Time Interest Earned Ratio

8/12/2019 Time Interest Earned Ratio

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Number

Topics PageNumbe

r

1.1. Title Fly 1

2.2. Title page 2

3.3. Copyright Notice 3

4.4. Letter of Transmittal 4

5.5. Letter of Authorization 5

.. !roup"s #eclaration 6

$.$. Ac%no&le#gement 7

'.'. Ta(le of contents 8

).). List of Chart 9

1*.1*. List of !raphs 1011.11. Limitations of the report 11

12.12. An intro#uction to +,e-imco harma/ 12

13.13. Current ratio analysisCurrent ratio analysis 13

14.14. 0uic% ratio analysis0uic% ratio analysis 15

15.15. nentory turnoernentory turnoer 17

1.1. Aerage collection perio#Aerage collection perio# 18

1$.1$. Aerage payment perio#Aerage payment perio# 19

1'.1'. Total assets turnoerTotal assets turnoer 21

1).1). e(t ratio analysise(t ratio analysis 22

2*.2*. Time interest earne# ratio analysisTime interest earne# ratio analysis 24

21.21. Commonsize income statementCommonsize income statement 25

22.22. !rossprofit margin!rossprofit margin 2623.23. perating profit marginperating profit margin 27

24.24. Net profit margin.Net profit margin. 28

25.25. 6arnings per share 76896arnings per share 7689 29

2.2. :eturn on total assets 7:A9:eturn on total assets 7:A9 30

2$.2$. :eturn on common e;uity 7:69:eturn on common e;uity 7:69 31

2'.2'. rice


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Number Chart heads Page Number





5.5. Aerage payment perio#Aerage payment perio# 20

.. Total assets turnoerTotal assets turnoer 21

$.$. e(t ratio analysise(t ratio analysis 23

'.'. Time interest earne# ratio analysisTime interest earne# ratio analysis 24

).). Commonsize income statementCommonsize income statement 25

1*.1*. !rossprofit margin!rossprofit margin 26

11.11. perating profit marginperating profit margin 27




15.15. :eturn on common e;uity 7:69:eturn on common e;uity 7:69 32

1.1. rice


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Number Graph heads Page Number





5.5. Aerage payment perio#Aerage payment perio# 20

.. Total assets turnoerTotal assets turnoer 21

$.$. e(t ratio analysise(t ratio analysis 23

'.'. Time interest earne# ratio analysisTime interest earne# ratio analysis 24

).). !rossprofit margin!rossprofit margin 26

1*.1*. perating profit marginperating profit margin 27




14.14. :eturn on common e;uity 7:69:eturn on common e;uity 7:69 32

15.15. rice


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The analysis of financial statements is based on the use of ratio. Ratio analysis involvesmethod s of calculating and interpreting financial ratio to analyze and monitor the firms performance. Thebasic inputs to ratio analysis are the firms income statement and balance sheet.

Financial Ratios can be divided for convenience into five basic categories !i"uidity Ratio. #ctivity Ratio. $ebt Ratio. %rofitability Ratio. &ar'et Ratio.

Liquidi! R"i#$The li"uidity of a firm is measured by its ability to satisfy its short term obligation as they

come due. !i"uidity refers to the solvency of the firms overall financial position. These ratios are vie( asgood leading indicators of cash flo( problem.

The t(o basic measures of li"uidity ratio are) The current ratio. The "uic' *#cid Test+ ratio.

T%& 'u((&) ("i#$

The current ratio is one of the most commonly cited financial ratios. ,t measures the firmsability to meet its short - term obligation. ,t is epressed as follo(s

Cu((&) A**&*

Cu((&) R"i# +

Cu((&) Li"i-ii&*

11

Ratio AnalysisRatio Analysis


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14

T%& qui' A'id T&* ("i#$

The "uic' ratio is similar to the current ratio ecept that it ecludes inventory (hich isgenerally the least li"uid current assets. ,t is epressed as follo(s.

Cu((&) A**&* I)&)#(!

ui' ("i# +

Cu((&) Li"i-ii&*

088112343 - 114251081ui' ("i# .#( 2003 +

128959

; 0.51

4513123 - 1294594905ui' ("i# .#( 2004 +

150139343

; 0.62

2493849162 - 16825039ui' ("i# .#( 2005 +

30184368

;0.5

T%& qui' ("i#* #. B&/i'# P%"("$

Quick Ratio

1

2

3

ui' ("i#

2003 2004 2005 A&("&

071 063 072 066

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15

I)&((&"i#)$# "uic' ratio of 1.0 or greater is occasionally recommended .e can see from the abovecalculation that the "uic' ratio of eimco %harma is fluctuating over the year 002 to 003. #s eimco%harma is a pharmaceutical company its average ratio of .066 is relatively acceptable.

