Profitability Ratio Analysis of Square Pharmaceutical Ltd Bangladesh (Part-5)
http://www.reportbd.com/articles/947/1/Profitability-Ratio-Analysis-of-Square-Pharmaceutical-Ltd-Bangladesh-Part-5/Page1.html
humpty dumpty
I m a human By humpty dumpty
Published on 4 February 2012
Profitability Ratio Analysis of Square Pharmaceutical Ltd Bangladesh. Profit Margin, Return on Assets and Return on Equity.
Profitability Ratio Analysis of Square Pharmaceutical Ltd Bangladesh
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.
Profit Margin
2006 2007 2008 2009 2010
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.
Return on Assets
2006 2007 2008 2009 2010
0.13 0.12 0.11 0.14 0.14
Table of Return on Assets Ratio for Fiscal Year 2006-2010
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
Return on Equity
2006 2007 2008 2009 2010
0.18 0.18 0.16 0.19 0.18
Table of Return on EquityRatio for Fiscal Year 2006-2010
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.
Profit Margin
2006 2007 2008 2009 2010
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.
Return on Assets
2006 2007 2008 2009 2010
0.13 0.12 0.11 0.14 0.14
Table of Return on Assets Ratio for Fiscal Year 2006-2010
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
Return on Equity
2006 2007 2008 2009 2010
0.18 0.18 0.16 0.19 0.18
Table of Return on EquityRatio for Fiscal Year 2006-2010