Term Debt Ratio Long Term Debt/ (Long Term Debt+ Total Equity) 10 Times Interest Measure EBIT/ Interest Expense 12 Cash Coverage Ratio (EBIT+ Depreciation)/Interest Expense 13 Inventory Turnover Cost of Goods Sold/ Inventory 14 Days to Sales Inventory 365/ Inventory Turnover 15 Receivables Turnover Net Sales/ Receivables 16 Days to Sales

Receivables 365/Receivables Turnover

17 Payables Turnover Cost of Goods Sold/ Payables 18 Days to Sale Payables 365/Payables Turnover 19 Net Working Capital

Turnover Net Sales/ (Current Assets-Current Liabilities)

20 Fixed Assets Turnover Net Sales/ Fixed Assets 21 Total Assets Turnover Net Sales/ Total Assets 22 Profit Margin Net Income/ Net Sales 23 Return on Assets Net Income/ Total Assets 24 Return on Equity Net Income/ Total Equity 25 Earnings Per Share Net Income/ Shares Outstanding 26 PE Ratio (Price Per Share)/ (Earning Per Share) 27 Sales Per Share Net Sales/ Shares Outstanding 28 Price-Sales Ratio Price Per Share/ Sales Per Share 29 Book Value Per Share Total Equity/ Shares Outstanding 30 Market to Book Ratio Market Value Per Share/ Book Value Per Share 31 Dividend Ratio Cash Dividend/ Shares Outstanding 32 Payout Ratio Dividend Per Share/ Earnings Per Share 33 Retention Ratio 1-Payout Ratio 34 FCF Per Share Free Cash Flow/ Shares Outstanding 35 Price to FCF Share Price Per Share/ FCF Per Share 36 Required Return on

Equity Risk Free Rate + 훽 × Market Risk Premium

37 Weighted Average Cost of Capital (Total Equity/Total Value)× 푅 + (Total Debt/ Total Value) × 푅 × (1− 푇 )

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Table of Data used for calculating Beta of Square Pharmaceuticals Limited Bangladesh

Date Stock Weekly Price (Close)

Index Weekly Price (Close)

Excess Stock Returns

Excess Market Returns

14-07-11 3,648.00 6,578.28 2.91% 4.22% 07-07-11 3,545.00 6,311.80 0.08% 3.18% 30-06-11 3,542.25 6,117.23 2.34% 4.62% 23-06-11 3,461.25 5,847.26 4.40% 1.23% 16-06-11 3,315.25 5,776.18 -1.04% -3.76% 09-06-11 3,350.25 6,001.90 0.49% 4.15% 02-06-11 3,334.00 5,762.71 1.84% 6.76% 26-05-11 3,273.75 5,397.62 -1.98% -5.60% 19-05-11 3,340.00 5,718.07 2.30% 4.29% 11-05-11 3,264.75 5,482.87 -2.32% -8.21% 04-05-11 3,342.25 5,973.09 2.80% 2.87% 26-04-11 3,251.25 5,806.31 -2.46% -7.10% 19-04-11 3,333.25 6,250.00 1.00% -0.20% 11-04-11 3,300.25 6,262.69 1.09% -4.18% 04-04-11 3,264.75 6,535.88 0.96% 4.68% 28-03-11 3,233.75 6,243.53 -2.07% -4.36% 21-03-11 3,302.25 6,528.21 4.67% 5.64% 13-03-11 3,155.00 6,179.53 4.02% 11.61% 06-03-11 3,033.00 5,536.91 2.04% 1.35% 27-02-11 2,972.50 5,463.35 -4.33% -7.81% 15-02-11 3,107.00 5,926.35 -7.89% -13.14% 08-02-11 3,373.00 6,822.85 -1.29% -6.29% 01-02-11 3,417.25 7,280.98 3.21% 6.74% 25-01-11 3,311.00 6,821.08 -5.78% -8.25% 16-01-11 3,514.25 7,434.59 10.64% 4.20% 09-01-11 3,176.25 7,135.02 -10.77% -14.08% 02-01-11 3,559.75 8,304.59 1.62% 2.57% 26-12-10 3,503.00 8,096.14 1.10% 5.77% 19-12-10 3,465.00 7,654.41 -5.78% -10.79% 09-12-10 3,677.50 8,580.20 -2.25% -2.92% 02-12-10 3,762.25 8,838.10 -2.09% 1.34% 25-11-10 3,842.50 8,721.09 -0.15% 3.29% 15-11-10 3,848.25 8,443.35 5.69% 5.89% 08-11-10 3,641.00 7,974.05 -1.39% 0.33% 01-11-10 3,692.25 7,947.80 -2.09% 2.68% 25-10-10 3,771.25 7,740.48 4.13% 3.29% 18-10-10 3,621.75 7,493.60 -0.21% 2.76% 10-10-10 3,629.50 7,292.54 2.63% 0.96% 03-10-10 3,536.50 7,223.49 -0.20% 3.81% 26-09-10 3,543.50 6,958.69 15.09% 1.66% 19-09-10 3,079.00 6,844.98 1.50% 0.55% 08-09-10 3,033.50 6,807.24 -2.41% 2.82% 30-08-10 3,108.50 6,620.33 2.25% -1.80% 23-08-10 3,040.19 6,741.38 -0.89% 1.79% 16-08-10 3,067.50 6,622.52 3.24% 0.31% 08-08-10 2,971.35 6,601.77 2.12% 2.56% 01-08-10 2,909.62 6,436.77 0.21% 0.50% 22-07-10 2,903.46 6,404.97 2.10% 1.51% 15-07-10 2,843.85 6,309.44 -3.52% -1.91% 08-07-10 2,947.69 6,432.50 -1.31% 4.53% 30-06-10 2,986.73 6,153.68 -4.08% -0.55% 23-06-10 3,113.85 6,187.50 -2.66% -1.00% 16-06-10 3,198.85 6,249.91 8.82% 0.89% 09-06-10 2,939.62 6,194.84 -1.29% 0.89% 02-06-10 2,978.08 6,140.21 0.73% 2.53% 25-05-10 2,956.54 5,988.94 5.11% 1.91% 18-05-10 2,812.88 5,876.55 -1.79% 2.59% 11-05-10 2,864.23 5,728.23 3.42% 3.50%