R&'#&)d"i#)$ although their "uic' ratio acceptable but they should increase their "uic' ratio. They canincrease their "uic' ratio by increasing their current assets or by decreasing their current liabilities

14


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R&'#&)d"i#)$For increasing their inventory turnover eimco pharma should increasetheir cost of goods sold.

17

A&("& '#--&'i#) &(i#d$The average collection period is the average amount of time need to collect accounts

receivable. ,t is useful in evaluating credit and collection policies. ,t is epressed as follo(s

A''#u) (&'&i"-&

A&("& C#--&'i#) P&(i#d +

A&("& S"-&* &( :"!

A''#u) (&'&i"-&

A&("& C#--&'i#) P&(i#d .#( 2003 +

A))u"- S"-&*

360

499655356 ;

18289593 260

; 8.8 days60008182

#verage /ollection %eriod for 004 ;4050096 260

; 89.9 days

559598942

#verage /ollection %eriod for 004 ; 2250354

260 ; 84.4 days

S%#; %& "&("& '#--&'i#) &(i#d #. B&/i'# P%"("$

@ear

2**3

Collectionerio#

'2.4

@ear

2**4

Collectionerio#

').)

@ear

2**5

Collectionerio#

'4.4

!vera"e co##ection $erio%

@ear Collection erio#

A&("& '#--&'i#) &(i#d

2003 2004 2005

824 d"!* 899 d"!* 844 d"!*

I)&((&"i#)$The average collection period is meaningful only in relation to the firms credit term. Thethere years payment periods 8.4 days 89.9 days and 84.4 days are "uiet poor rate. ,t is possible to

16


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eimoco that the lengthened collection period resulted from an intentional relaation of credit termenforcement in response to competitive reassure.

18R&'#&)d"i#)$,n this situation eimco pharma should reduce their average collection period. They

can do so by reducing their accounts receivable mare (ith their average sales per days.

A&("& "!&) &(i#d$#verage payment period is the average amount of time needed to pay accounts payable.

%rospective lenders and suppliers of trade credit are most interested in the average payment period because itprovides insight into the firms bill paying patterns. The average payment period is epressed as follo(s.

A''#u) "!"-&

A&("& P"!&) P&(i#d +

A&("& u('%"*& &( d"!

A''#u) "!"-&

A&("& P"!&) P&(i#d .#( 2003 + A))u"- u('%"*&*

360

16828353 ;

0.50 < 1233548848 260

16828353

; 626158

; 62.9 days.

06448258#verage %ayment %eriod for 004 ;

0.50 < 125899281 260

06448258 ;

6813

;56.99 days.

16660542#verage %ayment %eriod for 003 ;

0.50 < 15683262 26016660542

;2428592

15


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; 62.0 days.

19

T%& "&("& "!&) &(i#d #. B&/i'# P%"("$

!vera"e &ay'ent $erio%

2**3>

34A

2**4>33A

2**5>

33A 1

2

3

A&("& "!&) &(i#d

2003 2004 2005

639 d"!* 7699 d"!* 630 d"!*

I)&((&"i#) $The average payment period is meaningful only in relation to the avg /redit termsetended to the firm. The avg payment period for beimco from 002 to 003 are 62.9 days 56.99 days and62.0 days. ,f the companys suppliers have etended and average of 20 days credit terms then the eimcoavg payment period is very poor.

R&'#&)d"i#)$eimco pharma should reduce their payment period. The can do so by reducing theiraccounts payable as much as possible compare to their average purchase per day.

18


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0

T#"- "**& u()#&($

Total asset turnover is indicates the efficiency (ith (hich the firm uses its assets to generatesales. This measure is probably of greatest interest to management because it indicates (hether the firmsoperations have been financially efficient. ,t is calculated as follo(s

S"-&*

T#"- "**& u()#&( +

T#"- A**&*

18289593

Total asset turnover for 002 ; 80806341

; 0.5 times

4050096Total asset turnover for 004 ;

863849654

; 0.8 times

2250354Total asset turnover for 003 ;

10943459980

; 0.20 times T%& #"- "**& u()#&( #. B&/i'# P%"("$

ota# !((eturnover

2**3>

34A

2**4>

33A

2**5>

33A 1

2

3

T#"- "**& u()#&(

2003 2004 2005

027 i&* 028 i&* 030 i&*

I)&((&"i#)$7enerally the higher a firms total asst turnover the more efficiently its assets have beenused. Form the above calculation (e can see the Total #sset Turnover of eimco pharma is graduallyincreasing. The average of the three years total asset turnover is 0.82 that means the company turnover itsassets 0.82 times a year. ,t is a very poor rate.

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R&'#&)d"i#)$eimco pharma ltd. should increase their total asset turnover ratio. Theyneed to increase their sales as much possible for increasing their turnover ratio

21

:& R"i#$

There are t(o basic measures of debt ratio calculation. $ebt ratio. Time interest earned ratio.

