Long Term Liquidity Ratio Analysis of Square Pharmaceuticals Ltd Bangladesh (Part-3)
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I m a human By humpty dumpty
Published on 4 February 2012
Long Term Liquidity Ratio Analysis of Square Pharmaceuticals Ltd Bangladesh during the fiscal years 2006-2010. Total Debt Ratio, Debt Equity Ratio, Equity Multiplier, Times Interest Earned, Long Term Debt and Cash Coverage Ratio.
Long Term Liquidity Ratio Analysis of Square Pharmaceuticals Ltd Bangladesh
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.
Total Debt Ratio
2006 2007 2008 2009 2010
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.
Debt-Equity Ratio
2006 2007 2008 2009 2010
0.45 0.43 0.51 0.33 0.30
Table of Debt Equity Ratio for Fiscal Year 2006-2010
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.
Equity Multiplier
2006 2007 2008 2009 2010
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.
Time Interest Earned
2006 2007 2008 2009 2010
12.51 8.64 6.58 7.64 10.60
Table of Times Interest Earned Ratio for Fiscal Year 2006-2010
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.
Long Term Debt Ratio
2006 2007 2008 2009 2010
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.
Cash Coverage Ratio
2006 2007 2008 2009 2010
14.63 10.84 8.13 9.28 12.96
Table of Cash Coverage Ratio for Fiscal Year 2006-2010
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.
Total Debt Ratio
2006 2007 2008 2009 2010
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.
Debt-Equity Ratio
2006 2007 2008 2009 2010
0.45 0.43 0.51 0.33 0.30
Table of Debt Equity Ratio for Fiscal Year 2006-2010
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.
Equity Multiplier
2006 2007 2008 2009 2010
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.
Time Interest Earned
2006 2007 2008 2009 2010
12.51 8.64 6.58 7.64 10.60
Table of Times Interest Earned Ratio for Fiscal Year 2006-2010
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.
Long Term Debt Ratio
2006 2007 2008 2009 2010
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.
Cash Coverage Ratio
2006 2007 2008 2009 2010
14.63 10.84 8.13 9.28 12.96
Table of Cash Coverage Ratio for Fiscal Year 2006-2010