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04-05-10 2,769.62 5,534.65 2.46% -1.94% 27-04-10 2,703.08 5,644.19 -0.80% 0.63% 20-04-10 2,725.00 5,608.90 0.68% 1.47% 12-04-10 2,706.54 5,527.81 1.24% -0.82% 05-04-10 2,673.27 5,573.37 -1.79% 0.89% 29-03-10 2,721.92 5,524.11 -0.04% -0.69% 22-03-10 2,723.08 5,562.38 1.96% 3.48% 14-03-10 2,670.77 5,375.07 -1.36% -4.06% 07-03-10 2,707.50 5,602.59 -0.87% 0.76% 28-02-10 2,731.35 5,560.56 -1.52% -3.48% 18-02-10 2,773.46 5,760.95 -1.32% 2.22% 11-02-10 2,810.58 5,635.73 1.54% 3.71% 04-02-10 2,768.08 5,434.04 1.12% 0.81% 28-01-10 2,737.50 5,390.48 11.16% 5.80% 21-01-10 2,462.69 5,095.21 4.25% 5.32% 14-01-10 2,362.31 4,838.06 1.76% 2.46% 07-01-10 2,321.35 4,722.10 6.61% 4.11% 30-12-09 2,177.50 4,535.53 0.87% 2.87% 22-12-09 2,158.65 4,408.96 -1.72% -0.97% 14-12-09 2,196.35 4,452.20 -0.38% 2.59% 07-12-09 2,204.62 4,339.68 -2.39% -0.94% 26-11-09 2,258.65 4,380.95 5.50% 5.70% 19-11-09 2,140.96 4,144.75 2.42% 22.52% 12-11-09 2,090.38 3,382.87 1.83% -0.90% 05-11-09 2,052.88 3,413.53 0.39% 1.46% 29-10-09 2,044.81 3,364.26 -0.87% 1.40% 22-10-09 2,062.69 3,317.93 0.09% 1.02% 15-10-09 2,060.77 3,284.50 -2.27% 0.78% 08-10-09 2,108.65 3,259.04 1.68% 4.35% 01-10-09 2,073.85 3,123.24 7.79% 2.60% 16-09-09 1,924.04 3,044.11 1.89% 3.83% 09-09-09 1,888.27 2,931.86 -0.07% -1.43% 02-09-09 1,889.62 2,974.49 -0.68% -0.90% 26-08-09 1,902.50 3,001.60 -2.11% -1.09% 19-08-09 1,943.46 3,034.79 -2.81% 1.28% 11-08-09 1,999.62 2,996.49 -18.43% 2.39% 04-08-09 2,451.35 2,926.66 0.99% 2.27% 28-07-09 2,427.31 2,861.69 -0.14% 1.19% 21-07-09 2,430.77 2,828.07 -0.86% -3.05% 14-07-09 2,451.92 2,917.07 0.39% -1.43% 08-07-09 2,442.50 2,959.52 -14.91% -3.59% 02-07-09 2,870.38 3,069.71 -0.39% 6.51% 24-06-09 2,881.54 2,882.13 11.98% 3.64% 17-06-09 2,573.27 2,780.86 0.44% 1.37% Beta Coefficient of Square Pharmaceuticals Limited Bangladesh, 0.4706 = ࢼ Covariance = 10.037 Average Market Return Rate, 21.3305 = % Risk Free Rate,6 = %

CAPM= (-)ࢼ + = 6 % + (0.4706)(21.3305 % - 6 %) = 13.21 % Cost of Equity = 13.21 % Cost of Debt = 7.21 %

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Reference

1. www.squarepharma.com.bd 2. www.wikipedia.com 3. www.investopedia.com 4. Fundamentals of Corporate Finance by Ross,

Westerfield, Jordan. 9th edition

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