:& ("i#$

The debt ratio is measures the proportion of total assets financed by the firms creditors. Thisratio indicates that the company has financed close to half of its assets (ith debt. The debt ratio calculated asfollo(s

T#"- Li"i-ii&*

:& R"i# +

T#"- A**&*

2003 2004 2005

0


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ASSETS$

Cu((&) A**&*,nventories

#ccount receivable

!oans #dvances = deposits

/ash = /ash e"uipments/urrent account (ith related parties

N#)< Cu((&) A**&*$

%roperty %lant = >"uipment /arryingvalue,nvestment in shares

T#"- A**&*

LIABILITIES$

Cu((&) Li"i-ii&*$

:hort term borro(ing from ban'!ong term borro(ing)current maturity

/reditors = other payables

#ccrued epenses

$ividend payable

,ncome ta payable

/ustomer debenture

N#)< 'u((&) Li"i-ii&*$

!ong term orro(ing -?et off currentmaturity

!iability for gratuity = %%F$eferred Ta liability

T#"- Li"i-ii&*

2088113545

5,940,092,996

8,028,206,541

1,328,229,729

2,056,362,293

3,384,592,022

2471513225

6,186,983,049

8,658,496,274

1,701,529,545

2,120,954,071

3,822,483,616

3495849163

7,449,630,817

10,945,479,980

2,501,824,568

1,622,730,360

4,124,554,928

C"-'u-"i#) #. d& ("i# #. B&/i'# P%"("$

1

114251081

499655356

42981290

491186542981290

1294594905

60008182

468680822

800920)))

16825039

559598942

602564921

4836220)))

3893916546

4415630

614986599

2513630

514454365

2513630

959186301

)))

16828353

12359512

106531

4189829

1538285

111910904984482

06448258

4651685

1063425

694015

)))

10601119

1066020935

16660542

101839824

820440

3442140

)))

1996908089

)))

3943404

1919249631

13839361142008809

1285433909

190032330430901


15/40

)e*t Ratio

2**3>

34A

2**4>

33A

2**5>

33A 1

2

3

Total !iabilitiesTotal #ssetsCu((&) R"i#

2003 2004 2005

228439080806341

42 =

28482616863849654

44 =

4143349810943459980

376 =

I)&((&"i#)$The debt ratios of eimco pharma from 002 to 003 are 0.4 0.44 and 0.25 respectively.e can see the debt ratio of the firm is gradually decreasing the higher this ratio the greater the firmsdegree of indebtedness and the more financial leverage it has.

R&'#&)d"i#)$Their debt ratio should be more lo( . ,t is recommended to eimco to reduce theirliabilities by avoiding the finance by creditors as much as possible.

23

Ti& i)&(&* &"()&d ("i#$


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Time interest earned ratio is measures the firms ability to ma'e contractual interestpayment .The higher its value the better able the firm is to fulfill its interest obligation. :ometimes it calledthe interest coverage ratio. ,t is epressed as follo(s.

E"()i) &.#(& i)&(&* > "/

Ti& i)&(&* &"()&d ("i# +

I)&(&**

C"-'u-"i#) #. i& i)&(&* &"()&d ("i# #. B&/i'# P%"("$

i'e Intere(t +arne% Ratio

2**3

2**4

2**5

>arning before interest = ta,nterest

Ti& i)&(&* &"()&d ("i#

2003 2004 2005

42008253136601306

27 =

336215848109358413

5 =

54231518194924

326 =

I)&((&"i#)$The time interest earned ratio of 2.0 and closer to 3.0 is acceptable. The time interest earnedratio for eimco is "uite acceptable thus it has a good margin of safety.

R&'#&)d"i#)$#s the higher the value of time interest earned ratio the higher the firms ability to fulfillits interest obligations. :o eimco should increase more of their ratio by increasing their >arning beforeinterest and taes.

24

P(#.i"i-i! R"i#$

2


17/40

%rofitability ratios evaluate the farms profits (ith respect to a given level of sales a certainlevel of assets or the o(ners investment.

There are different measures of profitability ratios these are - /ommon)size income statement.

7ross)profit margin. @perating profit margin. ?et profit margin. >arnings per share *>%:+. Return on total assets *R # @+. Return on common e"uity *R@>+.

C##)


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increase in its selling and administrative epense from 13.83B in 004 to 1.49B in 003 decreased itsoperating profit margin from 2.135B to 1.55B .ut epenses (hich are increased from 004 to 003resulting an increased rate of 14.51B of sales of net profit margin in 003. *,n 004 it (as 12.51B+.

R&'#&)d"i#)$#s (e can see in operating epenses selling and administrative epenses increased from004 to 003 .:o eimco %harma should try to reduce their these epenses.

G(#**


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O&("i) (#.i "(i)$

@perating profit margin &easures the percentage of each sales dollar remaining after all costsand epenses other than interest taes and preferred stoc' dividends are deducted the CCpure profits earnedon each sales dollar. The operating profit margin is calculated as follo(s O&("i) (#.i O&("i) (#.i "(i) +

S"-&*

C"-'u-"i#) #. #&("i) (#.i "(i) #. B&/i'# P%"("$

S"-&*

/ost of goods sold

2003 2004 2005

2,183,829,795

*1233548848+2,402,700,962

*125899281+3,327,022,574

*15683262+ G(#** P(#.i

O&("i) &/&)*&* $

#dministrative epenses:elling = $istributing epense

P(#.i .(# #&("i#)*

828,080,947

*29599835+1,023,771,581

*465432522+1,558,500,211

*824148492+

430,082,375 556,317,848 724,351,718

T%& #&("i) (#.i "(i) ("i# #. B&/i'# P%"("$

.$eratin" &ro,it -ar"in

2**3> 34A

2**4> 33A

2**5> 33A

O&("i) P(#.i "(i)

2003 2004 2005

1969 = 2315 = 2177 =

I)&((&"i#)$@perating profit margin of eimco %harma is fluctuating from 002 to 004 it increasesfrom 14.69B to 2.13B but from 004 to 003 it decrease from 2.13B to 1.55B of salesdue to deceasein operating profit.

R&'#&)d"i#)$ eimco %harma should increase their operating profit by reducing their operatingepenses .

27

N& (#.i "(i)$

6

*842922+*21266940+

*86698224+ *280533299+

*119006323+*513141938+


20/40

The net profit margin measures the percentage of each sales dollar remaining after all costsand epenses including interest taes and preferred stoc' dividends have been deducted. The higher thefirms net profit margin the better. The net profit margin is calculated as follo(s

E"()i)* ""i-"-& .#( '##) *#' %#-d&(

N& (#.i "(i) +

S"-&*

C"-'u-"i#) #. N& (#.i "(i) #. B&/i'# P%"("$

:ales/ost of goods sold

2003 2004 2005

18289593*1233548848+

4050096*125899281+

2250354*15683262+

G(#** P(#.iO&("i) &/&)*&* $

#dministrative epenses:elling = distributing epense

%rofit from operations@ther incomeFinance cost

N& (#.i &.#(& '#)(iui)

# @PPF

/ontribution to (or'ers profitparticipationA(elfare fund

N& (#.i &.#(& "/

,ncome ta epense

/urrent Ta$eferred Ta incomeAepense

N& (#.i ".&( "/&"()i) ""i-"-&

.#( '##) *#' %#-d&(*

88080945*29599835+

420082532218390

*136601306+

102551381*465432522+

3362158482831006

*190358413+

133830011*824148492+

5423151852609

*194924+

56599439

*1218096+

62618322*36458165+

207,140,366

269390429

*1399409+

232661020*48330+

329,375,780

309623002

*468222+

483266650*2893094+

489,261,764

8

T%& N& (#.i "(i) ("i# #. B&/i'# P%"("$

5

*842922+*21266940+

*86698224+*280533299+

*119006323+*513141938+

*4616906+3006410

*2895306+*1530961+

*8469982+4184522


21/40

/et &ro,it -ar"in

2**3

2**4

2**5

12

3

N& P(#.i "(i)

2003 2004 2005

949 = 1371 = 1471 =

I)&((&"i#)$ The value of net profit margin differ from industry to industry. eimco %harma is a

manufacturing company .:o its net profit margin of 14.51B is considerable acceptable and it is alsogradually increased from 002 to 003 .

R&'#&)d"i#)$ #s their gross profit margin is increasing they should continue their (or' accordingly.ut if they (ant to increase more than eimco %harma is suggested to try to decrease their cost of goodssold as much as possible.

E"()i)* &( *%"(& EPS$

The earnings per share are generally of interest to present or prospective stoc'holders andmanagement. >%: represents the number of dollars earned during the period on behalf of each outstanding

share of common stoc'. >arning per share is calculated as follo(s

E"()i) ""i-"-& .#( '##) *#' %#-d&(*

E"()i)* &( *%"(& EPS +

Nu&( #. *%"(&* #. '##) *#' #u*")di)

29

T%& E"()i) &( *%"(& #. B&/i'# P%"("$

8


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+arnin" &er 0hare

2**3

2**4

2**5

1 2 3

?umber of shares of common stoc' outstanding>arning available for common stoc' holdersE"()i) &( *%"(&

2003 2004 2005

339563005140266

37

699502129253580

471

5685844648961564

636

R&u() #) #"- "**&* RAO$

The return on total assets measures the overall effectiveness of management in generatingprofit (ith its available assets. ,t is often called the return on investment.The return on total assets iscalculated as follo(s

E"()i) ""i-"-& .#( '##) *#' %#-d&(*

R&u() #) #"- "**&* RAO +

T#"- "**&

C"-'u-"i#) #. T#"- "**&* #. B&/i'# P%"("$

?on current assets

%roperty %lant = >"uity carryingvalue,nvestment in shares

/urrent #ssets

,nventories

#ccount Receivable

!oans #dvance = deposits

/ash = /ash >"uipments

T#"- A**&*

2003 2004 2005

394009996

05564850

801835866

6186982049

4513123

863849654

5449620815

2493849162

10943459980

30

C"-'u-"i#) #. R&u() #) #"- "**&* #. B&/i'# P%"("$

9

3893916546

4415630

614986599

2513630

541454365

2513630

114251081

499655356

44464613

4911865

1294594905

60008182

468680822

800920

16825039

559598942

602564921

4836220


23/40

Return .n ota# !((et

2**3

2**4

2**5

1

23

>arning available for common stoc' holdersTotal #ssetsR&u() #) T#"- A**&*

2003 2004 2005

05140266801835866

259 =

29253580863849654

380 =

4896156410943459980

447 =

I)&((&"i#)$ The value of R@# indicates that ho( much the company can earn on each dollarinvestment .The R@# of eimco %harma is increasing every year and in 003 it stri'es 4.45B .Thatmeans the eimco %harma has earned T'. 4.45 for each dollar investment.

R&'#&)d"i#)$ They should try to increase their earnings available for common stoc'holder tomaimize their R@#.

R&u() #) '##) &qui! ROE $The return on common e"uity measures the return earned on the common stoc'holders

investment in the firm. The higher this return the better off is the o(ners. Return on common e"uity iscalculated as follo(s

E"()i) ""i-"-& .#( '##) *#' %#-d&(*

ROE +

C##) *#' &qui!

C"-'u-"i#) #. S%"(&%#-d&(* Equi! C##) *#' &qui! #. B&/i'# P%"("$

S%"(&%#-d&(* Equi!

C##) *#' &qui!$

,ssued share capital:hare premium>cess of price over face value of

7$R/apital reserveTa holding reserveRetained earnings

2003 2004 2005

4,596,420,977 8,360,126,658 6,820,925,052

31

C"-'u-"i#) #. R&u() #) C##) Equi! #. B&/i'# P%"("$

20

308853000

1489530000

))))))

))))))

109003309

1305542468

33956300

1489530000

))))))

))))))

443233048

241143110

9391360

1489530000

969153203

94930930

414348999

69284158


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Return .n Co''on +1uity

2**3

2**4

2**5

1

2

3

>arning available for common stoc' holders/ommon stoc' e"uityR&u() #) C##) Equi!

2003 2004 2005

05140266439640955

451 =

29253580826016638

681 =

489615646809303

717 =

I)&((&"i#)$ The R@> of eimco %harma is found in good condition from 002 to 003 . The R@>indicate that during the years *002 to 003+ eimco %harma has earned 4.31 6.81 and 5.15 on each ta'aof common stoc'.

R&'#&)d"i#)$ They should try to increase their earnings available for common stoc'holder tomaimize their R@# e"uity.

32

21


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"(& R"i#$&ar'et ratios relate the firms mar'et value as measured by its current share price to certain

accounting values. These ratios give insight into ho( (ell investors in the mar'et place feel the firm is doingin terms of ris' and return.

e consider t(o types of popular mar'et ratios these are) %riceA>arnings *%A>+ ratio. &ar'etAoo' *&A+ ratio.

P(i'&E"()i)* PE ("i#$

The price A earnings *%A>+ ratio is commonly used to assess the o(ners appraisal of sharevalue. The %A> ratio measures the amount that investors are (illing to pay for each dollar of a firmsearnings. The %A> ratio is calculated as follo(s

"(& P(i'& &( *%"(& #. '##)

P(i'&&"()i)* PE ("i#$ +

E"()i)* &( *%"(&

C"-'u-"i#) #. P(i'&E"()i)* PE ("i# #. B&/i'# P%"("$

2**3

1*.$4

2**4

1).55

2**5

).*)

&rice 2 +arnin" Ratio

@ear rice < 6arnings :atio

&ar'et price per share of common stoc'>arning %er :hare *>%:+P(i'&&"()i)* PE ("i#

2003 2004 2005

29.52.5

1074

9.104.51

1955

35.806.26909

I)&((&"i#)$ %A> ratio of eimco industries that the investors (as (illing to pay T'. 10.54 19.33 and9.09 follo(ed by the years 002 to 003 for each ta'a of earnings of eimco %harma.

R&'#&)d"i#)$They should increase their mar'et price of common stoc' for increasing %A> ratio.Dnless they (ill fail to attract the confidence of the investors.

33

2


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"(&B## B ("i#$

The mar'et Aboo' *&A+ ratio provides an assessment of ho( investors vie( the firmsperformance. ,t relates the mar'et value of the firms shares to their boo')strict accounting - value. Tocalculate the firms &A ratio (e first need to find the boo' value per share of common stoc'.

C##) *#' &qui!

B## "-u& &( *%"(& #. '##) *#' +

Nu&( #. *%"(& #. '##) *#' #u*")di)

C"-'u-"i#) #. B## "-u& &( *%"(&* #. '##)* #' #. B&/i'# P%"("$

/ommon stoc' e"uity?umber of shares of common stoc' outstandingB## "-u& &( *%"(&* #. '##)* #'

2003 2004 2005

4396409553395630

8211

4826016386995021

6912

680930356858446

8872

Then the mar'et value is calculated as follo(s"(& (i'& &( *%"(& #. '##) *#'

"(& B## B ("i# +

B## "-u& &( *%"(& #. '##) *#'

C"-'u-"i#) #. "(& B## B ("i# #. B&/i'# P%"("$

2**3

*.4'

2**4

1.33

2**5

*.5

1 2 3

@ear =ar%et < ,oo% :atio

"(& B## B ("i#

2003 2004 2005

048 133 065

24

22SustainableSustainable

GrowthGrowth


27/40

F#( !&"( 2003

:ustainable gro(th *g+ ; b < R@>here b ; 1) $ividend payout ratio

; 1) 0.10 ; 0.90

Su*"i)"-& (#;% ; 0.90 < 0.0431 ; 0.04039 ; 4.039 B

F#( !&"( 2004

:ustainable gro(th *g+ ; b < R@>

here b ; 1) $ividend payout ratio ; 1) 0.03 ; 0.93

Su*"i)"-& (#;% ; 0.93 < 0.0681 ; 0.064693 ; 6.45 B

F#( !&"( 2005

:ustainable gro(th *g+ ; b < R@>here b ; 1) $ividend payout ratio

; 1) 0.13 ; 0.83Su*"i)"-& (#;% ; 0.83 < 0.0515

; 0.060943 ; 6.0943 B

S%#; %& Su*"i)"-& (#;%#. B&/i'# P%"("$

Su*"i)"-& (#;%

2003 2004 2005

4059= 647= 609=

24


28/40


B"*& &"(

2005

5= G(#;% 10= G(#;% 20= G(#;%

2250354*15683262+

2492252502*1836948481+

263954821*1943254399+

29945089*16826+

G(#** P(#.iO&("i) &/&)*&* $


%rofit from operations

@ther incomeFinance cost

N& (#.i &.#(& '#)(iui)

# @PPF


N& (#.i &.#(& "/

,ncome ta epense

/urrent Ta

$eferred Ta incomeAepense

N& (#.i ".&( "/

(")*.&((&d # *"&&) #.

'%")&* i) &qui!

E"()i) P&( *%"(&

1,558,500,211

834,148,493

54231518

52609*194924+

1,636,425,222

875,855,918

560369204

539429*22046590+

1,714,350,232

917,563,342

596586890

5933850*4414436+

1,870,200,053

1,000,978,192

869061

8659121*66229189+

509,635,003

*468222+

485,366,670

2893094

489,261,764

6 36

535,116,753

*3481530+

509,635,004

4089849

513,724,852

6 678

560,598,503

*6693166+

611,562,004

*911910+

533,903,337

484602

538,187,940

6 996

582,440,004

4654112

587,144,117

7 632

23

*119006323+*513141638+

*1493686+*530899036+

*120905189+*586636134+

*3058399+

3305032

*4616906+

3006410

*48455455+

336526

*1480584+*838150230+

*3340821+

60056944

Calculation of Best Scenario of Beximco


29/40


B"*& &"(

2005

5= G(#;% 10= G(#;% 20= G(#;%

2250354*15683262+

2160651443*168009643+

99420215*139165015+

661618039*1414815890+

G(#** P(#.iO&("i) &/&)*&* $


%rofit from operations

@ther incomeFinance cost

N& (#.i &.#(& '#)(iui)

# @PPF


N& (#.i &.#(& "/

,ncome ta epense

/urrent Ta

$eferred Ta incomeAepense

N& (#.i ".&( "/

(")*.&((&d # *"&&) #.

'%")&* i) &qui!

E"()i) P&( *%"(&

1,558,500,211

834,148,493

5423151852609*194924+

1,480,575,200

792,441,068

688124126850959*10831838+

1402,650,190

750,733,644

6319163466309248*19953429+

1,246,800,169

667,318,794

3594812543586085*155339439+

509,635,003

*468222+

485,366,670

2893094

489,261,764

6 36

484,153,253

*2034916+

461,098,337

2500229

464,798,676

6 042

458,671,503

*1841410+

407,708,002

*19414666+

436,830,003

2303383

440,335,588

5724

38,829,336

2116053

391,409,411

5 088

25

26

*119006323+*513141638+

*11203608+*659284860+

*10510388+*6426556+

*413312+43035550

*4616906+3006410 *42860353+45360914

*93038+*35112366+

*269231+4003196

Calculation of Worst Scenario of Beximco

Risk AnalysisRisk Analysis


30/40

:& &qui! ("i#

The debt ratio is measures the proportion of total assets financed by the firms creditors. Thisratio indicates that the company has financed close to half of its assets (ith debt. The debt ratio calculated asfollo(s

T#"- Li"i-ii&*

:& R"i# +

T#"- A**&*

C"-'u-"i#) #. d& ("i# #. B&/i'# P%"("$

Total !iabilitiesTotal #ssetsCu((&) R"i#

2003 2004 2005

22843908080634142 =

2848261686384965444 =

4143349810943459980376 =

Ti& i)&(&* ("i#Time interest earned ratio is measures the firms ability to ma'e contractual interest

payment .The higher its value the better able the firm is to fulfill its interest obligation. :ometimes it calledthe interest coverage ratio. ,t is epressed as follo(s.

E"()i) &.#(& i)&(&* > "/

Ti& i)&(&* &"()&d ("i# +

I)&(&**

C"-'u-"i#) #. i& i)&(&* &"()&d ("i# #. B&/i'# P%"("$

>arning before interest = ta,nterest

Ti& i)&(&* &"()&d ("i#

2003 2004 2005

42008253136601306

27 =

336215848109358413

5 =

54231518194924

326 =

Bu*i)&** (i*

25


31/40

/alculation of usiness Ris' *R+ of eimco phama usiness Ris' is the chance that

the firm (ill be unable to cover its operating costs.

e 'no(

R ; E*/.. of >,T+ of a firm Gere i ; >,T

n; ?o. of years.

:td. $eviation of >,T

;

&ean of >,T

; HI *i)+ n

I iAn

T%& EBIT #. B&/i'# P%"("D* .(# 2003 # 2005 i* i&) &-#;$

&"( 2003 2004 2005EBIT 430082,375 556,317,848 724,351,718

J i

;

42008253 K 336215848 K 54231518

;

2

; 35030645

H *42008253)35030645+K *336215848)35030645+K*54231518)35030645+

R ;

35030645

; 0.114; 0.1; 1.14B

28


32/40

Fi)")'i"- (i*

T%& C"*% .-#; '#&("& R"i# #. B&/i'# P%"("D* .(# 2003 # 2005 i* i&) &-#;$

?et opearting /Fs/ash flo( coverage Ratio for 002 ;,nternet A FiancL cost

20503089 ;

136601306

; .03

6846099/ash flo( coverage Ratio for 004 ;190358413

; 1.41

349142666/ash flo( coverage Ratio for 003 ;

1 946 24

; .45

29

FINDINGS


33/40

From the study of Beximco pharma are have found the liquidity, of the

pharma desirable.

The inventory level of Beximco pharma is also seems good.

There is some problem with the companys accounts Receivable section. The

average collection period is above that of industry average.

Beximco harmas indebtedness is quiet consistent.

!n the other hand the profitability of the company is more than the company

average

"arnings per share #"$% of the company is also increasing each year.

&e have also seen that the mar'et Ratio of the company is dertreasing every

year.

(ompared to other company in the industry Beximco pharma shows good

erformance in all the sectors.

40


34/40

@n the basis of the findings (e have some recommendations for beimco %harma.

Those are discussed belo(.

,t is recommended to eimco pharma to maintain their li"uidity level. They should

try their best to reduce their current liabilities.

The management of eceivablies and payables of eimco pharma need to beeamined as they fail to perform (ell.

41

RecommondatioRecommondatio

nn


35/40

R&.&(&)'&&.&(&)'& $$ #nnual report of eimco %harmaceutical !td. *Mear - 002 004 003+

,ndustry report *year ) 003+

. eimcopharma.com

4

Summarization o Ratios


36/40

Liquidi!$The overall li"uidity seems to ehibit a fluctuating trend having been maintained at a

level that is relatively lo( (ith the industry average in 003. The firms li"uidity seems to be poor.

A'ii!$eimco %harms inventory level seems good. #lthough its inventory management

seems to have improved but in 003 it fail to perform at a level of industry average. There is some

problem (ith the companys #AR :ection. The average collection period is above that of the industry

eimoc is also slo( in payment of its bills. This could adversely affect the firms credit standing. Themanagement of receivables and payables shoudl be eamined eimcos . Total asset turnover reflects a

increase in the efficiency of total asset utilization from 002 to 003. #lthough in 003 it is less than

the industry average. @verall (e can say eimcos activity ratio is Nuito acceptable.

:&$eimco %harmas indebtedness decreases from 004 to 003 but in 002 to 004 it (as

less than industry average it could be cause for alarm the firms ability to meet interest and fied payment

obligations to a level that performs the industry. Go(ever in 004 it sho(s a good increase in debt ratioof the company. @verall (e can say the overall datedness of eimco ehibit a level that is relatively

consistent (ith industry average in 003. The firms datedness seems to be good.

P(#.i"i-i!$eimco pharmas %rofitability relative to sales in 003 (as better than the average

company in the industry . The gross profit operating profit and net profit margin of the firm (as

relatively favorable to industry average as (ell as its past performance. The firms >arning per share

*>%:+ return on total assent *R@>+ behave much as its profit margin from 002)003. #lthough it (asvery less compared (ith the industry.

@verall (e can say the firms profitability is more safe than other industry.

42


37/40

"(& R"i#$,nvestors have greater confidence in the firm from 002)003 as reflected in %A> ratio.

Go(ever this ratio is belo( the industry average. The %A> ratio indicates that the firms risle has

declined but it is slightly above the other company in the industry.The firms &A ratio has increased over the years but it (as too la( compared (ith the industry. This

means in vectors are hopeful about the companys future but not enough compared (ith others in the

industry. The investors are epecting to earn high future returns as compensation for the firms above

average ris'.

,n summary the firm appears to be gro(ing and has recently undergone as epansion in assets financed

primarily through the use of debts. The 002)003 period seems to reflect a phase of adOustment and

recovery from the rapid gro(th in assets. eimcos sales profits and other (ith the increase in size of

the operation. ,n addition the mar'et response to these positive. ,n short the firm seems to have done

(ell in 003.

44eer Groupnalysis


38/40

%eer group analysis in normally done to evaluate the performance of a company compared (ithits competitor in the industry. ,t helps the company to find out their lac's and the (ay to improve it.

e have chosen #/, !td. For peer group analysis as it follo(s the same. usiness line aseimco and it is one of the 'ey competitors of eimco pharma.

Gere (e have compared different ratios of eimco pharma of the year 003 (ith #/, !td.

I)&((&"i#)$

From the table (e can see li"uidity of eimco pharma maintained a goog figure than #/,. Thismeans eimco has more capacity to satisfy its short term obligations as they come due.

The #ctivity ratio sho(s a favorable vie( to #/, .The average payment and collection period of#/, is very good compared (ith eimco. This implies that the speed of #/, to convert variousaccounts into sales or cash inflo(s or outflo(s is greater than eimco.

Go(ever the debt ratio of eimco presents an eye catching vie( .The debt ratio sho(s a verygood figure than #/, .This means eimco %harma has less amount of other peoples money being usedto generate profits than #/,.

eimcos profitability relative to 003 (as better than #/, !td. The gross profit operatingprofit net profit margin and R@# figures of eimco are greater than #/,. These values are theindicator that the firm has more capability than #/, to improve profitability.

,n case of mar'et r"atio (e can see the position of #/, is better than eimco it in dictates theinvestors vie( to(ards the company ho( investors Oudge the company in response to rise and return.,nvestors pay little more preference to #/T than eimco in case of ris'.

R&'#&)d"i#)$

@verall (e can see the position of eimco %harma is better than #/, ltd in the industry. utthere are certain recommendation for eimco to fill up their lac's.

#ctivity Ratio of eimco pharma is comparatively very poor. They should eamined thereceivable ad pay able management of the company.

They should try to deal (ith cash instead of receivable or pay able as much aspossible.

43


39/40

eimco should ta'e step to in care their sales volume. :o that their asset turnover ratio couldbe increased.

/ompare (ith #/, eimcos &ar'et ratio is also very poor. They can improve this by

follo(ing the given (ay -

i+ eimcos :hould try to increase the mar'et price per share of common stoc'

(hich affects the (illingness of investors for paying the amount for each dollar

of earnings of the firm.

ii+ ,n another (ay they can do by creating more common stoc' e"uity.

These are the recommendations (hich (e feet can ma'e eimco %harma the mar'et leader.

46


40/40

:ubstituting the values for eimco %harmas R#@ of 2.80B calculated earlier and

eimco %harmas F!& of 1.59 *T'. 863849654 A T'. 482601638+ into the

modified $u %ont formula yields.

R>@ ; 2.80 B < 1.59 ; 6.8 B

The calculation 6.8 B R>@ by using $u %ont formula is the same as that calculation

directly.

The $u pont system of analysis as a diagnostic tool is best eplained using the figure.

Du Pontnalysis

Documents

Time Interest Earned Ratio